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London elections put Metronet in limbo for six more weeks

Running the failed Tube company in administration costing taxpayer £14M per week

Failed Tube upgrade contractor Metronet will not be absorbed into Transport for London (TfL) until May at the earliest, NCE learned this week.

It was also revealed that running the failed firm in administration costs the taxpayer £14M per week.

NCE has learned that PPP administrator Ernst&Young spent last week in "frantic" meetings with TfL, the sole bidder for Metronet's Tube upgrade contracts, to work out an exit from administration before 18 March, when electioneering for the post of Mayor of London begins.

Strict impartiality during the election campaign, referred to as 'purdah', runs until 1 May. During this time, Greater London Authority bodies cannot be seen to favour the decisions of any candidate in their announcements.

The news will be disappointing to incumbent mayor Ken Livingstone, who will not now be able to make political capital from the transfer prior to elections.

NCE has also learned that onerous contract conditions for the private sector had led to TfL being the sole bidder for Metronet's contracts.
A PPP source told NCE: "London Underground said any private company taking the PPP contracts over would have to stick to the original schedules set out for Metronet."

Metronet was severely delayed when it went into administration, and London Underground's managing director, Tim O'Toole, has admitted that up to 60 station upgrades could be delayed due to a combination of Metronet's delays and subsequent slippage (NCE 19 November 2007).

Meeting Metronet's deadlines from so far behind would be virtually impossible, said the source.

A TfL spokesman confirmed that "companies had to find contracts as they stand".

When the transfer of Metronet to TfL completes, it will be dealing with its own subsidiary, and so have more freedom in renegotiating deadlines.

Imperial College professor of transport and infrastructure Stephen Glaister said this was an indication of the poor state Metronet was in when it entered PPP administration. "It is a real concern for us all, to know what the effects on schedule, and additional costs, are to get the work done to the original standards," he said. "It will cost a lot more, and this is just another manifestation of this."

MPs revealed this week that the costs of delays and administration will cost in the region of £2bn.

Louise Ellman MP told a Commons debate into Metronet's collapse on Monday that, "the service delivery failure has come with a £2bn financial tag".

"First, there is a £1.7bn grant to Transport for London to cover Metronet's debts; and, secondly, a £158M grant for TfL, which is understood to be the first instalment of the costs caused by Metronet's going into administration—and it is believed that the total cost of that is about £630M. The third part is £150M of further grant to Transport for London in recognition of the increased costs."

Metronet: the road to failure

January 2003 Public-private partnership begins.

November 2006 Arbiter Chris Bolt highlights Ł750M overspend in his first annual review of Metronet.

29 June 2007 Metronet asks for Ł551M, and an "extraordinary review", to decide who should pay for Ł1bn overspend.

16 July 2007 Arbiter awards only Ł121M of Ł551M claimed by Metronet while the extraordinary review progresses.

18 July 2007 Metronet enters administration.

6 February 2008 Government settles Ł1.7bn in Metronet's debt.

18 March 2008 'Purdah' for London Mayoral electioneering begins.

May 2008 Metronet absorbed by Transport for London, and liquidation begins.

2027 PPP due to end.

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