This document serves as written testimony to the Transport Select Committee's inquiry into the London Underground PPP.

PARSONS BRINCKERHOFF

  Parsons Brinckerhoff (PB) is an international, employee-owned, professional engineering and management services company with an annual turnover of £900 million. The firm employs over 9,500 staff, 1,400 of which are managed from the UK. PB's headquarters are in New York City and PB has over 150 offices worldwide. The Europe/Africa/Middle East head office for PB is located in Godalming, Surrey.

  The firm was founded in 1885 with the design of the New York subway system. During its 116 year history, PB has been involved with the planning, design, construction and operation of transit systems throughout the world including current assignments in London, Dublin, Washington, Boston, Chicago, Los Angeles, Seattle, New York, Cairo, Delhi, Bangkok and Hong Kong. Many of PB's transit professionals began their careers working for transit authorities in engineering, operations or administrative roles. These individuals have the ability to utilise their hands-on transit experience in assisting PB transit clients in resolving the issues and concerns they face in these challenging times.

  PB has worked on numerous LUL assignments, including the following recent projects; the Power PFI, the Jubilee Line Extension, tunnel and public area ventilation and the Central and Northern Line modernisation. PB is also involved in supporting One Arup as the technical engineer for implementation of the PPP.

PARSONS BRINCKERHOFF'S SCOPE

  In June 2001 Robert Kiley, in his then position as Chairman of London Transport, requested PB to support the ongoing negotiations with the private sector bidders for the PPP contracts. PB's role focused on evaluating how the PPP Infraco contracts could be managed by LUL and culminated in the issue of an LUL Standards Report dated 14 July 2001 (attachment A) that responded to the following question,

"Is the current LUL Standards Regime adequate to control the standards of workmanship and safety related activities of the Infracos under the anticipated PPP contracts?"

  This question was deemed critical in London Transport's evaluation of the PPP arrangement since the public interest and standards of workmanship are to be protected by the PPP Infracos adherence to the LUL Standards Regime.

PARSONS BRINCKERHOFF STAFFING

  PB mobilised 16 staff with varying specialist disciplines and previous experience over a period of approximately 1 month with the majority of the input focused on the issue of the LUL Standards Regime.

  The two representatives who will be providing testimony to the Transport Select Committee are Tony Mustard and Jerome Forman. Tony Mustard leads PB's Railway Division for the Europe/Africa/Middle East region, which includes the UK. Tony has over 30 years experience in transportation projects including metro projects in London, Hong Kong, Taipei, Bangkok, Kuala Lumpur and others. Jerome Forman is a PB Vice President based in New York. He provided a transit operational perspective to the analysis. Jerome has over 33 years experience and most notably up until 1996 he served as Senior Vice President of Capital Program Management for the New York City Transit system.

LUL STANDARDS APPRAISAL PROCESS

  PB reviewed a sample of the 1204 standards relating to Engineering (Rolling Stock, Track, Civil Engineering Structures, Lifts and Escalators, Mechanical and Electrical Systems, Station Systems, Communications and Signalling), 113 related Procedures, Manuals and Guidance Notes together with the 11 standards relating to safety. It should be noted that the study was to determine the effectiveness of the standards as a management tool to control workmanship not specifically a study to determine if the standards were effective in controlling safety of the system.

  The specific methods of appraisal were:

—  A desk-top study of a limited selection of specific standards;

—  Group discussion with relevant principal LUL staff responsible for standards, concessions maintenance and assurance processes;

—  Individual discussions with relevant principal Shadow Infraco staff responsible for compliance with standards and concessions (Infraco BCV and JNP);

—  Following preparation of a draft report, comments received from the LUL Chief Engineer's Directorate and Transport for London were evaluated and incorporated, as appropriate in the Final Report.

FINDINGS

  The present structure and composition of LUL standards, together with the varying ages of the assets has resulted in some assets not complying with the latest industry standards and non-compliance existing throughout the system. The use (or non use) of current standards is determined and implemented by staff from the original LUL organisation who are familiar with the standards, the inadequacies and the working methods which are based, to some degree, on trust.

  Going forward into the private sector controlled PPP, 71 per cent of the existing standards have been designated as mandatory and are under the control of LUL. The remaining 29 per cent will be under the control of the PPP Infraco contractors. A concession and non-compliance process is proposed, and is currently being tested, which will allow the Infraco to apply for an exemption from the mandatory standards and also to continue work (which is not in accordance with the standards) on the system for a period of seven days under a temporary non-compliance arrangement.

  LUL recognise that the current standards are inappropriate and too prescriptive for the PPP environment and initiated a programme several years previously to update the standards in anticipation of the PPP. However, funding constraints have frustrated the effort and a three year programme to provide the needed comprehensive update has only recently begun.

  LUL have been running the Shadow PPP since September 1999 with a high degree of co-operation between LUL and the Shadow Infracos. It has been PB's experience, and a working assumption during this study that, upon award of the actual PPP contracts to the private sector, the working relationship between LUL and the Infracos would inevitably become more contractual.

  PB's Standards Report highlighted specific concerns related to:—

—  The current Standards Regime not being an appropriate tool to manage the standards of workmanship in a performance based contract and there are risks in trying to accomplish an update of the standards after award of the PPP contracts;

—  The potential for contractual abuse of the concession and non-compliance process

—  The three Infracos being under no obligation to co-operate with each other resulting in LUL having three different sets of standards controlling working methods;

—  The degree of self-regulation by the Infracos entailed in the use of the non-mandatory standards and work carried out during the periods of non-compliance.

CONCLUSIONS

  Overall, PB concluded that the LUL Standards Regime, in their form as of July 2001, were inappropriate and inadequate to serve as an effective management control mechanism to protect the public interest in performance based PPP contracts with privately owned Infracos. There was a major concern that after the award of the PPP contracts to the private sector, the working relationships between LUL and the Infracos will inevitably become more controversial and LUL could be subject to uncontrolled cost over-runs.

RECOMMENDATIONS

  In order to move forward PB recommended that:

—  The standards update process should be implemented on an accelerated basis. The process to be completed in a period of the order of 18 months;

—  A top-level suite of standards be provided appropriate to LUL's needs to control the standards of workmanship and associated safety of the PPP contracts;

—  The whole issue of non-compliance should be reviewed to ensure that the concessions process is not open to abuse;

—  A single authority be set up for all standards led by LUL, but including Infracos and third parties, to maintain consistency of standards across the system;

—  PPP contracts should contain Owner Variation and Directive rights to permit LUL to change standards when warranted by the public interest.

17 October 2001