Following a court hearing on Friday, August 24, Transport for London has published a Deloitte & Touche report that criticized the British government's plans for London Underground, according to our sister site, AccountingWEB-UK.
London mayor Ken Livingstone and Transport for London commissioner Bob Kiley have used every possible means at their disposal to avoid being forced to fund improvement's to the capital's underground system by going for a part-privatization.
Messrs. Kiley and Livingstone oppose the government's plans for the tube because the plans would follow the Railtrack model and separate responsibility for operating trains from track maintenance. Having failed in a legal challenge, publicizing the accountant's report has proved to be one of their most successful campaigning tactics.
According to Mr. Kiley, the report, completed in July, exposed manipulation in government figures to make the public sector alternative look more expensive than its preferred public-private partnership option.
"The public’s bargaining power was thrown away in the rush to appoint chosen bidders. Moreover, the Underground applied ‘judgmental adjustments’ when they selected one of the preferred bidders," said Mr. Kiley.
"The big question is why the Underground was so keen to keep this vital information from the public. The answer may lie in the fact that the government has regularly said PPP [Public Private Partnership] contracts will not be awarded unless they demonstrate clear value for money when measured against the public sector alternative. The Deloitte & Touche report suggests that the government’s plan does not pass the test."
The entire Deloitte & Touche report and an executive summary can be viewed as PDF files on the Transport for London Web site. Among the comments the body highlighted are the following:
- "Neither the 30 year nor the seven-and-a-half year [value for money test] provides a satisfactory basis for establishing value for money;
- "Highly material adjustments to the [Public Sector Comparator] are judgmental, volatile or statistically simplistic;
- "Selection of preferred bidders too early in the process could lead to a materially adverse impact on value for money;
- "The financial advantages of selecting [one of the] preferred bidder[s] depends upon judgmental adjustments;
- "Public sector bond financing has been largely dismissed."
As well as gaining the Court of Appeal's approval to put the report into the public domain, Transport for London has forwarded a copy to the National Audit Office.