PracticePeople In PracticeReport says Tube PPP case ‘not proven’

Report says Tube PPP case 'not proven'

A huge question mark was today left hanging over the government's plans for London Underground following the release of a National Audit Office report.

The report on the public private partnership bids for the troubled underground operator revealed that any decision based only on a financial analysis would be ‘unsound’.

Comparing the process with a traffic light, Jeremy Colman, assistant auditor general, said: ‘We are saying it’s a flashing amber – proceed with caution.’

The report focused on LU’s methodology for the financial bids and public sector comparators, though looked the whole infrastructure and not at individual bids.

However, the NAO report stated that the financial analysis was not sufficient on its own to ascertain whether the PPP option offered best value for money.

Sir John Bourn, head of the NAO, said: ‘London Underground and the secretary of state should not take a decision solely on the basis of numbers emerging from their analysis. There are other important factors that need to be considered alongside the figures to assess the best value for money option.’

The report highlighted strategic, contractual and incentive issues which would be difficult or impossible to quantify in financial terms but could have a direct impact on the value of different options.

Colman said that the biggest issue was the effective management of the project.’The case for PPP depends on the judgement that the private sector can run it better than the public sector,’ he said.

The report came as Bob Kiley, London’s commissioner for transport, and Deputy prime minister John Prescott were due to meet to discuss options for LU.Kiley favours a bond issue to raise finance for the existing system.

Links

Tube forced into £5bn accounts change

NAO launches inquiry into underground privatisation

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