Page last updated at 02:51 GMT, Tuesday, 2 March 2010

'Poor management' failed Tube firm Metronet

Ex-Metronet staff at work on London Underground
Metronet went into administration in July 2007

"Poor and inadequate" management by the Department for Transport (DfT) of the failed Tube maintenance firm Metronet cost taxpayers up to £410m, MPs said.

Managers ignored a 2004 warning from the National Audit Office (NAO) about overseeing upgrade work, the Commons Public Accounts Committee report said.

Metronet, responsible for maintaining nine of the London Underground lines, went into administration in 2007.

The DfT said previous legislation stopped it managing Metronet contracts.

The report put the loss to the taxpayer at between £170m and £410m.

'Big financial risks'

Edward Leigh MP, chairman of the committee, said: "The taxpayer has lost up to £410m as a result of the DfT's inadequate management of the risks arising from the Metronet contracts for upgrading the infrastructure of the Underground.

"This committee finds it unacceptable that the department ignored the warning by the National Audit Office in 2004 to avoid a hands-off approach to overseeing the upgrades.

"The department's assumptions were flawed from the outset. It was naive in assuming that Metronet would establish strong financial management and corporate governance.

"And its assumption that Metronet's lenders would exert strong influence on Metronet's governance and financial health in order to protect their investment was undermined because the department shouldered 95% of the lenders' risks," he added.

Mr Leigh said the way Metronet was handled by the DfT exposed it to "big financial risks".

'Cavalier attitude'

"These mistakes must never be repeated on future large contracts and government departments must establish and exercise the right to intervene where problems of this magnitude occur," he added.

The report criticised the DfT's "cavalier attitude to protecting public money" but added that "the root causes of the loss to the taxpayer lay in the way the devolved delivery arrangements were set up".

Metronet and Tube Lines were set up under the Public Private Partnership (PPP).

A DfT spokesman said: "The NAO itself recognised that 90-96% of the money spent through the Metronet Public Private Partnership was economic and efficient and that the fundamental failure lies with Metronet.

"We were also prevented from micro-managing the contracts under the terms of the London devolution legislation which is why since the PAC hearing an independent advisory panel has been established to provide expert scrutiny and advice on the TfL investment programme, including the former Metronet contracts."

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