The collapse of Metronet has bruised reputations and hugely damaged the credibility of PPP/PFI for complex infrastructure projects
Having reported on the very difficult conception of the PPP in the early part of the decade I was expecting significant teething problems to emerge during the running of the tube modernisation PPP, but not the dramatic collapse that befell Metronet this week.
Surely all the time and expense taken to get the deals in place would have equalled fairly smooth progress once the contracts started? Hindsight tells us that was perhaps somewhat naïve. Let’s then consider two questions:
Why?Metronet’s slip into administration will inevitably reignite the debate over the suitability of PPP/PFIs for major complex infrastructure problems. Defenders of the procurement methods will roll-out a host of good examples of projects to undermine the argument, including the positive performance of fellow London Underground PPP contractor Tube Lines.
It seems clear though that the whole structure of the deals, their size and their scope, was wildly over-ambitious. As one team member involved in putting the deals together told me this week: “People will think we were on drugs when we did this.” And surely doling out two thirds of the system to one player, Metronet, was folly. “There wasn’t that much choice, to be honest,” adds my insider.
Yet one must also look beyond procurement for Metronet’s woes. Management and control must surely come into play, which is where the comparison with Tube Lines is instructive. The latter decided to outsource work, which has clearly proved to be wise.
And for those involved in drawing up the deal the outfit appeared to move swiftly to establishing itself as a separate entity to its constituent shareholders than Metronet (perhaps in a strange way the plight of shareholders Amey and Jarvis at the time actually helped that process). “They were much easier to deal with and were very quick to get in the mode of working as an independent entity,” a source said. Unlike Metronet, where the source said decisions were slow and the whole management structure was “difficult and complex”.
What happens next?Well something of a political impasse to start with. Ken Livingstone must surely fancy he has a lot of public support to argue for taking Metronet’s work in-house. This will clearly be very hard for our new primeminister Gordon Brown to swallow, given that he was the man who pushed the PPP model in the first place.
How about this for a short-term fudge? Tube Lines takes on half of Metronet’s contracts and the rest are temporarily taken on by Transport for London. This could be a middle way through the dark and dusty tunnel that the challenge of modernising the underground system has become.