Thank you for your letter of 22 November 2001. We are fully understanding of the reasons behind the abbreviated nature of the inquiry on 21 November and we are pleased to provide the following responses to your written questions.

  1.   You highlighted in your report the fact that London Underground could be exposed to "uncontrolled cost overruns" as a result of updating the standards during the PPP. Could you elaborate as to the potential seriousness of this problem and provide some indication of the potential cost of such overruns. The Committee will be interested to know whether the cost of the overruns could exceed the cost of updating the standards and to what extent.

  The issue of changing the standards after the award of the PPP contracts becomes a contractual issue. It is inevitable that changes to the standards will be required both from LUL and from the Infracos. Changes requested by the Infraco will be targeted at making their work more cost effective and over a 30 year period this could represent savings of many tens of millions which would be a windfall for the Infracos and is unlikely to be shared with LUL. Changes requested by LUL will be focused on revising the standards so as to define the required performance of the assets and their requirements for safety. The Infracos may perceive that these performance targets and safety requirements are greater than their undefined assumptions during bidding and would therefore require additional costs to implement.

  Our opinion is that the potential additional costs and/or loss of savings will be many times greater than the estimated £5-£10 million required to update the standards.

2.   The Infracos are able to alter 29 per cent of the standards in agreement with LUL in isolation of the other Infracos. Do you feel that this could cause a significant problem if at the end of 30 years the infrastructure were to be combined as a unified network again? What provisions could be made in order to avoid such problems occurring?

  There is scope for each Infraco to change standards through modifying the 29 per cent of Category 2 (non-mandated) standards and by applying for individual concessions from the 71 per cent of Category 1 (mandated) standards. This, in itself, is not necessarily a great problem except that there is a high degree of self regulation and it increases the workload and complexity for LUL staff in auditing different standards for different Infracos. At the end of 30 years there could be a wide variety between the standards being used by the three Infracos and the working methods adopted. Again this is merely a complication, for LUL who may wish to revise/rationalise the standards back to a single set following the end of the Infraco contracts.

  The PPP requires Infracos and LUL to attend Asset Performance Review Meetings (APRM). This is the forum at which revisions to standards are agreed. The mandate of this APRM, which must be led by LUL, should be to ensure that any and all (ie 100 per cent of standards) changes to standards are identical across all three Infracos. This should be included in the PPP contracts prior to signature as it may be costly to implement after award.

3.   Your report also highlighted the possibility of the Infracos acting on safety issues without involving London Underground for up to seven days under the TANC process and that there is potential for contractual abuse of this process. Can you clarify who would be responsible for any safety related incidents that were to occur during such a period and how serious this problem might be? What would be the likely impact if the Infracos flood London Underground with a wave of such requests?

  Our understanding of the Temporary Approved Non Compliance (TANC) process is that Infracos can apply for an exemption from current standards for a period of seven days. During these seven days the Infraco must either clear the non-conformance or submit justification for a permanent concession. The responsible person, as defined in the TANC process, is an "Infraco Authorised Person". Review of the requests for concessions by LUL can be lengthy (up to nine months) before approval and it is unclear if the temporary exemption applies throughout the review period. If a safety related incident happens at any time on the system, LUL would be ultimately responsible as LUL is the Infrastructure Controller and responsible for the Safety Case. Each Infraco will have its own contractual safety case and this is accepted by LUL but is not, in the eyes of the Health and Safety Executive, the ruling document. The problem is potentially serious as LUL has a legal responsibility for safety of the system and the Infracos can, under the contract, carry out work not in accordance with LUL standards.

  It is also possible given the TANC and the concession processes and the time consuming nature of the approval process that a "wave of requests" could extend the duration that Infracos continue to work outside the LUL standards. It could also require competent LUL auditing staff to be diverted from vital inspection and audit roles to deal with the TANC concession process.

  I trust the above responses are adequate to meet the concerns of the members and we would be happy to provide additional clarification should this be required.

Parsons Brinckerhoff Ltd

A J Mustard, Director—Railways

27 November 2001