Price
The price of the deals is reviewed every 7½ years by the parties. If the parties are unable to agree a price for the next period of 7½ years then the issue may be referred to an Arbiter - see Arbiter review below.
Scope
The signed contracts provide for a limited amount of change to the existing scope of work that the Infracos undertake (see case example 3 - scope changes). The agreement of any new scope at Periodic Review not envisaged at contract close -due to LUL changing its requirements -would need to be negotiated with the Infracos, and would be complex. LUL fear that constraints on its charge rights will make it hard to secure value for money and optimise services for customers, although the Department take comfort from the role of the Arbiter in price-setting.
Funding
The Infracos have secured finance in respect of their obligations falling within the fist review period. At a review, there is no obligation on the funders to provide further finance but there is an incentive for the lenders to stay within the deal if LUL does not significantly change the scope or the risk profile.10 Separately from the contractual Periodic Review process, the Department for Transport assesses the affordability of the PPPs with Transport for London, as it does on an interim basis during the first 7½ years, and agrees a future grant for work on the Tube infrastructure. TFL is concerned about the absence of guaranteed funding to meet the current scope of the PPP contracts. The Department believes that TfL has been given an unprecedented level of commitment over future funding levels, as set out in its "comfort letter" to the private lenders and investors.
_____________________________________________________________________________________
10 See Were they good deals? HC 645, June 2004, paragraph 4.3