Progress in delivering the Thameslink programme - Public Accounts Committee Contents


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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Prepared 29 October 2013