11 March 2010 | Jake Kanter

The Mayor of London is considering legal action in a bitter dispute over upgrade costs for the London Underground (LU).

Yesterday the Public Private Partnership (PPP) Arbiter – the body that mediates financial disputes between LU and its vendors – ruled that LU should pay supplier Tube Lines £4.46 billion for maintenance work on the Jubilee, Piccadilly and Northern Lines over the next seven years.

The PPP Arbiter was called in after the two parties were unable to agree on costs last year.

Mayor Boris Johnson – the elected head of the Greater London Authority, which runs the underground – said yesterday that Tube Lines should only receive £4 billion. Tube Lines, however, argued that the mediator’s figure “only partially reflected” the detailed cost representations it made. It originally wanted up to £7.2 billion for the work.

Johnson said: “We will fight this to the last and we are therefore examining all our options, including legal remedies.”

LU managing director Richard Parry added: “It is essential that Tube Lines and its shareholders, Ferrovial and Bechtel, are now called upon to set out in full their plan to deliver the full scope of works for £4.46 billion.”

Andrew Cleaves, acting chief executive of Tube Lines, said the Arbiter’s decision could pose a “significant challenge” to delivering the upgrades.

“The Tube requires sustained, high levels of long-term investment. It is important therefore that there is general support for this massive improvement in the Tube in order to deliver the London Underground’s vision of a world-class railway for London,” said Cleaves. “The Arbiter has previously agreed that we have already shown a real commitment to drive down costs and increase performance outputs for the benefit of passengers.”
 
Arbiter Chris Bolt said: “I am giving London Underground a further opportunity to either confirm that it is able to meet the full costs of its requirements or to revise them.”