PracticePeople In PracticeDeloittes LU report: main findings

Deloittes LU report: main findings

The Deloitte & Touche report on PPP for the London Underground has finally gone public following a High Court Ruling. These are the key points to come out the report.

The D&T report says:

Neither the 30-year nor the seven and a half-year [value for money test] provides a satisfactory basis for establishing value for money (VFM).

  • There is no evidence to suggest that there is a valid basis for establishing whether PPP will achieve VFM.
  • The selecting of 30-year contracts are flawed because bidders were not required to submit prices for the whole period, but only for the first seven and a half years.
  • The draft Public Sector Comparator shows the seven and half-year bids to be more expensive than the public sector alternative.

Highly material adjustments to the PSC are judgmental, volatile or statistically simplistic.

  • Adjustments made to Base Costs add £2.5bn to the PSC.
  • Concerns raised about the statistical analysis employed in the financial evaluation of the bids. D&T considers the analysis to be too simplistic and arbitrary.

Selection of preferred bidders has occured too early in the process and could have a materially adverse impact on VFM.

  • Appointment of bidders should be delayed until negotiations on conditionality are complete.

Financial advantages of selecting [one of the] preferred bidder[s] depends upon judgmental adjustments.

  • Assumptions for selecting preferred bidders are highly subjective.

Public sector bond financing has been largely dismissed.

  • Bond financing as a basis for PSC has been largely dismissed despite an efficiency gain of £900m.

Links

PwC: D&T Tube report not ‘balanced’

D&T Tube report

NAO to study unedited Tube report

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