Examination of Witnesses (Questions 66-79)
MR TIM
O'TOOLE
8 DECEMBER 2004
Q66 Chairman: Good afternoon. May I ask
you to be kind enough to identify yourself, please?
Mr O'Toole: I am Tim O'Toole,
the Managing Director of London Underground.
Q67 Chairman: Do you have something that
you want to say before you begin?
Mr O'Toole: Madam Chair, I just
wanted to thank you for taking your time and the time of this
Committee to look into this, with all the changes in front of
you, with the many matters in your remit, it would be so easy
to dismiss the Underground and the PPP as yesterday's news. But
it is so important for me and the people who work there that this
be kept in front of us because PPP did not solve and will not
solve London Underground's issues with one favourable spending
round decision, this will require examination and support for
many, many years if we are going to turn this system around, and
the only way that will happen is if people like you take the time
to focus attention on it. For that I am grateful.
Q68 Chairman: That is extraordinarily
tactful of you, Mr O'Toole, and I think I can assure you that
you are not going to escape our close attention over the coming
years.
Mr O'Toole: I shall look forward
to it.
Chairman: Mr Efford.
Q69 Clive Efford: Before the PPPs were
signed you were concerned by a reported "funding gap".
Has this gap been closed?
Mr O'Toole: Before the PPP was
signed, you say I was concerned about the funding gap?
Q70 Clive Efford: "You" in
terms of TfL were concerned, prior to taking over the contracts.
I accept that this may be a more appropriate question for the
Mayor, who cannot be with us, so if it causes you a problem perhaps
you can send a note on that?
Mr O'Toole: I did come after most
of the PPP wars were over with the mandate from the Mayor and
the Commissioner to make it work. But I will say that it was plain
from the start that PPP was only a partial solution. It had been
de-scoped in many ways; there were obligations that were implied
in the arrangements that did not seem to be addressed in the PPP.
In that respect the Department signed the Letter of Agreement
with the Mayor at the time of transfer that said some of these
uncertainties would be addressed by them as those liabilities
materialised. And so far, in fact, they have been good to their
word and that Agreement has been lived up to, the most obvious
example being the expanding pension obligations of London Underground.
Similarly there was much work that has to be done with the Underground
if it is going to be truly rehabilitated that we do not get out
of the PPP. The most obvious example is something like Victoria
Station. Victoria Station simply cannot deliver the throughput
required in order to take advantage of the line upgrade if it
happens. If we do not do something about that station we have
wasted money on the upgrade. With the government's agreement with
the Mayor to allow prudential borrowing we now have the possibility,
the capacity to bring new money into play to repair things and
address things like Victoria Station, so that we can fill out
the whole picture.
Q71 Clive Efford: You say that you are
using prudential borrowing to upgrade Victoria Station. Is there
any input into that from the Infracos, the contracts for the PPP?
Are any additional resources coming through from the PPP that
were anticipated, and do they assist with schemes like Victoria
Station?
Mr O'Toole: That is a key question,
for this reason. In many ways, for my money the real problem with
the PPP is that it was kind of a failure of imagination. People
assumed that this is as good as we are going to get so we might
as well sign up to this, we cannot find anyone who will say this
is the greatest thing in the world but the thing people will say
is that at least it meant some money for the Underground where
there was none before. Now we are in quite a different environment;
we are in an environment of the East London Line extension, we
are in an environment of maybe Crossrail; we are in an environment
of prudential borrowing where we can bring more money to bear
to fix some of these problems. And yet we have the structure through
which I have to deal that may not prove flexible; it is yet to
be tested. There is no obligation for that work to be done by
the Infracos. You can see there would be obvious efficiencies,
however, if they did. So what we have done is to put in place—or
we are putting in place right now—framework agreements with
alternative suppliers. We will bid this, give the Infracos a chance
for some of this new work and if the prices and the schedules
are unsatisfactory we shall bring in other companies.
Q72 Chairman: You have sufficient flexibility
to do that. You can, when you are in a situation where you have
problems, begin to offer work outside in a way which you think
will contribute to efficiencies; is that what you are telling
us?
Mr O'Toole: Only work that is
outside of PPP, not the PPP work itself. I will say that there
is the further complication—and I do not want to make it
sound simple—that when the new asset is created, is brought
into service, it has to then be given to the Infracos to maintain.
So there is a further negotiation that you could see would be
an advantage to them in bidding for the work, but the fact that
that barrier is there is no reason, I think, not to expand our
choices.
Q73 Clive Efford: Who manages the contracts
and how closely are they monitored?
Mr O'Toole: Obviously they manage
their own business. We manage the contracts in the sense that
I have a Chief Programmes Officer with a team that is assigned
to each of the Infracos and they work with them to help them get
their capital work done, to keep score under the various measures
that the prior witnesses talked about; to make sure that incidents
are attributed to the companies accurately so that the right company
pays for a failure, et cetera.
Q74 Clive Efford: There are contracts
for additional works that are let; are they let by the Infracos?
Mr O'Toole: What do you mean by
additional?
Q75 Clive Efford: The National Audit
Office was not sure that the PPP gave good value for money and
they make reference to the fact that the additional works that
have been carried out have been more expensive than had been anticipated.
These additional works presumably go beyond the detail of the
PPP.
Mr O'Toole: I assume they are
referring to things like the transition projects and the like
that were delivered, or things like Wembley Park, where we have
given a contract to Tube Lines to deliver Wembley Park in time
for the opening of the national stadium, where the cost of that
project was more than we anticipated it would be. To answer your
question directly, we give out that business.
Q76 Clive Efford: But they seem to be
part of the PPP in the reference that I have in front of me from
the National Audit Office, but you have control over who gets
those contracts?
Mr O'Toole: That is correct.
Q77 Clive Efford: Are you concerned,
as the National Audit Office seems to be, about whether we are
getting value for money and the increasing costs of those contracts?
Mr O'Toole: Naturally I am concerned.
I am paid to always have that in front of me, which is why, as
I said, we want to provide for alternative suppliers, so if I
face another Wembley Park I do not have a choice of one, which
is what I faced in this case. The only way I could make that deadline
for the national stadium was to give that work to Tube Lines;
there was no one else who could have pulled it off in time. If
I face that decision again, once I have this framework of suppliers
in place—and I had to go through an OJEU Notice to put them
in place—I will have alternatives.
Q78 Chairman: Do Tube Lines accept that?
You must have had talks with them both on the urgency, the timetable
and the ability to do the work. Do they really accept that you
are now in a position where you have much more flexibility and
do not have to go back to Tube Lines?
Mr O'Toole: I am sure they accept
the proposition that I am not required to give them the work;
I am also sure that they would believe that in any similar project
in the future, they would be able to deliver greater efficiency
since they are ones who maintain the assets.
Q79 Clive Efford: I am still not clear
because if these are additional works they are not part of the
money paid through the PPP to the Infracos?
Mr O'Toole: That is correct.
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