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Guidance published today by Underground PPP arbiter on Metronet £750M cost overruns

Guidance published today by the London Underground PPP artibter Chris Bolt has paved the way for an extraordinary review of seven London Underground contracts managed by PPP contractor Metronet that, combined, have run over budget by £750M.
The review would establish who should pay out for the overruns and will only take place if Metronet requests it, and it will not happen for at least a year.The troubled contracts are:-The sub-surface lines track improvement programme-Earls Court Station phase two work-Baker Street Station modernisation-Sub-surface lines rail buckling recovery programme-The Central Line heavy overhaul-Victoria Line upgrade with low loss conductor rail-Victoria Line upgrade enabling works'Where an infraco expects to incur costs above the level allowed for in its bid, it has a contractual right to seek additional payment from London Underground, to the extent that it considers the costs are incurred in an overall efficient and economic manner and in accordance with good industry practice,' Bolt said.But he warned that evidence seen so far 'leads me to conclude that the projected costs are not fully efficient and economic. This is consistent with the view I reached last year that Metronet has not carried out its activities in accordance with good industry practice'.Metronet has six months to pull all the necessary evidence together, and the Arbiter would take another six months to develop, consult on and publish his directions for a review.Bolt's guidance sets out the approach he would take in reviewing the seven contracts.'A review of the Metronet contracts is likely to involve scrutiny of all aspects of its programme,' he added.Metronet said it would 'consider the appropriate strategy to recover the money to which it is due'. 'Given the breadth and magnitude of this massive undertaking, the originators of the PPP anticipated that there would be additional or unforeseen works - and provided the infrastructure companies with various means to recover costs,' added Metronet chief executive Andrew Lezala .'Metronet recognises that it was not economic and efficient in all its activities during the earliest stages of its contract, but it is now working hard to rectify this position.'

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