Tube PPP study not based on value for money

28 Feb 02
The Ernst & Young feasibility study into the London Underground public-private partnership which ministers relied on to proceed with the partial privatisation of the Tube should not be viewed as a value-for money study, MPs heard this week.

01 March 2002

Members of the Commons transport committee suggested that Ernst & Young's findings were based on subjective evaluations which heavily tilted the conclusions towards proceeding with PPP.

In a hearing on February 27, MPs raised concerns that the method of analysis used for the consultants' report had an overall 5% benefit added in favour of the PPP.

One of these extra criteria was a 'social cost adjustment', which Martin Blaiklock, a project finance consultant, said was highly unusual. 'I cannot recall seeing an occasion when it has been used to assess a bid, and I have worked in this field for 25 years,' he told the committee.

Ernst & Young partner Dougald Middleton admitted the firm had not seen the SCA used in any other PPP evaluation, but that they had been asked to make the assessment by London Underground. Martin Callaghan, LUL PPP project director, said they always used the SCA to evaluate costs in any major project.

London's transport commissioner, Bob Kiley, told the MPs that his solution of using the capital market to raise finance would mean all 350 Tube trains being either replaced or refurbished over the first seven and a half years. Under the PPP, he said, only 12 trains would be replaced or refurbished in that time.

A DTLR spokesman said ministers had always conceded that the Ernst & Young study was subjective, but that critics should look at what the PPP could deliver over the project's 30-year lifetime.


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