Metronet

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Metronet Rail Ltd
TypePrivate / consortium
IndustryRailway infrastructure
Founded1999
Defunct2009
FateAdministration
HeadquartersTemplar House, 81-87 High Holborn, London, WC1V 6NU
Key people
Andrew Cooper (BCV MD), David Crawley (SSL MD), Andrew Lezala (group CEO)
Number of employees
approx. 6000
ParentAtkins, Balfour Beatty, Bombardier Transportation, EDF Energy, Thames Water

Metronet Rail was one of two infrastructure companies (the other being Tube Lines Ltd) in a Public-Private Partnership (PPP) with London Underground. A consortium of private companies, Metronet was responsible for the maintenance, renewal, and upgrade of the infrastructure (track, trains, tunnels, signals, and stations) on nine London Underground lines from 2003 to 2008.[1][2]

Following financial difficulties, the company was placed in administration in July 2007.[3] In May 2008, the company's responsibilities were transferred back into public ownership under the authority of Transport for London (TfL).[4][1] In June 2009 the National Audit Office estimated that the failure of the Metronet PPP contract cost the taxpayer up to £410m, adding that "most of the blame for Metronet's collapse lay with the consortium itself."[5] The administration complete, the company was wound up in December 2009.[6]

History[edit]

In the late 1990s, the Labour government proposed a Public Private Partnership (PPP) to reverse years of underinvestment in London Underground.[7] The Tube trains themselves would be operated by the public sector, however the infrastructure (track, trains, tunnels, signals, and stations) would be leased to private firms for 30 years to allow for improvements to be made.[7]

Metronet was founded in 1999 as a consortium of companies to bid for PPP contracts.[8] The equal shareholders were Atkins, Balfour Beatty, Adtranz (later Bombardier Transportation), SEEBOARD (later EDF Energy), and Thames Water.[8]

To pay for the works, each company provided £70m of equity. A further £2bn was raised using bank loans, and £600m from the European Investment Bank.[9] The consortium awarded contracts to its own shareholders, for example rolling stock contracts were awarded to Bombardier Transportation.[2] This closed shop supply chain approach was later criticised for causing high costs for the consortium.[10]

Formation of the PPP[edit]

Following a two-year bidding process,[11] Metronet and Tube Lines were selected as the preferred consortiums in May 2001.[12]

In April 2003, Metronet began to maintain, upgrade and renewal London Underground infrastructure as part of the PPP.[9] Metronet Rail had been the successful bidder for the two 30-year contracts for the following tube and sub-surface lines:

A second PPP company, Tube Lines, held the contract for the other London Underground lines – Jubilee, Northern and Piccadilly. Both Metronet and Tube Lines were colloquially referred to as "infracos".[12] Contracts were worth around £17bn over the 30-year period, with each contract receiving around £660m each month from the Government, albeit with reductions if targets are not met.[13]

Commitments under the PPP[edit]

Under the terms of the PPP contracts, Metronet agreed to maintain London Underground infrastructure (track, trains, tunnels, signals, and stations) to the standards and performance levels set in the contract. Furthermore, Metronet committed to delivering substantial improvements to the network, by refurbishing, upgrading and renewing track, trains, tunnels, signals, and stations. To encourage high reliability, deductions suffered for poor performance were set at twice the rate of increase in revenue for improved performance.[2][9]

At a cost of £7bn, Metronet promised substantial investment during the first 7.5 years of the contract (2003 to 2010):[2]

  • 147 stations (including lifts and escalators) modernised or refurbished by 2012
  • 127 miles of track renewed and 166 points/crossings replaced
  • Upgrade and refurbishment of tunnels, bridges, embankments, track drainage and other civil structures
  • Refurbishment of existing rolling stock, as well as making them more reliable
  • 47 new trains with upgraded signalling on the Victoria line by 2012 (delivered as 2009 Stock)
  • 190 new air conditioned trains for the District, Circle, Hammersmith & City and Metropolitan lines by 2015 (delivered as S Stock)
  • 24 new Bakerloo line trains by 2019 (cancelled following the collapse of the PPP)

Performance and criticism[edit]

In June 2004, the National Audit Office criticised the complexity of the PPP deals, noting they offered "the prospect, but not the certainty" of improvements.[14] In August 2004, Metronet was declared at fault by an accident investigators' report into a May 2004 derailment at White City, for failing to implement sufficient safety checks despite being ordered to do so by TfL.[15][16]

In April 2005, the Commissioner of Transport for London, Bob Kiley, pressed for an urgent review of the PPP, describing its performance as "bordering on disaster". A week later the chief executive of Metronet was sacked,[17] after complaints that it had made £50m profit despite being behind on all its major works.[18] By April 2005, it had started work on only 13 station refurbishments, instead of 32 as scheduled, and was more than a year behind on the refurbishment of 78 District line trains. It was also behind on its track replacement programme, having completed 28km of the anticipated 48km.[19]

In March 2005 the House of Commons Transport Select Committee noted that "Availability is the most important factor for Tube travellers. All the infracos needed to do to meet their availability benchmarks was to perform only a little worse than in the past. On most lines, they did not even manage that."[20]

In November 2006, Metronet were heavily criticised by the arbiter of the PPP, the Office of Rail Regulation (ORR) over their performance from 2003 to 2006.[13] Analysis included criticism that Metronet had not performed in an economic or efficient manner, and had failed to follow good industry practice. The ORR also stated that Metronet would be held responsible for £750m in cost overruns.[13][21] The other PPP consortium, Tube Lines, noted that they were delivering projects on time and on budget.[10]

In July 2007, Metronet admitted that it may have caused a Central Line train derailment near Mile End, in which a train hit a fire blanket left by maintenance workers.[22][23]

Administration[edit]

In April 2007, Mayor Ken Livingstone stated that Metronet could collapse due to a £750m overspend.[24] In July 2007 it was reported that Metronet was "teetering on the brink of administration".[25] The situation arose because it had received only £121m out of the £551m it needed to cover cost over-runs. By contrast, Tube Lines, the other PPP company, had brought in almost all of its works on time and on budget.[26] On 18 July 2007, the company was placed into administration.[6][3]

To enable its business activities to be kept going while the winding-up of the company was in progress, the UK Government provided Metronet with £2 billion in 2008.[27] Following negotiations with Bombardier, Metronet modified contracts to allow for continued delivery of 2009 Stock and S Stock trains, while releasing Bombardier from its obligation to resignal the sub-surface lines.[4]

Aftermath[edit]

On 27 May 2008, Metronet came out of administration, and its contracts and employees were transferred to Transport for London under two new temporary companies, LUL Nominee BCV Ltd and LUL Nominee SSL Ltd. On 3 December 2009, the PPP business of Metronet Rail became an integral part of London Underground.[4][1] Some of the improvements promised by Metronet were delivered (such as new 2009 Stock and S Stock trains), however other improvements were cancelled or delayed.

In 2008, the Department for Transport refuted claims that the PPP was to blame for the collapse of Metronet, and that it was "predominantly a corporate failure", with "structural weaknesses [that] led to its own downfall."[28] In 2010 the House of Commons' Public Accounts Committee reprimanded the Department for Transport for its failure to heed National Audit Office warnings about the company's management.[29] According to the report from the Public Accounts Committee, around £170m to £410m of taxpayer money was lost due to the failure of Metronet.[30][31] The companies involved in the consortium collectively lost around £350m in the collapse.[30]

In May 2010 it was announced that TfL would buy out the Tube Lines consortium, formally ending the PPP.[32] By the beginning of 2011, with the formal liquidation process having been completed, the Metronet brand and group of companies had ceased to exist.

See also[edit]

References[edit]

  1. ^ a b c "Metronet's takeover is complete". BBC News. 27 May 2008. Retrieved 7 March 2021.
  2. ^ a b c d "Metronet Brochure 2005" (PDF). Metronet. 2005. Archived from the original (PDF) on 31 October 2006. Retrieved 7 March 2021.
  3. ^ a b "Metronet calls in administrators". BBC News. 18 July 2007. Retrieved 7 March 2021.
  4. ^ a b c Wright, Robert (1 April 2008). "Metronet resolves contract dispute". Financial Times. Retrieved 7 March 2020.
  5. ^ "Metronet failure cost taxpayer upto £410m". Contract Journal. Archived from the original on 15 June 2009.
  6. ^ a b The London Gazette, 11 November 2009, pp. 19523
  7. ^ a b "New blow to Tube sell-off plan". BBC News. 16 December 2000. Retrieved 7 March 2021.
  8. ^ a b "House of Commons - Transport, Local Government and the Regions - Appendices to the Minutes of Evidence". Parliament.uk. October 2001. Retrieved 7 March 2021.
  9. ^ a b c "Final stamp on Tube PPP deal". BBC News. 4 April 2003. Retrieved 7 March 2021.
  10. ^ a b Milmo, Dan (28 May 2007). "London tube work - one firm on budget; the other £750m over". The Guardian. ISSN 0261-3077. Retrieved 7 March 2021.
  11. ^ Baldock, Hannah (9 February 2001). "Getting the Tube to work". Building. Retrieved 7 March 2021.
  12. ^ a b Kiley, Bob (12 October 2001). "Bob Kiley: Trouble down the line". the Guardian. Retrieved 7 March 2021.
  13. ^ a b c "Metronet shareholders face £750m bill for London Underground failures". the Guardian. 17 November 2006. Retrieved 7 March 2021.
  14. ^ "London Underground PPP: Were they good deals? - National Audit Office (NAO) Report". National Audit Office. June 2004. Retrieved 7 March 2021.
  15. ^ "Formal Investigation into the derailment of a Central line train at White City on 11th May 2004" (PDF). London Underground. August 2004. Archived from the original (PDF) on 22 September 2004.
  16. ^ Clark, Andrew (20 August 2004). "Private firm blamed for tube derailment". The Guardian. London.
  17. ^ "Metronet boss sacked over delays". the Guardian. 13 April 2005. Retrieved 7 March 2021.
  18. ^ Vulliamy, Ed; Clark, Andrew (21 February 2005). "Down the tube: how PPP deal is costing London". The Guardian. London.
  19. ^ Webster, Ben (14 April 2005). "Metronet behind schedule on all of its main Tube projects". The Times. London.
  20. ^ "The Performance of the London Underground" (PDF). House of Commons Transport Committee. 9 March 2005. p. 9.
  21. ^ "Tube and train services disrupted". BBC News. 20 November 2006. Retrieved 12 January 2007.
  22. ^ "Metronet admits it may have caused tube derailment". the Guardian. 5 July 2007. Retrieved 7 March 2021.
  23. ^ Rail Accident Report - Derailment of a London Underground Central Line train near Mile End station 5 July 2007 (PDF). Department of Transport - Rail Accident Investigation Branch. January 2008. Archived from the original (PDF) on 20 July 2011.
  24. ^ "Mayor admits Metronet could collapse". the Guardian. 24 April 2007. Retrieved 7 March 2021.
  25. ^ Hawkes, Steve (17 July 2007). "Metronet on brink of collapse after plea on costs is rejected". The Times. London.
  26. ^ Partnership that turned sour, The Times, 27 June 2007
  27. ^ "Govt in £2bn Metronet bail-out". www.inthenews.co.uk. 7 February 2008. Archived from the original on 26 October 2013. Retrieved 6 March 2017.
  28. ^ "PPP 'not to blame' for Metronet collapse". the Guardian. 31 March 2008. Retrieved 7 March 2021. The government is clear that this was predominantly a corporate failure, and that the structural weaknesses of Metronet led to its own downfall.
  29. ^ DoT failed to heed NAO warning over Metronet finances Archived 18 August 2010 at the Wayback Machine, Accountancy Age, 2 March 2010
  30. ^ a b "House of Commons Committee of Public Accounts - Department for Transport: The failure of Metronet" (PDF). Public Accounts Committee. 22 February 2010.
  31. ^ "'Poor management' failed Metronet". BBC News. 2 March 2010. Retrieved 7 March 2021.
  32. ^ "Tube maintenance back 'in house' as new deal is signed". BBC. 8 May 2010. Retrieved 9 May 2010.

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