Thameslink contract: rip it up and start again

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Most commentators agree that the award of the £1.5bn Thameslink rail contract to Siemens rather than Bombardier was a bad decision. Perhaps it’s not too late to reconsider

Despite the summer recess, the Bombardier-Thameslink story hasn’t gone away. The Transport Select Committee evidence session yesterday required an overflow room to accommodate all the interested parties.

It’s worth recapping how this all began. In June the Department of Transport awarded the £1.5bn Thameslink rail contract to a consortium led by Siemens, which meant the carriages would be built in Germany. As a consequence, Derby-based Bombardier announced 1,400 redundancies with its long-term future as the UK’s last surviving train manufacturer in doubt.

Inside the Committee room yesterday, an interesting parallel developed. The first panel comprised the vanquished and dissenters, the second panel the victor and assorted while the third panel was dominated by the extraordinarily well briefed Transport Secretary Philip Hammond complete with sympathy for the workers, for Derby and the rail users, but no concessions.

But some things have changed. The coalition has changed tack and tone from the initial reaction of (predictably) blaming the outcome on the Labour shadow ministers who had originally drafted the contract in 2009. While government ministers maintain the no concession standpoint, most politicians and commentators still agree with thousands of petitioners from Derby that this as a bad decision.

Few can deny there is disquiet about the outcome but other than to argue to give the contract to Bombardier, there is less clarity about how things might be put right. The key problem was of ‘bundling’, and the definition of the public interest. This point is covered in a report, Knowing what to do? How not to build trains, published by the Centre for Research on Socio-Cultural Change (Cresc) based at the University of Manchester.

The Thameslink tender was a (PFI) style contract that covered the building of carriages, their maintenance, plus the lease finance. This ‘bundling’ of carriage building and financing helped tip the balance when the Department of Transport used narrow judgements about which company could build better and cheaper trains and raise lease financing more cheaply.

This never was a level playing field when Siemens had an A+ credit rating and Bombardier a BB+. On a back-of-an-envelope calculation (and in the absence of information from the government) this probably gave Siemens a finance cost advantage of around £500m-£700m.

The Cresc report demonstrates that it does make economic sense to award the contract to Bombardier once the broader social costs are added in. But that is little consolation to the stoic Derby workers who came to Parliament to campaign for their jobs.

But there is a solution. Both the EU representative and Hammond agreed, we could rip up the contract and start again.

Karel Williams is a co-director of the Centre for Research on Socio-Cultural Change and is one of the authors of the Knowing what to do? How not to build trains report

2 comments on Thameslink contract: rip it up and start again

  1. WatcherZero says:

    I believe what a lot of people in the industry know, that Hammond hinted at in his testimony and why Bombardier itself has not challenged the decision leaving it to local politicians is that it wasn’t just the financial metrics that Bombardier lost on. They also were marked lower over concerns of recent build quality not too dissimilar to British Leyland and the quality of the product itself. Siemens has invested £30m in research and development of UK rolling stock just to win this and Crossrail contracts, Bombardier on the other hand has not invested just promising that, should it win, technical improvements would be developed.

    What has alarmingly shown itself however is a level of jingoistic nationalism or downright willful ignorance of shocking scale. Notable examples include the willful ignorance of Bombardier informing the government it would shed 1,200 staff even if it won the contract several months before the contract was awarded. The Unions criticising Siemens for having a Bombardier developed Bogey as backup if they should fail to finish development of their own lightweight design in time saying it demonstrated lack of British know-how, even though the Bombardier bogeys are manufactured in Germany. Or all the supporters travelling down to London on a Class 222 train temporarily named ‘Pride of Derby’, these trains were made in Belgium!

  2. Pamela Tyers says:

    Yes, rip it up and start again. Its not just about trains. The amount of benefit to be paid to the Derby unemployed, the loss of revenue from their earnings, both local and national, needs to be factored in. If there are problems with the trains as Watcherzero says, make Bombardier sort them out. Siemens would, Hitachi would. Where’s the Big Society, buying British, if the government then spends British taxpayers money abroad in vast amounts when there is a British alternative – and if that is nationalist it is no more so than Germany and Japan demonstrate.

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