Ministers yesterday accused Metronet shareholders of corruption, and demanded a Public Inquiry into the tube contractor's collapse earlier this year.
Speaking at a special session of the Transport Select Committee, former Metronet non-executive chairman Graham Pimlott said that the company's structure was "flawed", because the contracting arm, Trans4m, could demand payment for work, even when jobs were not specified and could not be completed.
"I think contractual arrangements were a factor [in Metronet's collapse], as Metronet's contracts with Trans4m gave Metronet little leverage. They had to pay when bills were presented, and could not withold for failures," he said.
Trans4m was the contracting arm, owned by four of Metronet's five shareholders - Atkins, Balfour Beatty, EDF Energy and Thames Water. The fifth shareholder, Bombardier, had a separate contract to supply rolling stock.
"There was a failure to get contracts specified. By contrast, the Bombardier contract was working perfectly well. The difference was that this was an output contract," he said.
The four shareholders of Trans4m came under savage criticism from Committee member Graham Stringer MP, who said that shareholders paying themselves as contractors was "corrupt". "The shareholders of Metronet were paying themselves vis the construction company. This is a scandal," he said.
In a subsequent evidence session, transport secretary Ruth Kelly was repeatedly asked by both Stringer and the Committe chair, Gwyneth Dunwoody, for a public inquiry into the collapse. Kelly rejected this.
Kelly did indicate that the Metronet collapse could adversely influence whether Metronet shareholders win government work in the future. "Of the five, Balfour Beatty, Atkins and Bombardier have each written-off £300M. Thames Water and EDF are yet to report. This has not only impacted on these companies financially, but also impacted on their reputation."
Dunwoody commented, "You mean taking on a contract, not managing it, and then walking away might damage their reputations? How astonishing."
Kelly said the the shareholders would have this, "Terrible failure" taken into account should they bid for public work.
PPP Administrator Alan Bloom from Ernst&Young said that the sale of Metronet, confirmed last week, would would need to complete by January 18, when TfL's funding package runs-out. He revealed that Transport for London paid the Administrators £13M per week to keep the Metronet shell company operating. Over six months which represents some £336M.
"This is public money down the drain. We have a responsibility to get this out in the open," said Stringer.
London Underground chief Tim O'Toole said that he wanted to take control of Metronet's contracts as soon as possible, and would put much of the work out to tender, hinting that Tube Lines or its shareholders Bechtel and Amey could be in a strong position to pick up some of this work.