TfL announced “a formal expression of interest” to take over contracts operated by Metronet, the failed infrastructure company responsible for maintaining and upgrading more than two thirds of the Underground network. The move would unwind one of Gordon Brown’s flagship policies. The collapse of Metronet was embarrassing for the former chancellor who backed the establishment of the public private partnership against stiff opposition from TfL and Ken Livingstone, London’s mayor.

TfL, under the proposal made to Alan Bloom of Ernst & Young, Metronet’s administrator, would take over the contracts for an initial period of up two years. But it did not rule out trying to make the move permanent if it were successful.

The failed contractor is temporarily being run by the former Railtrack administrator, who has been given public funding by TfL to ensure the Tube network does not grind to a halt. A spokesperson for Mr Bloom said that he was looking forward to receiving a formal offer from TfL by the end of the September but would also “like to receive other bids”.

Tube Lines, responsible for maintaining the remainder of the network, said on Friday that it was not going to bid for the Metronet contracts. It said: “We would need to know what we would be bidding for. When a decision is made about the long term future [of the work] Tube Lines will review its opportunities.”

Metronet, which was owned by five companies – WS Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy and Thames Water – went into administration last month after it ran out of cash only four years into a £30bn-programme to upgrade the underground. It had sought £551m emergency funding but was granted only £121m by an independent arbiter.

TfL said: “We want to bring Metronet out of administration and this is the fastest and most efficient way.” Tim O’Toole, London Underground managing director, added: “The best and most robust way to achieve our ultimate goal is for an early exit from the administration process to enable TfL to maintain the continued safe operation of the Tube network and to mitigate the performance and cost risks that inevitably come with such a situation.”

Unions threatening to disrupt services next month because the administrator had failed to guarantee Metronet jobs, welcomed TfL’s move. Bob Crow, RMT general secretary, said it was the union’s “view that Tube maintenance should be returned to the public sector under the di­rect control of London Un­der­ground. If this is to be a se­rious bid it is clearly a wel­come step in the right direction”.

Gerry Doherty, TSSA general secretary, said: “Returning Tube maintenance to TfL could ultimately deliver a stable, economic and efficient structure that is better able to meet the needs of Londoners than that delivered by the failing private sector under the PPP arrangements.”

See also:

TfL in pursuit of stricken Underground contractor Metronet

The Times: August 25, 2007
Steve Hawkes

Transport for London (TfL) is bidding for Metronet, the stricken London Underground contractor, in a move that could lead to maintenance work on three quarters of the Tube being returned to the public sector.

The Mayor of London’s transport authority revealed yesterday that it had lodged an expression of interest with Metronet’s administrator and would make a formal offer by the end of next month. In a short statement, TfL said that it “was in the best interests of all parties for an exit from administration as quickly as possible”.

The move follows the collapse last month of Metronet, which ran more than £2 billion over budget on repairs and refurbishments to nine London Undeground lines, including the Victoria, District and Circle lines.

TfL would state only that it wanted to take control of the contractor on a “temporary basis”. However, sources said that TfL executives were preparing to operate the business for two years, given the scale of inefficiency in the Metronet business and the time they believe that it would take to restore it to full health.

The decision threatens to spark a new political dispute between Ken Livingstone, the Mayor, and Gordon Brown. Mr Livingstone has been a fierce critic of the Public Private Partership (PPP) – championed by Mr Brown when he was Chancellor – as a way of funding the biggest Underground investment programme since the Second World War.

When Metronet called in the administrators last month Mr Brown insisted that the PPP was working. He noted: “If Metronet pulls out, then another private company will be found to take its place.”

Metronet was four years into a 30-year, £17 billion work programme, split into two contracts. It was attacked for vast cost overruns and a system under which work was handed out among its five shareholders rather than awarded by competitive tender. The latter approach is used by Tube Lines, the other London Underground contractor.

TfL set aside £750 million last month to ensure that maintenance and repair work on the Metronet lines did not grind to a halt, putting a further strain on the public purse.

Tim O’Toole, the London Underground managing director, said yesterday that TfL wanted to put in place a “stable, economic and efficient structure” at Metronet as quickly as possible. He added: “We strongly believe that the best and most effective way to achieve our ultimate goal is for an early exit from the administration process.”

Alan Bloom, the Ernst & Young partner in charge of the administration process, declined to comment. Union leaders, who have declared a series of three-day strikes by 1,400 Metronet staff over a planned redundancy programme, welcomed TfL’s move.

Ken rolls the dice

"To impose the PPP on the capital is to show contempt for the overwhelming views of London"
Ken Livingstone, April 2001

"Mr Livingstone has made clear that he would like to see a way forward which involves maintenance being carried out by London Underground"
TFL spokesman, 23 August 2007

See also:

TfL could take over Metronet's PPP contracts

Guardian Unlimited: August 24, 2007
Dan Milmo, transport correspondent

Transport for London moved to unravel one of Gordon Brown's flagship policies today by declaring an interest in taking over Metronet, the stricken company behind a controversial £17bn public private partnership programme to upgrade the capital's underground network.

The London mayor's transport authority said it had lodged a formal expression of interest in taking over Metronet's two PPP contracts, which cover three-quarters of the capital's tube network.

If TfL's bid is successful it would undermine the fundamental principle of the PPP process, which is to have private sector involvement in funding and running a public asset. The tube PPP was one of the ideological cornerstones of Gordon Brown's tenure as chancellor, when he drove through the programme in the face of vociferous opposition from Mayor Ken Livingstone.

One of Mr Livingstone's senior lieutenants, London Underground boss Tim O'Toole, said the contracts would be restructured under the TfL proposal.

"We strongly believe that the best and most robust way to achieve our ultimate goal is for an early exit from the Administration process, to enable Transport for London to maintain the continued safe operation of the Tube network and to mitigate the performance and cost risks that inevitably come with such a situation."

The Guardian revealed last month that TfL has held talks with the government about taking over the contracts on a temporary basis, but it has now decided to make an official approach to administrator Alan Bloom, the Ernst & Young accountant who was called in to manage Railtrack's insolvency.

If TfL's bid is successful it would unravel the fundamental principle of the PPP process, which is to have private company involvement in funding and running a public asset. The tube PPP was one of the ideological cornerstones of Gordon Brown's tenure as chancellor, when he drove through the £30bn PPP programme in the face of vociferous opposition from London mayor Ken Livingstone.

Mr Livingstone has played an astute political game second time round, refusing to criticise the PPP process or its intellectual godfather. However, his office has made clear in talks with government officials that they believe Metronet's internal problems to be more severe than envisaged and they are unlikely to be resolved if the contracts are returned to the private sector.

Metronet went into administration in July after racking up a projected overspend of £2bn. So far TfL has provided emergency funding of around £750m to ensure that maintenance work continues and the tube does not grind to a halt.

Tim O'Toole, the head of London Underground, said last month he expected the government to refund any money spent by TfL on propping up Metronet while it is in administration: "This will feed in with the larger discussion with the government about the funding of TfL and transport in London," he said.

Under the terms of the PPP, Metronet was paid around £860m a year in taxpayers' money.

Other funds came from Metronet's shareholders - Balfour Beatty, Thames Water, EdF, WS Atkins and Bombardier - which put in £350m and have washed their hands of the company. However, they still have lucrative subcontracts with Metronet, which TfL is expected to enforce with much more zeal if it takes over the business.

RMT general secretary Bob Crow said: "It is the RMT's view that tube maintenance should be back in the public sector under the direct control of London Underground. If this is to be a serious bid it will obviously be a welcome step in the right direction."