1. An alternative solution might have been to restrict the PPP approach solely to major upgrade work. A major part of the justification for the PPPs was London Underground's inability to carry out major upgrades effectively. Yet much of the infrastructure work covered by the PPP is just ongoing maintenance and renewal work.
2. Departments should not use the Public Sector Comparator (PSC) as conclusive evidence of the value for money of the PPPs. Recent Treasury guidance, following representations from this Committee and the National Audit Office, downplays the role of the PSC in favour of a broader more meaningful analysis. The Department and London Transport did consider wider, non-quantitative factors alongside the PSC in this case and assessed value for money based on a broader, more judgemental basis.
3. Issuance of a public sector bond should be considered for financing future infrastructure projects in which significant risk transfer to the private sector may not be achievable. Bond financing would have been cheaper than the PPP financing costs though the risk of non-performance would then have fallen directly on the public sector. TfL is now planning to use bonds for investment under new rules introduced in April 2004.
4. Disagreement between the main parties responsible for procuring and managing a PPP ideally should be resolved beforehand and certainly before the terms of a PPP are agreed. The perception by financiers of political risk (such as the amount of central government support to local government), rather than project risk, appears to account for much of the £450 million extra cost of private finance.
5. Public sector bodies should ensure that the contractor discloses the existence of any success fees in bid competitions and that there is satisfactory justification for such fees. It is common for the public sector to reimburse bid costs to winning bidders through the PPP service charge. Success fees of some £90 million, approximately 30% of total bidders' costs of £275 million, were paid to the winning bidders in this case.