2.11 The Department and LCR consider, overall, that financing the Link using private capital has had the following advantages:
■ the involvement of private finance reduced the risk of contractors developing the mindset that public funds would be available to cover cost overruns. LCR attributed the commercial disciplines between Union Railways13, its project manager (Rail Link Engineering14) and the contractors, in part, to the perception that the project was not a Government enterprise;
■ by having financing commitments in place at the start of construction for the two sections of the Link, LCR was able to plan its capital expenditure in a way that made sense for the project rather than be subject to the annuality of the Department's budget. Project managers, knowing what funds were available, could focus on delivery of the Link and managing problems as they arose rather than managing the project around cash flow issues; and
■ the financing commitments that LCR had secured to fund construction of the two sections sent out a positive message to prospective contractors that the project would definitely proceed. LCR considered that, for each section, this message encouraged bidders to resource, as best they could, the preparation of their bids and to price aggressively.
_________________________________________________________________________________
13 Union Railways (South) Limited was the client body responsible for the construction of Section 1. The company, an LCR subsidiary, was from 1998 to 2002 under the control of Railtrack Group. In this part of the report we refer to Union Railways (South) Limited as Union Railways.
14 Rail Link Engineering is a non-incorporated body comprising Ove Arup & Partners Limited, Bechtel Limited, Sir William Halcrow & Partners Ltd and Systra.