05.03.15
TOCs, not DfT, should be in charge of buying new trains
Train operators and ROSCOs should take the lead on rolling stock procurement, according to rolling stock manufacturers and the Railway Industry Association (RIA), who want less Department for Transport micro-managing such purchases.
The third Long Term Passenger Rolling Stock Strategy for the Rail Industry (RSS) says the role of ROSCOs is “crucially important” for addressing residual value, and that procurement decisions should be based on “optimisation of whole-system life-cycle value”.
The Public Accounts Committee (PAC) in late 2014 criticised the DfT for its decision to put itself in charge of buying the new trains for Intercity Express Programme and Thameslink.
The cross-party PAC report, ‘Procuring new trains’, said the DfT’s decision to lead the procurement, despite having no previous experience of doing so, was a significant break from its previous approach of leaving it to the ROSCOs and operators to buy trains.
At the time, Margaret Hodge MP, chair of the PAC, said: “The Department has no previous experience of running a procurement of this kind, let alone two with a combined value of £10.5bn. Yet it has chosen to break with its previous approach of leaving it to rolling stock companies and train operators to buy trains, transferring risk away from the rail industry back to government.
“This means that if passenger forecasts are wrong and fewer new trains are needed in future taxpayers will have to pick up the bill.”
Government policy is that rolling stock procurement should in most cases be franchise-led and the RSS fully supports this principle. But the DfT’s approach to deliverability is important e.g. for ‘new’ vs ‘life extended’ rolling stock decisions, and in franchise bid evaluation.
A prime example of this would be last week’s Northern ITT, which says the new franchisee must modernise the fleet of Northern trains, replacing Pacers and bringing into service a minimum of 120 new carriages for non-electrified routes.
Train builders and RIA added that “procurement evaluation criteria and weighting for rolling stock investments must be transparent and proportionate”.
Whether this is true of the mandated Pacer replacement is unclear, as the transport minister Patrick McLoughlin used a ministerial direction to release the ITT for the Northern and TPE franchises, despite civil service assessments of the business case suggesting it is “poor value for money”.
RIA and train builders added that batch sizes and continuity of ‘beat rates’ (i.e. the rate of production) for new rolling stock have major impacts on build efficiency, cost, and ability to innovate; and full service maintenance provision by the manufacturer can in their view produce a better train, but typically needs a maintenance contract period of around 10 years to justify the investment required.
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