London Underground and PPP

In 1998 the Government announced its plans to modernise the Tube Network using Public-Private Partnership (PPP) agreements. Between December 2002 and April 2003 three separate PPP were made.

1. Tube Lines were given responsibility for the maintenance and renewal of the Jubilee, Piccadilly and Northern Lines.
2. Metronet Rail BCV were given responsibility for the maintenance and renewal of the Bakerloo, Central, Victoria and Waterloo and City Lines;
3. And Metronet Rail SSL, where responsible for the maintenance and renewal of the “sub-surface lines”: the Circle, District, Hammersmith & City, Metropolitan and East London Lines.

The PPP agreements cover a 30 year period in which the infrastructure companies (Infracos) are expected to maintain, renew and upgrade distinct parts of the London Underground infrastructure. The running of the services has remained in public hands and is the responsibility of London Underground.

The Collapse of Metronet

In July 2007 Metronet went in to administration.

The collapse of Metronet had enormous implications for the London Underground system. Contracts that were supposed to deliver upgrades to 35 stations over three years in fact only delivered 14, this is just 40%. Stations that were supposed to cost Metronet £2 million in fact cost £7.5 million, 375% of the original stated price. By November 2006, only 65% of scheduled track renewal had been achieved.

Metronet’s demise only cost its five parent companies (Atkins, Balfour Beatty, Bombardier, EDF Energy, and Thames Water) £70 million each. It cost the tax payer £1.7 billion. This means each parent company has lost just 4.1% in comparison to the public purse.

The Transport Committee’s Report into Metronet

The Transport Select Committee report into the London Underground and the Public–Private Partnership Agreements was highly critical of the structure of the PPP agreements. Whilst they recognised that there were many flaws in Metronet’s management of the agreement they also concluded, “If the Government is again tempted by a seemingly good deal from the private sector, it should recall Metronet’s pathetic under-delivery and the deficiencies in the contracts that allowed it to happen.”

The committee were inclined to the view that the model off PPP itself is flawed and probably inferior to traditional public-sector management. ”In comparison, whatever the potential inefficiencies of the public sector, proper public scrutiny and the opportunity of meaningful control is likely to provide superior value for money.”

The Future of London Underground

Since the collapse of Metronet, it looks likely that Transport for London will take over Metronet’s remit, although a formal decision on this will be taken later this summer.

Meanwhile Minister for transport Rosie Winterton has suggested that contrary to the compelling and detailed evidence of the Transport Committee, the debacle was down to Metronet and did not show any deficiencies in the PPP structure.