London Underground has appealed to PPP arbiter Chirs Bolt to find a final figure for the work Tube Lines will carry out to upgrade the Northern, Jubilee and Victoria lines up to 2017, after deciding proposed costs are “unacceptably high”.
Interim managing director of London Underground (LU) Richard Parry said the upgrades: “Must be delivered at a price which is clear value for money and acceptable to us, the mayor, government and passengers.
“Tube Lines therefore has two key challenges. First, to deliver promised improvements on time. Second, to deliver the improvements in a way that is economic and efficient, ensuring value for money for London’s fare payers and taxpayers.
“While we have had constructive talks on their future work programme which have seen some of their cost demands come down, Tube Lines’ price remains unacceptably high in some areas,” he said.
Tube Lines said in response that it has a ready-made and affordable solution on the table that London Underground is unwilling to accept.
The Tube upgrade contractor and London Underground have been at loggerheads since they gave widely differing costs for this work last year.
Tube Lines initially said it could carry out the work for £7.2bn, considerably more than the £4.1bn London Underground said it could afford. Tube Lines later revised the figure down to around £5bn.
Last month the Mayor of London Boris Johnson said the upgrade of the Jubilee Line was: “unacceptable”, although work on the remaining lines seemed to be progressing well.
A Tube Lines spokesperson said: “We have made London Underground a very good offer that will bring the cost of work down to a level that it can afford whilst still being able to deliver the performance and upgrades that the underground needs.
“Many of the savings already agreed were included in the proposals detailed in the Path to Affordability document we issued to LU back in June and there are further savings opportunities we have tabled that we believe warrant further consideration by LU.
“These would, if agreed, narrow the gap to negligible levels and enable us to continue to get on with doing a good job while delivering good value for the tax payer, good value for the fare payer and good value for London. It is disappointing then that they should ask the Arbiter to intervene when an affordable solution is there for the taking.
“It will now be some months before either Tube Lines or London Underground will be informed by the Arbiter of his recommendations of the cost. We would have preferred for there to have been proper consideration of our proposal before involving the Arbiter,” she said.
Bolt’s own estimate was that it would cost between £5.1bn and £5.5bn for the work to be completed. Bolt said: “Tube Lines’ formal submission to London Underground in June proposed costs of £6.8bn over the next 7½ years, although it identified possible savings to bring this figure down to just over £5bn.
“London Underground and Tube Lines have made significant progress in agreeing opportunities to reduce costs, but there is still a big gap between them. My role is now to determine a fair price for London Underground to pay for the maintenance, renewal and upgrading of the Jubilee, Northern and Piccadilly lines over the period to 2017,” he said.
London Underground has asked Bolt to publish his draft decisions on these costs by Christmas, to include final decisions on costs and on London Underground payments under the contract following in early 2010. A timetable for this information to be published will be released next week.
In its submission, London Underground says: “Although the parties have made progress in resolving various matters since June 2009 when Tube Lines made its Response and propose continuing engagement where necessary or desirable, LUL is mindful of the timetable constraints and considers that the parties may be unable to resolve remaining issues without direction and guidance from the Arbiter.”
“I have already undertaken a considerable amount of work in preparation for a reference, including commissioning international benchmarking studies. I will draw on this work, as well as submissions from the main parties and others, in reaching my final decisions,” said Bolt.
“One of my statutory duties is to promote economy and efficiency in the PPP, and it is important for Tube Lines, for London Underground and for users of the underground to resolve the current uncertainties about costs and future payments as quickly as possible,” he said.