Metronet contract has lost taxpayers £410m, says PAC

1 Mar 10
MPs have attacked the Department for Transport for its ‘inadequate’ contract management, which it said has resulted in losses of up to £410m for the taxpayer
By David Williams

2 March 2010

MPs have attacked the Department for Transport for its ‘inadequate’ contract management, which it said has resulted in losses of up to £410m for the taxpayer.

A Public Accounts Committee inquiry into the collapse of Metronet, the company set up to upgrade the London underground rail network under the Private Finance Initiative, found that the department’s assumptions were ‘flawed from the outset’.

The government entered into three 30-year contacts to improve the tube network in 2003. But in 2007, two of the contractors – Metronet BCV and Metronet SSL – went into administration, resulting in delays to the renovation programme and losses of between £170m and £410m.

The PAC criticised the department for shouldering the majority of the risk of failure, and for its ‘hands-off’ approach in spite of warnings from the National Audit Office in 2004 that it should manage the contract more closely.

The MPs said the DfT’s assumption that Metronet would be well managed was ‘flawed,’ and undermined by the assurance that the taxpayer would meet 95% of debts if the PFI project collapsed.

The report also pointed out that London authorities were unable to oversee the contract because they were unable to access sufficient information, and concluded the DfT must learn from its mistakes.

PAC chair Edward Leigh called the department ‘naïve’, and said it was ‘unacceptable’ that it ignored the NAO’s warning.

‘These mistakes must never be repeated on future large contracts – and government departments must establish and exercise the right to intervene where problems of this magnitude occur,’ he said.

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