3.9 London Underground, concerned about hostility to the project, elected to produce a very detailed public sector comparator which followed the guidance available at the time. In our December 2000 report (HC54: The financial analysis for the London Underground Public Private Partnerships) we said,
"The ranges of values produced from the [Public Sector] Comparators are of some use in guiding judgement. But, as London Underground recognises, a decision taken only on the basis of where a bid lies compared to the ranges for the Comparators would be unsound. The financial analysis provides useful but incomplete insight into the value for money of alternative approaches to managing and funding the Underground's infrastructure". |
With hindsight, London Underground agrees that some of the cost, particularly the production of refined cost projections, extensive Monte Carlo simulation (see glossary) and the overly detailed documentation associated with the model's development, was unnecessary, given inherent weaknesses in the underlying data. Aspects of the model, however, did have value, for example the investment in base cost analysis, which was relatively high level and could usefully have been further developed at lower levels,9 gave the project team a general idea about what the bidders' proposals should cost. The risk analysis work was also available and was used productively outside of the public sector comparator, for example in informing contract negotiations.
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9 Ernst & Young's 5 February 2002 review said (page 17) that the "Public Sector Comparator represents a high level of costing of the PPP requirements so a detailed analysis of the individual differences between the Base Costs and the PPP bids cannot be undertaken."