A The five shareholders in Metronet, each with different interests, chose to structure the business as a joint venture in which many decisions needed to be agreed unanimously. The shareholders were also suppliers in a tied supply chain, and they adopted governance and management structures which gave power to the suppliers rather than the management of the business. Metronet's management was unable to extract key information or incentivise suppliers to perform their roles in line with its own interests.
DfT designed the PPP contracts in accordance with the HM Treasury guidance that existed at the time. HM Treasury's Standardisation of PFI Contracts now provides guidance to Departments on how to achieve commercially balanced contracts, which avoid the conflicts of interest that can occur when suppliers have too much influence over what is to be delivered, and how to achieve value for money. In line with the guidance, future PPP contracts should be awarded to bodies which have clear leadership, a credible corporate governance structure and an approach to securing suppliers which can be demonstrated to be value for money. Departments also need to ensure:
i contracts with the supply chain are structured to enable those managing delivery to access the information they need;
ii incentives in the contracts and sub-contracts within the supply chain are aligned with and reflect the interests of the public sector partner; and
ii there is a public sector option to withhold payment unless the private sector is able to produce reliable and timely records to back up claims.