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The collapse of the 30-year Tube Lines PPP deal with Transport for London has been blamed on an 鈥渙nerous鈥� and 鈥渆xpensive鈥� contract.

Experts claim the reasons for the breakdown were specific to the London Underground deal and have little consequence for other PPP deals.

The comments follow a decision last week by London mayor Boris Johnson to buy Tube Lines for 拢310m, after the two parties reached a stalemate on their negotiations over a price for the next seven-and-a-half years of upgrade work.

An adviser on the winding up of now defunct PPP Tube contractor Metronet, who will also advise on the Tube Lines takeover, spelled out two key reasons for the demise: 鈥淭he first was that it was a highly onerous contract, in which lawyers and professionals tried to allow for every possibility. It would have been much better if it had reflected a spirit of agreement.

鈥淭he second was that it was far too expensive. For the next seven-and-a-half years Tube Lines was willing to do the work for 拢1.3bn less than the originally estimated 拢5.7bn. That tells you a lot.鈥�

Tube Lines, which was upgrading the Northern, Jubilee and Piccadilly lines, will now become 100% owned by Transport for London (TfL). At present it is two-thirds owned by Spanish firm Amey and one-third by US outfit Bechtel.

The adviser added: 鈥淣ow TfL will have control of its capital spending, rather than being locked in.鈥�

The first quarter of the 30-year contract had already been carried out, and the breakdown came during negotiations for the second quarter. Tube Lines initially suggested a price of 拢5.7bn, which the arbiter reduced to 拢4.46bn. TfL still wanted a further 拢600m taken off the price.

Neil Rutledge, a government and infrastructure adviser at financial services firm Grant Thornton, said: 鈥淚 don鈥檛 think the collapse has any wider implications for PPP, as the markets have always understood that this [Tube contract] was an unusual case.

鈥淧eople couldn鈥檛 do the due diligence they鈥檇 usually do [because of the nature of the underground network] and there were restrictions on when work could be done 鈥� a lot of the problems were about working on the Tube rather than PPP. Deals that are well-structured and involve building new assets will carry on as normal.鈥�

The TfL deal will be finalised on 30 June, after which Amey, a subsidiary of Spanish construction giant Ferrovial, will continue to provide management and maintenance services at a reduced rate. Bechtel will remain for an 鈥渋nterim period鈥� before handing capital works to TfL.

It is unclear how many of the 3,000 Tube Lines staff will be made redundant, but Bob Crowe, general secretary of the RMT union, has already warned of industrial action.

The London Underground鈥檚 only other PPP deal collapsed when Metronet entered administration in 2007.

Boris Johnson set out his transport plan for London on Monday, detailing the city鈥檚 strategy for the period up to 2031. Among the list of proposals was making sure Crossrail is delivered by 2017 without any scaling back. The project will employ up to 14,000 people between 2013 and 2015.

Three sides to every story

What Boris said:

鈥淔reed from the perverse pressures of the Byzantine PPP structure, I am confident that London Underground and a private contractor are more than capable of delivering the improvements to London鈥檚 transport network we need, on time and on budget.鈥�

What he meant: 鈥淲hat idiot came up with this PPP?鈥�

What Amey said:

鈥淲e are proud of our record over the past seven-and-a-half years and the results we have achieved 鈥� these include a significant reduction in delays, increased reliability, improved safety and reduced costs. We look forward to building on these achievements and further strengthening our partnership with TfL.鈥�

What it meant: 鈥淚t was Bechtel鈥檚 fault.鈥�

What Bechtel said:

鈥淲e are extremely proud to have played an important role in delivering the substantial improvements on the Jubilee, Northern and Piccadilly lines, while transforming safety for people working on the network. These achievements are a tribute to the dedication and hard work of Tube Lines鈥� employees.鈥�

What it meant: 鈥淕et your P45s ready.鈥�