Metronet, the company responsible for maintaining and upgrading two thirds of London’s Tube network, has requested £992 million in compensation for extra work it is carrying out, claiming London Underground has been too demanding.

The contractor, which is working on nine Tube lines, said that the transport operator was rendering its upgrade programme “unaffordable” because of the high specifications it was demanding.

The claim, which was made to Chris Bolt, the PPP Arbiter, came as Metronet detailed its call for compensation for work it is carrying out but which is not included in the original contract it signed.

It has two Public Private Partnership (PPP) agreements. The claim covers the work of Metronet Rail BCV, which is carrying out work on one of the agreements that covers the Bakerloo, Central, Victoria and Waterloo & City lines.

The company claims it has been forced to do extra work because of the demands of London Underground and difficulty in creating a precise contract at the time of its award.

The nature of the Underground system means it was also too costly to define precisely the state of assets at the time of the award. Metronet has been forced to pick up costs where it was initially unclear whether work was needed.

Graham Pimlott, Metronet’s chairman, yesterday conceded that the group had made mistakes, but said that its shareholders would bear the cost where it was responsible. “The PPP terms are clear – where additional spending is required to meet London Underground’s demands, then we are entitled to be paid. It’s disappointing that we have been unable to reach a mutually acceptable solution,” he said.

Ken Livingstone, the Mayor of London, has indicated that he does not want the contractor to receive any more of the taxpayers’ money.

Metronet called on Mr Bolt to carry out an extraordinary review of the cost overruns and to reach an interim judgment under which London Underground would be forced to increase its payments to Metronet immediately. An interim judgment could be made within a few weeks.

Some £550 million of the £992 million claim relates to work already carried out, or due to be carried out in the next 12 months. The remaining claim relates to work due to take place beyond June 2008.

Mr Pimlott said London Underground was still in a position to reduce the need for extra spending by reducing the scope of its upgrade work.

“Our shareholders remain fully supportive and we are confident of a large recovery from London Underground,” he said.

The company accuses London Underground of acting as if the PPP contract is a fixed-price contract, prompting the transport group to increase demands on its contractors.

Metronet said it had already funded about £350 million of additional costs, with its shareholders set to pick up 50 per cent of the tab, acknowledging its own inefficiencies.

Concerns over the future of Metronet were highlighted this week after WS Atkins and Balfour Beatty, two shareholders, both wrote down the value of their stakes in the company.

The shareholders are talking to Metronet’s banks over the uncertainty caused by the dispute with London Underground. Its banks have withdrawn lending facilities.

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