The Department for Environment, Food and Rural Affairs has stonewalled a request by Lord Berkeley seeking further information on Defra’s commercial interests in relationship to the funding of Thames Water’s £4.2 billion Tideway Tunnel project.

In a response to a written question placed by Lord Berkeley on 29^th June in the House of Lords asking what commercial interests the Department for Environment, Food and Rural Affairs has that are exempt from the Freedom of Information Act 2000, Lord Gardiner of Kimble replied:

“The Freedom of Information Act provides an exception under Section 43 allowing commercially sensitive information to be withheld. Use of this exception is considered and applied as appropriate on a case-by-case basis.”

Earlier in June the Department refused a request under the Freedom of Information Act 2000 for information about the Thames Tideway Tunnel and the UK Government “Pre-Funded Risk Reserve.”

Defra had been asked to provide confirmation of the following:-

1. the number of tenders received;

2. the names of those who submitted a tender;

3. the names of those who submitted a compliant tender;

4. the tender totals; and

5. who from Defra was present at the tender opening?”

Defra confirmed that the Department holds information which falls within the scope of the request, but declined to make the information available, commenting:

 “Section 43(2) of the FOIA exempts any information from disclosure if this would, or would be likely to, prejudice the commercial interests of any person or business (including Defra). Having consulted Thames Water Utilities Limited, we are satisfied that the disclosure of this information would cause significant harm to their commercial interests, especially given that the procurement of the infrastructure provider for the Project remains live. It would also harm Defra’s commercial interests.”

Defra internal review of request for information currently underway

The outcome of a further request to review the refusal is now currently in the process of an internal review by Defra which must respond by 11^th August at the latest. The complainant had written to Defra as follows:

“Although I can understand the embarrassment felt by Thames Water and the UK Government in this matter, I do not accept that making the information requested public is counter to the public interest.”

“Does your response not indicate that the IP "tender" process itself was not a true tender, in the normally accepted meaning of the word, since the result of that tender is being unreasonably withheld from the public?”

The respondent went on to comment that media reports said only two consortia were left in the competition for the role of Infrastructure Provider to build and operate the Thames Tideway Tunnel for Thames Water.

The respondent then referred to the Secretary of State’s Specification for the Thames Tideway Tunnel Project in June 2014 which stated:

"If delivered through an IP, the SIP Regulations require the project and its financing to be put out to competitive tender. Provided that there are sufficient bidders to achieve competitive tension, it can be reasonably assumed that the resulting financing costs will represent fair market price and both OFWAT and investors will recognise this as an appropriate WACC."

Reference was also made to the joint Office of Government Commerce/ HM Treasury Guide on procurement for complex investments in infrastructure assets, "Competitive Dialogue in 2008: OGC/HMT joint guidance on using the procedure", which states:

 “The number (of bidders) invited to participate in the dialogue needs to be sufficient to ensure genuine competition and must be a minimum of three provided that there are that many suitably qualified candidates”; and

(b)]: where there is an inadequate bidder response, the Contracting Authority must consider if the procurement should proceed or not (cf. Single Bidder Situations: Box 5.7)”.

Box 5.7 states that:

"Market failure or lack of competition occurs when there is only a single (or no) bidder for a project, or perhaps where there are two or more bidders but only one is considered to be credible. In the absence of competitive tension a bidder is not appropriately incentivised to offer its best price, terms and conditions.”

“Consequently value for money will be difficult to achieve unless other steps can be taken to secure it. The Contracting Authority should carry out a thorough review before deciding on the way forward. If it concludes that it is not possible to take appropraite additional action to secure value for money, the procurement should be halted at that point".

The respondent has asked Defra that given there are only two bidders for the IP ownership and financing and that questions have been raised as to whether TTT is Value for Money or even needed, whether it is not therefore appropriate that the bidding for IP be halted so that the matters can be “properly and transparently resolved”.

At the end of June two Judicial Reviews supported by the Environmental Law Foundation (ELF) challenging the Thames Tideway Tunnel were dismissed by the High Court.

Thames Water itself has separately come in for further criticism by The Blue Green Economy group which has consistently campaigned against construction of the Tideway Tunnel on both environmental and financial grounds. Most recently the Group has flagged up what it describes as “complex structures underpinning the company”, including 10 corporate layers between the UK licensed company and its shareholders.

Attention has also been drawn to the fact that a significant proportion of the company’s debt has been raised via a Cayman Islands company, Thames Water Utilities Cayman Finance Limited. The Cayman Islands are among 30 territories which form the first list of international tax havens published by the European Union in June as part of a crackdown on multinational companies trying to avoid paying tax in the 28-nation bloc.

Ofwat has also separately turned its attention to issues relating to transparency and financial risk. In June the water industry regulator published an assessment which said that while the regulated companies have taken further steps towards improving their accountability, more needs to be done by their holding company owners.

This week Ofwat has also launched a new consultation on its plans to monitor the financial stability of the water sector in England and Wales.