National Audit Office on Cabinet Office savings and train procurement

The UK’s National Audit Office has produced two reports recently with procurement interest. NAO has taken a look at the recent Cabinet Office savings announcement, and analysed the robustness or otherwise of the savings numbers claimed. NAO doesn’t give a totally clean bill of health to the numbers, but neither does it rubbish them comprehensively.

We pointed out here that some methods of measurement had changed which of course NAO spotted too! Cabinet Office “should do more to strengthen its own processes. It should also look to improve its reporting on how the scope of the savings has changed over time”. NAO does solve one mystery we identified, that of the growth in “centralising procurement” savings, but we’ll come back and explain more on that on Monday.

The other report is on the rail industry, snappily titled “Procuring new trains”. It covers acquisition of rolling stock over the last few years.

“The Department for Transport (the Department) has awarded contracts for both the Intercity Express and the Thameslink programmes to private sector consortia to supply, finance and maintain new trains. Train operators on the Great Western Main Line, East Coast Main Line and an expanded Thameslink network will pay the consortia to use the trains, subject to specified performance and availability levels being met. The Department estimates future payments will be around £7.65 billion for Intercity Express and £2.8 billion for Thameslink (2014 prices, present value) over 27.5 and 20 years respectively”.

So just the odd £10 billion then riding on the outcome of these procurement processes. And it’s a very thorough and insightful report from NAO, as usual, but unlike many of their efforts, it is ultimately unsatisfying in one sense because there is no clear value for money conclusion.

We are not able to conclude fully on value for money on either project until the new trains are in service and benefits are being realised. This is dependent on the Department and train operators managing the contracts and the wider programmes effectively, and assumptions, such as passenger demand forecasts, holding true.

That seems a genuine conclusion rather than a cop-out to save the Department for Transport embarrassment. But there are certainly some significant criticisms of the Department within the detail;

  • Should DfT have even been running the procurement of rolling stock themselves given their lack of experience and capability – or should they have let the rail industry do that? And they “confused” the industry through their involvement.
  • Should DfT have accepted a revised bid from the preferred bidder (as they did) without going back to the market to test whether anyone else could do better?
  • DfT did not manage communications and relationships with bidders well, which amongst other consequences increased the risk of legal challenge.
  • DfT did not consider the use of public money (rather than private funding), which was in part responsible for both contracts being awarded more than three years later than intended (three years!)

The NAO recommendations are all sensible. Some are very train-specific, but we’ll return to this in a future article and look at whether there are wider “lessons learnt” for procurement for generally.


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