UNCERTAINTIES ABOUT safety regulation and funding mechanisms threaten to undermine London Underground's efforts to launch the £7bn privately financed infrastructure and train improvement programme unveiled this week.
Contractors and consultants immediately started to form consortia to bid for the work, but said they needed more details of the contractual arrangements before spending money on bids.
So far Railtrack, consultants Symonds, Gibb, Mott MacDonald and Brown & Root plus contractors Amec, Balfour Beatty and Amey have expressed interest in bidding for the work.
Deputy Prime Minister John Prescott announced the first details of plans to use private finance to clear London Underground's £1.2bn investment backlog on Friday. He said he wanted LU to use private finance to carry out £7bn of infrastructure and train improvements over the next 15 years.
LU will retain overall control of the Tube system, employing train drivers, running the ticketing and signalling systems and staffing stations.
Private contractors will then be invited to bid for concessions combining the maintenance and modernisation of track, signalling and rolling stock.
Prescott said he was undecided on whether to let the work under a single private concession or to split it into two or three franchises. If the network is split it is likely to be between deep tunnels, track built in cut and cover and above ground track.
Bidders will be invited to tender either for the whole system or for one or two smaller franchises. 'We could accept a single bid from Railtrack,' said Paymaster General Geoffrey Robinson. LU would then have to decide which solution offered the best value for money.
Invitations to bid for the work are not expected to go out until 1999 with contracts due to be let the following year. In the meantime LU has to start talks with potential bidders so that a mutually acceptable contractual framework can be set up.
However, splitting the Tube system into two or three sections could compromise safety, according to a document on public private partnership for LU, released by the Department of the Environment Transport and the Regions this week.
This reveals that the Health & Safety Commission had warned the government that 'the more complicated the structure and the greater the number of interfaces, the more difficult and expensive it would be to set up a suitable safety regime'.
Mahmud Nawaz of economics consultancy London Economics said there would need to be a regulator to ensure safety standards are maintained. And he warned that this regulator could impose tough and expensive safety requirements on contractors to maintain safety standards across different sections of the network, threatening the financial viability of their concessions.
Nawaz pointed out that safety considerations prevented the break up of the national air traffic control system into regional operators because of the risks to long distance aircraft.
ICE economist Owen Simon also expressed concern that LU and the private operators could blame each other for poor services.
In the meantime LU will get an extra £365M in government funding to pay for urgently needed work over the next two years. This includes £100M unspent cash carried over from last year's budget and will bring total Tube spending to £1bn over two years.