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Treasury orders Tube bidders to delay costly improvements

NEWS

TREASURY OFFICIALS ordered bidders for the £13bn upgrade of London Underground to delay some efficiency improvements because they were too expensive, the chairman of one of the consortia revealed this week.

Bidders, he said, were ordered by the Treasury to put back spending on new trains because their introduction could push up bonus payments for good performance.

The claims were made by Michael Cassidy, chairman of the Linc consortium. Linc bid unsuccessfully for the Bakerloo, Central and Victoria line contract (BCV) and for the subsurface lines contract (SSL), which includes the Metropolitan, District and Circle lines.

Cassidy stressed he was speaking in a personal capacity and not on behalf of Linc whose members are Alcatel, Anglian Water, Bombardier, Fluor Daniel and Mowlem. It is now reserve bidder for the BCV and SSL contracts.

Cassidy claimed bidders could put new trains into service within the first eight years of the three 30-year Public-Private Partnership (PPP) contracts.

But this would mean that the government risked having to pay costly performance bonuses as services improved.

As a result, new trains are not expected to come into service before the eighth year of the 30year contracts. Bidders have instead been told to concentrate on improvements which will yield smaller bonuses. These will fit with Treasury imposed budgets in the first eight years of the contracts.

'It (the Treasury) may be prepared to pay, say £600M to £700M a year - but not £1.5bn, ' said Cassidy.

Smaller bonuses relate to less capital intensive works such as station cleaning and train refurbishment.

Government payments for this work will be made to the private companies via the Greater London Authority's transport arm, Transport for London (TfL).

Cassidy suggested there were political reasons behind the timing of improvements as TfL will benefit from increases in ticket revenues after the upgrade.

He also suggested that the government wanted to use the delay to limit the amount of cash at TfL's disposal, early in the upgrade programme. 'They don't want to create a cash cow for a future Ken Livingstone, ' said Cassidy.

The Treasury first approached the bidders with its concerns after initial tenders had been submitted earlier this year, said Cassidy.

'We were told that the totality was too expensive - to take out sectors or delay expense until later, ' he said.

As a result, the private companies re-adjusted their work programmes to fit in with the Treasury cashflow projections when bids were refined.

Preferred bidders for the three contracts were chosen in May. Metronet won the BCV and SSL contracts, whereas consortium Tubelines was selected for the Jubilee, Northern and Piccadilly lines.

Metronet comprises Balfour Beatty, WS Atkins, Thames Water, Seeboard and Adranz.

Tubelines comprises Jarvis, Amey and Bechtel-Halcrow.

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