30 The final component of our estimate of the taxpayer's loss comprises:
■ The costs of Metronet's administration - £40 million; and
■ The value of London Underground's investment in establishing the Metronet PPP contracts, which was lost when Metronet entered administration.
31 We have calculated the latter loss in a manner similar to our calculations of the benefits associated with the reimbursement of Metronet's bid costs and the payment of one-off debt arrangement fees. In our report, London Underground PPP: Were they good deals? (HC 645, Session 2003-2004), we identified that London Underground had spent approximately £170 million (1999 prices) establishing the three companies and the related PPP contracts. This investment is equivalent to £188 million in 2003 prices when inflated using the Office for National Statistics' Retail Prices' Index CHMK.
32 We assumed that two-thirds of this investment was attributed to establishing the two Metronet companies (£126 million). We assumed also that the 2003 present value of the derived benefits equalled the cost of the investment.
33 We produced a worst case estimate for the loss of value of this investment and a best case. The former was based on the premise that London Underground will abandon the PPP structure for the Metronet works. The best case is based on the premise that London Underground will retain the PPP structure. In the best case, we have assumed that, with the exception of the work conducted by London Underground's PPP procurement advisers Freshfields and PricewaterhouseCoopers, London Underground's investment in the PPP project prior to the selection of preferred bidders has not been lost (£68 million in 2003 prices). Therefore, the investment in the Metronet companies that is subject to loss is £58 million.
34 We have assumed that the value of the benefits associated with London Underground's investment in the Metronet companies was constant in real terms. In the best case, London Underground continues to receive the benefits associated with setting up the companies, so we were interested in how the value of the benefits associated only with the procurement of Metronet offsets the £58 million loss in the investment. We calculated that the annual value of these benefits was approximately £3 million (2003 prices), which over the 4.3 years of Metronet's operation equates to just over £13 million (2003 prices). Therefore in the best case, the net loss of value in the investment is approximately £45 million (2003 prices), or £50 million (2007 prices).
35 Using a similar approach to calculate the net loss associated with the worst case, we found that the annual value of the benefits relating to the lost investment was nearly £7 million (2003 prices). We calculated that the net loss in the worst case was approximately £100 million (2003 prices) or nearly £110 million (2007 prices).
36 The range for the taxpayer's loss associated with the issues that we have classed as "other losses" is between £90 million and £150 million.