Wednesday, 31 August 2011

CrossRail - fall out from the Bombardier/Siemens decision

The Prime Minister has announced (rather quietly I thought) that there will be no review of the decision to award the Thameslink to Siemens rather than Bombardier.  This is not surprising as the alternatives were going to be extremely unpleasant - at best we could find a valid reason to annul the competition, and restart the process with the award (hopefully) coming to a different company.  At worst the UK gets a hefty fine from the European Union and sued by Siemens.  In the middle the government looks powerless to act.

The fallout continues though, and in the link here it is reported that Alstrom have withdrawn from the process to supply trains to the CrossRail project.  Now if you have not been following these projects, it should be pointed out that CrossRail and ThamesLink are major projects - far larger and more expensive than the Olympics, but with a much lower public profile.  Both should make a major contribution to travel in London and the South East. 

The government has announced that it delay the tend for the trains by a few months (from late 2011 to early 2012)  and will review the procurement process.  The shortlisted companies are Siemens, Bombardier, Hitachi and Ferrocarrilles.  Alstrom have withdrawn from the bidding process.

The question is what can the government achieve?  Although they blame the previous administration for the rules, in reality all that is happening is that the process is following EU procurement rules.  Transport Secretary Philip Hammond says he wants to change the rules so that "UK companies compete on an equal footing with Continental competitors".  Of course that is already happening, or we would be able to lodge a case with the EU for illegal support, non-competitive behaviour, cross subsidies or something similar.  If we have evidence that it is not happening, then what are we doing using the EU legal system to correct the problem.

What the minister means, and most of us would be behind him on this, is that he wants the work to go to a British company.  In practice this means Canadian company Bombardier, rather than German company Siemens.  The withdrawal of Alstrom may be a sign that they perceive the UK government to be "rigging" the process so that Bombardier wins. 

Which then leads us to ackward consequences.  If Bombardier do win, will people think it is a political fix?  Will Bombardier actually have the best bid?  Or will we be paying a higher price for lower quality to keep jobs in Britain?  And will the EU approve it?  Will it actually help Bombardier in the long term if they can only win business that is "sorted" for them?
If Siemens, or one of the other bidders win, what will that mean for the government's rhetoric?

It is politically unpopular, but the government could take the tack of pointing out that we want fair competition across Europe, and the way to do that is not to impose barriers but to ensure other countries follow the due process.  If we give preference to national companies, how can we complain about other countries doing the same?  And where does the balance lie between encouraging business competition and nurturing developing or weak business sectors?  And having given a lead that national governments can ensure business goes to national companies, what will the impact be on UK exports?

The government is encouraging British business to have an input on their submissions on proposed changes to EU procurement legislation, and I encourage companies to have their say.  However realistically the choice for the UK government is to agree to EU procurement policy, and the consequences of that single market, or to withdraw from the EU.  There is a lot of support for withdrawal in both the country and the government (though personally I do not agree) and it is possibly the time to have that debate about the benefits (advantages) and obligations (disadvantages) of being in the European Union.

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