2.25 DfT expected these parties, in their respective roles, to identify and then mitigate risks (paragraph 2.3). Although DfT managed to monitor the PPPs' performance through the Arbiter (paragraphs 2.14 to 2.18), neither Metronet's shareholders (paragraphs 2.20 to 2.21), Board (paragraph 2.22), lenders (paragraphs 2.23 and 2.24) nor London Underground (paragraphs 2.6 to 2.13) performed their roles as DfT anticipated.
2.26 By February 2006, Metronet projected £1.2 billion of extra spending over the first 7½ year period, a level where it was possible that the taxpayer might become liable (see paragraph 1.28). DfT believed, on the basis of discussions with the Arbiter, that these figures should be treated with caution and that extensive further work was required before reliance could be placed on them. DfT chose to monitor developments more closely by increasing its liaison with London Underground and TfL. It chose not to be drawn into disputes between competing parties because it believed that its involvement would lead to confusion and undermine London Underground's position.
2.27 The Arbiter's 2006 Annual Report projected extra spending of up to £750 million for Metronet SSL and BCV over the first 7½ years, but noted that there was substantial uncertainty over the figures. He found that some of Metronet's costs were not economically and efficiently incurred, but could not provide clarity on the level of economic and efficient extra spending without being asked by Metronet for direction on the issue. The Arbiter found that Metronet did have grounds to trigger an Extraordinary Review, and DfT agreed that London Underground should encourage Metronet to proceed to one.
2.28 In February 2007, the Mayor of London publicly asked Metronet to go to Extraordinary Review. At that point, Metronet had spent an additional £860 million in capital expenditure and £300 million in operational expenditure since the extent of its problems emerged 12 months earlier. We estimate that approximately 90 per cent of this £1.1 billion was spent economically and efficiently, with the remaining 10 per cent being wasted. This estimate is based on the Arbiter's work and assumes that Metronet SSL would have achieved a similar level of efficiency to Metronet BCV.
2.29 DfT's risk management was constrained because it was not signatory to the contracts. It was not responsible for resolving contractual disputes nor for requesting an Extraordinary Review from the Arbiter. DfT was, however, responsible for protecting the taxpayer's interests. The taxpayer was the ultimate source of funding for London Underground's payments under the PPP contracts and faced potentially significant liabilities should the PPP contracts fail. The failure of the parties relied upon by DfT to identify and then mitigate risks effectively, left DfT with a residual risk which it had few levers to manage. As a result the taxpayer was not effectively protected.