Another fine mess?

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Thursday July 7th, 2011

By Morven MacNeil, GO Content Editor

Since the recent announcement that German-based contractor Siemens had won the £1.4 billion Thameslink contract over UK firm Bombardier, the question on everyone’s lips has been – how could the Government let this happen?

The Thameslink Rolling Stock Programme covers the delivery, maintenance and financing of around 1200 vehicles and the construction and financing of two depots.

It was announced on 23 June that Siemens and Cross London Trains (XLT) had been selected as the preferred bidder for the contract by the Department for Transport. However, this decision has created a widespread backlash, even from within the Government’s own ministerial ranks.

Business Secretary Vince Cable has highlighted the ‘very narrow tender terms’ drawn up for the contract by the previous Labour Government. Ironically, the Labour Party has called for a review over the contract. They said that awarding the Thameslink trains deal to Siemens rather than Bombardier has ‘dealt a body-blow to British manufacturing’.

The TUC has also labelled the Government’s failure to award the Thameslink train production contract to Bombardier as ‘a missed opportunity’ to boost British-based manufacturing and jobs.

Job losses – Bombardier

Following the loss of the contract, Bombardier announced plans to cut around 1400 jobs. The company said that there was not enough future work to keep its Derby facility, which employs 3000 people, operating at current levels.

Francis Paonessa, President of the Passengers Division for Bombardier in the UK, said: “The loss of the Thameslink contract, which would have secured workload at this site, means that it is inevitable that we must adjust capacity in line with economic reality.”

Despite calls from unions and opposition leaders for the Government to review its decision to choose Siemens, Transport Secretary Philip Hammond said that this was not possible under the terms of the European procurement rules.

Economic Response Task Force

Mr Cable has also announced that he is to set up an Economic Response Task Force as a result of the ongoing review by Bombardier Transportation of its UK rail operations and the announcement that it has started a 90-day consultation process on proposed job losses at Derby.

The Task Force will be headed by Margaret Gildea OBE, who runs Organisation Change Solutions, to mitigate the economic impact of job losses at Bombardier, its supply chain and the local communities. It will draw on representatives from Derby City Council, Derby City College and the Skills Funding Agency. Jobcentre Plus will also deploy its Rapid Response Service to support workers who will be affected.

Commenting on the situation, Mr Cable said: “Philip Hammond, the Transport Secretary, and I recently wrote to the PM to highlight the issue of public procurement and how we should manage the process in the public sector to sustain a competitive supply base that meets the UK’s strategic needs within EU procurement rules.

“We recognise that there is a need to examine the wider issue of whether the UK is making best use of the application of the EU procurement rules. The Government will now look at this area in the next phase of the Growth Review.”

Mr Cable said he wants to investigate how future government procurement contracts can operate within European rules and, at the same time, take account of British manufacturers and their supply chains.

However, one positive to come from all this is that Siemens envisages that as a direct result of the Thameslink Rolling Stock procurement project it will create up to 2000 new jobs in the UK.

Up to 600 highly skilled roles involved in the manufacture of train components will be created, including up to 300 at Siemens’ factory in Hebburn, South Tyneside. The remainder will be created within Siemens’ supply chain across the UK.

What’s your view on the Thameslink contract decision? Do the EU procurement rules need to be changed? There’s a heated debate on our LinkedIn group about the contract if you’d like to join in.

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