Local councils paid over £4m for the Boris Bike’s expansion into South West London, how much did Barclays pay?

docking_station_wandsworthCommitted readers may recall that Hammersmith & Fulham, Lambeth and Wandsworth councils boroughs paid more than £4.2m towards the cost of the Boris Bike scheme’s extension into South West London.

As I reported in February 2012, councils were told the scheme’s arrival into their areas was “conditional” on them stumping up cash, despite City Hall and Transport for London announcing the expansion in July 2011.

In total boroughs, including Tower Hamlets and Kensington and Chelsea, have paid £6.5m towards the scheme despite their funding being underplayed by TfL’s publicity machine.

The press release announcing the South Western expansion didn’t mention that TfL was milking boroughs for money.

Instead it said the expansion would be helped by a second payment of £25m by scheme sponsors Barclays which was extending its sponsorship term by three years to 2018.

Yet despite the certain statements of Boris, TfL and Barclays, the deal hadn’t been formally extended and there was no additional £25m.

In December, when news that the bank was quitting as sponsor in 2015 first broke, TfL insisted it had been in negotiations with Barclays to secure the extra money but that the bank’s own internal review of its sponsorship commitments had superseded those talks.

There had, it said, been Heads of Terms setting out the extension and this was proof that all sides intended to do the deal, making it OK to press release the second pot of cash, but no actual deal was ultimately concluded.

Yet those Heads of Terms, belatedly
released to MayorWatch under Freedom of Information laws, raise further questions.

BCH Heads of Terms

Dated 4th August 2011 – after all three parties had announced the bank’s commitment to provide extra money – they set out a very simple framework to amend the original 2010 sponsorship contract.

They also raise the question of whether Barclays ever paid anything towards the expansion.

The original 2010 contract gives Barclays exclusive naming rights to the scheme, but part B of the document limits the initial £25m as a contribution towards the first two phases.

This is further reinforced by Part C which sets out clawbacks applicable only to the first and second phases and the July 2011 press release which states:

“The extra funding will help the scheme to expand throughout west and south-west London by the summer of 2013”

And clause 3.2 of the Heads of Terms – which TfL and the Mayor insist were never formalised into a contract – says:

“TfL shall grant naming and sponsorship rights to the Sponsor in relation to phase 3, in the same form as the Rights set out in the Agreement in relation to phases 1 and 2 of the London Cycle Scheme and Cycle Superhighways”.

The document even places a price on the naming rights for the third phase – £10m.

Of the £25m announced by Barclays, Boris and TfL in July 2011, £15m was a payment for extending the length of the deal and £10m was for the third phase with additional clawbacks set out to protect the bank against delays and insufficient bikes being available at launch.

It’s therefore clear that as of August 2011, TfL believed the original £25m didn’t cover any third or subsequent wave of expansion and wanted £10m in return for letting the bank exercise its exclusive naming rights.

Given the Heads of Terms were apparently never formalised into a contract, did Barclays ultimately pay anything towards the 2,000 bikes coasting around South West London emblazoned with their logo?

TfL has never said or even hinted so, preferring in their answers around the early termination to always refer to the end dates of the original contract rather then any geographical elements to the funding.

If Barclays has contributed more money towards the South West expansion, why hasn’t this been announced to Londoners, the Assembly and the media?

TfL’s failure to turn a 3 page outline into an agreed amendment of the original contract looks damning on its award winning legal team. But it may have been a blessing in disguise.

The August 2011 proposal sets out clawbacks both if less than 3,000 bikes were available in the South West expansion at launch – for each percent of bikes by which TfL was short, Barclays would deduct an equal percentage of the money – and if the expansion was delayed beyond July 2011 – £100k for each month’s delay.

The expansion finally opened in December 2013, 5 months late which would have cost TfL £500,000 in penalties.

When it did finally launch, TfL’s own website confirms that there were 2,000 bikes – a full third below its offered commitment to Barclays – which would have cost it £3.3m.

That’s a potential £3.8m of deductions at launch leaving Londoners with a maximum of £6.2m from the bank, almost the exact sum paid by boroughs whose funding TfL once tried to hide behind FOI exemptions.

But today it’s not at all clear whether the bank actually paid anything towards the expansion or, if it has, how much taxpayers are getting.

TfL have been asked to confirm how much money it’s received or will receive from Barclays for the third phase of the bike hire scheme and the total due to be received from Barclays by 2015.

If they come back to me with an answer – the stated deadline of 11am has already passed – I’ll share it with you.

In the meantime London Assembly members are seeking clarity over exactly what the bank paid towards the multi-million third phase.

Green Party Darren Johnson has said: “Londoners will find it staggering that while local authorities paid millions towards the expansion of cycle hire in south west London, Barclays appear to have got their name splashed all over an additional 2,000 bikes without paying a penny extra.

“If it turns out that Barclays didn’t contribute any additional money, then why were local authorities helping to pay for the expansion of the scheme, whilst a bank gets all the credit and a load of council tax funded publicity?

“The whole procurement process for this contract seems flawed, as Transport for London agreed £25m sponsorship money to help pay for the first two phases of the scheme, but then gave Barclays exclusive rights to phase 3 of the expansion without guaranteeing that there would be any additional money. The result appears to be that Barclay’s said thanks a lot and got all the upsides of further expansion without paying the £10m that TfL expected.

“This whole deal should have gone through the formal procurement and tendering process which normally requires adverts in the Official Journal of the European Union. There are now big questions about whether the Mayor used his friendly relationship with Barclays Bank to help push along such a seriously flawed contract.”

Update: Transport for London has confirmed that Barclays will make no further payment for the third phase, it tells me:

“Barclays remain sponsors until 2015, as per the terms of the original deal signed in 2010, worth up to £25m.”

Except, as previously reported, TfL won’t even be getting £25m – the bank has already deducted more than £2m for poor performance and the missing of service level agreements and journey predictions.