News on 24 August 2000

The National Audit Office will report on the financial evaluation of the proposed infrastructure public private partnerships for London Underground, before any contracts are signed.

The announcement follows a recommendation from the Environment, Transport and Regional Affairs Select Committee. The NAO had already signalled its intention to examine the proposed PPP for London Underground once the contracts had been signed. One part of this work would be to carry out an appraisal of the public sector comparators used by the DETR and London Underground, and to check that public and private financing options had been evaluated on the same basis. In response to the recommendation from the Select Committee and to public interest in this project, the National Audit Office has decided this part of its work should be brought forward.

The NAO will report once best and final offers have been made by the PPP bidders. The results of its examination should be available ahead of final negotiations and the closing of any deal.

The Government's PPP proposal will see a new public sector operating company running trains and stations and determining service patterns. Responsibility for maintaining and improving the infrastructure (track, signals, and stations) and rolling stock will transfer to three privately-owned infrastructure companies on fixed term contracts. The competition for the three 'Infracos' PPPs is currently being held by London Underground and the results are expected early next year.

London Transport, advised by Pricewaterhouse Coopers and Ove Arup and Partners (the advisers), is employing a 'public sector comparator', to assess the cost of a wholly public sector London Underground to deliver the PPP's outputs. The comparator will be used by London Transport and the Government, and by the advisers, to test whether the PPP is the best option for the funding of London Underground's infrastructure. The Government's intention is that the PPP will only go ahead if the private sector's bids are shown to represent best value.

Richard Byatt