It is pleasing to hear that the Commons Transport select committee has arrived at similar conclusions to those published by the East Midlands Liberal Democrats in October. They have concluded, like us, that financing was key to Siemens being announced as 'Preferred bidder' and this in turn was a consequence of the contract being a 'Private Finance Initiative' (PFI) contract. If the contest between Siemens and Bombardier had simply been about building trains, then there is no reason to suppose that Bombardier would not have been competitive, as they have been in the past. However, Siemens are believed to have an in-built advantage when it comes to raising the finance for the whole contract, putting Bombardier at a disadvantage overall.

We also support the recommendation that the National Audit Office should look into this. We do not, however, believe that the EU competition laws have had the kind of effect that the select Committee have implied. The issue we believe should be investigated further is why was the tender put out using the 'Utilities Contract Regulations 2006' rather than the 'Public Contracts Regulations 2006'? If the Train Operating Companies had been buying the trains then the former regulations would have applied, but the Train Operating Companies do not own their own trains. It was the Government making all the key decisions and we believe there is a case for arguing that the latter regulations should apply.

Why does this matter? It matters because Siemens has been fined heavily for corruption. Under the 'Public Contracts Regulations 2006' they would have been automatically excluded from the bidding, or at the very least the Government could have excluded them if they wished. Under the 'Utilities Contract Regulations 2006' they have no such powers.

We also understand that, under the 'Public Contract Regulations', the government has powers to take wider socio-economic issues into account that cannot be taken into account under the 'Utilities Contract Regulations'.

So, two key decisions put Siemens where they are now. The choice of Regulations took Siemens from the side-lines to the starting grid, the choice of a PFI contract rather than a normal contract took them to pole position. The then Labour Transport Secretary Ruth Kelly has some questions to answer, we believe. It may be she did not understand the implications of what she signed off, but no doubt her civil servants understood. They too have questions to answer and this is what we believe the National Audit Office should investigate.

Over and above all of this is the failure of Government (Labour or Coalition) to have a high-level view of the overall National Interest. In August this year, the Liberal Democrats tabled a series of questions in the House of Lords asking "is any attempt made to determine the overall net cost to the exchequer of each tender?", and "what consideration they give to (a) the impact on unemployment and consequent social security costs, (b) the impact on tax revenues, VAT receipts, and corporation and other taxes, and (c) the impact on balance of trade statistics; and which department is responsible for assessing each factor and deciding which tender is most in the national interest." And also "what responsibility does the awarding body have to take into account the need to maintain an adequate number of contractors to ensure future competition?"

The answers made it plain that no department was considering the wider implications of the tender decision, not even the Treasury, which one would have assumed would take in the big picture even if no other Department did. This too the National Audit Office should investigate.

Transport Selection Committee report - 16th December 2011

Reform of The Private Finance Initative

Comment from Clive Trussel

I think that the Siemens and Bombardier "mess" that I have just read about, by Steve Coltman, should be shouted to the public; to show that the Lib/Dems have more "know-how" and really are on their side. And how can people ever contemplate voting for the incompetent Labour party again!