Today (3 August 2015) we are told that London Underground has finally concluded its single-source contract with Thales. The Thales press release (clearly written by, or severely ‘guided’ by, TfL) is more an advertorial for TfL than anything else, but at last we find the true numbers for the new signalling and the intended commissioning dates, which are largely as set out in my last blog. I summarize below:
- Original Metronet (Westinghouse) plan at about 2005 prices £550m. Cancelled as too expensive but would have been in service by now.
- Cost of disengaging from this, £95m at about 2008 prices, plus some unknown proportion of £80m already spent and which may not be needed as provided. Perhaps £30m wasted.
- Cost of Bombardier Citiflo system which was abandoned in 2013, £354m. Contract delivery date 2018.
- Cost of agreed Thales system is £760m with 2022 completion.
- In addition to the Thales costs, we have already paid for getting out of the Westinghouse contract (described above) which adds perhaps another £125 to the final bill, which sounds all in all like the thick end of £900m. This is a lot more than a lot of people thought, and explains the softening-up press release of a few months ago.
It is hard to avoid concluding that in order to get ‘better value for money’ (a favoured TfL expression) the Westinghouse contract was cancelled in order to discover that doing so created a 7 year delay in achieving the promised benefits and added £350m to the bill.
Meanwhile, of course, the old signalling has had to soldier on, and will continue to have to soldier on for much longer than was expected. I don’t know whether a day has gone by without a significant signal failure on the Metropolitan Line, but if it has then I think it is unusual. They are more frequent (I think) than they used to be and there is a very real prospect for all this old equipment becoming a lot less reliable while we wait for the new signalling to be commissioned. I would be interested to know what the main causes of failure are and the extent to which (now we know how long it will still be needed) any practical measures can be taken to refurbish the existing equipment. This could well be worthwhile, but actually is a further cost that would not need to be borne if we had had the new signalling by now. Not to refurbish may instead mean excessive maintenance costs will need to be covered, or the cost of delays (which are not ‘free’). Either way, if we deduct the projected maintenance costs of the old equipment from the expected maintenance costs of a new system over the 7-year delay period then there is another chunk of money being spent on our behalf that would not have been necessary had we had the new signalling – maybe another £20m? My suspicion is that if we took all the actual costs of this new signalling into account (some will have been ‘lost’ under other headings), and the abortive work, and normalized them to a common inflation date, we would be looking at £1bn.
I have no particular reason to doubt that the Thales system will work, even though there are material differences from the Northern and Jubilee Line systems already installed. With the experience gained in the existing installation there is probably no reason to be pessimistic about project completion date either. Whether it is a better system than the Westinghouse one would have been I guess we will never know. There is also something to be said for having a minimum of different systems on the network, so that is good, too. This could well predispose London Underground to require the Thales system on the Piccadilly Line given the inter-running with Metropolitan and District services (something that the PPP contracts regarded as fixable detail, but, in practice, was an expensive high-risk challenge as Tubelines proposed a different signalling system from Metronet). In turn it might influence what is installed on the Bakerloo and Central Lines. This is no doubt a factor not lost on the supply industry.
The extra costs, the abortive Bombardier expedition and the delays in providing the promised upgrades are not causes for celebration and can’t really be expected to inspire confidence in the procurement and project management regime. To let an undeliverable contract to discover the ‘proper’ cost is double is quite extraordinary and cries out for restoring the role of ‘the intelligent client’ (or one which knows almost as much about the subject as the bidders – LU had these once). Whether any repetition is possible is idle speculation, but I’m sure there are a few discomforted people in TfL who are desperate to make sure the next raft of big contracts are as safe as they can be from similar misfortune.
I have a thoroughly unprovable theory that the signalling debacle, for which it seems nobody is going to be held accountable, is at least partly a consequence of the ongoing fallout from the poorly thought-through and ultimately disastrous PPP contracts. For a start, had the PPP not been imposed by naive government (ie Treasury) whim the sub surface lines would probably have had new trains and signalling a few years ago and probably (at least in the case of the trains) this would have involved a PFI deal similar to the one done for the Northern Line. As no scheme was drawn up before the PPP was imposed, all I can conclude is that something would have been done but we can only guess what. Perhaps it is better we didn’t have another PFI deal as most of the existing ones have been bought out.
More relevantly, the PPP involved reorganization and skills loss, and PPP failure involved a lot more reorganization and skills loss. For example London Underground had eight years during which it was, in essence, no longer an engineering, project management or procurement organization. The loss of knowledge and experience takes years to put right, even assuming the organization recognizes that crucial loss has occurred and is minded to do something about it. It may be that good people can be recruited, but the lack of actual system knowledge and experience cannot be replaced overnight, and nor can it (in the real world) be substituted by external consultants with no long term stake in the decisions and patchy system knowledge obtained partly by recruiting the people the Underground let go, but only partly. This is a direct consequence of enforced reorganization but won’t appear on any balance sheet (or not in a way where it is linked to the PPP). My hunch is that the money wasted in consequence of the PPP is far more than the National Audit Office imagine and is still racking up (remember the PPP is still part live).
If I am right, the sub-surface line resignalling problems, or something like it, was almost an inevitable stage on this learning curve. It doesn’t excuse the heavy losses and delays, but it might go some way to explaining it.