As the demise of Railtrack throws the government's rail policy into turmoil, we look at the implications for construction firms relying on new rail and tube contracts in 2002.
It's not just a bewildering time for a rail traveller, it's also a bemusing time for any construction firm trying to make sense of the chaos and confusion surrounding big transport clients.

Question marks continue to hang over the status and direction of Railtrack since it was shunted into the sidings by Stephen Byers, and now there are serious concerns over Tube PPP and whether the government has the political will to get its transport policy back on track.

The government's response to political anger over the railways is to throw more money at the problem. It is set to announce an extra £4.5 billion of railway investment over the next ten years, taking the total to £33.5 billion. At least £430 of this will be spent on Rail Passenger Partnership Schemes to deliver short-term improvements.

In the meantime confusion has been stoked by strikes (with the promise of more to come) and speculation in the national press over the fate of the £13bn part-privatisation of the tube.

The Livingstone camp tells us that control of the tube is heading in its direction. Tube bidders are worried that even if their bids pass Byers' value-for-money tests, the tube will eventually be handed to Ken who will scrap PPP all together. This is one of the reasons why funders are calling for a money-back clause of up to 90% of their investment to safeguard contracts.

If their investments are not underpinned, they argue, the banks would be left with no reparation if Livingstone abandons PPP and terminates contracts before completion.

The bidders may not necessarily get that far as Byers publishes an independent assessment of the private bids on February 8. If they fail to pass his value-for-money tests he will hand all or some of the contracts back to Livingstone's Transport for London and will be forced to dish out £50m of compensation to the bidders.

As for Railtrack, construction companies are hoping for a less adversarial atmosphere now that ex-contractor John Armitt is at the helm. The new Railtrack head made his name as an engineer at Laing and Union Railways before moving to Costain as chief executive. As well as making the most of his civil engineering skills, he will need to learn to deal in the murky world of politics if he is to get rail investment up and running.

Working alongside Armitt is Mike Casebourne, the former chief executive of the Institution of Civil Engineers and another with years of experience in the rail industry. Casebourne took up the role of director of maintenance delivery in November and has promised to build bridges with disillusioned contractors.

Construction firms are banking on increased public rail expenditure to make up for order book shortfalls caused by the global slowdown, and those contractors with no previous presence in the rail sector are hurriedly putting teams of specialists in place. Just how important a safety net government spending is was reinforced again this week by new forecasts that predict a decline in construction growth in 2002.