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.