The Thick of It

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Tuesday, July 17, 2007

Metronet going bust

Yesterday's post about the Tube PPP Arbiter's decision not to cave in to Metronet's demands for more Government hand outs attracted attention to this blog from both PPP contractors, Metronet themselves and Tubelines. It is of course interesting to note that Tubelines hasn't faced the same problems as Metronet.

Metronet failed to competitively tender work, preferring to offer it to it's member companies, including Balfour Beatty, WS Atkins and Bombardier. They obviously saw this as a way to make more money at the public expense from themselves by running a closed shop. Tubelines have offered contracts competitively.

More seriously though the public purse looks likely to pick up th ebill from Metronet's chronic failure to deliver. The transfer of risk from public to private sector was one of the strongest arguments made at the time the PPP was being proposed. At the time I thought the cost of drawing up the PPP high. The vast sums, around £500m, spent on lawyers and management consultants to draw up these contracts failed to envisage this. This money could have been invested in the system directly. However, I was happy to see the PPP go through if it was going to deliver real investment into the network at effectively a fixed price to the public purse.

Now it is likely that Transport for London will have to arrange a re-financing package. This isn't how it was meant to work. Something was clearly lost between the Government's argument at the time and what was put into place. I'm sorry to my Dad as I remember saying to him at the time that the PPP was nothing to worry about when clearly this is proving a big waste of time and money.

The National Audit Office's 2003 report into the PPP "London Underground PPP: Were they good deals?" will make for more interesting reading now.

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