Philip Hammond leaves Transport in ‘mini-reshuffle’

From: Rail News.co.uk

THE TRANSPORT SECRETARY Philip Hammond is moving to the Ministry of Defence, following the resignation of defence secretary Liam Fox. His replacement is Putney MP Justine Greening.

Mr Hammond has been in the top political job at the Department for Transport since the election in May 2010, and has overseen the launch of the controversial McNulty report into railway ‘value for money’ as well as supporting higher rises in train fares and the construction of High Speed Two, which is set to be the first domestic High Speed line in Britain.

He has also presided over and backed the award of the £1.4 billion Thameslink rolling stock contract to German-owned Siemens — a move which has been bitterly criticised in some quarters, particularly in the East Midlands where the losers Bombardier would have built the fleet of 300 trains.

He leaves as Network Rail is poised to move into a new era, with devolution of day-to-day management to route level due to take place on 14 November.

This change is being accompanied by hopes that Network Rail’s new route managing directors will be able to contain costs more effectively, particularly as the routes will be financially compared with each other over time through a system of benchmarking.

Mr Hammond will be handing the draft of a forthcoming railway White Paper to his successor.

His most controversial remark was probably his description of railway travel as often being a ‘rich man’s toy’, when he was being questioned by the House of Commons Transport Select Committee a few weeks ago.

Vision for the future of railways

Better services, improved passenger information, and cuts in the cost of running the railways have been outlined in future plans announced by rail chiefs.

Described as an initial industry plan, the programme covers the period 2014 to 2019, with the industry aiming to cut rail costs by £1.3 billion a year by the end of this decade.

Plans include £5.6 billion-worth of schemes, including the Northern Hub – a £560 million plan to deliver more than 700 extra services a day between Leeds, Manchester, Liverpool, Newcastle upon Tyne and Sheffield.

The rail chiefs’ vision also includes journey time improvements in the East Midlands, Yorkshire, Bristol and Oxford areas and electrification of the Midland main line, the north trans-Pennine line, and further electrification schemes in Scotland.

The plan also envisages improvements to a number of stations including Fenchurch Street in London and Liverpool Central, as well as a £200 million scheme to improve services between Inverness and Aberdeen in Scotland.

By better linking Britain’s major cities, an extra 180,000 peak-time seats could be provided, as well as accommodating a 30% increase in freight.

Rail chiefs also announced plans to move from 800 signal boxes to 14 modern signalling centres. The hoped-for schemes, which will need Government approval, are in addition to £4.9 billion-worth of ongoing projects such as the Thameslink and Crossrail schemes in London and already-announced electrification schemes such as the Great Western line.

The rail industry also spoke of trying to improve the passenger experience in key areas such as journey information, comfort and accessibility.

Michael Roberts, chief executive of the Association of Train Operating Companies, said: “Rail has a bright future in supporting a successful green economy in the years ahead. This plan shows how we can do that by providing a better quality of service to growing numbers of passengers at a more affordable cost.

“We look forward to working with government to ensure the right framework is in place to make this possible.”

Government ‘should give up its control’ of £1bn Crossrail deal

From: Derby Telegraph

Labour MPs last night called for the Government to hand over control of plans to buy £1 billion worth of trains to another organisation.

Shadow Transport Secretary Maria Eagle made the demand while giving her speech to her party’s annual conference in Liverpool.

She argued that the Government had shown it could not be trusted to ensure British firms – like Derby trainmaker Bombardier – had a fair chance of winning state contracts.

Her comments came a day after Labour gave an award to campaigners from Derby, who are fighting to get the Government to change its decision to hand a £1.4 billion Thameslink contract to German firm Siemens, instead of Bombardier.

After the move was taken, the Litchurch Lane firm announced it would review its UK operations, raising the prospect of 1,400 job losses.

Now the Government is drawing up plans for its next big train order, Crossrail, valued at about £1 billion.

Ms Eagle told conference delegates: “I say to (Transport Secretary) Philip Hammond – there is no faith that your department will give British manufacturing a fair chance. So hand over responsibility for ordering the new Crossrail trains to Transport for London, which – thanks to Labour – has a track record of buying British.”

Ms Eagle pointed out that Prime Minister David Cameron had promised to support business when he took his Cabinet to Derby, shortly before naming Siemens as the preferred bidder for Thameslink.

Ministers have consistently said the way the tender for Thameslink was designed by the previous Labour administration meant they could only have given the contract to Siemens. They claim it would have been breaking EU law to do otherwise.

Ms Eagle called that “a lie” and said the Government could have scrapped the tender process and started again with one that gave the Derby firm a better chance of winning. She urged campaigners to keep fighting to get the Government to change its mind.

Last night ministers were defiant. Mr Hammond warned the consequences of further delaying Thameslink would be too severe for taxpayers to bear and said: “The project is already 16 years behind schedule – in its original iteration it was known as Thameslink 2000. It has already had very large amounts of capital investment sunk into it,” he said.

He argued that 3,000 construction jobs depending on the project moving forward could be put at risk if it was delayed.

On the Crossrail issue, a Government spokesman pointed out that it was Labour that had set up Crossrail Ltd – an arms-length body – to deliver the scheme, overseen by the Government and Transport for London. He said: “Is Labour seriously saying taxpayers in the rest of the country, outside London, should have no control over the billions of pounds they are putting into Crossrail?”

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It really beggars belief what Labour will do these days. Not only did they ‘make TfL buy British’, but they also award the people protesting about a loss of work in Derby, that the party’s own ineptitude in developing the procurement process caused in the first place.

Maria Eagle would of course have backed the Government if they had scrapped the procurement process to give Bombardier a chance.  Thus costing millions more pounds of taxpayers money to be wasted.

The above article also once again fails to mention that Bombardier were already considering up to 1200 job losses regardless of the Thameslink deal.  In the modern world, and including the findings of the McNulty report, rolling stock procurement MUST give serious value for money and not just be awarded on the basis of where the companies are based.  Let us not forget that even Bombardier is not a British company, they are Canadian.

Why Transport Secretary Phil Hammond was right to give Thameslink contract to Siemens

From: Daily Telegraph

Transport Secretary Phil Hammond was right to award the controversial Thameslink train contract to Siemens earlier this year and right to resist calls for the decision to be reviewed, or the procurement process reopened. So says Damian Reece of the Daily Telegraph.

Siemens won the deal fair and square. The fact the trains will eventually be built in Germany should be a relatively small detail for an internationally competitive country, which the UK aspires to be.

True, the incumbent supplier, Canada’s Bombardier, promptly announced 1,400 eventual job losses as a result of losing the contract but Siemens intends to create 2,000 jobs in the UK, including 1,400 to build depots and maintain trains and 600 in the supply chain. The company already employs 16,000 people here in 13 factories, with £1bn of manufacturing exports from the UK. It’s been here for 168 years, built the telegraph line from London to Calcutta and laid the first sea cable from England to the US. It invests £80m to £90m a year in R&D.

Siemens UK is one of the country’s finest companies and Bombardier’s failure to compete should not be turned into a witch hunt against it.

To rescind a contract would also reveal the UK government as an untrustworthy partner and make the UK a far less attractive investment destination.

What the Coalition could legitimately do in the wake of the Bombardier decision is review how future contracts are awarded and bring them in line with wider European practice. This could help employment here but value for money is also crucial. The best way to secure UK jobs is to have competitive UK companies – which requires lower tax and less regulation.

8800 extra spaces for busy trains on key routes

Source: Department for Transport

Space for up to an extra 8,800 rail passengers is being created on key commuter services in Birmingham, Bristol, Leeds, Manchester, Liverpool, Sheffield and Newcastle, Rail Minister Theresa Villiers announced today.

Under a deal funded by the Government, passengers on Northern Rail are to benefit from an extra 22 train carriages. Separate agreements also deliver an extra 6 carriages to First Great Western and an additional 4 carriages to London Midland.

Theresa Villiers said:

“I am delighted we have been able to finalise these important deals which will make a real difference to passengers. Even at a time when we are tackling the huge deficit we inherited, we are determined to invest in Britain’s future. That is why we’re committed to a major investment programme in our railways to deliver a big increase in capacity to ease crowding and provide commuters with more comfortable journeys.”

“Today’s good news has been made possible by our plans to introduce 2,700 new rail carriages on to the network by May 2019.

“We are also committed to the completion of the vital Crossrail and Thameslink projects in London and we are investing £900m in rail electrification. In the longer term our plans for a high speed rail network will free up a huge amount of space on our current network for more commuter trains – with some towns potentially seeing a near doubling of services.”

“As well as improving life for passengers, these rail improvements will play an important role in strengthening economic growth.”

The extra carriages, which will be in service from December 2011, are becoming available as a result of the planned deployment of 69 new train carriages which are being delivered to London Midland for use in the Birmingham area. This then allows for the carriages currently being used by London Midland to serve passengers using Northern Rail and First Great Western services. Consequently some First Great Western trains are to be released to serve Northern Rail passengers.

Rethink on rail franchising welcomed by train operators

A REVISED franchise timetable announced by the transport secretary has been welcomed by the Association of Train Operating Companies, but the largest rail union has condemned the new plans as a ‘rip-off’.Philip Hammond has reduced the length of the First Capital Connect franchise, and extended others.  He has also accepted that East Coast cannot now return to private sector operation before the end of 2013.

The transport secretary said the changes were being made to provide ‘clarity to the market’.

He explained: “In producing this timetable, I have had regard to the impact on bidders and  their sub-contractors of trying to compete for too many franchises at once, and the likely reduction in value for money to the taxpayer that would result. “

The present FCC franchise will now end in September 2013, almost three years early

Mr Hammond’s new timetable means that Great Western and Thameslink (currently First Capital Connect) have been brought forward (by 35 months and 18 months respectively), the next Northern and TransPennine Express can now have a simultaneous start date of April 2014, while two other franchises (East Coast and Greater Anglia) have been extended.

In at least one case, Mr Hammond’s hand has been forced: FirstGroup has already announced that it will surrender the Great Western franchise in 2013. The group therefore avoids paying more than £800 million in premiums which would have been due in the last three years of the original contract.

Three franchise replacements – West Coast, South Eastern and Essex Thameside (currently c2c) – remain unchanged. However, talks are continuing over whether Virgin Trains should continue to operate West Coast between March 2012 – its original expiry date – and December, with the Department for Transport’s own operator Directly Operated Railways poised to step in to fill the gap if necessary.

ATOC, which has been calling for less restrictive franchises, welcomed Mr Hammond’s announcement.

The Association’s chief executive Michael Roberts said: “The next few years present a chance to improve fundamentally how the railways are run.  On the right terms, longer and less prescriptive franchises would give train companies more opportunity to invest in improvements, respond more quickly to passengers’ needs and reduce costs.

“We welcome the government’s commitment to a horses for courses approach to franchising. The secretary of state rightly recognises the scale of work ahead to translate principle into practice – his announcement will allow the government and bidders alike to plan how best to respond.”

However, the RMT union dubbed the transport secretary’s plans a ‘rail franchise rip-off’, particularly as the next round of franchises are expected to last longer.

Bombardier ‘had little chance’ on Thameslink because of contract terms

From: Daily Telegraph

Bombardier had virtually no chance of winning the controversial £1.5bn contract for Thameslink trains because of its relatively higher financing costs, senior Government sources have disclosed.

The Canadian train maker, which on Tuesday axed 1,400 jobs at its Derby plant, was at a competitive disadvantage worth hundreds of millions of pounds because of the way the previous Labour government structured the contract.

The tender called for bidders to build, maintain and, crucially, finance 1,200 new carriages over 30 years for the London commuter service.

Bombardier Class 377 EMU in service with Southern

The financing element gave Siemens of Germany a big advantage over the three other bidders because of its higher credit rating – one vastly superior to Bombardier’s, which is below investment grade.

Siemens’ debt is rated A+ by credit rating agency Standard & Poor’s – six notches above Bombardier’s BB+. The other two bidders, Alstom and Hitachi, are respectively rated BBB and BBB+.

Investment bankers familiar with deals similar to Thameslink trains said that each notch of difference equated to at least 0.25 of a percentage point on any debt-funded deal.

That would leave Bombardier having to pay extra interest of at least 1.5pc a year to finance the deal. Over a 30-year contract that could amount to £700m.

“The way the contract was structured, it wasn’t just about building the trains but financing them,” said the source. “On that basis it was very hard to compete with Siemens.”

A summary of the tender, dated April 2008, states: “The Department [for Transport] intends that the chosen bidder will be required to arrange the finance necessary for the acquisition and ownership of the rolling stock.”

That effectively turned the winning bidder into a rolling stock leasing company, where cost of finance is crucial.

Bombardier, which remains reserve bidder on the Thameslink contract, is yet to be told by the Government why it lost the bid. A company spokesman declined to comment.

So it seems that once again Labour have screwed up and the Conservatives are taking the blame.  There is no denial that the Labour Government set up the contracting process and it has been left for the Conservatives to deal with the mess.  How many more deals will go up in smoke due to this incompetence?  Only time will tell.

Bombardier to announce ‘substantial’ job losses

From: Guardian.co.uk

Fears 1,500 jobs at risk at Derby train factory after company loses £3bn Thameslink contract to Siemens of Germany

Bombardier, the Canadian engineering group, will announce major job losses at its Derby train factory on Tuesday, amid fears that 1,500 workers are at risk after the business lost a £3bn government contract to a European rival.

The company told trade union officials to expect “substantial” redundancies. Significant reductions appear to be inevitable after Bombardier warned the government privately in May that 1,200 posts were already at risk among the 3,000-strong workforce. It is thought that up to 350 more engineering jobs are under threat.

In a blow to the government’s plans for Britain to manufacture its way out of recession, Bombardier has placed its UK operations under review after the Department for Transport awarded a contract to make carriages on London’s Thameslink rail route to Siemens of Germany, bypassing Britain’s last remaining train factory.

In a recent letter to the transport secretary, Philip Hammond, Bombardier warned that 1,200 jobs could be at risk at Derby even if it won the Thameslink contract. However, it had hoped that winning a deal for more than 1,000 carriages on the rail route would allow the company to retain many of the jobs. If it lost the Thameslink deal, it said, more jobs could go by the end of the year, amid doubts over the 350-strong engineering unit.

It is understood that about 700 agency workers employed at Derby are most at risk, with the heaviest cuts expected to come from manufacturing staff. In a letter to David Cameron, Labour has claimed that up to 20,000 jobs could be hit by the Thameslink decision and looming cuts at Bombardier. Bombardier’s manufacturing lines will grind to a halt in 2014 when it finishes a contract for London Underground trains. Future orders for the as-yet unbuilt Crossrail and High Speed Two projects are years from being tendered.

Unite has written to two cabinet ministers in an effort to have the Thameslink decision reversed. Diana Holland, assistant general secretary of the UK’s largest trade union, said the move could be the “last straw” for Bombardier in the UK.

The RMT trade union, which also represents workers at Derby, said the effect of the Siemens decision would be “devastating.” Bob Crow, RMT general secretary, said: “This act of political sabotage to a key element of the remaining UK manufacturing base could leave the nation that gave the world the railways building nothing but a few basic components.”

The government believes its hands were tied over the Thameslink decision by European Union procurement rules, which state that any EU state must not allow a company’s location or nationality to influence contract awards. Nonetheless, Unite has pointed out that Germany’s state-owned rail operator, Deutsche Bahn, recently handed a €6bn (£5.4bn) high-speed train contract to Siemens.

Siemens, which employs 16,000 people in the UK, claims the contract will create up to 2,000 jobs in the UK supply chain. However, even though some components will be made in the UK the trains will be built in Germany.

I have highlighted some parts of this report that I believe need to be commented on.

There have been several reports in the media that Bombardier are being forced to cut jobs due to the loss of the Thameslink contract but, apparently in a letter to Philip Hammond, they were already considering the job losses EVEN IF they secured the contract.  This is completely at odds to what has already been reported.

Labour are claiming that 20,000 jobs will be hit by the decision.  Where exactly are the facts backing up those figures?  Siemens have already stated that some components for the fleet will be manufactured in the UK so I don’t see the jobs being lost in the supply chain and as Bombardier are looking to cut up to 15oo jobs, this leaves the Labour figures 18500 jobs short.

As usual, a gold plated opportunity arises and Bob Crow just has to put the boot in by claiming that the award to Siemens was “Political Sabotage”.  The European Union rules on Procurement basically state that contracts should not be awarded based on a company’s location or nationality so, by playing by the rules, the Government are wrong.  Perhaps Mr Crow should look at the figures used to decide on the best value for money and see how much the labour costs involved are.  I won’t place a bet that the German figure was cheaper.

 

Government to review how contracts are awarded

Following on from the announcement of Siemens being named preferred bidder for the Thameslink rolling stock order.

From The Derby Telegraph

A LETTER to the Prime Minister has confirmed that the Government will review the way it deals with EU contract law in the wake of the decision not to give the Thameslink contract to Bombardier.

The Derby train-manufacturer learned two weeks ago that German firm Siemens had won the contract.

Ministers said at the time that EU procurement rules forbade them from favouring British companies when tendering the contract.

But critics pointed out that both France and Germany give almost all their train-making contracts to home-based firms.

A senior Government source told the Derby Telegraph last week that ministers were planning to instruct officials to discover how other states got round EU rules.

Yesterday, the paper was passed a copy of a letter written from both Transport Secretary Philip Hammond and Business Secretary Vince Cable to Prime Minister David Cameron.

The letter reads: “We need to ensure that we manage our public procurement and investment programmes so as to sustain a competitive supply base that can meet the UK’s strategic needs cost effectively over the long term. There is a perception that other EU countries appear to manage their public procurement processes with a sharper focus on domestic supply chains than we have hitherto.”

Mr Cable’s department is currently carrying out a review to ensure that all Government departments are doing all they can to help the economy recover.

 

It seems once again that we are the only Country in Europe that plays by the rules and obeys the laws.  From my point of view it looks as if France and Germany claim to be part of Europe but are in reality only interested in themselves.  I am pretty certain that if the Government had announce Bombardier as the preferred supplier, certain French and German politicians would have been up in arms about Britain breaking the rules.

Hopefully in future, the playing field will be levelled and the procurement of rolling stock will be awarded to the supplier best capable of delivering what is required at the correct cost without all the political motives in the background.

All is not lost for Bombardier despite Thameslink setback

I found this statement from Heather Wheeler, the Conservative MP for South Derbyshire and thought it raised some valid points.

LIKE you, I was shocked and disappointed to hear that Bombardier had lost out to Siemens in its bid to build the new trains for Thameslink, and will be asking questions of ministers and in the House as to why this has happened, writes MP Heather Wheeler.

It is important not to lose sight of the fact that the Government intends to retain Bombardier Transportation UK Ltd with VeloCity as the reserve bidder in the event that contracts cannot be satisfactorily finalised with Siemens.

I am asking particularly if part of the tender can be subcontracted to any of the businesses which form the Derbyshire Rail Forum, including Bombardier.

Other members may be able to tender for work from Siemens and we hope they will be successful. ESG, which is already expanding its facilities in Bretby, is one of these, so hopefully some of this contract will come back here.

It is not all gloom and doom, as Bombardier has a number of active orders at its Derby plant, the largest of which is 1,300 carriages for the Sub-Surface lines, due for completion by 2014.

The company has employed a number of contract workers on short-term contracts to cope with this peak activity.

Bombardier is also one of the bidders who have pre-qualified for the Crossrail rolling stock order (around 600 carriages), with the contract award expected in late 2013, and is a potential bidders for the new LUL tube trains, which could total up to 3,400 carriages.

There has been a lot of anger and disbelief in both the railway and National press regarding the fact that the Thameslink rolling stock contract has gone to German company Siemens.  The fact of the matter is that, with the findings of the McNulty review, rolling stock procurement as well as other facets of railway life now have to offer value for money to the British taxpayer. 

As unfortunate as the loss of this contract is, the future for Bombardier could still be secured if they can gain the contract for either the Crossrail rolling stock or to continue producing tube stock for London Underground.  Work on the “S Stock” Underground trains for the Metropolitan, Circle, District & Hammersmith & City Lines should see work continue until 2014 which should give enough time to gain more work.