2.19 In May 2001, London Underground appointed Tube Lines Holdings and Metronet as preferred bidders for Infracos JNP and BCV respectively. Metronet, in September 2001, also won preferred bidder status for Infraco SSL. London Underground wished to preserve its bargaining position over the preferred bidders, and therefore invited Tube Rail and LINC to become reserve bidders for Infracos JNP and BCV respectively. With no other immediate opportunities to win other railway infrastructure business, it was always likely that the organisational support behind the reserve bidders would start to dissolve, and this is what happened. Even if London Underground had agreed to meet the cost of keeping the bid teams together, key members would naturally have moved on to more challenging work. The credibility of the approach was further reduced when London Underground approved contact with the financial backers of the reserve bidders to help one of the winning bidders prepare a Committed Finance Offer.
2.20 Time spent in negotiations with Railtrack about Infraco SSL for, among other reasons, exploring greater integration with the national railways resulted in the competition for Infraco SSL running about five months behind those for the deep tube Infracos. When the negotiations collapsed, London Underground designed the Infraco SSL competition to be independent of the others. So London Underground considered itself legally compelled to award preferred bidder status to Metronet when its bid was judged to be the most economically advantageous. The selection of two consortia for the three Infracos effectively led to a smaller market for Infraco contractors than the Government had originally hoped when it, in part, justified the chosen PPP structure on the basis that there would be more competitive pricing and opportunities to benchmark prices.
2.21 London Underground was aware of the risk of unduly limiting the Infraco supply market, and said early in the procurement that no bidder would be able to win more than two Infracos. Had it realised, in July 1999, that its negotiations with Railtrack might prove fruitless and had maximising the diversity of supply been an explicit objective, London Underground could have designed the procurement around sustaining the largest possible railway infrastructure market throughout the process. It could have drafted its advertisements in the Official Journal to the European Communities to reflect such a goal. For example, the notice could have informed bidders that those bidding for more than one Infraco would have to rank the Infracos in preferred order. Bids for second and/or third ranked Infracos would attract negative weighting, if the relevant bidder led the competition for its top choice Infraco. While not guaranteeing the selection of three different preferred bidders, this, or a similar process, may well have led to such a result in this case, with the appointment of LINC rather than Metronet as the preferred bidder for Infraco SSL, given the small differences between their bids. In the same advertisements London Underground could have advised bidders that, in the event of there being three different preferred bidders, each preferred bidder would have to act as a reserve bidder for one or both of the other two Infraco competitions. If such an arrangement had been an option for London Underground, it could have provided considerably more bargaining power than it had with only two bidders and no reserve bidders.