Don鈥檛 worry. If life lacks excitement after the Wembley peace treaty, it鈥檚 a safe bet in our industry that a fresh outbreak of hostilities won鈥檛 be far off.

Actually, it seems to have arrived already, by tube: Metronet, London Underground and Ken Livingstone are fighting over which of them is going to pay the 拢750m that Metronet estimates it will overspend in the first seven-and-a-half years of its contract.

The problems revolve around what counts as a station refurbishment. You can imagine the sort of thing. The contract says tiling is to be 鈥渕ade good鈥�. Metronet reads that as taking care of a few broken ones; London Underground wants the whole lot replaced. By way of example Metronet says the ceiling at Lancaster Gate was painted three times because London Underground kept saying it was the wrong colour.

How could there have been such a basic misunderstanding in such a lengthy contract covering such a vast project? Well, Metronet took on an 拢18bn deal that involved upgrading 150 stations on nine lines. It couldn鈥檛 have surveyed all of them before it signed. Clearly this job will run smoothly only if it has a helping of Latham鈥檚 magic ingredient 鈥� trust. Instead, we have a politically charged feud that could be set in construction鈥檚 version of Life on Mars.

Metronet鈥檚 mismanagement in its first three years was confirmed in a review by an independent arbiter. This wouldn鈥檛 inspire any client with confidence, let alone one that had the PPP foisted on it despite its vigorous protests. It doesn鈥檛 look good, either, that the smaller Tube Lines contract has gone smoothly.

In response, Metronet says it has shaken up its management and is putting work out to tender, rather than giving it all to members of the consortium. That said, the job is so inherently inefficient that it would be surprising if Metronet avoided all the penalties arising from disrupted services. The good news for Balfour Beatty and Atkins is that the rest of their businesses are doing well, so the writedowns they鈥檝e made as a result of Metronet 鈥� 拢36m in Atkins鈥� case 鈥� haven鈥檛 pushed them into the red.

Livingstone is calling for an extraordinary review by the arbiter (a provision originally written into the contract by Metronet), which would result in binding arbitration. This would take a year to resolve and cost 拢5m in legal fees for both sides. Metronet is, understandably, pushing for a negotiated settlement and has appointed Deloitte to amass evidence to bolster its case. Although its chances of success do not appear good, this is surely still the best approach. Despite its myriad problems, this contract has a great deal going for it. It鈥檚 tackling a problem that has dogged the tube for decades, and it has transferred the risk of doing so away from the public sector. A drawn-out legal battle could jeopardise that, and Livingstone鈥檚 gamble of taking a tough stance could backfire 鈥� around the time of next spring鈥檚 mayoral elections.

Denise Chevin, editor

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