Order for new trains could have left taxpayers ‘badly ripped off’, say MPs

http://www.theguardian.com/uk-news/2014/dec/17/trains-taxpayers-ripped-off-department-transport-rail

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Two fleets of trains ordered for £10.5bn by inexperienced officials at the Department for Transport have put taxpayers’ money at risk, sown confusion in the rail industry and could mean higher fares, a report from MPs claims.

The public accounts committee said the DfT’s uncertain procurement process, which ended with contracts awarded two and a half years late, could have seen the government “badly ripped off”.

The department paid a Hitachi-led consortium £7.7bn to provide and maintain Intercity Express trains, which will into service on the East Coast and Great Western lines from 2016. Siemens won a £2.8bn contract to provide trains for the enhanced Thameslink network, which goes into operation from 2017.

Margaret Hodge, who chairs the committee, said the department’s decision to buy the trains itself had left the taxpayer bearing all the risk.

“The department has no previous experience of running a procurement of this kind, let alone two with a combined value of £10.5bn,” she said.

“Yet it has chosen to break with its previous approach of leaving it to rolling stock companies and train operators to buy trains, transferring risk away from the rail industry back to government. If passenger forecasts are wrong and fewer new trains are needed, taxpayers will have to pick up the bill.

“The only way the department can limit this risk is by requiring train operating companies to use these new trains to run their services regardless of whether they best fit the services they would like to offer.

“We are concerned that the department did not appear to have looked at whether there were better ways of achieving its objectives.”

The report finds the Intercity Express programme was poorly managed and could have cost billions more without a review in 2010, after Hitachi had already secured the work. The manufacturer submitted a bid 38% cheaper than its original offer.

Hodge said: “Had it not been for the review the taxpayer could have been badly ripped off. The department had begun the procurement without a clear idea of how many trains would be needed, which routes they would run on and what form of power would be required.”

The DfT revised its order to buy trains that could use either diesel engines or electrified lines as decisions about electrification were revised. The report says this “gold-plated specification” is likely to mean higher prices and higher fares.

Hitachi is assembling the 866 carriages in a factory in Co Durham, but Siemens is not manufacturing its 1,140 Thameslink carriages in Britain. Siemens was controversially chosen over Bombardier, which makes trains in Derby.

Hodge said the decision to order trains from overseas was extremely disappointing, adding: “The department must be much more assertive in ensuring that the UK economy benefits from large public-sector capital investment programmes.”

The report said the department’s decision to run the procurements itself, despite having no previous experience, was confusing and constrained the options available to future train operating companies as they would be required to use these trains to run their services.

It said the Intercity Express debacle illustrated MPs’ concerns about the small number of staff in the DfT with the experience to oversee complex procurements.

A DfT spokesman said: “The Intercity Express Programme and Thameslink are huge projects that will bring enormous benefits to passengers. Successive governments have considered how best to deliver these orders and have come to the same conclusion, that government should lead with expert support and advice from the train operating companies.”

Rail unions backed the MPs’ critical report. Mick Cash, the RMT general secretary, said the committee was “shining some light on the murky racket of train procurement” and “drawing attention to the need to defend and develop train building capacity in this country”.

Aslef’s leader, Mick Whelan, said: “A failure to put any long-term strategy for the rail industry in place has once more led to additional burdens, and risk, for the British taxpayer.”