02 August 2007 | Helen Gilbert
Suppliers working on the London Underground (LU) upgrade will get paid and procurement functions will continue to operate, despite its biggest maintenance firm entering administration.
Metronet Rail, which holds two of the three contracts for upgrading the LU network, covering all lines except the Jubilee, Northern and Piccadilly, entered Public Private Partnership (PPP) administration on 18 July.
Under the new arrangements, Transport for London will pick up outstanding costs for work done and goods delivered. Four administrators from Ernst & Young will work closely with Metronet's procurement team.
An Ernst & Young spokeswoman said: "For ongoing work performed during the administration, suppliers should receive orders or instructions in the usual way from Metronet staff. Going forward, suppliers will be paid for approved invoices at their usual rates and on existing terms and conditions agreed with Metronet for work carried out (or goods delivered)."
The firm's original tied supply chain - where its five shareholders (Balfour Beatty, Bombardier, EDF Energy, Thames Water and WS Atkins) were guaranteed most work - came under fire for the £2 billion of cost overruns that led the firm into administration.
In the Annual Metronet Report
published last November Chris Bolt, the arbiter for the PPP, said: "Metronet's supply chain arrangements have in some areas contributed to its failure to carry out its activities in an overall efficient and economic manner."
He also warned of a "conflict of interest" caused by this type of supply chain.
Earlier this year Metronet switched to selecting contractors through competitive bidding. This process is used by Tube Lines, the firm upgrading the the Jubilee, Northern and Piccadilly lines.
A Tube Lines spokeswoman said: "We have been able to decide on the best contractors and can manage them properly if they aren't performing."