London Underground PPP Judicial Review

02 September 2005

The Mayor of London and Transport for London (TfL) have applied for a Judicial Review on the Government's proposed London Underground Public Private Partnership.

The TfL Case

The Judicial Review is being heard by Mr Justice Sullivan at the High Court (Royal Courts of Justice), The Strand, and began at 10.00am, Tuesday, July 23. The hearing is expected to last four days.

TfL"s legal argument for the PPP Judicial Review is summarised below.

TfL Legal Argument

1) Reasons for the Challenge. The main grounds for challenge are:

(a) that the procurement is unlawful because it breaches public procurement rules;

(b) because the contracts have not been properly procured the best deal has not been obtained from the private sector and the contracts therefore cannot satisfy the Government"s own value for money test; and

(c) based on current funding promises from Government, London simply cannot afford PPP.

2) Procurement

Publicly tendered contracts must satisfy European and domestic procurement rules. In short this means that they must be competitively tendered and awarded to the bidder who offers the best terms. In order to comply with these rules and preserve the benefits of competition it is not permitted to change the contracts in any meaningful way once preferred bidders are appointed and the competitive element of the tender removed. In this case the preferred bidders have negotiated much more favourable terms in a non-competitive environment than they offered when they were appointed. The TfL case is that they are now to do less work for more money than they offered when appointed and, far worse, are making larger profits but accepting less risk in return. 

3) Value for Money

It is obvious that by changing the contracts after the appointment of preferred bidders, London Underground has struck a worse deal for London than could have been obtained if the bidders knew they were still bidding against another party keen to secure the contract. The contracts therefore cannot offer best value for money for London.

4) Funding

On current figures, and assuming that the PPP will work as its supporters claim, PPP will cost the Underground (and thereby TfL) £1.473 billion more than the Government has agreed to pay for it over the first seven and a half years of the contract. On London Underground"s own figures PPP will cost £771million more than Government grant for it between 2005/2006 to 2009/2010. Where will the shortfall come from? It is wholly unrealistic to suggest it could be met by fare increases or increases to council tax. In fact it could only be reduced (but not met) by diverting substantial funds from other important transport projects such as Thames river crossings, walking and cycling and road safety. It is irrational to commit London to PPP without properly considering the effect on London of the shortfall in PPP funding.

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