PPP was fundamentally flawed says departing Tube boss

Tim O’Toole, the managing director of London Underground who is leaving at the end of the month, launched a scathing attack on the £30bn Public Private Partnership created by Gordon Brown to fund the refurbishment of the Tube in an exclusive interview with the Standard.

Mr O’Toole an American who joined London Underground six years ago after a career on freight railways in the US, also warned Londoners that while major improvements are on the way, including ‘fabulous new air conditioned trains for the Metropolitan, Circle and District lines’ in the short term disruptions are likely to get worse as new signalling systems are introduced over the next few years on several lines.

Mr O’Toole says that the PPP scheme had wasted a vast amount of public money and warned that its future was in doubt unless the remaining contractor, Tube Lines, was able to deliver the Jubilee Line resignalling project on time at the end of this year. The PPP, a highly complex scheme dreamed up by New Labour and consultants PriceWaterhouseCoopers as a way of bringing funding into the London Underground has already partly collapsed at great expense to taxpayers following the demise in 2007 of Metronet, the company which was responsible for maintenance of two thirds the system, following the discovery it had overspent at least £1bn. The Tube Lines contract comes up for renegotiation in 2010 and its future hangs in the balance because there is a gap of around £2bn between the amount of money available to pay for the work up to 2017 and the company’s assessment of how much it needs. To survive, he says, Tube Lines must ‘present a sensible commercial face that makes sense to stakeholders, such as us and the government’.

. Mr O’Toole attacked the core idea of the PPP, which was pushed through by Gordon Brown as Chancellor despite widespread opposition in an effort to reduce the cost of refurbishing the Underground by using private companies to do the work. While London Underground remains responsible for train operations, the maintenance of the track and the rolling stock is undertaken by private companies and Mr O’Toole said this was at the root of the problems: ‘So many things about the PPP were wrong. Separating the track from the infrastructure was wrong. The theory was that these private companies would come in and introduce all this innovation but fundamentally we have not had the level of innovation that justifies the extra cost of the PPP.’ The private companies, he says, have played safe and not introduced risky new technology but rather have milked the system for what they can get. The collapse of Metronet was, he had been, ‘inevitable’

Worse, because of the way that the contracts were structured, Londoners have been paying far more for the refurbishment of the Underground than would have been necessary otherwise: ‘The PPP was designed to prevent us having proper oversight of the work. Under the PPP, we could not even withhold payment to the contractors as you could under normal contracts’. Mr O’Toole said it had tried to force Metronet to take ‘corrective action’, a legal process over work at stations but the company had successfully appealed in the courts.

Mr O’Toole was an unlikely choice for the job of running one of the biggest metro systems in the world, having been previously worked for American freight railways. He was headhunted when he was out of a job after his company, Conrail, had been taken over and while at first he did not take the idea of running London Underground very seriously, he accepted the offer after meeting the mayor and Bob Kiley, the American who was then Transport Commissioner, and the mayor, Ken Livingstone.

Amazingly, given his lack of passenger experience, Mr O’Toole has the common touch and is hugely popular among London Underground staff as well as Londoners. You only have to travel on the Tube with him to see that the staff both recognise and respect him, as they all greet him. He was fortunate that due to the delay in handing over the Underground to Transport for London, he spent his first five months in London touring round the system meeting staff and passengers, and some of his innovations, such as having boards with information on every line at each station, result from that experience.

Mr O’Toole is proudest of the way that he has managed to engage with the 13,000 staff (with another 7,000 having arrived recently from Metronet) and, though he does not say it, that has enabled him to go over the heads of the troublesome trade unions. Since his arrival, with one minor exception, there have been no strikes, despite the innumerable threats. He says that the secret is to ensure that he keeps communicating with his staff, which makes confrontation harder.

Mr O’Toole’s surprise departure comes at a difficult but exciting time for the Tube with major resignalling projects being implemented and the Tube Lines contract being renegotiated. There is no doubt, as he repeats several times, that he regrets having to go. He has been living in a different country from his wife for six years and he is returning to the US because she did not want to settle here but the whole interview is suffused with expressions of regret. He says that with new signalling systems coming on stream and the new trains on the sub surface lines, Londoners will finally start noticing substantial improvements. However, first there will be even more weekend closures as a result of the upgrading.

Yet, if in Madrid such work can be carried out without shutting any lines, why can that not happen here. Again, the PPP is at fault: ‘The way the PPP was structured, it encouraged these closures. In Madrid, they overlay a new signalling system and can turn it on and off during testing.’

In the future, though, he envisages that things could be done differently, especially when the Piccadilly Line is resignalled in the mid 2010s. ‘The Piccadilly is London’s artery at weekends with Harrods, football, the airport and the West End. There must be an alternative way of doing it.’

That will certainly be a relief to Londoners, but without it will have to happen without Mr O’Toole’s dynamism.

Successes

Mr O’Toole claims a number of successes for his six year tenure with both passenger numbers and passenger satisfaction at record levels. He says that normally such overcrowding would lead to a higher level of complaints but, in fact, figures just released by Transport for London show that just under 1.1 bn travelled on the Tube in the year to April 1 2009, slightly up on the previous year and that surveys showed 79 per cent of people were satisfied with their journey, the best ever score. Derailments have also been dramatically cut since his arrival in 2003 with just two since April 2004, compared with 12 in the previous five years

Surviving 7/7

It was the terrible events of the July 7 bombings in 2005 that brought Mr O’Toole to the attention of Londoners and earned him the CBE, a rare honour for a foreigner. It was not only the calming effect of Mr O’Toole’s press conferences in the immediate aftermath that was so impressive, but the way that he ensured that a near full Tube service was running the next morning – with shuttle services to avoid the bombed stations – and the whole system was fully functioning within four weeks.

To achieve this, Mr O’Toole says: ‘Within an hour and a half of the incident, we divided the management into thirds – we had one group to continue to deal with the immediate response, there was a second group who worked on an operating plan to restore services immediately and there was a third group to bring these three sites back.’ That was in sharp contrast to the derailment at Chancery Lane just before Mr O’Toole’s arrival which resulted in the closure of the line for several months.

Mr O’Toole realised that restoring the full service was not only important for London – and indeed the whole country in terms of its economy – but that it actually reduced the chances of further attacks: ‘I like to think that the job we did made us a less likely target because if they could be shown to succeed in shutting us down they would keep on returning.’

Shares