NAO: DfT rolling stock strategy causes confusion

Whitehall mandarins have caused confusion across parts of the railway industry by procuring trains centrally, despite having a policy of leaving this to the industry.

That is one of the conclusions of a report by the National Audit Office, published on July 9. 

NAO chief Sir Amyas Morse said: “At the moment there is a gap between the Department’s stated desire to play only a strategic role in the rail industry and how it is acting. It needs to ensure that the industry understands its policy on the procurement of trains, and produce a detailed integrated plan bringing together infrastructure, rolling stock and franchising strategy.”

The NAO acknowledged that the Department for Transport did not follow its own policy because it was trying to take a long-term view of rolling stock procurement and reduce long-term costs. 

It added: “There is still a lack of incentives for train operators to consider long-term, whole-system costs more generally, such as maintenance costs for tracks, although the Department has begun working with industry to resolve such issues.”

The NAO looked into the detail of the DfT’s procurement of new Thameslink and Hitachi Intercity Express Programme (IEP) trains, noting that both were done under private finance initiatives (PFIs) and that both deals were running late.

It said that the DfT issued the Invitation To Tender (ITT) for Thameslink in November 2008 and expected it to take 16 months to reach contract award - it actually took four and a half years. 

For IEP, the DfT expected to award the contract for the order in April 2009, but did not do so until July 2012.

Some of the delays to IEP were caused by the DfT changing its mind about electrification, and the NAO called for better strategic planning of infrastructure and train needs. 

It said the delays had led to higher costs, and specifically mentioned an extra £34 million on top of the Thameslink purchase price for delays, noting that the DfT had been forced to procure an extra 286 carriages for Southern to bridge the gap caused by those delays. 

Furthermore, the extra costs of maintaining the first 170 of these carriages until the end of that franchise would be £50m, while the costs of the other 116 could not be known until their procurement was complete.

NAO draws no conclusion on the value for money of the two deals, saying that it was too early to know until the trains were in service and delivering their benefits. 

However, it added: “We are concerned that in the case of Intercity Express, the Department decided to proceed with a revised bid without competition, which means that the Department’s view that no other manufacturer could offer better value for money is untested.”

The audit office also noted that IEP was more expensive than other broadly comparable new train types, but that the DfT had said that it hoped to outweigh these higher costs with long-term benefits from the trains.

The NAO called on the DfT to refinance the £4.7bn IEP deal and £1.8bn Thameslink deal to improve their value for money; to support collaboration between train operators and the train suppliers; and to maintain oversight of the contracts and intervene where necessary.