High Peak Liberal Democrats

Letter to Vince Cable regarding the future of Bombardier in Derby from Peter Morris, Chair of East Midlands Liberal Democrats,

Dear Dr Cable

As you can imagine, the East Midlands Liberal Democrats are rather upset, or should we say angered, by the threat to the future of Bombardier in Derby. The fate of some industries is outside the direct influence of government, and there is only a limited amount government can do to help them. In the case of the railway industry this is not the case. Bombardier is the sole survivor in this country of a once very large industry. The rest of the industry perished in the 1990s due to a 3-year drought of orders, a consequence of the policies of the government of the day.

We are very disappointed by the firm announcement by Phillip Hammond that there is no legal basis for not awarding the contract to Siemens. The costs of redundancies at Bombardier and its suppliers, the loss of tax revenue and the increase in Social Security costs are such that we very much doubt that the Siemens award represents 'best value' overall.

We have taken advice on this matter and there is reason to doubt the competence of DfT civil servants when it comes to the finer points of European Law. There has also been a suggestion that, because financing was part of the contract, and Siemens can borrow cheaply from the German government, Bombardier was disadvantaged right from the start. We would like to see a review of the document that Bombardier and Siemens tendered against. We would like to see if there is any substance in these assertions. State aid rules may have been breached if the financing of the deal for the successful contractor was supported/backed by public sources. Freedom of Information rules in the UK apply to public procurement contracts and the publicity this issue has raised makes it all the more important to release all data which had a factor in weighting the rival bids. Allowing Bombardier to borrow on similar terms from the British government would be a rebalancing of terms between bidders.

An additional factor has been brought to our attention. The Siemens proposal is for a "paper design" of a bogie with an unproven ride capability. This may be a technical risk. The contract is for 30 years and includes through life maintenance. However their maintenance costs are all estimated based on a "paper design". Bombardiers are based on 10 years experience with a proven bogie
design. No doubt the DfT will say this is Siemen's risk, but experience suggests that contractors find ways of claiming additional costs.

We also have it on good advice that it is within the law for the government to insist that, even if the award does have to go to Siemens, Bombardier get a significant amount of sub-contract work. There is precedent both in Europe and the US. When Bombardier won an order in France, Alstom ended up doing much of the work under licence. In the US it is common for the winner of a large government contracts to give sub-contract work to the losing bidders. This way the US Government keeps a number of competitors in play and stops any one company becoming a monopoly. If, after reviewing the rival bids, it emerges that Siemens is still the winner, all efforts must be pointed towards a deal that guarantees a sizable portion of the works to the Derbyshire plant. This can be
achieved through contract specifications, (which have not been yet drafted) and legally channel sub-contract orders to Bombardier. It is imperative that the government has a say in the drafting of the (substantive) contract to deliver the rolling stock. This should include design work, not just assembly.

Finally, there must be some possibility of additional work that Bombardier could bid for and win, which will be enough to keep it open. Urgent attention is needed in planning for the next procurement of rail stock. So, the government should take advantage of innovative procurement methods which encompass socio-economic criteria and industrial policy considerations. By doing so, the plant and
incumbent know-how could be retained until the full-blown procurement process for the sizable next rail stock contract is carried out. Some quite specific suggestions have been made, for example, to build more middle coaches for the Voyager and Pendolino sets, to take each set to six carriages (East Midland Trains runs them happily as 8-carriage sets). This gives extra seat capacity without needing extra train crew. The same process could be done to upgrade all the class 158 / 159 sets to four carriages, and likewise the class 170 family.

On behalf of East Midlands Liberal Democrats I would like to re-iterate that we think it essential that the government do what it can to help Bombardier Derby survive, not just as an assembly plant but as a Design and Development centre as well. We note in your recent statement that you have set up a task-force to pursue that objective. As you and others have rightly pointed out, the UK needs a stronger manufacturing sector, not weaker. In addition, Edward Heath is still remembered as the saviour of Rolls Royce in Derby and there may be serious political consequences locally if the two parties in government are branded as the destroyers of train making in the UK.

To summarise, what we wish to see are:

(i) A review of the terms of the Thameslink tender document. It needs an informed second opinion about how the document was drafted and how the bids were evaluated. This needs to be done out in the open, not behind a veil of commercial confidentiality, with a view to learning for the future.

(ii) Ensure that the relative technical risks of the two tenders have been properly taken account of.

(iii) Urgent government action to secure for Bombardier Derby as much sub-contract work as possible, including design and development.

(iv) Government action to make available further orders for rolling stock that Bombardier might successfully bid for. There is no shortage of demand for more trains in the UK.

Yours,

Peter Morris Chair, East Midlands Liberal Democrats

Peter.Morris@eastmidslibdems.org.uk

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