Latest Rail News

21.04.17

Higgins defends botched HS2 contract despite conflict of interest

HS2 Ltd would have likely disqualified CH2M before it even withdrew from the procurement of the Phase 2B development contract for a conflict of interest, as a member of its team had previously worked on HS2 Phase 1, it has been revealed.

CH2M had been awarded the £170m contract but pulled out after a competing bidder, Mace, raised issues with the procurement process.

Speaking to MPs at the Transport Select Committee, Sir David Higgins, chairman of HS2 Ltd, stated that his organisation was aware that CH2M had employed a member of staff who had previously held a position at HS2, which meant that he may have been privy to confidential information that would have aided CH2M’s bid.

The employee in question, Chris Reynolds, worked for HS2 between 2011 and 2016 before moving to bidder CH2M last year, and had been involved in writing documents for Phase 1 including a “lessons learned” report – all of which meant it was likely he had advantageous information when he was working on CH2M’s bid for Phase 2.

Sir David pointed out that although it was not uncommon for HS2 staff to be employed by companies involved with bidding for contracts on the project, it was the responsibility of the tenderer to ensure that any persons with a conflict of interest were “nowhere near” the tendering process.

“CH2M assured us that the person in question had a minimal role in the tender and not much involvement in HS2, but for us that wasn’t sufficient,” the HS2 boss told the committee.

“HS2 were at the stage of preparing 50 questions for the individual and CH2M to discern whether the person did have any information that was confidential that could be used in a potential bid. But before the board was given a chance to make their final consultation, CH2M withdrew their bid.”

Sir David also emphasised that the responsibility of raising the issue with HS2 was down to the bidder, in this case CH2M, as he explained that Reynolds’ potential conflict of interest was not raised to the company.

“Once they have submitted their bid they have to sign a declaration, including a conflict of interest term, that it is their responsibility to remind the company if any bidders may have a potential conflict of interest in connection with HS2 projects or anyone who has the knowledge of projects through previous HS2 roles,” he added.

Grayling points to problems with procurement

This is a point that transport secretary Chris Grayling also confirmed, as he assured MPs that his department had tried to make sure there was no conflict of interest – but also that it was unrealistic to expect the government to “pore over details” about bidders to make sure there was no conflict of interest with the companies involved.

“When this particular contract was let, and CH2M ended up at the top of the list, alarm bells would be the wrong phrase, but a desire to make ‘quadrupally’ certain that we were not getting into difficult territory rang in my head,” Grayling stated.

“During the standstill period, we were alerted to the fact that there was a conflict of interest in the bid team from CH2M. We made appropriate inquiries about this, then they took a decision to step back before we made a decision that compromised their position and meant they couldn’t go any further.

“I asked my permeant secretary to do serious due diligence to make sure that neither of the two individuals, interim or incoming CEO, had in any way a position that would have compromised the recruitment process.”

The secretary of state also argued that the procurement had run in the way it was supposed to, adding: “There is an exhaustive procedure, the issue was raised, and the bidder has withdrawn before the board of HS2 has had to take steps to rule on the future of the contract.”

The news follows reports this week that Bechtel has been awarded the HS2 phase 2b contract in place of CH2M.

And competing bidder Mace said that it was pleased that the committee had raised issues with the procurement during the meeting.

A spokesperson said: “As the Transport Select Committee has shown, there are a lot of serious questions to be answered around HS2’s procurement process. If we hadn’t raised these concerns, these serious issues would never have come out.”

Mace also argued that it was “remarkable” that Sir David had admitted that if CH2M hadn’t withdrawn, it would have been removed from the process, something it perceives as “a clear admission that their procurement process was riddled with errors”.

“Over the past 26 years we have bid on thousands of projects, but we have never yet taken a case to the High Court,” the company added. “This tells you how seriously we take the matter.”

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Comments

Stephen Leary   21/04/2017 at 12:20

Two Points: Are not HS2 Ltd pledges to 'tighten up' on the procurement process like "shutting the stable door after the horse has bolted" and if If HS2 Ltd's vetting procedure for contracts was so inadequate, then all previous contracts should be reviewed to see if there any other conflict of interest cases.

John   22/04/2017 at 10:24

What a waste of time Where was the examination of all the other contracts Where was the demand that the components of the expenditure budget and spend to date be in the public domain Where was the demand that the procurement process be in the public domain

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