2 Buying new trains
8. The Department has chosen to finance the purchase
of over 1000 railway carriages through a complex PFI contract
with one supplier to design, build, finance and maintain the new
trains, at an estimated capital cost of £1.6 billion.[14]
At the time of our hearing the award of the contract was delayed
by over three years and the Department was limited in what it
could tell us about the procurement as negotiations were on-going.[15]
The Department has since awarded the contract to a consortium
of Siemens and Cross London Trains, but we remain interested in
why this procurement took so long and intend to examine the deal
further.[16]
9. The Department told us there were three reasons
for the delay in awarding the contract: unsettled financial markets
made it difficult to raise the finance required; securing planning
permission for the depot at Hornsey took longer than expected;
and the scale and complexity of the transaction took all parties
by surprise.[17] The
Department told us that its decision in March 2008 to use a PFI
contract was primarily due to policy at the time rather than a
result of any comprehensive evaluation of all the options.[18]
The Department could not tell us how the cost of using PFI compares
to that of buying the trains up front. The Department told us
that it made a comparison of the PFI option against a private
sector comparator based on a traditional rolling stock transaction
and lease structure, but did not evaluate it against a public
sector comparator. We are concerned, therefore, that the decision
to go down the PFI route was not based on a comprehensive assessment
of value for money.[19]
10. The delay in awarding the contract has reduced
the time available for the manufacturer to build the trains and
we remain unconvinced that all the trains will be delivered in
time for 2018.[20] The
C&AG's report showed that to deliver to the 2018 deadline
Siemens will have a timeframe some eight months shorter than originally
envisaged to deliver the first trains into service. The Department
told us it is confident Siemens can deliver in the shorter time
frame.[21] The Department
said that Siemens has already carried out some design work at
their own risk, and there are a number of financial incentives
and penalties in the contract intended to encourage delivery to
schedule.[22] However,
the Department was unable to point to any past examples of a train
manufacturer delivering a new fleet of trains earlier than planned.[23]
14 C&AG's Report, para1.12 Back
15
Qq 42-43 Back
16
Department for Transport press release 27 June 2013 Back
17
Qq 65, 69 Back
18
Q 70, C&AG's Report, para 3.4 Back
19
Qq 76-78 Back
20
Q 47, 171-174 Back
21
Qq 48-50; C&AG's Report, para 3.5 Back
22
Qq 50, 60 Back
23
Qq 53-58 Back
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