Transnet delays big locomotive bid process

[John Ashworth]

Transnet delays big locomotive bid process to settle localisation details

By: Terence Creamer
31st October 2012 Engineering News

The award of two tenders issued by Transnet for the procurement of 1 064 locomotives to be introduced into its general-freight-business fleet between 2014 and 2019 have been delayed to enable the freight logistics group and the National Treasury to work out the finer localisation details. Together, the supply contracts are estimated to be worth around R35-billion.

Transnet Freight Rail (TFR) CEO Siyabonga Gama says the requests for proposals for the supply of 599 new dual-voltage electric locomotives and 465 new diesel locomotives attracted significant interest with some 15 companies and consortia having collected the tender documentation.

But the tenders were now only likely to close at the end of February 2013, instead of on October 2, 2012, as initially advertised to enable Transnet and the National Treasury to come to terms on the nature of the Competitive Supplier Development Programme (CSDP) elements.

CFO Anoj Singh indicated that the discussions revolved around ways to “maximise” the CSDP benefits for South Africa and did not relate to the principle of localisation itself. In fact, group CEO Brian Molefe indicated that Transnet felt it could improve on the localisation thresholds contained within a CSDP instruction note that had been issued by the National Treasury.

Gama expected resolution on the issue during the course of the coming month, after which TFR would host a briefing session with the potential bidders.

“The actual tender will close sometime in the new-year, probably around the end of February and we will probably make an announcement in terms of the successful tenderers around June or July next year,” he added.

The two tenders follow on from the recent award of a contract to China South Rail (CSR) for the supply of 95 new electric locomotives. The first 45 locomotives were expected to enter operation next year, with the 50-unit balance to be supplied by the end of September 2014.

The first 10 locomotives would be assembled at CSR’s factories in China, while the remainder would be made in South Africa in line with a local supplier development commitment representing 60.5% of the total value of the contract.

Transnet was currently achieving local-content levels across all of its railways acquisitions of around 40%.

But the group had started to ramp up the local-content stipulations in its more recent procurement programmes and was currently achieving 67% localisation in a 'follow-on’ agreement with General Electric for 43 diesel-electric locomotives. These Class 43-000 locomotives are being assembled by Transnet Rail Engineering (TRE) at its workshops in Koedoespoort, north of Pretoria.

The group was also aiming to re-establish TRE as a global locomotive manufacturing hub through the integration of work packages arising from the R123-billion acquisition programme being undertaken by the Passenger Rail Agency of South Africa (Prasa).

The commuter-rail utility was hoping to procure 7 200 passenger coaches by 2035, but the National Treasury had set an affordability limit of R40-billion for the first phase.

Seven companies and consortia had submitted bids, where a 65% local content target had been set.

The bidders include CAF, of Spain; Bombadier, of Canada; CSR, of China; China North Rail; Gibela Rail Transportation (a French consortium comprising Alstom and Actom); Dudula Rail (a consortium comprising ABB South Africa and Stadler, of Switzerland); and the CSR/Wictra consortium.

It was also confirmed that TRE would provide the facilities for the production of the passenger coaches and had also been designated in the tender documentation as the conduit through which all technology transfer would occur.

In return TRE would be expected to invest in a customised facility at which the preferred Prasa bidder would manufacture and assemble the passenger coaches.

TRE CE Richard Vallihu said TRE was offering all three of its workshops to the original-equipment suppliers. However, the eventual site selection would be decided once Prasa made a preferred-bidder selection.

“Over the last decade, we’ve invested a great deal in our workshops, so we are not talking about a greenfields operation. We have facilities that are world class and I think it is a fantastic opportunity not just for Transnet, but for South African suppliers, which will also be participating in this capital expenditure by Prasa,” Vallihu said.

[Steve Appleton]

The group was also aiming to re-establish TRE as a global locomotive manufacturing hub through the integration of work packages arising from the R123-billion acquisition programme being undertaken by the Passenger Rail Agency of South Africa (Prasa).

It seems that Transnet is favouring its own subsidiary, TRE, to the apparent exclusion of some other private, local manufacturers such as Union Carriage and Wagon, who in the past have succesfully built a number of the locomotives and rolling stock still in service and which is now verging on total closure. Could this action not be regarded as a form of corporate nepotism?