A HOUSE of Commons Committee has published a damning report of the Department for Transport’s management of Metronet, the London Underground PPP contractor which collapsed in 2007. The Committee of Public Accounts said the taxpayer could have lost as much as £410 million because of the DfT’s methods.
Metronet was a private Public-Private Partnership consortium set up to provide maintenance, renewals and upgrades on the Bakerloo, Central and Victoria tube lines and also on the subsurface network, which consists mainly of the Metropolitan and District Lines.
But the company failed to convince the PPP Arbiter that its costs were reasonable, and collapsed in summer 2007 when he refused to allow most of the additional funding it had claimed from London Underground. Its activities were taken over by Transport for London, and Metronet is now an in-house TfL department.
The Committee has examined the events which led up to Metronet’s failure, and has concluded that the DfT should bear much of the blame. The Chairman of the Committee, MP Edward Leigh, said: “This Committee finds it unacceptable that the Department ignored the warning by the National Audit Office in 2004 to avoid a hands-off approach to overseeing the upgrades.
“The Department’s assumptions were flawed from the outset. It was naïve in assuming that Metronet would establish strong financial management and corporate governance. It wrongly assumed that the public bodies given the task of overseeing the devolved delivery of the project had the information and influence to do the job. And its assumption that Metronet’s lenders would exert strong influence on Metronet’s governance and financial health in order to protect their investment was undermined because the Department shouldered 95 per cent of the lenders’ risks.
“The Department got itself into a position whereby it was exposed to big financial risks which it had little scope or means of mitigating. These mistakes must never be repeated.”
The DfT said it would be studying the report’s conclusions carefully, and in a statement it added: “The National Audit Office itself recognised that 90-96 per cent of the money spent through the Metronet Public Private Partnership was economic and efficient and that the fundamental failure lies with Metronet.
“We were also prevented from micro managing the contracts under the terms of the London devolution legislation which is why since the PAC Hearing an independent advisory panel has been established to provide expert scrutiny and advice on the TfL investment programme, including the former Metronet contracts.”