Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 520-539)

MR ROD HOARE AND MR IAIN COUCHER

WEDNESDAY 5 DECEMBER 2001

Dr Pugh

  520. Can I take you up on these stations. It is noticeable that a lot of the finance committed in the early phases refers to station modernisation and refurbishment. Where did that suggestion come from that it be financed like that?
  (Mr Hoare) It came in from London Underground. Could I perhaps add what might be done under a station refurbishment or modernisation?

  521. Can you clarify first the distinction between "modernisation" and "refurbishment". A refurbishment, theoretically anyway, could be putting paint on the wall.
  (Mr Hoare) The refurbishment takes place every seven and a half years in the contract now on the basis that stations need upgrading and re-tarting up and making sure all the things are efficient.

  522. Can I just press you on "re-tarting". It is hardly specific in the contract exactly what refurbishment means, it may be simply a bit of paint around the station.
  (Mr Hoare) No, it is very specific. One of the problems is people look at modernisations and refurbishments but what they include are upgrading the fire facilities, upgrading the communication facilities—

  523. This is the refurbishment, is it?
  (Mr Hoare) Yes. Some of it is done under refurbishment, some of it is done under modernisation, it depends which comes first. In terms of upgrading the fire facilities, upgrading the communications, upgrading the passenger help points, upgrading video control of what goes on at the station, all of that goes into that expenditure as well as replacing the platform floors if they have become slippery. There is a whole range of things.

  524. But I am right in thinking that a refurbishment is a significantly cheaper operation than a modernisation simply because there are far more refurbishments than modernisations?
  (Mr Hoare) Yes.

  525. Okay. After the seven and a half year period are you obliged to provide private sector finance? Are you under a contractual obligation to produce more private sector finance at that point?
  (Mr Coucher) For the JMP lines we are not forecasting any additional finance, so we are not anticipating any. There is a mechanism by which we bring in new finance and that is a contractual obligation as to how we introduce new finance.

  526. New finance could be public finance?
  (Mr Coucher) It could be public finance, it could be private finance.

  527. It could even be private finance?
  (Mr Coucher) The contract provides a great deal of flexibility in this area to cope with circumstances.

  528. Finally, are your financing commitments in place? In other words, despite the recent events you have the backers, do you?
  (Mr Coucher) Yes. We are just finalising our arrangements. Last week we announced the addition of another banking group, so it is looking very robust.
  (Mr Hoare) I would confirm that for BCV and SSL as well.

  Mrs Ellman: What do the contracts say about penalties for inadequate safety?

Chairman

  529. One of you, please?
  (Mr Coucher) The contract is quite precise in the areas of safety. If we are in a safety breach and it is not remedied immediately then London Underground step in and they charge all the costs incurred in stepping in to us.

  530. Mr Hoare, some conditions?
  (Mr Hoare) Yes, I can confirm that 100 per cent. I was looking for something else but I realised what your question meant.

Mrs Ellman

  531. Who makes the assessment about whether there is inadequate safety, whether there has been a breach?
  (Mr Hoare) London Underground or the HSE or the HMRI.

  532. What bonuses does the contract state for good performance?
  (Mr Coucher) The Underground has specified some very high performance targets and if we can exceed those we can make additional monies. It is based on a £3 per customer hour benefit.

  533. Is that the same for both of you?
  (Mr Hoare) Yes. The contracts are basically the same. The performance we have to achieve is spread over four parameters really.

  Mrs Ellman: Are the bonuses a lot more attractive to you than the penalties that you would incur for lack of safety?

  Chairman: I am sorry, I cannot hear so I think it might be difficult for the people who make a record.

Mrs Ellman

  534. Do you think you could be tempted to perhaps breach safety because you might get better funding for bonuses for better performance at the risk of safety?
  (Mr Hoare) Firstly, the penalties for not reaching performance can be severe and, therefore, one works hard to achieve the performance you can because that is all based into the business plan you are achieving. I would not, under any circumstances, see how I or any of my people could be led into a position of putting those sorts of bonuses before safety. Having worked in the airline business, the shipping business and the railway business now for 40 years and having seen those go through a process of privatisation, I do not know any transport business that I have certainly been involved in where one puts first any respect of trying to earn bonuses or take away performance or avoid penalties that has a conflict with safety because safety always comes first in the transport business.

  535. How do you ensure high standards of training and competence of your contractors and subcontractors?
  (Mr Coucher) There is already a very rigorous subcontractor selection process designed to ensure there is competence in the staff who are put on the job and we intend to enhance that regime to make it even more exact.

Chairman

  536. Mr Hoare?
  (Mr Hoare) We would do the same thing. Our supply chain in terms of our subcontractors will be in place by the start of our contract. We are in a somewhat different position in that a lot of our supply chain capital expenditure work comes in very much in the early years.

  537. I am going to ask you very quickly, if I may, because I want to allow you to escape quite quickly, what peak period network capacity increases will you achieve in the seven and a half years?
  (Mr Hoare) The first thing is we will have increased the availability on certainly all our lines in a very short period of time by putting an investment in things like signalling and track.

  538. We understand why you are being brought in, Mr Hoare, but what extra capacity do you expect to deliver?
  (Mr Hoare) Availability will create reliability which will create extra capacity. It will,

  because—

  539. Oh, I have great faith.
  (Mr Hoare) As they say, the proof of the pudding is always in the eating.


 
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