Partnership report uncovers an uneven playing field
Professor Karel Williams
Tuesday 06 September 2011
In June the Department of Transport awarded the £1.5bn Thameslink rail contract to a consortium led by Siemens, rather than the competing bid from a consortium led by Derby-based Bombardier. Some 1,200 new train carriages will now be built in Germany. Bombardier then announced 1,400 redundancies and many feared their next move would be the closure of the Derby facility, the last surviving UK factory capable of making trains.
The coalition government’s Transport and Business Secretaries who awarded the contract predictably blamed the outcome on their Labour shadows who had originally drafted the contract in 2009. But remarkably, all the Westminster politicians agreed with thousands of petitioners from Derby and a chorus of critics in the national media who denounced this as a |bad decision.
If there was much disquiet about the outcome, there was less clarity about how things might be put right. This was an opportunity for the ESRC-funded Centre for Research on Socio-Cultural Change (Cresc), run jointly by Manchester University and The Open University. Within a month we produced a report, available on www.cresc.ac.uk, focusing on the issues of “bundling”, and the definition of the public interest.
The Thameslink contract was a public procurement contract in the Private Finance Initiative (PFI) style which covered the building of carriages, their maintenance, plus the lease finance. Because the contract “bundled” train building and rolling stock finance together, judgements about which company could build better and cheaper trains were contaminated by the question of who could raise lease financing more cheaply. There never was a level playing field because Siemens had an A+ credit rating against Bombardier’s BB+, giving Siemens a finance cost advantage of maybe £700 million.
Cresc’s report has been welcomed. Among other things it reinforces the Treasury Select Committee’s recent criticism of PFI financing of schools and hospitals. Here again, the state stands to lose more through ineptly designed contracts than it gains from private sector management skills, unless it changes its approach to awarding public contracts.
Professor Karel Williams teaches at Manchester Business School, and is co-author of ‘How not to build trains’
Malaysia Airlines flight MH17 crash: 'Nine Britons, 23 Americans and 80 children' feared dead after Boeing passenger jet is 'shot down' near Ukraine-Russia border
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
Malaysia Airlines MH17 crash analysis: A tragic lesson of advanced weapons in the wrong hands
- 1 Husband creates spreadsheet detailing wife's 'excuses' for turning down sex
- 2 UK pirates will get four warning letters a year
- 3 Saneie Masilela, 9, marries Helen Shabangu, 53 years his senior, for the second time
- 4 Laurie Penny: Feminist author subjected to 'vile sexist and anti-Semitic abuse' over her book
- 5 Why I'm on the brink of burning my Israeli passport
- < Previous
- Next >
£100 - £120 per day: Randstad Education Chelmsford: The successful applicant w...
£21000 - £35000 per day: Randstad Education Chelmsford: The JobThe successful ...
£20000 - £25000 per annum + OTE £35,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: The SThree group is a world le...