Government funding of Transport projects: Metronet

So TfL are going to pile in £750m worth of public money to the tube network to stop it grinding to halt as a result of the collapse of Metronet.  Tim O’Toole (MD of LUL) has said he expected the taxpayer to plug any financial gaps left by the Metronet intervention. "-This will feed in with the larger discussion with the government about the funding of TfL and transport in London-."  Indeed it will.  So much for pass the risk on to the private sector! 

I am not against PPP as an alternative to government lending and bond schemes as I agree with the sentiment that the private sector will deliver projects to a better standard and on time - but only if they really are genuinely carrying the risk.  The problem with Metronet was they took on more than they contractually agreed to do because they thought that the extra work would mean they would get more cash from the gravy train.  Ken, who clearly wanted to make a scene over this one, dug his heals in and took Metronet down.  In some respects, I think Ken has done a good thing - he has exposed this contract for what it is - an over generous ticket to the good life for a bunch of fat cats who believed that now they were working public sector rules so they couldn't lose.

There were times that it made more financial sense to Metronet to not meet their targets.  They messed with competitive tendering by awarding all contracts to members the consortium rather than having a diverse supply chain.  It is text book stuff on how not to do it.  As it turns out, no-one is the winner out of this.  The investment programme on the tube is likely to be hit with costs and slowed up and the tax payer is hit with a massive bill.  At least Ken isn't openly gloating.  

And so he shouldn't, the alternative scheme was a bonding scheme that would have meant exactly the same - only Ken wouldn't have anyone else to blame when it went wrong as TfL would have taken the risk.  The whole maintenance contract agreements on the tube have been a massive case of picking a loser - while we pick up the bill.