WRITTEN QUESTION P-2362/02 by Charles Tannock (PPE-DE) to the Commission. Consistency of the British government's proposals for the London Underground system with EC rules on public procurement and state aids.
Date: 2002-07-24
Institutions: European Parliament, Provisional data
Subjects: State aid, United Kingdom, application of EU law, award of contract, control of State aid, public contract, underground railway, vehicle on rails

12.12.2002

EN

Official Journal of the European Communities

C 309 E/227

(2002/C 309 E/260)

WRITTEN QUESTION P-2362/02

by Charles Tannock (PPE-DE) to the Commission

(24 July 2002)

Subject: Consistency of the British government’s proposals for the London Underground system with EC

rules on public procurement and state aids

It is the stated policy of the UK Government to proceed to an extensive programme of modernisation of
the London Underground via a Public Private Partnership involving a tender process initiated in April
2000 by London Transport (LT) through its commercial vehicle London Underground Limited (LUL).
Under this project, the physical assets and infrastructure, including rolling stock, are due to be leased to
two private consortia for a period of 30 years, whilst the operator would remain in the public sector under
the new body Transport for London (TfL) which is under the political control of the elected body of the
Greater London Authority. The undertaking is estimated to be worth in the order of EUR 45 billion in
2001 prices over 30 years, making it one of the largest public procurements ever carried out in Europe.
London Underground assets were incorporated into three Infraco (infrastructure) companies and
transferred to two preferred consortia bidders Tubelines and Metronet on 8 May 2002, subject to UK
safety regulatory approval and clearance by the European Commission merger and state aid rules. Merger
clearance under EU competition rules was obtained on 24 June 2002 (ref. Case Comp/M 2694).

TfL will guarantee the obligations of LUL under the PPP contracts and oversee their implementation. TfL,
however, allege in a complaint filed with the Commission a breach of both EC public procurement and
state aid rules. They allege that the PPP contracts do not constitute a concession as cash payments will be
made by LUL to the Infracos and, therefore, fall under Directive 93/38/EEC (1) (‘Utilities Directive’) and that
after selection of the preferred bidders further negotiations significantly enhanced the contract value and
decreased the inherent risks by more than 10 % of the bid value (estimated to be of the order of EUR 3
billion to Metronet consortium-para 69 of ref. Case Comp/M 2694), which should have triggered as
required under Article 4 of the Utilities Directive a mandatory re-tendering by all the initial bidders.

Tfl also alleges breaches of Article 34 of the same Directive in LUL’s failure to employ correct methodology
in the evaluation of the most economically advantageous bid. The process is complicated by alleged
breaches of State Aid rules which will favour only those winning bidders and disadvantage the competition
even if the aid element is permissible after due notification having been given by the UK Government.

Given Commissioner Bolkestein’s declaration against any abuse of competition in public procurement
where preferred bidders or winning tenders are permitted to change fundamental aspects of their bids and
so jeopardise the principle of equality of treatment and the need to ensure value for money in public
tenders, will the Commission undertake an urgent investigation of these allegations of breaches of EU law?

(1) OJ L 199, 9.8.1993, p. 84.

Answer given by Mr Bolkestein on behalf of the Commission

(4 September 2002)

The Commission is presently working to examine the submission made by the United Kingdom
government, together with the complaints the Commission has received relating to state aid and public
procurement aspects of the London Underground PPP case.

The Commission will conclude its examination once it has received all the information necessary to assess
this case

The Commission will inform the Honourable Member in due course of the results of its examination.