Metronet crisis: Balfour Beatty given 12 months to hit targets on Tube work

carol.millett@rbi.co.uk

Balfour Beatty has just 12 months to prove itself on a new £102.4m London Underground track renewal contract agreed with Metronet's administrators last week.

Failure to meet stringent cost, performance and delivery targets will see the lucrative contract terminated next April and the work put out to tender.

The deal replaces Balfour Beatty's original seven-and-a-half-year Public Private Partnership contract, which was to run until 2010. It gives Transport for London (TfL) much greater control over how the work is delivered.

The 15-month contract, running from January this year until April 2009, gives TfL an option to renew every 12 months. However, TfL made clear this week that any extension depends on Balfour Beatty meeting strict performance conditions.

In a statement to CJ, TFL said: "This new track contract lasts for only 15 months and can be renewed for a further 12 months on a rolling basis, but only if Balfour Beatty deliver on the performance, cost and quality commitments that they have signed up to."

In addition, Balfour Beatty and Metronet track renewal management teams will work together more closely.

A Metronet spokesman said: "The agreement creates a new Track Alliance team of almost 600 Metronet and Balfour Beatty staff with an initial 15-month programme of work worth £102.4m. Further work will be contracted out every 12 months. The previous arrangement saw Metronet and its contractor working as two very separate entities. "

Balfour Beatty and Metronet have been informally working under this new arrangement since the start of 2007, saving an estimated £10m on costs in the first 12 months.

Metronet chief executive officer Andie Harper added: "The Metronet Track Alliance makes us more efficient and the collaborative arrangement allows us to spend more on the work and less on the management. It is more flexible and gives greater visibility of cost."

A Balfour Beatty spokeswoman said: "We are pleased that TfL, through Metronet, has appointed Balfour Beatty to proceed with the London Underground's track renewal contract."

The new deal was signed in the same week Metronet's administrators cancelled Westinghouse Rail System's £550m signalling upgrade contract.

Both agreements bring massive savings to London Underground's Tube upgrade programme and up the pace of Metronet's journey out of administration.