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The Financial Analysis for the London Underground Public Private Partnerships 

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.

"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."

Sir John

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 https://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.

PN: 71/00