E&Y paid £33m for Metronet administration

Ernst & Young was paid £33m for handling the administration of Metronet,
the company which left the maintenance of two thirds of the London Underground
in limbo when it collapsed.

The failure cost the taxpayer up to £410m, the National Audit Office also
disclosed in a highly-critical report released today.

‘The taxpayer has borne some of the direct costs of Metronet’s failure,
including the unexpected upfront payment of £1.7bn. We estimate there has been a
direct loss to the taxpayer of between £170m and £410m,’ the NAO said.

The government had to shell out the £1.7bn to cover Metronet’s debt
obligations to its lenders, which would have been paid back over the course of
the 30-year contract if the company had not collapsed.

‘The main cause of Metronet’s failure was its poor corporate governance and
leadership. Many decisions had to be agreed unanimously by five shareholders,
which all acted as Metronet’s suppliers and had different motivations depending
on their roles. The executive management changed frequently and was unable to
manage the work of its shareholder-dominated supply chain effectively,’ the NAO
said.

The suppliers had power over some of the scope of work, expected to be paid
for extra work undertaken and had better access to cost information than the
management, the NAO said.

‘The poor quality of information available to management, particularly on the
unit costs of the station and track programmes, meant that Metronet was unable
to monitor costs and could not obtain adequate evidence to support claims to
have performed work economically and efficiently.’

The public sector watchdog called for an annual review of any future work,
including an audit of financial models produced to improve the transparency of
information about delays or cost overruns and make the Department for Transport
aware of any risk to the taxpayer in any future.

The NAO added future Public-Private Partnership contracts should be awarded
to bodies which had clear leadership, a credible corporate governance structure
and an approach to securing suppliers which could clearly demonstrate value for
money.