Cost of UK hi-tech mail office 'out of control'

Plans for the world's most advanced automated international mail sorting office near Heathrow airport have spiralled out of control and behind schedule, as the loss-making Royal Mail prepares to announce another year of pounds 200m in the red.

The scheme – which was opposed by two former cabinet ministers, Stephen Byers and Chris Smith – was originally planned to cost pounds 150m, but has risen to pounds 367m. Costs may rise to pounds 420m before the centre's hoped-for completion in December, almost two years behind schedule, its critics claim.

The plan involves closing nine international mail sorting centres – including Mount Pleasant in London and offices in Glasgow – and concentrating the mail in one new hi-tech centre in Langley, Buckinghamshire, four miles from Heathrow and close to the M4.

Royal Mail estimates it will cost pounds 183m in relocation and redundancy payments.

The new centre uses ground-breaking technology to sort the mail and aims to be the sole centre in Britain for the handling of international letters and parcels. It aims also to be the European gateway for mail from South America.

Documents seen by the Guardian, however, show that the technology – supplied by Siemens Dematic – has failed operational tests and could lead to mass mis-sorting of the mail.

A report in March said: "The acceptance tests showed that the automation system was not sufficiently robust – performance and reliability did not meet specification and the levels of rejects and mis-sorts were considerably in excess of the agreed requirement.

"During January it became clear that a significant amount of work would be required before the acceptance tests could be rerun. This was a cause of great concern to the business."

Royal Mail was hoping to start using the centre this month, but an official statement says this has been delayed until December. It should have opened in January 2002.

The Communications Workers' Union opposes the scheme, arguing that it is a waste of money and will mean the loss of more than 2,000 jobs. A spokesman for the London division of the union said: "We will be calling for a public inquiry into what appears to be a waste of money. We have been told unofficially by senior management that the costs will rise even further – to pounds 420m before it is completed."

Brian Sedgemore, Labour MP for Hackney South and Shoreditch, who objected to the scheme in 1998, said yesterday: "This is disgraceful. We have a senior management who are mesmerised by grandiose schemes.

"Any member of the board who originally proposed this scheme, which has wasted taxpayers' money, should have no part in the future of the Royal Mail or, for that matter, British industry."

Royal Mail issued a statement to the Guardian defending the project. "Heathrow Worldwide Distribution Centre will be the most advanced international mail sorting office in the world," it said. "It will hugely enhance Royal Mail's international mail capabilities in an intensely competitive market place."

The organisation confirmed that the project was running behind schedule and that costs were rising.

"Further development work was also required on the technology, as testing . . . showed it was not delivering the required performance," the statement admitted.

But it added: "Completing the new centre was the right course of action. The whole of Royal Mail's renewal plan is about putting problems right."

A spokesman said the Royal Mail did not accept that the cost of the project would rise to pounds 420m. He also added that the company originally had to budget for pounds 156m to cover redundancy and relocation.

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(c) The Guardian