Centralised train procurement ‘leaves taxpayers over-exposed’

17 Dec 14

A decision by the Department for Transport to centrally procure trains for the East Coast, Great Western and Thameslink lines has left taxpayers bearing all the risk of a £10.5bn programme, the Public Accounts Committee has said.

Examining the plans to purchase trains through the Intercity Express Programme for the two regional mainlines and as part of the Thameslink upgrade scheme in London, MPs said central procurement was a significant change. Previously, the government left it to rolling stock companies and train operators to buy trains.
Committee chair Margaret Hodge highlighted that the department had no previous experience of running a procurement of this kind.
‘Yet it has chosen to break with its previous approach … transferring risk away from the rail industry back to government,’ she said.
‘This means that if passenger forecasts are wrong and fewer new trains are needed in future 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.’
Hodge said the committee was concerned that the department had not considered alternative ways of achieving the objectives for new trains.
‘For example, it could have addressed the lack of incentives that mean train operating companies do not have an interest in buying trains which minimise maintenance costs to Network Rail,’ she said.
‘Furthermore the department’s decision to take over the procurement has led to confusion over the respective roles and responsibilities of government and the industry which need to be clarified.
The Intercity Express Programme has been poorly managed from the outset, the PAC added.
The scheme was started under the last Labour government, while the coalition commissioned a review by Sir Andrew Foster when it came to office.
Once the review was completed, Agility Trains – who had won the original tender – came back with a revised bid that was 38% cheaper, which MPs said was ‘surprising, to say the least’
Hodge added: ‘Had it not been for the Foster review, the taxpayer could have been badly ripped off.
‘Yet again we see that the department has limited capacity and capability to manage large-scale procurements, and that it remains overly reliant on consultants.’
The IEP carriages are now expected to enter service between 2016 and June 2018, and the Thameslink stock between June 2017 and 2020.
Responding to the report, 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.
‘IEP and Thameslink are making excellent progress and are on track to deliver very good value for taxpayers and improved services for passengers. They are also creating thousands of new jobs across the UK rail industry.’

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