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Reshaping rolling stock procurement, part three

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Having taken evidence on the Thameslink (trains) Programme, the House of Commons transport committee has now published its report containing conclusions and recommendations both for the UK rolling stock market

1. Although it may not be feasible or desirable to smooth out completely peaks and troughs in procurement there is scope for the DfT to ensure that there is a steadier flow of opportunities to UK-based manufacturers and the supply chain. (Paragraph 15)

2. We recommend that the Government clarify how it intends to use Network Rail’s passenger rolling stock RUS in ensuring that there is a steadier flow of procurements in future as well as clearer information to industry about the work which the DfT expects to initiate via operating firms or generate itself. We also recommend that the Government clarify whether the medium-term procurement plans mentioned in the Chancellor of the Exchequer’s autumn statement will include a plan for rolling stock. In the meantime, we would encourage the Government to assist the UK train building sector in finding opportunities for work before the next major train procurement projects are completed. (Paragraph 16)

and for the Thameslink process itself.

3. We recommend that the Government explain how the measures announced in the Chancellor’s autumn statement to improve procurement practices will achieve a more strategic approach to large-scale procurement and publish an implementation timetable. (Paragraph 23)

4. There would now appear to be few defenders of the previous Government’s decision to exclude socio-economic criteria from the Thameslink procurement. We note that it would not have been possible for the terms of the contract to have been amended, following the change of Government in May 2010, without starting the procurement afresh with a new invitation to tender. Looking ahead, we fully support the Government’s intention to have a “sharper focus on the UK’s strategic interest” in major public procurements. We hope that this new approach to procurement does not come too late for the Bombardier plant in Derby. (Paragraph 24)

5. It is hard to escape the conclusion that Siemens’ A+ credit rating made a significant contribution to its success in winning the Thameslink procurement. Omitting credit ratings from the evaluation criteria for future rolling stock procurements, beginning with Crossrail, is a sensible step. We have a wider concern, however, that bundling train manufacture and financing together in procurement exercises will skew the market towards larger multinational firms, possibly at the expense of excellence in train design and domestic manufacturing. We recommend that the Government work with the railway industry to establish how train manufacturers can create finance partnerships which offer good value to the taxpayer whilst promoting long-term best value. (Paragraph 29)

6. We would expect the DfT to take a robust attitude to any further allegations of corruption involving Siemens, or any other firm it contracts with, and not to hold back from excluding firms from procurement exercises where there is sound evidence of corruption. (Paragraph 33)

Conclusion

7. We think that it would be in the public interest for the procurement process to be independently reviewed and we have written to the Comptroller and Auditor General to ask him to undertake this work and to report to Parliament before summer 2012 (Paragraph 38)

8. If the Government proceeds to sign a contract with Siemens we recommend that it publish the reasons for favouring Siemens over Bombardier and the difference in the cost of the two bids. (Paragraph 39)

I don’t think these recommendations are going to come close to solving the shortcomings of rolling stock procurement, but perhaps they are the best that can be expected. Politicians such as Ed Miliband (who spoke of Bombardier “being sold down the river by this government”) showed little to no interest when factories such as Metro-Cammell were shuttered, or when huge orders were handed to Hitachi and Siemens, etc.

It’s not clear how closely the size of Bombardier’s Derby workforce is related to loss of the Thameslink contract, how ‘British’ its trains are, or even how ‘British’ they could be. Because huge parts of the Derby rolling stock works were razed after its privatisation, Bombardier has long been reliant on factories in Germany and Belgium to do a lot of its manufacturing.

Written by beleben

December 19, 2011 at 1:33 pm

Ed, David, and Thameslink

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David Miliband tweets about 300 jobsOn 17 June 2011, Labour MP David Miliband tweeted the “Great news of 300 jobs at Siemens in South Tyneside from new Thameslink contract”. The government had announced that Siemens of Germany was preferred bidder for the supply of new Thameslink rolling stock, rather than Bombardier’s Derby factory. Very little of the Siemens train would be built in Great Britain.



At its conference in September, his brother, Labour party leader Ed Miliband, took a rather different position.

But when I am Prime Minister, how we tax, what government buys, how we regulate, what we celebrate will be in the service of Britain’s producers.

And don’t let anyone tell you that this is the anti-business choice.

It’s the pro-business choice.

Pro-business on the side of the small businesses who can’t get a loan.

Pro-business on the side of high value manufacturing that can’t build its business because of the short-termist culture.

Pro-business on the side of the British company losing out to its competitors abroad when their government steps in and our government stands aside.

And that includes companies like Bombardier and BAe systems.

Being sold down the river by this Government.

Reshaping rolling stock procurement, part two

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Following the award of the Thameslink trains contract to Siemens and (the embarrassing press coverage of) Bombardier‘s announcement of downsizing at its Derby plant, Prime Minister David Cameron said he would

“look carefully” at the situation in Derby after he heard that Bombardier had pledged to open a centre of excellence in the city if it had won the Thameslink contract.
[…]
On Tuesday, Francis Paonessa, Bombardier’s UK president of the passengers division, revealed the firm would have established a worldwide centre of excellence for aluminium carriage body design at Litchurch Lane if it had won the £1.4 billion Thameslink deal.

The Department for Transport (DfT) had claimed that Siemens’ bid offered best value for the British taxpayer, but later had to concede that it had not considered factors such as the economic impact of job losses in Derby. Transport secretary Philip Hammond admitted that these could have been taken into account, if the Department had written them into the original tender process.

In June, Mr Hammond told Rail Professional that EU procurement laws have driven up costs:

‘I have my own not-so-very-private views about how helpful they are in driving the construction of properly collaborative supply chains and the best long-term value-for-money for the industry. But we will do what we can within the constraints of European law.’

The European Union’s public procurement rules are supposed to provide “a regime to facilitate competitive, transparent and non-discriminatory purchasing and tendering procedures by public sector and utility bodies”. But it’s painfully obvious that these objectives are not being met. In the Thameslink contract, there is no public information about the prices offered by Bombardier or Siemens, no supporting data on comparative labour costs or productivity, and no disclosure of the technical scoring of the rolling stock designs.

The farcical Intercity Express Programme (IEP) was, and is, another transparency blackout zone. It’s accepted that both of the final bidders for the IEP were not compliant with the “essential” requirements set by DfT, but virtually nothing is known about the details, or the costs. Mr Hammond decided to continue with the Programme, but the product to be supplied by ‘preferred bidder’ Hitachi is completely different to what was originally offered.

Written by beleben

July 7, 2011 at 12:19 pm

Reshaping rolling stock procurement

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On 22 June, I looked at the procurement of Thameslink trains and the wider issues of rolling stock procurement and political doublespeak.

Transport secretary Philip Hammond attempted to blame the previous government for his decision to award the Thameslink train contract to Siemens:

Labour MP for Derby South Margaret Beckett said the decision had put 3,000 jobs at risk and pressed the transport secretary to call in the process and invite bidders to retender to supply the new fleet of trains.

But Hammond defended the decision to award Siemens the business. “I understand the disappointment felt by Bombardier and indeed by the people of Derby about this decision but before she delivers a finger wagging lecture perhaps I can remind her of a couple of points – her government designed and initiated this procurement process – some members of this house may remember they used to call it Thameslink 2000; we inherited it 16 years later and £600m over budget and it fell to us to effectively open the envelope.”

Mr Hammond could (and should) have stopped the Thameslink train procurement process, to ensure that it took account of political and economic realities. As things stand

  1. there is no transparency in rolling stock procurement,
  2. Department for Transport procurement activity is not delivering equipment that best meets passenger or wider national interests, and
  3. it’s an open secret that rail equipment markets in many countries are rigged for the benefit of their domestic manufacturers.

Hammond urged MPs not to lose sight of the fact that “the Siemens bid clearly offered the best value for money” but suggested Britain might be losing out from other European countries skewing EU procurement processes to serve their own national interests.

“I do think there is a case for looking at the way the EU procurement directive is operated by some of our neighbours and competitors because it seems to me quite astonishing that complying with that directive as we do they have managed to achieve very high percentage penetrations of French built trains on the French railway and German built trains on the German railway,” he said.

The EU procurement regulations are not promoting cost-effective acquisition, fairness, innovation, or efficiency, and the DfT procurement activity is a black box. Anything could be happening. For example, it’d be entirely possible for a German manufacturer to cross-subsidise its tender for a British rolling stock contract from its domestic contracts (where foreign competitors are excluded, regardless of whether they are cheaper).

Villiers and Beckett in denial

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On 16 June the Department of Transport announced that Siemens was the preferred rolling stock bidder in the Thameslink Programme. With the trains being supplied from Siemens’ factories in the Germanosphere, the decision has placed the future of the only remaining train factory in Britain, the Bombardier-owned Litchurch Lane works in Derby, in doubt, along with thousands of jobs in the supply chain.

Siemens have announced that the contract would ‘create 300 jobs’ in component manufacture in North East England, but there is no dispute that the British content of the trains is going to be very low. The carriages are not even going to be assembled in Britain.

The announcement unleashed an avalanche of hypocrisy and doublespeak from politicians, including David Miliband. The Derby Telegraph reported the exchange between Derby Labour MP Margaret Beckett and Conservative Transport Minister Theresa Villiers.

TRANSPORT Minister Theresa Villiers has caused anger by suggesting the North East would “lead” UK train manufacturing – hours after delivering the decision which denied the work to Derby, the industry’s UK home.
[…]

On hearing of the comments, Derby South MP Margaret Beckett recalled a visit Ms Villiers had paid to Derby before the election.

She said: “Theresa Villiers came to Derby and I said a Government of her party would not be good news for the city. She assured us all that was wrong and that Derby would be at the forefront of their minds.

“But this week has given us a perfect example of how this Government operates. On one hand we’re told how sympathetic she is, only for her to go and tell another area they are the train-makers of the future. She was probably hoping that the two different ends of the conversation would not be seen by people in Derby, but it just goes to show you can’t trust the Coalition.”

But Ms Villiers hit back, saying: “If Margaret Beckett doesn’t like the result of this procurement she should be taking this up with her colleagues in the last Labour Government who designed it and set the criteria against which bidders would be judged.”

While in Opposition, Theresa Villiers censured the Labour government’s handing of the Intercity Express Programme contract. The IEP programme was handed to a supposedly British-led consortium called Agility Trains. In reality, Agility was, and is, controlled by the Hitachi company, who plan to build the trains in Japan, with a screwdriver factory used for ‘final assembly’ in (surprise) North East England.

After all this, no-one is any wiser about how the Thameslink rolling stock programme is run, how the decision was made, or what the Siemens and Bombardier bids were. In the United States, it’s not unknown for bids for public projects to be made public at the conclusion of the process (bid tabulation). It’d be quite interesting to know the details of the Thameslink Programme’s Bombardier and Siemens bids. Given the very weak value of the pound against the euro, one might have expected a bid with a high British labour content to be attractive from a numbers standpoint.

Ms Villiers could have modified or stopped the Thameslink trains contract to make it more sensible, but it appears that she had no idea how to do that. The current approach to rolling stock acquisition is unsatisfactory in just about every way imaginable.

Interoperability and HS2

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As part of its consultation exercise, the Department for Transport has issued information sheets on various aspects of the HS2 rail project. Its ‘Interoperability: International Standards for High Speed Rail’ leaflet (HSRFCT08) describes interoperability as:

the ability of different systems to work together. If you borrow a kettle from your neighbour, you know that it will plug in to the electric supply in your house and work normally. This is because plugs, sockets, and the electricity supply are built to designs which were standardized many years ago. So your appliance is ‘interoperable’, meaning it can operate anywhere in the UK without you needing to adapt it.

Interoperable systems have been used on European high speed railway lines for a number of years and are defined within the Technical Specifications for Interoperability (TSIs). This is a set of international standards specified under European law and adopted by the UK Government. Many of the standards used to develop our HS2 specifications are derived from the TSIs.

The Department’s ‘electric sockets’ analogy for HS2 interoperability was unfortunate, because British 3-pin plugs are not usable in continental Europe, and adopting the European TSIs is a bit like equipping a handful of buildings in Britain with French electrical sockets. In which case: ‘you can no longer use your neighbour’s kettle, but if you know someone in France, you could ask them to send you their kettle cord’.

DfT’s claims about European high speed lines being standardised and ‘interoperable’, are far-fetched. The TSIs were drawn up after large parts of high speed track in Italy, France, Germany, and Spain had already been built, and electricity supply, maximum axle loadings, signalling, and maximum gradients vary from one country to the next. TSIs do not even define specifications for the 400 km/h operation planned for HS2. To date, European high speed rail interoperability has, in practice, meant equipping trains crossing borders with multiple electrical and signalling systems, rather than conformance to a single standard. Even this has not prevented disputes, such as squabbling and legal threats about the use of distributed traction trains, and safety procedures, in the Channel Tunnel.

There are strong arguments for new rail projects to be compatible with European rail systems, but that does not mean that implementing the TSIs for British intercity passenger rail is cost-effective. Compatibility is important for efficient rail freight and containerisation, but that does not imply that railways should be built, or converted, to Continental ‘standards’. The new build HS2 is intended as an intensively operated passenger-only railway, with maintenance carried out at night, so its loading gauge has no obvious application.

The factsheet suggests that building HS2 in line with the TSI would help Britain to participate in exporting transportation equipment. However, there’s no evidence that rolling stock orders are determined in this way. For example, Japan has its own technical standards, which are different from those found elsewhere. Foreign manufacturers are effectively barred from Nipponese railways, yet it supplied the Class 395 trains used on Britain’s HS1 domestic services.

To have a chance of exporting rolling stock, Britain needs a rolling stock industry. At the time of writing, it doesn’t really have one. There is just one train manufacturing plant (the former British Rail carriage works at Derby), with a second Ikea-style screwdriver facility planned in the North East (for Hitachi’s frankenstein IEP trains).