HS2 Contract – CH2M Withdraw, Bechtel “Win”, Mace Will Challenge

We featured the HS2 rail programme problem with the potential CH2M conflict of interest case here and subsequently in a couple of “down the procurement pub” mentions.  To recap, programme management experts CH2M has provided the last two Chief Executives for government organisation HS2, and has seen many of its staff seconded to the organisation.

In addition, CH2M is bidding for major delivery contracts which HS2 is letting as the buyer. Hence there are obvious potential conflicts of interest. We emphasise the “potential” word – clearly, it is possible that such issues can and should be avoided. But equally clearly, HS2 has to work very hard to prove that other potential suppliers are not disadvantaged by this situation.

But the proverbial has now hit the giant HS2-sized fan. Recently, CH2M was awarded a major contract to develop Phase 2b, namely the stretches from Crewe to Manchester and Birmingham to Leeds.  (We assume this is programme management of the work, not the actual boots on the ground construction work).

This led to one of the unsuccessful bidders, Mace, asking questions of the process and threatening to challenge. After some debate, last week CH2M announced they were withdrawing from the process and the contract – we assume that came after considerable pressure from HS2 and from high levels of government (otherwise why would you forego £170 million income?).

The conflict of interest issue got more tangible too. As the Times reported; “Christopher Reynolds was chief of staff at HS2 and is alleged to have drafted a key document while employed by HS2 that influenced the procurement and may have helped CH2M to win.”  Reynolds then joined CH2M and was heavily involved in their bidding process.

That doesn’t look good. We will probably never know the truth, and we suspect that neither HS2 or CH2M are stupid enough to allow critical information to leak during the process, but ultimately, if something looks dodgy, sounds dodgy and smells dodgy … then people will assume it is dodgy.

HS2 now appears to be planning to award the contract to Bechtel, who came second in the supplier selection process. That would raise some interesting legal questions too, and we are pretty sure Mace would (rightly) challenge that. The legal argument would go along the lines (we suspect) of this – there was a conflict of interest, we don’t know how that affected the competition but clearly it did, so we cannot rely on just going to the supposedly “second best” bidder.

We think this line will have a good chance of succeeding in court and suggest HS2 need to start again with a fast track (and fair) competition. Indeed, Mace has said it has other issues about the procurement rather  than "just" the conflict of interest.

So, who is to blame for this? Well, the rats are leaving the sinking ship, so no doubt by the time National Audit Office and the Public Accounts Committee get around to looking at this, there will be no-one left to blame. The director-general at the Department for Transport's (DfT) High Speed 2 Group, David Prout, has just resigned to go and be pro vice-chancellor for planning and resources at Oxford University.  Philip Ratnam (Permanent Secretary at DfT) is off to run the Home Office – and no doubt everyone involved in this will have their alibis well in place.

This is what infuriates even those of us who are advocates for and defenders of the public sector. Generally, people who under-perform in the private sector get fired. In the public sector, they get promoted or at worst, moved sideways.

This also raises issues about the role of Cabinet Office. We might excuse Gareth Rhys Williams (government's Chief Commercial Officer) for this and indeed the recent NDA fiasco given his newness. But Cabinet Office needs to get to grips with these organisations that sit outside the core departments, as they seem to be where the real problems lie. These cock-ups are costing the taxpayer hundreds of millions, and were avoidable.

Not being arrogant, but I really think I would have identified this HS2 problem and the obviously unfair and illegal NDA procurement process within hours of talking to a few key people. Isn’t there anyone in government who is capable of doing that – or are officials being over-ruled by politicians?


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