Light rail contractors charging for risks, say MPs

7 Apr 05
The use of design, build, operate and maintain contracts for light rail has driven up costs as bidders increase tender prices to try to cover risks over which they have no control.

08 April 2005

The use of design, build, operate and maintain contracts for light rail has driven up costs as bidders increase tender prices to try to cover risks over which they have no control. 

That is among conclusions by the Public Accounts Committee from an inquiry into why so few schemes have been completed. 

In a report issued on April 5, the committee said the government's insistence on these contracts meant that 'operators have been left to bear all of the revenue risks, and have built risk premia into their bids'. Such risks include parking provision at stops, traffic priorities, planning consents given alongside the route, and other factors not under the control of operators. 

The report notes that this had driven up the costs of the Manchester Metrolink third phase, Leeds Supertram and South Hampshire Rapid Transit to the point where the Department for Transport last year withdrew funding approval. It said the DfT had not acted quickly enough to help bidders when these problems became obvious.

The MPs also criticised the lack of integration of light rail with other forms of transport. Bus operators outside London are not regulated, and so can undercut light rail with cheaper fares.

The report said the DfT should require bids to show plans for transport integration. 

There are seven light rail lines in England, which carried 142.9m passengers in 2003/04. 

Construction costs per kilometre have ranged from £21.2m for Manchester Metrolink phase 2 to £5.4m for the Sunderland extension in Tyne  and Wear. 

The average cost was £10.2m.

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