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2000-03-30 DET-001
Department of the Environment, Transport and the Regions

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Pressing ahead with the PPP - Public Sector Comparator details published


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public-private partnerships



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Department of the Environment, Transport and the Regions

Pressing ahead with the PPP - Public Sector Comparator details published
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related documents


2000-03-28 Keith Hill welcomes tube PPP progress (Department of the Environment, Transport and the Regions)

1999-12-08 PPP is the best option for London's Underground (Department of the Environment, Transport and the Regions)

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date
30 March 2000
source Department of the Environment, Transport and the Regions
type Press release



Details of how London Underground will test the Public Private Partnership (PPP) bids for best value were published today by London Minister Keith Hill.

London Underground have constructed a public sector comparator to show how much it would cost the public sector to deliver the outputs that will be specified under the PPP contracts. The comparator will model the costs in two scenarios: with the Tube financed as now; and with the Tube financed by public sector bonds.

This demonstrates the Government's commitment to making a fair and rigorous comparison between the private sector's proposals and the public sector alternatives.

The actual values produced by the comparator can be released only once negotiations with bidders have been completed, so as not to expose the taxpayer's negotiating position, and thus jeopardise the chances of securing best value.

Responding to a Parliamentary Question from Harriet Harman MP (Camberwell and Peckham), Mr Hill said:

"London Transport awaits bids for the two deep tube infrastructure service contracts tomorrow. These will be very detailed, weighty proposals. It will take several weeks to analyse and clarify them properly. When this process is completed, the bids will be tested for best value against the public sector comparator.

"I have today placed in the Library of the House a detailed note which describes how London Transport have constructed the public sector comparator against which bids for infrastructure improvement and maintenance contracts under the Public Private Partnership (PPP) can be tested. "The methodology on which the comparator has been built is designed to offer a fair and reliable estimate of how much it would cost London Underground itself to carry out all the work needed to upgrade and maintain the Underground network over the next 30 years, to the standard required under the PPP contracts. The comparator will show the cost for each of the three infrastructure companies separately, so that each bid can be directly assessed against its public sector alternative.

"The comparator will also explicitly establish how much it would cost to deliver the required contract outputs if London Underground were to raise the necessary finance through the issuance of public sector bonds. The bids will also be tested against this means of raising finance."

Notes to editors
Copies of the note "London Underground Public-Private Partnership: methodology for preparing the Public Sector Comparator" are available on the DETR website www.railways.dtlr.gov.uk/underground/index.htm or (press copies) from London Transport's Press Office tel: 0171 918 4747.

The development of partnerships is central to the Government's approach to policy delivery. Public private partnerships are playing an increasingly important role in delivering improvements to public services and infrastructure - by combining public and private sector skills and expertise.

The Underground PPP will keep London Underground operations - trains, stations, safety and signalling - in the public sector. The private sector will deliver a massive programme of engineering and upgrading work to the tune of around £8 billion new investment and around £5 billion maintenance over the next 15 years.

The full text of Keith Hill's answer reads:

"London Transport awaits bids for the two deep tube infrastructure service contracts tomorrow. These will be very detailed, weighty proposals. It will take several weeks to analyse and clarify them properly. When this process is completed, the bids will be tested for best value against the public sector comparator.
"I have today placed in the Library of the House a detailed note which describes how London Transport have constructed the public sector comparator against which bids for infrastructure improvement and maintenance contracts under the Public Private Partnership (PPP) can be tested.

"The methodology on which the comparator has been built is designed to offer a fair and reliable estimate of how much it would cost London Underground itself to carry out all the work needed to upgrade and maintain the Underground network over the next 30 years, to the standard required under the PPP contracts. The comparator will show the cost for each of the three infrastructure companies separately, so that each bid can be directly assessed against its public sector alternative.

"The comparator will also explicitly establish how much it would cost to deliver the required contract outputs if London Underground were to raise the necessary finance through the issuance of public sector bonds. The bids will also be tested against this means of raising finance.

"The methodology which London Underground is using, and which is described in the note that I have placed in the Library, has been reviewed by KPMG as London Underground's independent, external auditors. KPMG were asked to consider whether the note accorded with the relevant Treasury guidance and was appropriate to the circumstances of the PPP. KPMG will also be asked to review the actual comparator and the bond-financed variant before they are used to test bids for best value.

"The actual values produced by the comparator can be released only once negotiations with bidders have been completed, so as not to expose the taxpayer's negotiating position, and thus jeopardise the chances of securing best value.

"As well as the external audit undertaken by KPMG, the design, construction and use of the comparator will be made available for scrutiny by the National Audit Office (NAO). The NAO has made clear that while it is always available to give guidance to the bodies whom it audits on areas of risk and uncertainty, and to draw attention to relevant financial experience in NAO and Public Accounts Committee reports - my Department has accordingly received such guidance - it could not go further and become involved in the decision-making process. This would inevitably lead to questions about its ability subsequently to carry out an independent examination for Parliament, once the key decisions on the PPP have been taken.

"The NAO, however, notes that as part of the decision-making process, London Transport is having its work on building and using the public sector comparator reviewed by KPMG. The NAO regards it as being in line with good practice for such comparators to receive scrutiny external to the project."


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Press enquiries 020 7944 3045; Out of hours: 020 7944 5925 or 5945
Public Enquiries Unit 020 7944 3000
E-mail: press@dtlr.gov.uk
Web site http://www.dtlr.gov.uk/


Railhub Archive ::: 2000-03-30 DET-001





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