Update on the London Underground and the public - private partnership (PPP) agreements (HC 100-ii) Transport Committee 6 Jan 2010

Q178 Mr. Eric Martlew (Carlisle): Mr Bolt, you say things very reasonably, but having listened to some of the things you have said they are quite startling. At one point you indicated that you fined - my word "fined" - or charged London Underground for being unreasonable. Is that the case?

Mr Bolt: The nature of the PPP contract involves a lot of interfaces between London Underground as client and Tube Lines, and I think on previous occasions when this Committee has looked at the PPP, examples have been raised about the number of signatures that were originally required to sign off a station project and things like that, and it was included in the NAO's report which the Public Accounts Committee looked at recently. Yes, this sort of relationship involves costs. There have been some areas. I have had to exercise judgements in interpreting benchmarks and in two areas - admin costs and risk - I have shaded that upwards because of my view that that relationship does add to costs and that even the most efficient company would incur those sorts of costs.

Q179 Mr. Eric Martlew (Carlisle): I am not totally sure what you said there, Mr Bolt. The question I am asking you is you have looked at it and you have increased the amount of money due to Tube Lines because you accept that in certain instances London Underground has been unreasonable. Is that correct?

Mr Bolt: Where I have exercised judgements in some areas I have shaded the judgement up. Can I point to a precise number in here? No. It is in the overall judgements and weighing the balance of arguments between the two parties.

Q180 Chairman: Do you consider you have access to enough information to make those judgements?

Mr Bolt: To be honest, I do not think that is the sort of decision which is one that you can say the cost of London Underground's behaviour is X. It is a judgement about what you would expect and whether in all cases London Underground has acted as constructively as it can. Within the contracts there is this description of a partnership and it is absolutely clear that that concept of partnership has not always operated.

Q181 Mr. Eric Martlew (Carlisle): In some ways you think instead of an arbiter they need a marriage guidance counsellor? At one point you said that the Bechtel model did not appear to be right for this. Could you develop that point?

Mr Bolt: The point I was making quite simply was a signalling project is essentially software and the way you manage software projects is very different from the way you manage a civils projects. Bechtel have a good reputation on managing civils projects. When I appeared in front of this Committee wearing another hat we have talked about the failings that Network Rail had on signalling projects. It is one of these areas where it seems the UK is not very good yet.

Q182 Mr. Eric Martlew (Carlisle): You made the point and the present Rail Regulator is making the point that the cost of doing work on rail is probably 25% greater in the UK than it is in comparative countries and that goes for the Tube as well, but can I take it that what you are saying is that none of them, be it Tube Lines or London Underground, are as efficient as they should be but that Tube Lines are more efficient than London Underground? If that is the case, how do you explain the Mayor denying that when he came before us?

Mr Bolt: I cannot explain what led the Mayor to say what he said.

Q183 Mr. Eric Martlew (Carlisle): What you are saying is there is no evidence to back up his view?

Mr Bolt: No, not that I have seen. Not that I have seen. One point he was making could be a very different point which is that London Underground undoubtedly has managed to drive costs out of the former Metronet infracos but so it should have done because that was starting from a woefully inefficient position.

Q184 Mr. Eric Martlew (Carlisle): A final point, and it is a question Mr Stringer asked, is that you are saying there would be a cost to Tube Lines for the delay in completing the Jubilee Line and that would amount to a fine. Have you got any idea about what sort of figure that would be?

Mr Bolt: From memory it is of the order of £10 million a month.

Q185 Mr. Eric Martlew (Carlisle): So it is a lot of money?

Mr Bolt: It is a significant sum of money, yes.

Q186 Mr. Eric Martlew (Carlisle): How long do you think it is going to be overrunning?

Mr Bolt: I believe Tube Line's current estimate is they will deliver the full contractual capability by October so ten months late.

Q187 Mr. Eric Martlew (Carlisle): So you are talking about a £100 million fine?

Mr Bolt: Against that they have claimed £300 million from London Underground which includes in a sense their view that the primary cause of that delay is London Underground itself.

Q188 Mr. Eric Martlew (Carlisle): That is to be decided?

Mr Bolt: That is the matter which the adjudicator is currently considering.

Q189 Mr. Eric Martlew (Carlisle): Finally again, going back to the issue of when you were the Rail Regulator, have you ever been in a situation where you have had two so-called partners who have been at loggerheads as much as these two organisations are?

Mr Bolt: I think it is fair to say that relationships between train operators and Network Rail were not always straightforward and the Rail Regulator felt like a marriage guidance counsellor on occasions.

Q190 Mr. Eric Martlew (Carlisle): But I am asking is this worse than that?

Mr Bolt: It is worse in the sense that quite often on the national rail network, if you take the West Coast, Virgin had a particular view but the freight operators or London Midland or Cross Country might have had a different view, and it was the job of the Regulator to balance competing views and make sure Network Rail was delivering efficiently. In this case you have just got two so you probably get more extremes in the views coming out.

Q191 Mr. Eric Martlew (Carlisle): Do you suspect there could be politics involved in this as well?

Mr Bolt: I do not get involved with politics.

Mr. Eric Martlew (Carlisle): I am sure you do not but I thought I would ask you anyway.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB