Update on the London Underground and the public-private (PPP) partnership arrangements - Transport Committee Contents


2  The performance of Tube Lines and the London Underground

11. Following Metronet's demise, responsibility for improvement and maintenance work on the Underground is as follows: Table 1: Responsibility for improvements to the Underground network, March 2010
Tube Lines TfL (formerly Metronet BCV) TfL (formerly Metronet SSL)
JubileeBakerloo Circle
NorthernCentral District
PiccadillyVictoria Hammersmith & City
Waterloo & City Metropolitan

Source: Department for Transport

Tube Lines (in collaboration with its parent companies Bechtel, and Amey, a subsidiary of Ferrovial) has been responsible for the upgrade and maintenance of the Jubilee, Northern and Piccadilly lines since 2002. The two former Metronet companies were transferred to TfL ownership in May 2008. London Underground, a subsidiary of TfL, is currently responsible for the day-to-day running and upkeep of the lines previously managed by Metronet on behalf of TfL.

12. The day-to-day performance of Tube Lines, and now London Underground, is judged on three outcomes: availability (assessed in lost customer hours, weighted according to the type of service disruption), the ambience of the network (the quality of the passenger experience) and the speed and quality of fault rectification.[14]

13. As we have noted in previous Reports, the ambience of travelling on the Tube has improved under the PPP. During this inquiry, Tube Lines told us that, since 2002, it has completed the upgrade and refurbishment of 72 of the 96 stations along the Jubilee, Northern and Piccadilly lines. In addition, improvement work was in progress on 13 stations, with work on the remaining 11 due to begin shortly. Tube Lines has also completed 76 lift and escalator refurbishments across the three lines.[15]

14. The improvements made to station infrastructures are welcome. However, as we noted in our 2005 report:

…ambience is the easiest of the three performance measures to improve, and although it is important to customers, it is less important than a speedy, reliable service.[16]

Tube passengers are most concerned about whether trains are available and reliable and it is against this measure that the performance of Tube Lines, and now London Underground, is judged.

Tube Lines

15. The Department for Transport (DfT) measures reliability against "the availability indicator". The measure records "Lost Customer Hours", resulting from delays and service interruptions, against a benchmark figure set out in the PPP agreements. The performance of Tube Lines between 2003 and 2009 is shown in Table 2 below. Table 2: Lost customer hours against benchmark on the lines managed by Tube Lines
—   —  2003-04 —  2004-05 —  2005-06 —  2006-07 —  2007-08 —  2008-09

—  

—  Jubilee —  33% worse —  1% better—  8% better —  20% better —  0%—  9% worse
—  Northern —  32% worse —  95% worse—  62% worse —  23% worse —  25% worse—  31% better
—  Piccadilly —  8% better —  52% better—  63% better —  51% better —  49% better—  54% better

Source: London Underground PPP & Performance Report 2008-09[17]

16. In every year since 2003-04, Tube Lines has performed consistently better than its benchmark target on the Piccadilly line. On the Northern line, the infraco's performance has bettered the benchmark only once, in 2008-09. This is because Tube Lines took over the Northern line when its infrastructure was in a particularly parlous state. Having completed a number of track and infrastructure improvements, Dean Finch, the former Chief Executive of Tube Lines, told us that the Northern line was now "one of the best performing metro lines [...] anywhere in the world".[18] Taken together, the performance of Tube Lines on the two lines, compares favourably with the record of Metronet—a point recognised by TfL which noted that Tube Lines had "showed more consistency in day-to- day maintenance performance".[19]

THE JUBILEE LINE UPGRADE

17. Tube Lines' recent performance on the Jubilee line, has been less satisfactory.[20] Until 2008-2009, the performance on the line was deemed satisfactory, but since then, it has been judged to fall short of the "acceptable level" of performance. The cause of Tube Lines' underperformance on the Jubilee line over the past 18 months is the overrun of the upgrade to the signalling system which has resulted in serious disruption to passengers. The upgrade to the line, when completed, will provide a third more capacity. It was scheduled to have been completed by 31 December 2009, but will now not be finished before October 2010.

18. To enable the work to take place, Tube Lines initially asked London Underground for permission to close the line wholly or partially for up to 52 weekend days. However, the line was eventually closed either wholly or partially for 120 weekend days from April 2007 through December 2009. As the deadline for completion of the project approached, the line closed with greater frequency, sometimes with little notice—between September and November 2009, there was a full or partial closure of the Jubilee line on one or both days of every weekend.[21] Over the Christmas holidays in 2009, the line was closed for four days, causing disruption at a particularly busy time of the year.

19. The disruption caused to the lives of residents and commuters who rely on the Jubilee line for work or leisure has been considerable. Tim Bellenger, Director of Research and Development, London TravelWatch, told us about the experience of a member of the public who relied on the Jubilee line to move around London:

She cannot plan her life properly now because she does not know whether or not the Jubilee line is going to be available, whether she is going to have to use a replacement bus for all or part of her journey. Essentially she is more dissatisfied now, because she does not know what is going to happen on the weekend.[22]

20. In addition to providing a vital link for commuters, the Jubilee line serves the entertainment venues of Wembley Stadium in North West London and the O2 Arena in South East London, and the ExCel exhibition centre in East London. In December 2009, The London Assembly Transport Committee reported the impact that the Jubilee line weekend closures had on those venues and their customers:

ExCel estimated that over one million visitors have been affected by disruption to public transport over the last two years and that it has lost 25% of its turnover due to the closures. It had paid some £500,000 a year in compensation to clients and measures to reduce the impact on visitors. The O2 had paid £400,000 in the last year for additional replacement transport for its customers when the Jubilee line was closed.[23]

21. Dean Finch, the then Chief Executive of Tube Lines, acknowledged that Tube Lines had underestimated the complexity and scale of the project on the Jubilee line and that this had contributed to the project running severely late. To his credit, Dean Finch apologised for the disruption to services on the Jubilee line and for the inconvenience experienced by passengers.[24] However, he also acknowledged that the disruption would continue until October 2010 and that Tube Lines had requested further line closures over the Easter holidays. As a consequence of its failure to meet the deadline, Tube Lines will be fined £10 million per month from January 2010 until completion of the works.[25]

22. We are concerned that, despite over 100 weekend closures of the Jubilee line, including complete closures of the line during seasonal holidays, Tube Lines has failed to complete the upgrade on time. The ongoing disruption caused to people who rely on the Jubilee line to go about their daily lives, and the cost to businesses, is unacceptable.

23. We welcome Tube Lines' apology and recognise that, in accordance with its PPP agreement, the company has been fined for its poor performance. However, that alone is not enough. Tube Lines must learn the lessons from its poor performance on the Jubilee line upgrade so that, in any future upgrades it undertakes, missed deadlines and disruptions for passengers are minimised. We call on Tube Lines to publish its plans for avoiding similar overruns to its projects in the future.

Changes to the scope of the project

24. Tube Lines placed much of the blame for the overrun of the signalling upgrade on LU. Both Tube Lines and TfL acknowledged that the upgrade is a complex project involving the introduction of signalling technology that has not been implemented in any other metro system in the world.[26] According to Tube Lines, LU had, on a number of occasions, changed its requirements for the project quite significantly beyond the scope of the original agreement. It claimed that these changes had added significant costs and delayed the project further. The task was, according to Tube Lines, made harder because London Underground had:

Constantly sought to depart from the contractual structure established under the PPP Agreement […] by repeatedly seeking changes to the scope and/or manner in which works are carried out.[27]

Tube Lines claimed that LU's behaviour had resulted in the project costing the company an additional £327million beyond the agreed price for the work. In an attempt to reclaim these costs and, in the face of opposition from TfL, Tube Lines appealed to the PPP Adjudicator, Alex Charlton QC.[28] However, on 22 January 2010, the PPP Adjudicator ruled that:

Tube Lines case is dismissed in its entirety […] LU has not breached the PPP Contract as alleged [by Tube Lines] and is not liable for the amounts claimed (or any amount) in respect of the alleged breaches.[29]

Track access

25. Any requests by Tube Lines for line closures over and above those set out in its PPP agreement have to be agreed by LU. There is only recourse of appeal to an independent body—the PPP Arbiter—if both parties agree to a referral. Dean Finch, the then Chief Executive of Tube Lines, argued that LU had contributed to the delay to the Jubilee line project by not granting his company sufficient track access to move heavy machinery into place and to turn off the power to the system:

London Underground is quite right in saying that it has granted a substantial volume of closures to Tube Lines. However, the important point is: has it granted those closures in the pattern, both in terms of duration and geography, that Tube Lines requested? In terms of the match request, they have only matched Tube Lines' request to the extent of something just over 50%. The consequence of that is that Tube Lines has needed more access. If Tube Lines has requested a 52 hour closure and is granted two 27 hour closures, they do not amount to 52 hours of work because you have to power down and power up the railway.[30]

26. Tube Lines commissioned a review of its work on the Jubilee line from Phil Gaffney Consulting Ltd which concluded that Tube Lines and TfL were both to blame for delays. According to the report, Tube Lines had "significantly underestimated" the scope and complexity of the project and its management was slow to respond to problems when they occurred. On the other hand, the report concluded that TfL had allowed only a "limited amount of track access" to carry out the upgrade and that, while it had agreed to closures on 52 occasions, it was either for less time than requested or for a shorter section of the line, meaning Tube Lines could not make as much progress as it had planned.[31]

27. TfL responded that, rather than hampering the work of Tube Lines, it had tried to meet all "reasonable" requests for line closures. Its prime concern had been to restrict disruption to passengers as much as possible in the face of Tube Lines' requests for ever more closures. TfL told us they had faced repeated requests for additional closures: "we were assured that granting a further 12, then a further six, closures was all that was needed".[32]

28. The terms of the PPP agreement give TfL power to allow or to refuse requests for line closures over and above those stated in the agreement. There is clearly an inherent conflict between Tube Lines' need to gain adequate access to the track and signalling system so that it can finish its work on time and TfL's wish to minimise disruption to passengers. While there is insufficient evidence to conclude that TfL has behaved unreasonably in this instance, there is some evidence that it could have responded to Tube Lines' requests for whole closures of the line more readily. We recommend that to avoid such squabbles in the future, the neutral PPP Arbiter should be responsible for making decisions on requests for additional line closures. The Department should make the necessary amendments to the PPP agreement to put this change into effect.

The use of secondments

29. We have noted previously that a prime cause of Metronet's demise was its tied supply chain whereby Metronet intended to award some 60% of its projected capital projects in the first seven and a half year period to its parent companies. In our 2008 Report, we concluded that:

The fact that such a management structure was judged to be capable of efficient and economic delivery seems extraordinary now that Metronet has collapsed but the ultimate recipients of the money which was paid to the company have walked away with limited losses. The Government must not allow this blurring between the roles of shareholder and supplier in future bids to carry out work by the private sector.[33]

30. Some witnesses argued that Tube Lines was in danger of replicating Metronet's tied supply chain through its use of seconding work to its parent companies. However, Tube Lines told us that it seconded companies to carry out work on its behalf only after a competitive tendering exercise. The company argued that, unlike Metronet, it had not experienced any of the inherent conflicts of interests associated with operating a tied supply chain.

31. The PPP Arbiter accepted that Tube Lines' use of secondments had generally avoided the problems experienced by Metronet. However, the Arbiter argued that in relation to the signalling upgrade:

I think there is an issue, and maybe this is part of the experience with the Jubilee line, that a signalling project is actually an IT software project rather than a civil engineering one. I think there are questions about whether reliance on the Bechtel secondment arrangements in that case has enabled Tube Lines to manage that project as effectively as it might have done.[34]

32. We remain convinced that Metronet's tied supply chain was a major cause of its demise. Although we note similarities between Tube Lines' practice of seconding work to its parent companies, we also note that, unlike Metronet, Tube Lines awards contracts only after a process of competitive tendering. We are concerned, however, that there may be a temptation for Tube Lines to award projects to its parent companies for which they do not possess the required expertise. Such practices may have contributed to delays on the upgrade.

London Underground

33. It is widely accepted that LU inherited from Metronet some of the worst performing lines on the network. Starting from a low base, in the one full reporting year since then (2008-09), the company's performance on lost customer hours has been better than the benchmark target on all lines apart from the Waterloo and City line, which is a remarkable 219 % below the benchmark.Table 3: Lost customer hours against benchmark on the lines formerly managed by Metronet, now managed by London Underground
—  
—  2003-04

—  Metronet
—  2004-05

—  Metronet
—  2005-06

—  Metronet
—  2006-07

—  Metronet
—  2007-08

—  Metronet
—  2008-09

—  LU
—  Metropolitan, Circle, Hammersmith & City —  21% better —  50% better—  39% better —  37% better —  44% better—  48% better
—  District —  43% better —  35% better—  16% better —  19% worse —  53% worse—  14% better
—  East London —  4% better —  2% better—  34% better —  29% better —  20% better—  Line closed
—  Bakerloo —  15% better —  34% better—  13% better —  10.7% worse —  3% better —  34% better
—  Central —  16% worse —  2% better —  14% better—  24% better —  33% worse —  33% better
—  Victoria —  16% worse —  9% worse—  11% worse —  26.7% worse —  40% worse —  23% better
—  Waterloo & City —  58% worse —  12% worse—  66% worse —  29.2% worse —  66% worse —  219% worse

Source: London Underground PPP & Performance Report 2008-09.

34. Richard Parry, Interim Chief Executive at London Underground, told us that LU's first aim had been to eliminate Metronet's inefficient practices. As a consequence, a number of central support functions across LU were removed and duplications eliminated with the loss of around 1,000 jobs. In addition, LU had renegotiated Metronet's key contracts and taken measures that it estimated would "save Londoners and taxpayers an estimated £2.5bn, now and in future".[35]

35. LU also maintained that, since 2008, it had carried out work on the former Metronet lines very efficiently. This claim was disputed by Tube Lines which further argued that it compared very favourably to LU in terms of value for money. The Tube Lines Chief Executive told us that Tube Lines' delivered improvements to its three lines, at a cost approximately one-third cheaper than similar work carried out by LU on its lines.[36]

36. Making comparisons on costs under the PPP is difficult. We have previously noted that the lack of comparable performance data is a significant failing of the PPP, a point also emphasised by the PPP Arbiter, Chris Bolt. The Arbiter went on to say that although he would value more information with which to make a direct comparison, the available information suggests that Tube Lines' maintenance costs are lower on average than those of LU.[37]

37. We were pleased to hear from the Arbiter that better information about both costs and the quality of the work undertaken by Tube Lines and LU is forthcoming. Chris Bolt told us that:

It is currently difficult to make a full assessment of the upgrade projects, given that most are still under way, and because of changes in reporting arrangements for Metronet following administration. The Arbiter is working with London Underground to develop information that would permit him to monitor the Metronet upgrades and use data gathered in this way as a benchmark for Tube Lines.[38]

38. It is clear that London Underground inherited from Metronet a number of lines that were under performing. Early indications are that London Underground has succeeded in cutting costs and improving performance on the lines it inherited. That is welcome.

39. We are, however, concerned by indications that London Underground's work is up to one third more expensive than similar work undertaken by Tube Lines. It is important that reliable data about costs and the quality of work undertaken on all Underground lines is collated. We therefore welcome the Arbiter's work with London Underground on developing information that will enable him to set performance benchmarks for the former Metronet lines. We look forward to these benchmarks being made public as soon as practicable.

RELATIONS BETWEEN TUBE LINES AND TFL

40. For the remaining PPP agreement to function effectively there must be good working relations between TfL and Tube Lines. Unfortunately, due to the disagreements over the Jubilee line upgrade, including a series of claims and counter-claims made by the two parties in public, relations between TfL and Tube Lines have deteriorated. The Mayor, Boris Johnson, told us about an acrimonious exchange he had in September 2009 with Riley Bechtel, one of Tube Lines' parent companies.[39] The Mayor has also written a number of letters to Tube Lines that are highly critical of its performance and which subsequently appeared in the press. Tube Lines described TfL as having adopted an "unco-operative approach" to Tube Lines since the PPP started in 2003.[40]

41. The lack of co-operation between the parties has had a detrimental effect on the programme to renovate the underground network and on the experience of passengers. The PPP Arbiter argued that "Tube Lines, operating in effective partnership with London Underground, could have delivered the Jubilee line upgrade on time and to budget, and could now be progressing well with the Northern line upgrade".[41] Laying blame on both sides, the Arbiter described how "it is absolutely clear that that concept of partnership has not always operated.[42] The relationship between the two organisations was the poorest he had come across both in his current role and during his time as Chairman of the Office of Rail Regulation.[43]

42. We are deeply concerned at the increasingly antagonistic relationship, stoked by the Mayor, between TfL and London Underground on one side, and Tube Lines on the other. Relations between the parties have deteriorated further over the past year. They are the poorest that the PPP Arbiter has ever witnessed and both TfL and Tube Lines must bear responsibility for this sorry state of affairs. The PPP Agreement between Tube Lines and TfL will only succeed if all parties work in co-operation and in a spirit of goodwill on all sides.


14   See www.tfl.gov.uk/pppreport for monthly performance figures. Back

15   Ev 35  Back

16   Transport Committee, Sixth Report of Session 2004-05, The Performance of the London Underground, HC 94 Back

17   See www.tfl.gov.uk/corporate/modesoftransport/londonunderground/management/1582.aspx. Back

18   Q 50 Back

19   Ev 46 Back

20   The Jubilee line runs from Stanmore in North West London to Stratford in East London. Back

21   London Assembly Transport Committee, Too close for comfort, Passengers' experiences of the London Underground, December 2009 Back

22   Q 86 Back

23   London Assembly Transport Committee, Too close for comfort, Passengers' experiences of the London Underground, December 2009 Back

24   Q 35 Back

25   Q 184 Back

26   Ev 35 Back

27   Ev 43 Back

28   Under the 1999 Act, if TfL and the infraco are unable to agree on a dispute then upon the request of the party who referred the dispute or difference to adjudication, a person is chosen by London Court of International Arbitration to act as adjudicator. Back

29   www.Tfl.gov.uk Back

30   Q 48 Back

31   Phil Gaffney Consulting Ltd, Review of status of Jubilee Line Upgrade, October 2009.  Back

32   Ev 49 Back

33   Transport Committee, Second Report of Session 2007-08, The London Underground and the Public-Private Partnership Agreements, HC 45, para 18 Back

34   Q 151 Back

35   Ev 46 Back

36   Q 47 Back

37   Q 158 Back

38   Ev 28 Back

39   Q 25 Back

40   Ev 35 Back

41   www.ppparbiter.org.uk/ Back

42   Q 181 Back

43   Q 189 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 26 March 2010