News

Tube Lines deal collapses amid cost accusations and fears for future work

14 May 2010

The collapse of the 30-year Tube Lines PPP deal with Transport for London has been blamed on an “onerous” and “expensive” contract, Building reported.

The comments follow a decision last week by London mayor Boris Johnson to buy Tube Lines for £310m, after the two parties reached a stalemate on their negotiations over a price for the next seven-and-a-half years of upgrade work.

An adviser on the winding up of now defunct PPP Tube contractor Metronet, who will also advise on the Tube Lines takeover, spelled out two key reasons for the demise: “The first was that it was a highly onerous contract, in which lawyers and professionals tried to allow for every possibility. It would have been much better if it had reflected a spirit of agreement.

“The second was that it was far too expensive. For the next seven-and-a-half years Tube Lines was willing to do the work for £1.3bn less than the originally estimated £5.7bn. That tells you a lot.”

Tube Lines, which was upgrading the Northern, Jubilee and Piccadilly lines, will now become 100% owned by Transport for London (TfL). At present it is two-thirds owned by Spanish firm Amey and one-third by US outfit Bechtel.

In a separate story, Construction News reported that the TfL buyout of Tube Lines could mean a reduction in work.

While Amey will stay on to carry out day-to-day maintenance for another seven-and-a-half years, Bechtel will be phased out of its role carrying out capital improvement works once the deal is completed in June.

One industry insider told Construction News: “At this stage it remains to be seen whether they put the work out to market.”

The source said the eradication of the PPP and private contractors’ input into the works would make it easy for TfL to decrease the scope of projects.

“The primary concern is that they will put the brakes on. If budgets are tight, this deal gives TfL that flexibility, which is worrying.”

It is unclear how many of the 3,000 Tube Lines staff will be made redundant, but Bob Crowe, general secretary of the RMT union, has already warned of industrial action.

Comments

Couple of points; 1 funny how Bob was completely anti the PPP (as were a lot of his union members) and now they're complaining about the demise of it and the consequent redundancies. Given the annual capex went from something like $400M ish pre-PPP for LUL, to around well over $1Bn post, and is now likely to be reversed, was that inevitability not visible to Bob or was he too busy looking for his next conflict? Lilke most contracts albeit this one had many degrees of uniqueness, work can be taken out and scope reduced by so that's nothing new. If TfL had wanted that they could have instructed it. The main point though is that the comment above about the contract being onerous is spot on. Having worked on various aspects of it, from a busness analysis and scoping role to a delivery role it is ludicrously complex. It is not and never was a contract that any type of 'partnership' could be based on; everything the consortium member company did, was prescribed by the contract, man-marked, validated at many levels; it was anything but a partnership and hypocrisy to call it such. It is a credit to Tubelines and the people in it, they made it work so well for so long.

Joe Colgan, 16 September 2010

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