The Civil Aviation Authority is considering powers that could require Heathrow to use competitive delivery models for major construction projects, including new and redeveloped terminals.
The proposals could cover projects linked to Heathrow’s proposed third runway as well as the redevelopment and modernisation of the existing two-runway airport. The CAA said Heathrow would need to demonstrate why its preferred procurement approach offered better value than competitive alternatives.
Competition under review
Giving evidence to the House of Commons transport committee on 21 October, CAA interim executive director Tim Johnson said the regulator was examining stronger procurement requirements.
“We are looking at how we could introduce competition and stronger procurement requirements to help to deliver value for money,” Johnson told MPs.
He said the changes would be developed over the next year, followed by further consultation before any implementation. Committee chair Ruth Cadbury questioned whether the proposals amounted to “tinkering around the edges” of Heathrow’s existing regulated asset base model.
Johnson said the CAA had considered alternative approaches but concluded that the current regulatory framework needed stronger incentives for efficiency.
Potential delivery models
Under the proposals, Heathrow could be required to put the design and construction of specific assets out to competition, or to appoint third parties to design, build and then operate them.
Heathrow has opposed applying design-build-operate competition to terminals and other assets closely integrated with airport operations or critical to the expansion programme. The airport argued that third-party financing would cost more and could create additional operational and programme risks.
However, the CAA said it was not persuaded that terminals should be excluded. “We are not convinced that certain core investments, such as terminals, should be removed from further consideration,” it said, pointing to existing examples of international airports using third-party arrangements to develop, finance and operate terminal infrastructure.
Proposed timetable
The CAA plans to seek detailed information from Heathrow on its procurement programme during autumn 2026. It has proposed an initial £200m threshold for investments requiring information on scope, estimated cost, design maturity and procurement arrangements.
The threshold would trigger additional regulatory scrutiny rather than automatically require a competitive tender. Heathrow would normally continue to manage procurement, subject to stronger independent oversight, although the CAA is also considering backstop powers to require competition.
The regulator intends to publish a working paper by mid-2027 and identify projects suitable for testing competitive procurement during Heathrow’s 2027–31 regulatory period. A further update on potential test projects is expected by the end of 2027.