Completion of A465 Upgrade Sparks Debate Over Welsh Government Funding Model

The final stage of the A465 Heads of the Valleys upgrade has raised questions about the viability of its funding approach.

The £590 million dualling project, covering the 17.3km stretch between Dowlais Top and Hirwaun in South Wales, was officially reopened on 30 May. Work began in May 2021 under design and construction contractor Future Valleys Construction (FCC Construcción).

The upgrade has transformed the road from a three-lane single carriageway into a dual carriageway with a 70mph (110kph) speed limit and six junctions. It forms the concluding phase of the broader £1 billion Heads of the Valleys programme, which aims to modernise 40km of the A465 between Hirwaun and Abergavenny, improving traffic flow and road safety along this key route first constructed in the 1960s.

Engineering Challenges

Described as the largest road infrastructure project ever commissioned by the Welsh Government, the Dowlais Top to Hirwaun section presented significant technical challenges, particularly widening an existing corridor constrained by steep valleys. The scheme involved moving 2.2 million cubic metres of earth and rock and constructing multiple structures, including steel truss footbridges, single- and multi-span concrete and steel bridges, 28 retaining walls, 38 culverts, and upgrades to existing junctions.

FCC director Mike Cummine highlighted additional challenges caused by the area’s industrial past, which included historic mine workings over roughly one-third of the route. A risk-based approach incorporated geogrids beneath the carriageway subbase to mitigate potential voids, with depressions in the surface allowing planned maintenance interventions.

The project also had to contend with complex river valleys, requiring innovative temporary works and retaining solutions such as soil nails, shotcrete facing, block stone, and gabion walls. The carriageway was reconstructed in a narrow corridor, often altering levels by up to 10 metres, and more than 110 traffic diversions were required to allow phased construction while maintaining traffic flow.

Environmental considerations were central to the project, as the route passes near Brecon Beacons National Park and habitats of protected species including bats, dormice, and great crested newts. Mitigation measures included habitat creation and mammal crossings integrated into culverts.

Funding Under the Mutual Investment Model

The project was financed under the Welsh Government’s Mutual Investment Model (Mim), a scheme designed to support major capital projects and infrastructure investment. Mim allows private partners to construct and maintain public assets while the government pays a fee covering construction, maintenance, and financing, with the asset ultimately transferred into public ownership.

However, the fixed-price contract under Mim placed all construction and delivery risks on FCC. Unforeseen global events—including the Covid-19 pandemic, the Ukraine conflict, and the Palestine-Israel conflict—caused material cost increases, supply chain disruptions, and market volatility, stretching the contractor’s risk exposure.

Extraordinary Measures

FCC implemented extensive measures to keep the project on schedule, including adjusting work sequences, stockpiling materials, redesigning earthworks haul distances, and managing complex traffic arrangements. The team also worked weekends, nights, and holidays to offset delays caused by Wales’ wetter-than-usual weather in 2021–2023, while taking advantage of dry spells in the final year.

Despite these efforts, project director Ignacio Poyales Morales confirmed that material costs surged dramatically, with steel three times higher than anticipated and concrete prices 40% above estimates. Inflation rates during the construction period significantly exceeded the 1.6% assumed in the financial model. While the final cost remained broadly in line with the original £590 million budget, FCC reported substantial losses.

Implications for the Mim Model

The challenges faced have prompted discussions with the Welsh Government about the risk allocation inherent in Mim contracts. Poyales Morales stressed that while standard construction risks are manageable, extraordinary global events fall outside the logical risk capacity of private contractors. He warns that without adjustments, the current Mim approach could deter future bidders or inflate public costs for subsequent projects.

“We need a commonsense approach,” he said. “The Welsh Government must consider how this will shape the future of the Mim model. Contractors need to be able to manage risk realistically, and the public must be protected from extraordinary costs.”

Despite these contractual discussions, FCC remains optimistic, noting that the work itself has been widely recognised as a significant engineering achievement.