Firms sweat on MPs' Metronet verdict

Firms who worked on the controversial Metronet deals are braced for further criticism this week as a commons committee publishes a report into the matter.

The Commons’ transport select committee will publish what is expected to be a highly critical report into the London Underground and its Public-Private Partnership Agreements on Friday morning.

Ernst & Young, PricewaterhouseCoopers and KPMG have together earned almost £25m from advising on various aspects of the deal, which has provoked criticism at Westminster after the high-profile collapse of the rail maintenance contractor.

After advising London Underground and the Department for Transport on the deal, E&Y continues to profit because it is now handling the administration.

During an intense grilling by Transport Committee chiefs last year Alan Bloom admitted that the collapsed business was costing £13m a day to run.

This figure excludes the debt on work that Metronet is still contracted to carry out, meaning further costs for its prospective new owners at Transport for London.

According to figures submitted to the Public Accounts Committee in June 2004, PwC, as the lead financial adviser to the London Underground ahead of the Public Private Partnership, earned £21.4m.

KPMG earned £2.4m for auditing public sector methods for assessing the value of the bids for the tube contract for London Underground.

E&Y earned approximately £1m for advice to both London Underground and the Department for Transport, separate parliamentary records revealed.

MPs on the committee are expected to contrast the apparent success of the Tube Lines PPP with that of collapsed Metronet following claims that the agreements insisted upon by then chancellor Gordon Brown ended up costing £500m.

While Tube Lines maintains a far smaller chunk of the Underground its finance function was proportionately bigger than Metronet’s, adding weight to suggestions that the latter’s financial operations were not up to par.

Committee chairwoman Gwyneth Dunwoody said at one point during the development of the report that the evidence showed the original contracts with both consortia were ‘not only deficient but useless’.

PPP Arbiter Chris Bolt earlier told the committee Metronet’s performance was ‘deficient’ and it had failed to sort out problems with its supply chain. He said PPPs could work and matters might have come to light sooner if he had been allowed to complete an annual report in 2005.

Unions have called for all the work ­ including that covered by Tube Lines ­ to be taken back in-house by Transport for London and London Assembly Transport Committee chairman Roger Evans said TfL had never wanted either PPP and should not be saddled with the feared £2bn cost of the Metronet failure.