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Some you win, some you lose

News that Railtrack has snapped up the sub surface lines deal has received a mixed reaction from those it would have had to compete with.

Preliminary discussions over a possible deal between Railtrack and London Underground over the upgrade of the Tube's sub surface lines have been going on since last November.

Deputy Prime Minister John Prescott has been closely involved in the talks, and the decision to make Railtrack the preferred bidder for this part of the £8bn Underground upgrade programme was taken during a meeting with advisors earlier this month to decide on priorities for the Department of the Environment Transport and the Regions over the next six months.

The next round of talks to flesh out the details of Railtrack's proposal is scheduled for completion by early next year. The company has proposed a raft of projects to connect the Tube with surface rail lines, including new seamless links with London's five main airports.

Railtrack is tight-lipped on the details of the talks but one insider ventured: ' What was placed in front of the Government was a concept. Some imaginative projects have been put forward and Prescott thinks he can do a good deal with Railtrack.'

Rod Hoare is managing director of the Metronet consortium of BICC, Adtranz and WS Atkins, one of the candidates to upgrade the deep Tube lines. He is positive about the deal. 'It leaves us with a clear run at the deep tubes. There's going to be active competition and I think we are going to see some very innovative bids.'

A director of another interested company was disappointed. 'Yes, we would have liked the opportunity to bid. Taking Railtrack out of the arena reduces competition but I would like to know what exactly Railtrack can offer that the industry cannot. Obviously, the one thing about giving it the sub surface lines is that at least it clarifies where everything is, and I think that is a good thing.'

The organisation he represents now intends to make a 'very strong bid' for the deep tube lines. 'It's unlikely that there will be a big group of tenderers and some will undoubtedly withdraw because this is going to be very expensive to bid for. It will all come down to raising debt and equity, and the ability to persuade the DETR and London Transport that you have the balance sheet to be able to do so.'

All interested parties appreciate that Railtrack would have been in a strong position to fend off competitors in any head to head bid for part of the Tube upgrade. Some are consulting lawyers to see whether the agreement to negotiate exclusively with Railtrack on the sub surface lines breaches European public procurement rules. But a legal challenge seems futile, just as it was when Railtrack picked up the Channel Tunnel Rail Link. The company's agreement not to bid for the other two deep Tube packages leaves the field open. There are also likely to be opportunities to work for Railtrack as subcontractors on the sub surface lines.

A director at one of the deep Tube consortia says: 'It will be interesting to see how they can take it on without competition. I don't know how they can justify it in light of European procurement regulations. There is a concern that this is all going to be delayed further. We've got a new mayor coming, and is he or she just going to accept a fait accompli?

'The big worry is that the timetable is going to drift and the whole process could end up being restricted to the sub surface lines,' he adds. 'It's very early days, but I think it could easily delay other schemes like CrossRail.' Indeed, Prescott told MPs after his statement that a decision on CrossRail is unlikely for at least two years, until responsibility for transport strategy in London passes to the new mayor.

Railtrack has faced a barrage of criticism for under-investment this year and the question is whether Prescott can nail down the company to some firm obligations on the Tube upgrade.

Some optimists believe he can. One contractor says doubters should look no further than the bargain he brokered to save the £4bn Channel Tunnel Rail Link.

Others are pessimistic about Railtrack's ability to deliver the improvements it signs up to given its slow progress in getting its core investment programme off the ground.

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