East London Line to be first rail PPP

Contractors are being asked to express their interest in the first groundbreaking multi-million pound PPP rail contract from the Strategic Rail Authority (SRA).

CJ can reveal that the first PPP contract, worth between £700m and £800m, will be piloted on the East London Line Extension. The contract received planning permission only a few weeks ago having gone to a public inquiry in 1997.

The original project was due to be completed by 2006 but construction was held up due to controversy over the demolition of the listed Bishopsgate Goodsyard.

An advert for the contract is due in the OJEC by September.

SRA chairman and chief executive Richard Bowker said: "This is great news for contractors. We have now developed our risk model and want to take it out to the market and start the bidding process. There has been a tremendous amount of interest from the City already."

The exact details of how the PPP will be structured have yet to be announced, but Bowker hinted that there would be a fair balance of risk to contractors, despite claims by some industry insiders that a rail PPP project would have too much uncertainty.

Network Rail chief executive John Armitt has warned that privately financed projects, based on the design, build, finance and transfer model (where the contractor designs, constructs and then hands the project back to Network Rail) would not suit the industry because of interruptions such as track possessions.

But Bowker dismissed these concerns and said that a lot could be learnt from the pilot project when other PPP deals come on line.
"The advantage is that there is a large amount of greenfield land to work on that allows room for trial and error," he said. "We would like to have started the PPP earlier but it wasn't meant to be."

Bowker would not be drawn into how the PPP model would fit into other complex major projects included in its 2002 Strategic Plan, such as the upgrade of the West Coast Main Line and the upgrade of lines run by South West Trains.