The Calm Before the Contractual Storm: Crossrail’s Rolling Stock Tender

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Two years ago LR found itself sitting in a conference room at the Albert Hall with a room full of railway journalists and industry representatives. The attendees were there to hear the details of a new rolling stock contract, one which had caused eyebrows to be raised when the winning bidder had been announced, and which had caused outcry in certain areas of the press.

As the press office presentation drew to a close and the floor was opened to questions, it was therefore no surprise when the subject quickly turned to the choice of manufacturer.

Why, one journalist asked, were Siemens – a foreign manufacturer – being chosen to build the new trains over the country’s own national manufacturer? What, asked another reporter (clearly irate), did they think they were doing? Did they not realise that this could be a fatal blow leading to the death of the domestic train industry?

To anyone who has followed the recent history of London rolling stock tenders, the above story will sound familiar. Yet this was not, in fact, the Thameslink reveal. Nor were the journalists in question part of the British press.

The contract that Siemens had just won was to provide new rolling stock for Eurostar, part owned by SNCF. The journalists asking the questions were French, and they wanted to know why French train manufacturer Alstom had missed out on the job.

A New Train For London

At the end of last month, Crossrail began the process of tendering for its rolling stock, with the first round participants – Bombardier, CAF, Hitachi and Siemens – all submitting their initial bids. Over the coming months each of those bids will be assessed and in Spring 2013 Crossrail will announce which firms have been shortlisted to advance to round two.

The tendering process itself and the purchase of new rolling stock for the Capital would not normally be particularly controversial or newsworthy – at least not outside of the railway industry itself or the London media. In recent years London has seen new trains on the Overground (378s and 172s), on the Victoria Line (the 2009 Stock) and on the Sub-Surface Lines (the S7 and S8 Stock), all built by Bombardier. Since Siemens gained preferred bidder status in June for the Thameslink rolling stock contract, however, the Crossrail contract has acquired a new level of public (and political) interest.

The announcement of Siemens’ preferred bidder status caused a reaction in the media not dissimilar to the story with which this article started. How, it was asked, had the German firm beaten out the trains built by Britain’s last remaining train manufacturer based in Derby?

Bombardier themselves, owners of the Derby works, swiftly threw fuel on the fire. 1400 jobs, they announced, would have to be shed. Indeed the future of the works was revealed to be under consideration. A significant amount of media – and political – attention followed, in the course of which it was reported that the way the financial terms of the contract would need to be structured was easier for Siemens to meet than for Bombardier, something that had contributed to Siemens’ success.

It is the above debate that will likely surface again in the coming months, as the shortlisting date approaches. Yet before it does, and before battle lines are potentially drawn in both press and Commons, it is worth looking briefly at just what the legacy of the Thameslink process turned out to be – and just what it means for both Crossrail and (potentially) Bombardier’s Derby works.

Devils and Details

Although Bombardier’s narrative naturally garnered significant sympathy, in truth the story of the British firm facing stiff – and potentially fatal – foreign competition was a very simplistic presentation of the situation, and one the specialist rail media and a number of newspapers soon called into question. Although the Derby works are, naturally, British (and possess a long and storied history), Bombardier themselves are a Canadian firm.

On top of this, it soon became clear that of the 1400 jobs allegedly under threat, 1200 were unrelated to the Thameslink contract and had already been under consideration by the firm. Of course not netting the Thameslink contract would have an effect on those working within Bombardier’s supply chain, but it was clear that the intiial impact on the works was likely to be less than the firm had implied. Similarly, various industry sources suggested that Bombardier had already begun to question their commitment to the UK rolling stock market, with the potential value of the Derby site to developers something of which the firm were increasingly aware.

On top of this, Bombardier’s management had consciously decided to focus Derby’s efforts on new rolling stock contract work, rather than maintaining a serious presence in the growing market (in the current economic environment) for rolling stock refurbishment work. Whilst there were no doubt valid reasons for this decision, in the aftermath of the Thameslink award it looked like an increasingly shortsighted one.

Should similar arguments surface before – or after – the Crossrail tendering process, all of the above will be worth bearing in mind.

Closing the Financial Gap

If Bombardier themselves could not escape blame for their situation though, then that did not mean that there were not grounds for their financial complaint. As the review process which followed the Thameslink award showed, the structuring of the contract did indeed favour Siemens’ corporate setup and links.

Thankfully, this is a situation that has since largely been addressed when it comes to Crossrail. A £350m capital contribution to the contract cost from the DfT and TfL, and the fact that this contract will be the first to take place under the auspices of the Government’s new UK Guarantee scheme, mean that the private sector debt and equity requirement is much lower.

Despite this, it is worth noting however that contrary to the image that was sometimes presented in the press, it was not solely in the financial category that Siemens’ Thameslink bid proved triumphant. Although the full details of the bids themselves have yet to be made public – and won’t be for some considerable time – both industry sources and the specialist press have repeatedly suggested that in most of the assessment categories Siemens apparently carried the day.

Whilst the financial playing field may have been levelled, therefore, believing that this was the sole reason why Bombardier’s bid was unsuccessful would be a mistake.

Keeping things Realistic

As Crossrail enters the first stage of its rolling stock assessment, therefore, it is worth bearing all the above in mind. Those assuming that the contract will represent an easy win for Bombardier should be careful. If there remains a “favourite” in the rolling stock race, then it is likely still Siemens. Although both ministers and Crossrail themselves have talked up the differences between the Thameslink and Crossrail requirements, the simple truth is that they overlap considerably. Many in the industry were saying that the Thameslink contract would give a good indicator as to the likely winner of the Crossrail contract before it was announced, and that remains true still.

Similarly although the financial playing field may have been levelled, the benefits (both in economic and in unit reliability terms) that Siemens will gain from being able to parley their work on the Desiro City for Thameslink into future work are likely reflected in their Crossrail bid.

Finally it is worth noting once again that the almost inevitable discussions of “British trains for British contracts” that will surface as the tendering process continues are not as clear cut as they may on the surface seem. Bombardier are just as foreign (although perhaps – importantly to some newspapers – not as German) a firm as Siemens, and even if the innate (and obvious) Britishness of the Derby works is accepted, it is important to note that Hitachi too would likely offer UK based construction of trains.

It’s also important to question just how pertinent that debate actually is to the Crossrail contract itself. Ask the average man on the platform whether they would like to see British trains running on British rails – something that both TV and newsprint will no doubt do – and they will almost certainly answer in the affirmative, but arguably that’s not the right question to ask.

It’s almost certainly the case that the firm which gains the Crossrail contract will do so because they represent the best fit for the job, and are offering the best train. Ask the same man on the platform whether he wants the best train for the job, even if that train isn’t British, and the answer will likely be less clear cut.

Ultimately, beneath the question of “Britishness,” however, lurks an important debate – just one that goes beyond, and is separate from, any which should take place over the awarding of Crossrail’s rolling stock contract:

Just what is the future of rolling stock construction within the UK?

Whether Bombardier get the Crossrail contract or not, this is an important question to ask, for the future of the Derby works – and more importantly the futures of those who work there – depend on the answer. If we are now locked in a long path of decline – one that perhaps began even before BREL was split up – then is it terminal, and thus just needs to be accepted, or is it a path we want to move ourselves away from?

Either way, the Crossrail contract will not provide an answer, something that will be well worth remembering in the coming months of debate.

Written by John Bull