The department for transport should hold annual reviews of major devolved delivery arrangements to ensure they can identify and mitigate “major risks to value for money”, an MPs’ report into the failure of Metronet has recommended.
The public accounts committee’s report on the collapse of Metronet in July 2007 said it was “unacceptable that none of the public sector bodies tasked with oversight of the complicated devolved delivery of the modernisation of London Underground’s infrastructure had the information or influence to do so effectively”.
The report added: “As a priority, the department should review major devolved delivery arrangements at least annually across the remaining life of the project with all of the other key players, and satisfy itself that, between them, they have identified and are mitigating the major risks to value for money for taxpayers.”
Mistakes made on Metronet should not be repeated on other large scale contracts, the committee warned. It did, however, praise the deal achieved for the M25 widening works, where the department negotiated rights for the Secretary of State to intervene should the company not be run in the way specified in the contract.
The MPs will ask the Treasury to make clear to departments that similar clauses must be built into all contracts that carry significant risks to the taxpayer.
The report said the department had also “failed to allow and plan for the additional risks to Metronet’s financial viability inherent in having a ‘tied supply chain’, whereby the company’s shareholders were also its suppliers”.
It added: “The department should review the way in which it identifies and monitors the risk associated with a tied supply chain on such major contracts. It should set out clearly how it will identify and monitor risks to the financial viability of the prime contractor, and should be prepared to intervene where necessary, even where delivery is devolved.”
The MPs’ investigation is based largely on a National Audit Office report last June.