The PPP contracts are intended to incentivise the Infracos to deliver the works necessary to meet the obligations described in the contracts. But they also allow LUL the option to require an Infraco to deliver a range of additional works for which the Infraco - or possibly an alternative provider in the case of a major enhancement - is entitled to payment. LUL is finding that some additional works are more costly than they anticipated, and that the market for alternative providers is limited.
It is sensible that the contracts allow for possible scope changes, but LUL must maintain its knowledge base and benchmark the private Infraco proposals to check that they offer additional works at a fair price. More generally, Departments should ensure that the review mechanisms in PFI/PPP deals secure the commitment of the private sector to its long term responsibilities. (Report reference: B2 and C1) |