NAO queries value of Tube deal after first 12 months

23 June 2004
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24 June 2004 | Steve Smethurst

The National Audit Office has delivered a worrying report on the progress of the three London Underground public-private partnership (PPP) deals to improve the infrastructure of the Tube network.

It said there was only limited assurance that the original price of the PPPs was reasonable and there is uncertainty about the final price, a year into the deals.

Furthermore, "given the volatility inherent in operations, it is hard to determine whether the benchmarks are easy or difficult to achieve. In the first year, the performance of the companies [Metronet, which runs two PPP deals, and Tube Lines] has been mixed."

Sir John Bourn, head of the NAO, said: "I welcome the fact that there are prospects for improvement to the Tube, but in the face of uncertainty about what the next 30 years will bring, only time will tell whether these prospects are fully realised."

The planned modernisation and upgrading of the Tube will cost £15.7 billion over 30 years, with £9.7 billion earmarked for the first seven and a half years.

Tackling the maintenance backlog alone is scheduled to take 22 years.

A London Underground spokesman said: "Like the NAO, we feel the picture is mixed. The financial incentive regime is unproven and we really need to see a big improvement in the second year of PPP."

Les Mosco, managing director of consultancy Purchasing Strategies Limited and former supply chain director at Network Rail, said: "It was a huge challenge when it was in the public sector and it's still a huge challenge for those with private-sector experience.

"But there's no point saying 'oh dear, we can't demonstrate value for money' because we're still at the experimental stage. You can't see the long-term picture because there are no simple measures to show the real trend."

Mosco added that in spite of reservations about using PPP for big infrastructure projects, the government would set up more because it could not pay for such projects in any other way.



SMjun2004

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