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LUL holds on to risk to keep PPP costs down


LONDON UNDERGROUND (LUL) is to pass less maintenance risk to private sector contractors than it originally intended, to control costs on the proposed £13bn Tube upgrade, transport experts said this week.

Transport for London board member Stephen Glaister said LUL was hanging onto risk to keep private sector prices down, and help Public Private Partnership (PPP) contracts pass transport secretary Stephen Byers' value tests next year.

Before contracts can be signed, Byers will demand the PPP is cheaper than the Public Sector Comparator - the cost of the work in the public sector - or the scheme will be thrown out.

However, Glaister said the decision to take back risk was entirely at odds with the PPP.

This view was confirmed in a letter to London transport chairman Malcolm Bates from transport commissioner Bob Kiley.

He pointed out that bidders would no longer be charged if they failed to meet performance criteria, arguing that in best and final offer contracts submitted earlier this year, missed performance, such as delayed trains or dirty stations, would result in financial penalties.

Kiley also said that LUL had claimed that, if bidders perform well, caps would be placed on the bonuses they may receive to safeguard against errors made calculating performance. These bonus caps have been removed.

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