Insiders say GLA has abandoned hopes of stopping PPP as mayor predicts agreement by mid-February.
London mayor Ken Livingstone has predicted a swift resolution to the conflict between government and the Greater London Authority over plans to part-privatise the Tube.

Livingstone said this week: "I am optimistic that we are heading to a happy resolution of all of this." However, insiders believe that the GLA has abandoned hope of financing the Tube revamp through a bond issue. Instead, Livingstone is believed to be negotiating the inclusion of clauses in the public–private partnership contracts that would give Transport for London greater control over contractors and include tough penalty clauses for safety breaches.

Speaking at a Transport for London meeting on Tuesday, the mayor said Tony Blair wanted to decide the future financing of the Tube by the middle of February. Blair's preferred option is a PPP; Livingstone wants to raise money through bond issues.

Livingstone added that he would be making a joint statement with deputy prime minister John Prescott when negotiations were complete.

Meanwhile, Bob Kiley, Transport for London commissioner, called for the 30-year PPP contracts to be shortened and simplified. He told Building: "I am hopeful we can reach a constructive compromise and we can make constructive changes in the scope of the contracts. I abhor lengthy complicated contracts as a way of trying to manage complicated procurement. I have never seen anything that compares to this in the scale of complexity." He criticised the current proposals, which would result in engineers from different consortia carrying out repairs on the Central and Northern lines at Tottenham Court Road even though they are in the same station.

However, under European Union procurement regulations, any changes to the contracts would involve retendering.

I am hopeful we can make constructive changes in the scope of the contracts

Bob Kiley

Kiley admitted that the £15m spent by bidders on their tenders was a sticking point, but added that it was important to get the contracts right before spending £15bn-20bn on rebuilding the Tube network.

He added that the financial structure of the Tube refurbishment should be tackled after the management of the underground network had been decided.

Kiley has also publicly opposed government plans to split responsibility for track and trains because it would lead to an unclear chain of command and threaten passenger safety.

A spokeswoman for the Tubelines consortium was confident that the contracts would not be changed significantly. She said: "I don't believe the PPP will be abandoned at this stage because of the delays it would cause." A preferred bidder for the Bakerloo/Central/Victoria line deal is expected to be announced as early as next week. The consortia bidding for it are Metronet (WS Atkins, Balfour Beatty) and Linc (Mowlem).