Crossrail delays prove too much for Alstom

The French train maker has called a halt to its involvement in the £16bn scheme to link London

The French train maker Alstom Transport yesterday washed its hands of London's £16bn Crossrail project, pulling out of the bidding process to build the trains and depot.

It's perhaps not all that hard to see why the maker of Virgin Trains' Pendolino fleet has called time on its involvement in the process – Crossrail yesterday announced that a decision on the tendering process for the £1bn contract to build 60 new carriages and a depot for the project will be delayed. It was scheduled to start this year, with the contracts being awarded in 2013. Now Crossrail says the process will be deferred for a year, with the tendering starting next year and a final decision not being made until 2014.

The publicly owned company, which is overseeing the construction of the much delayed East-West rail link for London, said that operational savings running into the "tens of millions" have been identified as a result of the delay because it will cut the time between the delivery of the trains and the trains then coming into service.

Public bodies are presently big on cost savings in austerity Britain, but there is another reason for the hold-up in proceedings.

It is to allow a review to be set up which will look at "whether the UK is making best use of the application of EU procurement rules, as well as the degree to which the Government can set out requirements and evaluation criteria with a sharper focus on the UK's strategic interest and how the Government can support businesses and ensure that when they compete for work they are doing it on an equal footing with their competitors". In other words, the Government would dearly love to avoid another firestorm like that created when a £1.4bn contract to build rolling stock for Thameslink was awarded to the German company Siemens, which plans to make the trains in Germany.

The decision led rival bidder Bombardier to make nearly half of the 3,000 staff at its Derby plant redundant. This led to accusations that the Government's decision would bring an end to Britain's long history of train building at a time when the country needs to build up its manufacturing base. In part, that is because ministers are desperate for the private sector to create jobs to make up for those lost in a brutal public sector cull. But there is also a broad consensus that the country needs to reduce its over-reliance on the City of London and financial services generally.

Not that Bombardier is actually British. It's a Canadian company.

All the same, unions were yesterday voicing their satisfaction at the news of the review. The TUC general secretary Brendan Barber said: "The TUC has been urging the Government to review its procurement strategy for months. We welcome the fact that real steps may now be taken to review the role that government can play in supporting UK jobs and growth and to apply these lessons to specific contracts.

"However, this comes too late for those workers at Bombardier who are losing their jobs on the back of the Government's appalling decision to award the Thameslink contract to overseas competitors. If the Government wants to demonstrate its commitment to more effective and intelligent procurement, then it should start with an immediate review of its Thameslink decision."

Mr Barber, and other leading union and Labour Party figures, have been arguing that it is madness for the Government to spend public money on supporting jobs overseas. In the case of the Thameslink contract that means jobs in Germany, which just happens to be, by a distance, Europe's strongest economy, one that has a manufacturing base that makes the rest of the continent

green with envy. They say it is crazy to support overseas jobs with British money during austerity, not least because, in the case of the Bombardier situation, taxpayers will end up forking out for the lost jobs in the form of jobseekers allowances and other benefits that will be claimed by the fired workers.

All the same, during the Thameslink furore it did emerge that at least some of the components for the rolling stock would be made by Siemens staff in Britain, and around 2,000 jobs will be created. Siemens also has a bigger UK workforce than Bombardier.

It remains the case that under European law, Britain cannot favour bidders perceived to be British. Value to the taxpayer is the paramount issue, and perhaps it should be in these financially-strained times. What's more, at the time of the Thameslink rumpus, the EU pointed out that the vast majority of work funded by the British taxpayer does get done in Britain.

According to Crossrail, all of the bidders (including Alstom) performed strongly at pre-qualification stage. Interestingly, none of them is British owned.

The bidders are: Construcciones y Auxiliar de Ferrocarriles (Spanish), Hitachi Rail Europe (Japanese) Siemens (German) and Bombardier Transportation UK (Canadian).

Alstom said it had pulled out because of the cost of modifying its existing products to meet Crossrail's requirements – both in terms of the sort of train Crossrail wants and its desire to keep the cost of that train down. The numbers, for Alstom, didn't add up.

It might also be worth noting that the delay to the £1bn contract won't do much to help those remaining employees at Bombardier's Derby plant, which does have a pressing need to fill its order books.

Private sector's prangs

Thameslink The £1.4bn contract for 1,200 carriages was awarded to Siemens after the German conglomerate beat off Canadian rival Bombardier during the final stages of bidding. This led to the Canadian company laying off nearly half the 3,000 employees at its Derby train-making plant, the last in Britain.

Metronet The company, owned by a consortium made up of WS Atkins, Balfour Beatty, Thames Water, France's EDF Energy and Bombardier, had the contract to refurbish 153 stations and most of London's underground railway network. However, it collapsed into administration in July 2007 after the shareholders concluded there was no prospect of making a return without £2bn of extra funding. Metronet was savagely criticised by the public-private partnership arbiter.

Aircraft carriers Defence procurement has come under the spotlight in recent months, not least because of the repeated incidences of overspends in defence contracts. In April the BBC claimed the Aircraft Carrier Alliance, made up of BAE Systems, Babcock and the French company Thales, said costs had risen by at least £1bn and possibly by £2bn, in the £5.2bn contract to build two new carriers. In December 2010, MPs highlighted the contract as an example of the "dangerous culture of optimism" at the MOD that led to a £36bn black hole in its budget.