When the government drew up the deal to part privatise the Tube network, ministers were so confident of the excellence of their cunning plan that they signed over 30 year contracts to the private maintenance companies.
The events of the past 10 days, with two derailments on the Tube and the renationalisation of all maintenance work on the national rail network, suggest that the controversial Public Private Partnership may not be as long-lived as the government had originally hoped.
It is, however, by no means, curtains yet for the PPP. It will take more than a couple of relatively minor mishaps on the Tube system for the scheme to unravel. But, for the first time since the deals were finalised earlier this year, there is a real sense of concern among the contractors that the whole thing could go pear-shaped. A source close to one of the contractors told the Independent on Sunday ‘I don’t think lots of money will be lost immediately but as we begin to have to make major improvements in order to fulfil the terms of the contract, in the next three or four years, things will get harder and harder and the contractors may get into difficulties.’
Once the PPP contracts prove to be not as lucrative as the contractors hoped, then they may have to be renegotiated. Moreover, Ken Livingstone, the mayor of London, is looking for any loophole that could get him out of the contracts and he is waiting for the results of the inquiries into the two derailments to see if the PPP can be blamed for these incidents.
The decision of Network Rail to take back all its day to day maintenance has added considerable fuel to Livingstone’s campaign to get rid of the PPP. He said: ‘If it turns out that the derailments and other disruption to the Tube over the last week are the result of companies like Bechtel, Jarvis, Amey and Balfour Beatty failing to honour their lucrative contracts to maintain the Underground in a state of good repair, Londoners will want to see a similar resolution of the situation on the London Underground.’
However, the PPP is enshrined in primary legislation and will be very difficult to rescind without massive amounts of compensation for the contractors. The PPP for the Tube is a uniquely complex and controversial contract that has never been tried on any other railway system in the world. The London Underground was split into four sections: three infrastructure units which have been privatised in deals lasting 30 years; and the operations, which remained in the hands of London Transport, that has now been passed on to Transport for London, the mayor of London, Ken Livingstone’s transport department.
One infrastructure contract, for the Jubilee, Northern and Piccadilly lines, was won by Tube Lines, a consortium of Amey, Bechtel and Jarvis, while the other two went to Metronet, a consortium of Balfour Beatty, Bombardier Transportation, Seeboard, Thames Water and WS Atkins which is responsible for the rest of the lines. The infrastructure companies are paid around £1bn per year to maintain and improve the condition of the Tube and have also, themselves, raised extra funds to spend on improvements.
The contracts are unique in that they are performance based. This means that instead of getting a fixed amount for work carried out, the infracos get more or less money depending on their ability to reduce delays. Broadly, the infracos have to pay £6 for every hour for which passengers are delayed, and this is calculated for each incident, such as a signalling failure or a breakdown. The current closure of Camden Town will have cost Tube Lines several million pounds, but if the service is disrupted for more that two days penalties are capped.
And this is where they have generated the most controversy. Opponents of the scheme were concerned that safety would be compromised because the infracos would be tempted to cut corners in order to reduce delays. This was a contributory cause to the Hatfield train crash which killed four people in October 2000 when a cracked rail was left unrepaired and no emergency speed restriction was imposed for reasons that have still not been explained.
While it is too early to say whether the PPP regime was a factor in the two derailments over last weekend, there was always a concern by those who campaigned against the PPP, including Livingstone and the unions, that speed limits might not be imposed where necessary on dodgy bits of track. The Piccadilly Line incident on Friday October 17 was the result of a broken rail which had been spotted as being in a bad condition the night before the derailment.
The Northern Line on Sunday occurred on points which had been the subject of work the night before. But some drivers had expressed concern about those points in recent weeks and had gone slower even than the 20 Mph speed limit which had been imposed on them.
There is an added complexity in that the derailment on the Piccadilly Line, for which Tube Lines is responsible, occurred on a stretch of track that is part of the District Line and consequently managed by the other infrastructure company, Metronet. Given that there will be compensation to be paid for the delays, that is a recipe for the type of legal action which opponents of the PPP warned about during the four year battle over its introduction.
While the PPP cannot be specifically blamed at this stage, Underground insiders point to the deterioration in the culture within the organisation which has resulted from greater use of contractors. One manager told the IoS: ‘It used to take 18 weeks to train the guys who do the low voltage cables, now we get people from agencies who can’t read a wiring diagram.’
London Underground used to be staffed mainly by people who stayed in the organisation for much of their careers. Now, each contractor has to have a safety case approved by the Health and Safety Executive and this is an extremely bureaucratic process which generates acres of paper. Another manager told the IoS: ‘If I had to read every document that came past my desk, I would not be able to carry out my job. So I just tick the boxes.’
That sort of attitude pervades the organisation. It has become bureaucratic and top-heavy as managers eyes were off the ball during the long dispute over the PPP. It was handed over to be run by Transport for London in July and a new managing director who has the difficult task of trying to establish a relationship with the infracos. The main problem is that the infracos have all the power, as London Underground does not have the ability to ask them precisely to carry out specific tasks, exactly the same problem which Railtrack experienced with its contractors in the early days of privatisation and which led to last week’s decision by its successor, Network Rail, to take control of the maintenance. London Underground is in just the same sort of flux as the overground railway was in the immediate aftermath of privatisation but has experienced its first crisis much sooner.
While the PPP is not yet under threat, if these incidents can be laid at its door, or if there are further mishaps, its days may well be numbered.