HS2 Rail Procurement Challenges – It’s Complicated!

There seems to be a series of procurement problems affecting the HS2 £2.8 BILLION contracts for rolling stock to run on the horribly expensive new line. The latest is a challenge from Spanish firm Talgo. Now this is a bit complicated, so let’s read the details from the Rail Technology website carefully …

“The Madrid-based company was shortlisted as one of the five suppliers to build trains for the new high-speed line as part of a major contract. However, the firm has decided to sue HS2 after Spanish rival CAF launched its own legal challenge and was then added to the shortlist late in the game.

In a complaint filed to the High Court, Talgo claimed that HS2 “failed to exercise rational judgement” and factored in “irrelevant considerations” by allowing CAF back into the tender race. Talgo wants HS2 to dismiss CAF from the competition or restart the entire procurement process”.

So Talgo are not suing because they have lost the competition, which is still running. They are challenging because HS2 has let CAF back into the process. That came after CAF challenged the process, which initially excluded them at PQQ stage.

After this challenge had gone to the courts, HS2 decided that OK, CAF could go through to the short-list, because two of the other bidders, Bombardier and Hitachi, had decided to team up. That meant there were now only 4 firms on the shortlist, not five. And as HS2 had said there would be a maximum of 5, there was now room for CAF, conveniently. So they dropped their challenge.

We are not totally clear whether Talgo objects to CAF being allowed back in to the competition, or to the Hitachi / Bombardier tie-up, which came about once the competition was under way, or both. But anyway, they want the whole process to be re-started.

As usual, there are a number of points to be noted in all this. Firstly, allowing firms to form consortia after the process has started tends to raise tricky issues. We’re not saying it should always be banned, but it means the pre-qualification needs to be looked at again for what is effectively a new entity. It certainly opens up the possibility of others challenging.

CAF’s initial claim that the process used criteria that were not disclosed is also worrying and if true, then really we have to ask whether HS2 procurement is fit for purpose. That really is one of the basics of public procurement, although we do see it still coming up as a problem more than it should. You simply can’t exclude a bidder – or even mark them down on the evaluation – if you have not mentioned that the particular issue is important.

“We marked you down because you don’t have a full implementation plan”

“But we do. We just didn’t put it in our response”

“Well you should have”.

“But you didn’t tell us you wanted it!”

The bidder will always win that argument. But bringing CAF back onto the shortlist is not wrong in itself if the wording in the documents allowed that – and as long as the firm was over the threshold(s) defined in the PQQ scoring.

These HS2 issues are also coloured by another report in the Times that says 25% of HS2 staff are earning over £100K a year. (We commented here on the salaries in other parts of the rail industry). With a central government department and a succession of Ministers that seems unable to provide day-to-day management of the industry generally, let alone strategic leadership, it looks suspiciously like HS2 is (pardon the pun) a gravy train for everyone involved.

Who really has an interest in controlling the costs? Top management know that the more junior staff are paid, the easier it is to justify their own salaries. The more that is spent with suppliers, the bigger the overall budget, and again the more important their own jobs appear.

Let’s get somewhat controversial for a moment. In a country where rough sleeping and use of food banks is growing, hospital waiting lists are lengthening, people are defending themselves in courts (badly) because legal aid has been slashed, HS2 is a luxury that we can’t afford. It increasingly just looks like a huge pile of cash spread out for the rail and construction industry to dive into. Here you go, help yourselves!

First Voice

  1. Procurement Everywoman:

    Could not agree more. Here is the best article I’ve ever read on the subject, laying bare the murky and narcissistic roots of this vanity project
    https://www.theguardian.com/uk-news/2016/jun/07/hs2-the-zombie-train-that-refuses-to-die

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