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Double-profit Tube Co cash claw back
TUBE operator Metronet, which maintains nine underground lines, is operating a “cartel”, members of the Greater London Assembly said on Thursday.
They accused the company of only sub-contracting work to its own shareholders, thereby effectively profiting twice from a £3 billion renovation project.
The GLA’s Transport Committee was examining a report which branded Metronet’s performance as “significantly less than was expected in its bid, at a higher unit cost”.
By only giving contracts to its own shareholders, Metronet was pushing up costs and falling behind on track and station renewal to the detriment of passengers, some members said.
They could now try to claw back £750 million in overspends from the taxpayer.
After the City Hall meeting, committee member Murad Qureshi AM said: “It’s a construction cartel, a safe pool for the shareholders to dip into for extra profits.”
The committee was interviewing the report’s author, PPP Arbiter Chris Bolt, an independent government appointee who monitors the £3 billion, 30-year deal to rebuild the underground.
Mr Bolt said Metronet’s system of giving contracts only to consortium members like Balfour Beatty and EDF energy meant costs were far higher than in the second PPP, Tube Lines, which puts contract out to tender.
He said: “Some of the costs so far incurred are not best value. Metronet need to be able to produce much better and clearer evidence that they are performing efficiently and economically.
“There’s a very clear signal here that information on the amount of money through the supply chain needs to be forthcoming.”
As PPP Arbiter, Mr Bolt could end up conducting an extraordinary review of Metronet’s claims that costs have overrun by £750m on their share of the underground works.
Although their contract with London Underground (LU) requires them to absorb the first £100m, they could demand the balance of £650m from LU if the Arbiter finds that the costs were incurred ‘efficiently and economically’.
Describing Metronet’s ‘tied supply’ structure, Committee member John Biggs AM demanded: “Do you think that there might be a case where £750 in excess profits is taken out of the system?”
Mr Bolt replied: “How the shareholders recognised profits is not at issue.”
Members also probed the governance structure of Metronet, which is run by a board containing members of the boards of the five consortium members.
“An independent chair would improve the governance,” Mr Bolt said.
Asked whether LU could get out of the contract with Metronet if the consortium failed to meet standards and timetables, he said: “If it was done unwillingly, this is a process that would take two or more years, and I’ve no doubt the lawyers would make quite a lot of money out of it.” |
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