Tuesday, 5 July 2011

Business Ethics - Bombardier

The railway firm Bombardier is blaming the government for 1400 job loses after losing a procurement process for £3bn for trains for Thameslink to Siemens. The government is saying that their hands are tied by EU procurement rules (with an insinuation it was the previous government's fault for signing up to such rules).

I have some knowledge of the sector, having done some work for ADtranz before they were taken over by Bombardier. I hope and trust that Bombardier have improved things in the intervening 12 years or so, but there were plenty of cost improvements that could have been made at ADtranz.
Curiously ADtranz had a strong presence in Germany, the D representing Daimler, so although the Thameslink trains might have been designed and built in Derby we should not think of Bombardier as a UK company - they are international.

It is unfortunate to that the contract did not go to Bombardier, and the accompanying comments that Germany and Japan would never give a contract to any firm who was not German or Japanese may have some truth - or may not. I don't have any facts to confirm or deny that. However, let us be clear - if the Germans awarded such a contract on the grounds of nationality it would be just as illegal as doing the same here (and Deutsche Bahn is partly government owned so the rules would apply).

Bombardier accused the government (in practice I assume TfL) of "just opening the envelopes" - and then giving the contract to the best bidder rather than a UK firm.

Let us think about that. TfL went out to tender, and took the best bid. We may not like the result, but what can be wrong about that? You may argue about how the specification was written, the process, and may not like the result - but basically Bombardier lost a fair process and would now like us to rig the result in their favour. You can dress it up any way you want, but that is basically what is being asked.

Assuming that we did, what would be the consequences? If Siemens have a better technical element, is it sensible to award a contract to a lower quality bid? Well Bombardier might offer to match Siemen's price - if they can do that, why did they not do it initially? Probably because they wanted to have a higher price. So, we would be rewarding a high bidder. And tax payers money to people who did not put in the best price.

Overseas companies would be put off bidding for UK contracts because after all the time and effort there would be a risk that even if they had the best bid, it would be given to a UK company for political reasons. So competition would drop, and prices would rise - and maybe quality would drop too. UK companies would learn that they do not have to be competitive to win. And everyone would realise that our UK procurement system is corrupt. That is an ugly word, but it is what people are wanting.

If you give public money to businesses who are not the winning bid because you like them more, it is corruption. All done with the best of intentions, but it is what it is. Commercial offers are no longer the determining factors, but how some one thinks and feels about you. We can dress it up with the national interest, but it is really about giving contracts to the firm that you want to. The reasons for which may be because of the UK economy, voters in a key constituency, personal relationships, or little brown envelopes. But make no mistake - you are opening the door, and many people will stroll through and you cannot control what will happen next.

I am very sorry for the people of Derby and Bombardier Transport. But that is not a reason to put aside business ethics - particularly when public money is involved. If they can prove the process was unfair, illegal or corrupt they can appeal against the decision and hope to win a rebid, or to be awarded the contract if Siemens are disqualified. Otherwise, they have to face the fact that they lost and to deal with the consequences. Complaining about it does not help the UK.


Anonymous said...

Get real.This not a world where fair play or level playing fields exist. There are two basic features in these considerations,the commercial/ technical case and the national interest.If a company like Siemens gets the tax payers money they have to make some kind of offer which economically and in terms of British economic development, makes sense
J Godwin C Eng ret.

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