UK: Bombardier rail deal could be investigated

[John Ashworth]

Bombardier rail deal could be investigated by National Audit Office

Transport select committee is urging the NAO to scrutinise the rail contract contest that saw Bombardier lose out to Siemens

Dan Milmo
The Guardian, Friday 16 December 2011

MPs are urging the public spending watchdog to investigate the decision that led to a German manufacturing firm receiving a £1.4bn government rolling stock contract ahead of the Britain's last remaining train factory.

The transport select committee (TSC) has asked the National Audit Office (NAO) to scrutinise a contest in which Siemens was chosen as preferred bidder for the procurement of 1,200 carriages for the London Thameslink route instead of Canada's Bombardier, which would have built the vehicles at its Derby plant.

"We think that it would be in the public interest for the procurement process to be independently reviewed," the committee's report said, adding that it had written to the head of the NAO requesting a report by next summer. The NAO said it was considering the recommendation.

The Thameslink decision has become a political quandary for the government, which has acknowledged that it could abandon the process and start again but has warned of the delays it would mean for the overhaul of one of Britain's busiest rail routes. In the wake of the decision Bombardier has announced plans to cut more than 1,400 jobs at Derby, equivalent to nearly half its workforce, leading to accusations that the government's "march of the makers" has slipped into a damaging reverse gear.

A Department for Transport source said the government would "welcome" an independent review of the decision. The source also highlighted the committee's comments on the original tender, which was drawn up under the Labour government and excluded socio-economic criteria that may have benefited Bombardier. The committee said there were "few defenders" of the previous administration's design of the contract. "The TSC recognises that the procurement process started by Labour was too narrowly drawn to take account of socio-economic factors, and could not have been reopened by the current government," said the source.

The report supported the government's pledge to put a "sharper focus on UK strategic interest" in future government contracts, although ministers have so far failed to find a framework that would meet EU rules, which prohibit member states from showing domestic bias in awarding government contracts.

The committee also suggested a change that could benefit Bombardier in bidding for the next big UK train contract, the Crossrail route, by recommending the tender separates train financing from train design and manufacturing. The Thameslink process asked bidders to finance as well as build trains, which the committee said appeared to favour Siemens with its superior financial heft.

"It is hard to escape the conclusion that Siemens' A+ credit rating made a significant contribution to its success in winning the Thameslink procurement. We are concerned that bundling train manufacture and financing together in procurement exercises will skew the market towards larger multinational firms,possibly at the expense of excellence in train design and domestic manufacturing," said the committee.

The shadow transport secretary, Maria Eagle, warned that the Crossrail contract risked making the same mistakes because it will be dominated by private financing rather than government-backed funding. "It would be unforgivable for the process of buying the new Crossrail trains to be carried out using the same procurement model," said Eagle.

The two trade unions with a strong presence at the Derby plant, Unite and the RMT, welcomed the report. Bob Crow, RMT general secretary, said Siemens had yet to close the deal and urged the government to reverse its decision. "There is a window of opportunity to reverse the betrayal of Bombardier on the back of this report," he said.

Unite's general secretary, Len McCluskey, said: "It will be a national scandal if the Transport Secretary refuses to put the Thameslink contract on hold to allow a full inquiry."

Stressing the importance of having an indigenous train building industry, the report noted that losing a UK-based train designer and manufacturer could hurt taxpayers and commuters because British carriages require smaller dimensions to their continental counterparts - a legacy of Britain's long history as a rail pioneer – and cannot be mass-produced. As a consequence, orders are relatively small and could be even more expensive if they are offered to European manufacturers geared towards making markedly different models.

However, the committee appears to acknowledge that the Bombardier decision cannot be reversed, noting that the coalition government could not have altered the contract to put greater emphasis on UK jobs without scrapping the process and starting again.

MPs call for NAO to review the Thameslink rolling stock procurement

16 December 2011
www.parliament.co.uk

The procurement process completed by the Department for Transport which led to the selection of Siemens rather than Bombardier as the preferred bidder for new Thameslink rolling stock should be independently reviewed by the National Audit Office, say MPs on the Transport Select Committee.

Launching the report of a recent inquiry into this procurement, Louise Ellman, Chair of the Transport Committee said,

"We could not evaluate whether the decision to choose Siemens was arrived at correctly because all of the bids were and remain confidential. We believe that in the public interest an independent review must evaluate whether this massive contract was awarded correctly on the basis of the criteria in the original invitation to tender."

The Transport Committee has therefore written to the Comptroller and Auditor General to request he undertake this work and report to Parliament before summer 2012.

There is now widespread agreement that the criteria used in the procurement were too narrowly drawn in excluding socio-economic factors.

"Both the current and previous Secretary of State have made plain they have no intention of starting the process again because of the delays they consider this will lead to," said Louise Ellman.

Conclusions

MPs also concluded:

Siemens' A+ credit rating almost certainly made a significant contribution to its success in winning the Thameslink procurement and that the bundling of train manufacture and financing together in large procurement exercises will skew the market towards larger multinational firms, possibly at the expense of excellence in train design and domestic manufacturing.

The government should clarify whether the medium term procurement plans mentioned in the Chancellor’s Autumn Statement include a plan for rolling stock.

The Government must do more to ensure that UK-based companies in, or supplying, the train building sector enjoy a steadier flow of business opportunities including new projects before the next major train procurement.

"We support the Government's intention to place a sharper focus on the UK's strategic interest in major public procurements and must hope that this new approach to procurement does not come too late for the Bombardier plant in Derby. It will be crucial for the Government to work closely UK train makers so that together they can develop a financial partnership that will offer good value to the taxpayer whilst promoting long-term best value," added Louise Ellman.