Tube Lines’ Claims for £327m Disputed Costs Dismissed

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The BBC are reporting that £327m-worth of Tube Lines’ claims against London Underground for overrun costs have been dismissed by the independent adjudicator tasked with resolving the dispute. These claims related to both the Jubilee Line and Northern Line upgrade works, with Tube Lines arguing that some of the delays to these projects should be attributed to London Underground rather than them.

In a nutshell, Tube Lines had argued that over the last seven years London Underground had breached the terms of the current PPP Contract in ways which had made it impossible for Tube Lines to deliver the Jubilee and Northern Line projects on time. The precise areas of dispute are currently unclear, but it is believed that Tube Lines highlighted failures of scoping and management, as well as inadequate provision of blockades when required – all of which, the company claimed – rendered it impossible for the projects to be delivered on time.

In contrast, London Underground argued that they had behaved appropriately within the terms of the contract. They also argued that the PPP contract itself (in both its original and restated forms) contained plenty of mechanisms for the resolution of disputes at the time Tube Lines alleged they had occured – mechanisms that Tube Lines had failed to take advantage of.

If the early reports are to be believed, it appears that the QC tasked to be the independent adjudicator has ruled that London Underground’s argument is correct, and that Tube Lines themselves are fully responsible for the issues identified. Thus, their claim has been dismissed. Tube Lines have also been ordered to pay all legal costs associated with the case.

This news will come as another financial blow to Tube Lines, as this £327m claim was already outside the scope of PPP Arbiter Chris Bolt’s ruling on their operating costs for the next seven year period, a ruling that had already left Tube Lines facing serious budgetary issues, meaning its a further cost burden to bear. In addition to this, it is believed that Tube Lines still have approximately £100m of claims waiting to be resolved that relate to Station Upgrade works.

Perhaps unsurprisingly – given the frosty relationship that currently exists between TfL and Tube Lines – TfL’s reaction to the announcement appears somewhat less then magnanimous:

This ruling proves that, contrary to Tube Lines’ claims, London Underground is a capable, disciplined and responsible commercial partner.

We are successfully delivering substantial upgrades to the Underground by working directly with private sector contractors on those parts of the network where there is no PPP arrangement, by contrast with the Jubilee line failure, wholly attributed to Tube Lines by this adjudication.

Tube Lines need to stop making further spurious claims for additional fare payers’ and taxpayers’ money, given the handsome returns already being earned by shareholders Bechtel and Ferrovial, and get on with the job in hand.

That is to complete the delayed upgrade of the Jubilee line as soon as possible, learn lessons to minimise any further disruptive suspensions, line closures and delay on the upgrade of the Northern line, and to deliver their future works at the value for money price determined by the PPP Arbiter.

Whilst Tube Lines – equally unsurpringly – are proving slightly more tight-lipped on the matter:

We have received the decision from the adjudicator and will be reviewing his ruling, which is highly complex, in detail before deciding any further steps.

With the Arbiter’s final judgement on costs approaching, Tube Lines’ financial situation looking increasingly bleak, and a break point nearing in the PPP Contract, it looks like the next few months may prove crucial in determining the future of the PPP Framework on the Underground.

Whether it will outlast the Government that put it in place seems increasingly to be a question worth asking as, unfortunately, does the question of precisely who should bear the cost should it fail to do so.

Written by John Bull