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UK Rolling Stock Procurement: Memoranda Received

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UK Rolling Stock Procurement: Memoranda Received This bundle: 11a, 12a, 21 UK Rolling Stock Procurement: Memoranda Received NEW items are listed below with the number and title in bold, and are available on the Members’ shared drive No. Author 01 Angel Trains 02 Debyshire and Nottinghamshire Chamber of Commerce (DNCC) 03 Porterbrook 04 Department for Transport 05 Huddersfield Penistone and Sheffield Rail Users Association 06 Associated Society of Locomotive Engineers and Firemen (ASLEF) 07 Professor Chris Bovis, University of Hull 08 Siemens plc 08a Supplementary from Siemens plc 09 Bombardier Transportation UK Ltd 10 Unite 11 Railway Industry Association 11a Supplementary from Railway Industry Association 12 European Commission 12a Supplementary from the European Commission 13 Margaret Beckett MP 14 Joint submission from RMT, GMB and the TSSA 14a Further written evidence from RMT 15 Peter Cousins 16 DATUM 17 Chris Williamson MP 18 Mark Thurnock 19 Derby and Derbyshire Rail Forum 20 Brian George 21 Derbyshire County Council Written evidence from Angel Trains (RSP 01) While Angel Trains appreciates that the enquiry will deal with specific points relating to the Thameslink procurement process, we wish to present some questions and thoughts on wider procurement issues in the rail industry. Will Government or the Rail Delivery Group set out an overarching strategy that provides manufacturers and suppliers with a steady new build order book? It is the ‘boom and bust’ approach to transport planning and investment over the last few decades that has had the most significant impact on manufacturing and suppliers in the rail industry. (Bear in mind that investment in rolling stock is not just about new trains. Making improvements to existing rolling stock would also provide opportunities for the whole supply chain. It would include improving access for people of reduced mobility, reducing the environmental impact of the stock, and changes to enhance its reliability and capacity. It is this kind of work which is the traditional "lifeblood" of the industry.) The whole rail industry needs clear goals so that it can contribute to UK economic growth. Certainty and stability for train manufacturing will enable the UK to trade on (and export) its significant expertise in this area, where manufacturing companies in the UK are some of the most innovative and specialised in the world. There is also a cost implication for the taxpayer. The Railway Industry Association estimates that the lack of continuity of rolling stock production adds approximately 20% to the cost of rolling stock in Great Britain. Could the private sector have procured the trains more efficiently? Neither the Thameslink nor the IEP procurement process has actually finished yet. They are still both at the preferred provider stage. The DfT issued its initial Invitation to Tender for IEP in November 2007, but the process of shortlisting suppliers had begun well before then. The Thameslink Rolling Stock Project began in April 2008. Passengers will not see the benefits for many more years. Angel Trains would question whether such a long and complicated process actually delivers value for money for the taxpayer. Angel Trains would argue that the industry structure has the right skills sets and expertise to manage the process of specifying, financing and managing rolling stock procurement through manufacturers, ROSCOs and TOCs better than the more centralised approach of the DfT. Angel Trains signed contracts with Alstom for the supply of new Pendolino rolling stock (106 vehicles) in September 2008 and the new trains will all be in service by December 2012. Should PPP continue to be used as the model for rolling stock procurement? PPP / PFI has only been a successful model for funding investment and delivering projects in some sections of the public sector. The rail industry has thrown up a number of poor examples, and not just in the UK; London Underground PPP contracts have not been a resounding success, but neither has the rolling stock PPP for Reliance Rail in New South Wales. First, experience has shown that if the nature of the requirement cannot be well identified at the outset then it will be difficult to write successful long-term contracts. Because of fluctuating patterns of passenger demand, rapidly improving technology, and on-going modifications to UK transport policies the specifications detailed in the contract will change significantly if the procurement process is long and drawn out. Secondly, the rationale for PPP initiatives is that of risk transfer, and the government pays a premium for transferring that risk. However, that premium is a particularly large one in the rail industry: stemming from the fact that the design, manufacture and maintenance of rolling stock are bespoke. By this we mean that the nature of rolling stock makes it very difficult for anyone to take over a contract part way through its term if things are not going to plan. (It is not the same as a hospital or a school PPP, where the government can appoint another construction company to lay bricks, or another management team to manage the service.) For financial investors the bespoke nature of these contracts represents an important risk. As a result they align themselves with manufacturers who are able and willing to stand behind their products with significant indemnities and guarantees. These indemnities and guarantees – and the risks of significant day-to-day performance regime payments – add major costs to the bids. (It also explains why those manufacturers who have strong credit ratings are at an advantage against those who do not.) And in the end, despite all these costs pilling up to offset the risks set out above government will always remain the operator of last resort (because of the importance of the transport network to the UK economy, and to the daily lives of millions of voters). So even with these large premiums the risk is not totally transferred to the private sector. September 2011 Written evidence from Derbyshire and Nottinghamshire Chamber of Commerce (DNCC) (RSP 02) The Derbyshire and Nottinghamshire Chamber of Commerce (DNCC) is the third largest Chamber of Commerce in the country with 3,400 Members. Those Members include many companies engaged in supplying the rail industry both in the UK and abroad. Most of these companies are located in the country's largest rail industry and service hub, located in and around Derby. DNCC keeps in constant touch with its Members and is well placed to provide the Select Committee with evidence and opinion on this matter. The rail industry is highly regulated and investment decisions are heavily influenced by Government decision and process. For there to be a healthy and viable rail industry in the United Kingdom there needs to be supportive Government policies, particularly in respect of procurement. This Chamber is therefore highly critical of the Government's handling of the Thameslink procurement process from its inception to the naming of Siemens as the preferred contractor. This decision has implications for the longevity of UK based manufacturing and design capability and will severely limit the UK's ability to participate in this key economic sector. There is concern that the loss of mass manufacturing would have a deleterious effect on the world class consultancy sector also located in and around the city of Derby. This evidence therefore sets out the perceived flaws in the UK procurement process and records the potential damage that could be done to the Derby and UK economy as a result of the current policy and practices. This Chamber believes that the basis of the Government's procurement policy must be changed to take into account the wider economic impact and strategic importance of decisions. It is heartened by the BIS Secretary of State Vince Cable's announcement made on 5 July 2011 that he will consider the application of EU procurement rules in the next stage of the Growth Review. The Committee is urged to endorse this approach. DNCC has called on the Transport Secretary Philip Hammond to open up to public scrutiny his claim that awarding the Thameslink contract to Siemens, instead of Bombardier, provides the "best value for the UK taxpayer". This statement almost certainly does not take into account the social and economic costs of the downsizing or loss of the Bombardier plant and the associated supply chain nor the effect on the UK Balance of Payments. Furthermore, the Chamber believes that this decision is wholly counter to the declared aim of the Government to bolster British Manufacturing and support growth in the regions. Whilst the Chamber supports procurement of goods and services that offer the best value and price, it believes that large industrial sector-shaping public contracts need to consider the wider social and economic impact of respective bids. It is also essential that when these bids are being determined that full knowledge of the identity of the bidders and the effect of decisions should be available to the decision-makers so that the wider context can be taken into account. This practice is the norm in the rest of Europe and affects procurement process in other European states. For example, almost all trains, trams or buses procured by the French Government are made in France. In Germany 90% of its transport procurement is German. These countries have safeguarded the prospects of their domestic suppliers without infringing EU procurement laws. UK procurement policies and practices should become similarly aligned. Bombardier is the UK's only integrated train designer and manufacturer. It is a highly successful global company used to winning contracts against competitors in many countries. Of the last 14 bids it has made to supply rolling stock it has won 11. In contrast, on the last five bids made where the UK Department of Transport was awarding the contract it has won none.
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