Many of the issues Chris Bolt will have considered before Monday morning’s announcement on Metronet’s emergency funding application can be summed up in one question. Why does one PPP contractor – Tube Lines – expect to complete the first quarter of its 30-year contract at around the original budget, while Metronet expects to be at least 25 per cent above its budget?
Andrew Lezala, Metronet’s chief executive, accepts that Tube Lines was initially better managed. He says Metronet, which he joined after its contract started in 2003, should have started its station upgrade programme more quickly. Metronet should also have adopted Tube Lines’ strict control over changes to the scope of upgrade work. Conflict areas on lines managed by Tube Lines are flagged up early and both it and London Underground usually reach clear decisions about addressing them.
As an example, Tube Lines points to a case where LU demanded it replace all the tiles in a station, rather than just the damaged ones specified in its contract. It agreed to replace all the tiles but struck a deal to do the work in daytime, rather than at night. Wage savings lowered the cost to the original projected level.
Mr Bolt might rule Metronet was not obliged to strike such cost-cutting deals. But it certainly appears to have accepted LU requests for extra work more readily than Tube Lines and without tackling their cost implications.
LU argues, meanwhile, that the companies’ key difference is how they relate to subcontractors. Metronet is owned by five companies – WS Atkins, Bombardier Transportation, Balfour Beatty, EDF Energy and Thames Water – which were all initially guaranteed certain work. The approach, which Metronet initially claimed would save money, has run into trouble because some shareholders have struggled to complete work on time and to budget.
Tube Lines, owned by Bechtel and Amey, two project management companies, has always issued tenders to find contractors for big projects. Metronet has adopted the same approach for station renovations.
LU will nevertheless argue Mr Bolt should not allow Metronet to reclaim any costs he believes have been inflated by its less efficient structure. Metronet will argue that, since LU hired it as a contractor knowing its structure, it agreed to pay such costs.
