Examination of Witnesses (Questions 140
- 145)
WEDNESDAY 17 OCTOBER 2007
MR TERRY
MORGAN
Q140 Chairman: I understand that,
but I need to know what it is that you will be asking for which
you believe you can deliver, which will be value for money and
which will be part of that negotiation.
Mr Morgan: The big project is
that we will have done a great deal of work on the Jubilee line
and we will have done a great deal of work on the Northern line
by the time we come to the Periodic Review. The big issues around
the Periodic Review I think is a number of issues. One is with
regard to Piccadilly, a huge project to upgrade, both the signalling
and to purchase a new fleet for 2004[1],
so that has to be sorted and settled and moved forward before
the Periodic Review. Clearly the Periodic Review is important
in terms of confirming that. Secondly, bearing in mind that this
contract is in embryonic stage and negotiations started in the
1990s, the agenda has changed enormously since.
Q141 Chairman: That is exactly what
we are asking you.
Mr Morgan: So the expectations
around the environmental debate is something we expect to see
built within the Periodic Review work that we will be asked to
bid for. We have in the detail obviously gone through enormous
learning curves about how we think, and London Underground think,
we could make this deal more efficient. So again we have been
sharing views. For example, concerns have been expressed about
engineering overruns, how we can make that more effective. We
have talked about how, in terms of when we go in to do some work,
do we actually minimise disruption to the public, so again lots
of discussions around more innovative ways of trying to get greater
access to do the work, but at the same time to ensure that we
can actually get the programmes completed on time. So we are fully
engaged with London Underground on coming up with ideas to improve
the work we can do -
Q142 Chairman: You are assuming that
this will in its turn be a fixed price contract?
Mr Morgan: Our view is that we
had a 30 year franchise and that the Periodic Review is all about
agreeing the scope of work, pricing and the performance objectives
that we are setting for the second review period. That is our
approach to it.
Q143 Chairman: Why then do you think,
finally, that there is this slight confusion in the minds of others
that the contracts are not necessarily fixed price? What clarity
of view, Mr Morgan, is it that you have got that is withheld from
others?
Mr Morgan: The area that creates
uncertainty about whether this is a fixed price contract is where
there is a dispute, and where there are huge amounts of money
around that dispute the consequences of that dispute can make
it such that that ability to maintain a fixed price approach,
knowing that there is then a dispute in place which might be quite
substantial brings huge risk.
Q144 Chairman: Yet there is a very
clear Arbiter with a responsibility and clear arbitration machinery?
Mr Morgan: You are right. The
Arbiter, though, does not handle disputes. There is an arbitration
procedure which deals with disputes, but it takes time. That is
the issue.
Q145 Chairman: So the problem is
not that you cannot ask for more money, it is not that you cannot
demonstrate that you are worth more money, the problem is you
have to take some time to produce the evidence and argue it?
Mr Morgan: That is part of it,
but I equally have to say that delivering the projects on time
gives you a huge advantage in terms of at least taking away the
debate about whether things were delivered on time. When you have
a time issue and a cost issue, it becomes very complicated.
Chairman: Mr Morgan, you have, as always,
been very tolerant and helpful. Thank you for coming.
1 Note by witness: should be 2014 Back
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