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Govt PPP warning after Metronet collapse

The Government should bear the Metronet debacle in mind if and when its parent companies next come to bid for publicly-funded work.

A committee of MPs said in a hard-hitting report published today that much of the blame for the “lamentable” state of affairs surrounding the consortium - which collapsed into administration last summer after a £2 billion cost over-run on its PPP contracts - lay with the Department for Transport.

The committee said Metronet was little more than a “buffer” between its parent companies - Atkins, Balfour Beatty, Bombardier, EDF Energy and Thames Water - and the obligations of the PPP agreements.

Transport for London has been funding an operational deficit of around £13 million a week as a result of the administration, said the report.

Committee chairman Gwyneth Dunwoody said: “The future of most of London Underground's upgrade and maintenance work is now in doubt. The public, whether as taxpayers or Tube passengers, is paying for the private sector's inefficiency and failure.

“Any reasonable person, looking at the current situation, would find scant evidence to sustain a dogma that the private sector will always deliver greater efficiency, innovation and value for money than the public sector.

“If the Government is ever 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 Transport Committee said the circumstances of Metronet's end had shown that the private sector would never wittingly expose itself to substantial risk without ensuring that it was proportionately “if not generously” rewarded.

The MPs said they were not able to get an estimate of the total cost of Metronet's collapse but, during the committee's hearings, they heard that the public was liable for 95 per cent of the consortium's debt.

The report said shareholders were able to reap the rewards of the contracts while in theory absorbing much of the risk, but in fact, responsibility for most of the cost over-run fell to the public sector.

Metronet only delivered 40 per cent of the station upgrades it was contracted to do in the first three years, while the cost of the work spiralled to 375 per cent of the anticipated price, said the MPs.