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Disgrace of legal costs

Comment

To hear that the Department of Transport (DfT) spent £29M on legal advice for the London Underground part privatisation - five times more than the £6M paid to Arup for engineering advice - is shocking. That the DfT still thinks it was right and proper is nothing less than a disgrace.

But it gets worse. The National Audit Office's (NAO) latest assessment of Tube PPP deals highlights a raft of other highly paid, non-engineering advisors. For example, £21M was paid to PriceWaterhouseCoopers for financial advice, £12.5M to PA Consulting and £13.8M to Arthur Andersen for business advice - and a massive £26.5M to 'other external advisors'.

The huge cost of setting up PPP deals is well known and well documented, and the NAO rightly highlights that this cost was much higher than anticipated. But this latest report shows just how far the expenditure was finally skewed away from engineering.

This is simply not right.

The lack of hard information about the condition of some of the Underground's assets was flagged up right at the start of the PPP procurement process.

And the scale of how much information was actually missing became increasingly clear as negotiations went on.

Of course, contractors increased their bid prices to reflect the rising scale of uncertainty. As the NAO points out, 'greater price certainty [from the private sector] would have resulted in bigger contingencies and a higher price'.

With such an old network of tunnels and track it is always going to be difficult finding out exactly what is likely to need the most attention first. Given the size of the network and the scale of under-investment over the last few decades, it is not surprising that London Underground's records are not as up to date as everyone would like.

Yet rather than employing professional engineers to start filling in the missing pieces of information to put the private contractors' minds at rest, the DfT elected instead to pay legal and financial advisors to come up with a potentially more expensive deal with lots of caveats to nail down cost overruns.

This is of course one route to go down. But it is surely not correct to state, as DfT permanent secretary David Rowlands told MPs last week, that more time (and money) spent on engineers to assess the infrastructure would not have provided more detail about the assets.

Of course it would.

What he perhaps meant is that it would have cost more time and money than the DfT wanted to spend at that particular point in the deal.

Bearing in mind that the original plan was for the private sector to worry about the backlog of maintenance work, it is perhaps understandable that the DfT did not want to look too deeply into this black hole.

But like it or not, if London Underground's infrastructure - or the rest of the nation's infrastructure for that matter - is to be brought back up to a decent modern standard, engineers will have to look into the darkness, and get to grips with what has to be done. And it will cost money.

The government should be aware that legal and financial advisors only ever paper the cracks. Investment in engineering advice reaps the real long term reward.

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