Press Release - The Financial Analysis for the London
Underground Public Private Partnerships
15 December 2000
Sir John Bourn, head of the National Audit Office, reported to
Parliament today that the financial analysis* carried out for the
London Underground Public Private Partnerships cannot, on its own,
be expected to show clearly which public or private sector option
for managing and funding the Tube will provide better value for
money.
Sir John considers that London Underground has been thorough in
estimating a range of costs that will provide useful but incomplete
insights about the value for money offered by each of the public
and private sector options. He explains that the financial analysis
does not, and could not, cover all the important factors needed to
assess value for money. London Underground has said that it shares
Sir John’s view that taking a decision only on the basis of where
bids lie in this range of costs would be unsound. Sir John believes
it is essential that both they and the Department of the
Environment, Transport and the Regions understand what lies behind
the figures before deciding which option to take forward.
The financial analysis includes valuable information that will
help to explain the differences between the options. In addition to
the financial analysis, Sir John suggests that London Underground
continues to assess wider factors including: the strategic risks
and benefits of the PPP; the proposed contractual framework and
incentive regime; how well a long-term partnering relationship
between all the parties can be established; which option will best
ensure effective risk management; and, of course, safety.
Sir John welcomed the opportunity to provide valuable
information to Parliament at an early stage of the proposed PPP,
which has also allowed London Underground to act on his comments
about their approach during their financial analysis. Sir John also
concluded that there are a number of good practice lessons emerging
from his examination of this financial analysis which should be
applied to future Public Private Partnerships.
Sir John said today:
"London Underground and the Secretary of State should
not take a decision solely on the basis of the numbers emerging
from their financial analysis. There are other important factors
that need to be considered alongside the figures to assess the best
value for money option."
Notes for Editors
*The financial analysis involves preparing an estimate of the
cost of a publicly funded infrastructure under several different
scenarios (a public sector comparator) and comparing these costs to
those of the PPP options.
Press notices and reports are available from the date of
publication on the NAO website at http://www.nao.org.uk/ Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
The Comptroller and Auditor General, Sir John Bourn, is the head
of the National Audit Office employing some 750 staff. He and the
NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 71/00
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