2 Delivering major rail projects more
successfully
8. The Department made significant changes to the
specifications for the new Intercity Express trains, which delayed
the procurement. These problems might have been avoided if the
Department had a better understanding of the sector's infrastructure
and train needs, and a clearer strategic overview of the rail
network.[16] The Department
went out to tender before it had decided which Intercity routes
the new trains would run on, resulting in it specifying six different
routes and then eliminating some. The Department agreed that it
should perhaps have been clearer about its plans for electrification
of routes before it drew up its initial specifications, rather
than considering electrification part way through the procurement
process. It also acknowledged that its specified range of between
500 and 2,000 carriages was very broad, and it had in practice
assumed that between 500 and 1,000 carriages would be procured.[17]
9. When the Department drew up its original specifications
for the Intercity Express programme, the business case for electrification
on the Great Western line was weak, so the Department specified
that it required self-powered (diesel) trains. When electrification
of parts of the line were approved in 2009, the Department had
to change its specification as self powered trains were no longer
required.[18] Rather
than stop and retender the Intercity Express train procurement
to reflect these significant changes, the Department pressed on
with the procurement with its preferred bidder, Agility Trains.
The Department said that before proceeding it had assessed very
carefully whether these changes fell within the original boundaries
of the procurement. The Department maintained that had there been
better value solutions available it would have stopped the procurement.
However, the Department concluded that the abortive costs of stopping
and then restarting the procurement would have been around £100
million.[19]
10. We asked the Department what the Intercity trains
would have cost if it had pursued a standard public procurement
rather than a PFI route.[20]
The Department told us that it had evaluated this option at the
beginning of the procurement and that it had concluded that the
PFI approach offered the best value for money. Affordability,
not value for money was the key factor in the decision to procure
Thameslink trains using PFI, and affordability was also a factor
in the decision to use PFI for Intercity Express.[21]
The Department said that the Government at the time believed that
a PFI-type approach could bring significant benefits in terms
of value for money, by creating incentives for the manufacturer
and its funders to deliver the trains on time and to the given
specification, and to maintain the trains so that they would operate
well throughout the life of the contract.[22]
11. The Agility consortium reduced its price by 38
per cent when the Department changed the specification at a late
stage. Such a large unsolicited reduction does not inspire confidence
that the Department has managed the procurement process well.[23]
The Department selected Agility in 2009, but in 2010 the Government
put the programme on hold as part of its overall spending review
and commissioned a re-evaluation of the programme's value for
money, including potential alternatives.[24]
The Department suggested that Agility made the reductions as it
saw the deal as globally important. However, the Department's
admission that it could not have afforded to proceed with the
procurement without this reduction did little to reassure us that
the price the Department has negotiated is best value for the
taxpayer. That Agility was able to offer such a significant reduction
raises questions about whether the original tender was inflated.[25]
The Foster Review into the value for money of Intercity Express,
commissioned by the Secretary of State in March 2010, stated that
he was "not convinced that all the potentially viable
and possibly preferable alternatives to IEP (Intercity Express
programme) have been assessed alongside it, on an equal footing".
In September 2010, the Department received a revised proposal
from Agility Trains, to provide fewer trains with a revised design
at a lower price.[26]
12. The Department admitted that it did not have
a credible alternative plan in case its negotiations with Agility
stalled. It could have extended the life of the existing rolling
stock while it paused to rethink before going through some further
form of procurement. We note that the Department considers itself
extremely fortunate that Agility revised its bid and offered an
unsolicited reduction in price.[27]
13. There was a lack of continuity on these two projects,
with 7 changes of senior staff leading the projects in 7 years.
The Department said that it would have welcomed more continuity,
particularly on the Intercity Express procurement. It is worrying
that on major projects like these, the Department does not have
consistent personnel in charge.[28]
14. The Department has a shortage of suitably qualified
and experienced staff and is still reliant on contractors and
interims. It has a programme in hand to recruit more permanent
staff and reduce its reliance on contractors, although it foresaw
that it would always have a need for contractors and interims
to help it manage peaks in its workload. It has launched a commercial
fast track programme, for example, to hire in young talented people
who are interested in developing commercial skills.[29]
15. Hitachi will be assembling the Intercity Express
trains in the UK, but Siemens will not be doing so with the Thameslink
trains. We asked the Department what attempts it had made to insist
on a proportion of the manufacture of the trains being carried
out in the UK. The Department told us that its focus with these
procurements was on getting the lowest price and value for money,
and that having obligations for trains to be manufactured in the
UK would have breached European law. The Department also told
us that it tries to help the UK rail supply base to develop, but
that this objective is treated as separate from its procurements.[30]
16 C&AG's Report, para 8 Back
17
Q 93 Back
18
C&AG's Report, paragraph 2.3, Q 93 Back
19
Qq 69, 70, 71 Back
20
Q 32 Back
21
Qq 33, 34 Back
22
Q 34 Back
23
Q 74 Back
24
C&AG's Report, para 2.13 Back
25
Qq 73, 75, 76, 78 Back
26
C&AG's Report, para 11 Back
27
Qq 77, 78, 80 Back
28
Qq 1, 3, 4 Back
29
Q 94 Back
30
Qq 36-37 and 44 Back
|
