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«Cm 9013 February 2015 Treasury Minutes Government responses on the Eighteenth, the Twenty First to the Twenty Fourth, and the Thirty Third reports ...»

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The Cabinet Office should require all service contracts to be published, including a clear expression of the performance the service user can expect and then how contractors are performing.

16.1 The Government agrees with the Committee’s recommendation.

Target implementation date: Autumn 2015.

16.2 Since January 2011, as part of the Government’s transparency programme, central government departments have been required to publish contracts above the value of £10,000 on Contracts Finder. A new version of Contracts Finder will be launched shortly which will allow users to search by area.

16.3 The Cabinet Office is working with stakeholders to produce a set of principles for improving the transparency of contracting. The Cabinet Office has also issued two procurement policy notes describing how performance should be taken into account in procurement; and explaining how the performance of strategic suppliers is to be assessed across all contracts held with central Government.

https://www.gov.uk/contracts-finder Twenty Fourth Report of Session 2014-15 Department for Transport Procuring new trains 1: Committee of Public Accounts conclusion The department awarded two large contracts to private sector consortia to supply, finance and maintain new trains for Intercity Express and Thameslink with a combined cost of around £10.5 billion, which will be paid by train operators. The department has opted to lead these procurements itself, rather than have rolling stock companies finance the trains and lease them to the train operators, which has been the usual model for train procurement.

The 866 new carriages procured from the Hitachi-led consortium (Agility Trains) under the Intercity Express programme will replace ageing trains on the Great Western and East Coast lines. Siemens, in the Cross-London Trains consortium, will supply 1,140 new Thameslink carriages which are needed as part of a wider improvement programme, increasing the capacity and improving the frequency of this cross-London commuter service. The contracts will run for

27.5 and 20 years respectively.

The department awarded both contracts more than two and a half years later than intended, largely because of pauses to the procurements and the challenge of securing finance for these projects during the financial crisis. The Intercity carriages are now expected to enter service between June 2017 and 2020, and the Thameslink stock between 2016 and June 2018.

1.1 On the basis of a report by the NAO, the Committee took evidence on 13 October 2014 from the Department for Transport on its procurement of new trains for the InterCity Express and Thameslink programmes. The Committee published its report on 17 December 2014. This is the Government response to the Committees report.

Background resources NAO report: Procuring new trains – Session 2014-15 (HC 531) PAC report: Procuring new trains - Session 2014-15 (HC 674) 2: Committee of Public Accounts conclusion The department's failure to articulate its role in the rail system has caused confusion in the rail industry.

Recommendation:

The department needs to work with the industry through the Rail Delivery Group to clarify the respective roles and responsibilities of government and industry, and to address weaknesses in the system including the lack of appropriate incentives to achieve a high-performing network, including good quality trains and low track maintenance costs.

2.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

2.2 The department has already outlined industry roles and responsibilities in the Reforming our Railways Command Paper in 2012. The department continues to work with the Rail Delivery Group (RDG) and wider industry as part of the franchising process and the development of the next Rail Investment Strategy. Through franchise awards, the department incentivises partnership working to deliver improved performance and to introduce better quality and lighter trains, leading to lower track maintenance costs and other benefits.

2.3 The department also supports initiatives such as alliancing and route-level efficiency benefit sharing encouraging industry to work together to achieve a high-performing network that is cost effective.

The department will continue to work with industry and the Office of Rail Regulation (ORR) to ensure alignment of incentives in delivering a high-performing network.

3: Committee of Public Accounts conclusion The department's decision to purchase the trains leaves all the risk with the taxpayer.

Recommendation:

The department needs to calculate the potential impact of its decision on the taxpayer and put in place plans to mitigate that impact, if demand for train services means it is not economical for train operating companies to use these trains as expected. More broadly, the department needs to develop with the industry a rolling stock strategy, setting out what rolling stock will be replaced, when and by whom to provide certainty to the industry.

3.1 The Government disagrees with the Committee’s recommendation.

3.2 Departmental policy already sets outcomes and places responsibility for delivery on industry, through a structured planning process involving Network Rail and partners. In line with the 2012 Command Paper, the department expects the market to lead the replacement and refurbishment of rolling stock reserving the right to lead in some circumstances.





3.3 The industry and the supply chain use the department’s rail franchising programme and Rail Investment Strategy (RIS) plus their own rolling stock strategy to plan, to which the department contributed. The department has also created the Integrated Delivery Directorate (IDD) to better manage the interdependencies between franchising, infrastructure and rolling stock.

3.4 The department also regularly reviews and updates the business cases used for the IEP and Thameslink procurement decisions and is in regular dialogue with the operators using the trains to understand how passenger demand is developing.

3.5 The department’s processes already involve a very careful examination of the impact on the taxpayer and a comparison of alternatives in order to seek the greatest possible value from taxpayer funding.

4: Committee of Public Accounts conclusion Value for money was undermined by the lack of certainty at the start of the procurement process.

Recommendation:

The department, working with key partners such as Network Rail, train operating companies and rail manufacturers, should develop a long-term, integrated strategy covering infrastructure, rolling stock and franchising, so that major decisions can be taken in a logical order which provides the industry with greater certainty.

4.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

4.2 In line with the 2012 Command Paper, the department already sets outcomes and places responsibility for delivery on industry, through a structured planning process involving Network Rail and partners. The department will consider what additional information from that provided in the Rail Command Paper could be published to optimise the market further through improved knowledge and visibility of outcomes.

4.3 The department considers that both procurements have delivered good value for money for taxpayers and were achieved despite challenging circumstances, including the financial crisis and challenges to the Eurozone.

5: Committee of Public Accounts conclusion The procurement process for the Intercity Express Programme was poorly managed from the outset.

Recommendation:

Before starting any procurement the department should develop its knowledge of the supply market and underlying costs to inform its procurement strategies, to determine whether bidders' proposed prices are reasonable, and to help negotiate prices with suppliers.

5.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

5.2 In procurement, the department will continue to engage early, regularly and comprehensively with supply chains and experts to ensure proposals are realistically priced and to develop intelligent procurement strategies.

5.3 Good examples come from improving rail franchise Direct Awards, which utilise a continuously improving pool of market knowledge; and franchise competitions, where stakeholders set specifications helping to deliver efficient procurements which drive value for money.

5.4 Similarly, during the UK Search and Rescue helicopter project, manufacturers, operators and banks were engaged extensively on supply market requirements to inform negotiations, achieving a £1.5 billion saving.

6: Committee of Public Accounts conclusion The Committee welcomes Hitachi's commitment to invest in County Durham so that trains are assembled in the North East and support is given to the UK supply chain.

Recommendation:

The department should be more assertive in using its powers to require information on, for example, the supply chain proposals, the use of SMEs and the employment in apprenticeships to ensure that the UK economy and UK-based industry benefit from large capital public sector investment programmes.

6.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

6.2 The department and the Department for Business Innovation and Skills have jointly established the Rail Supply Group (RSG) to strengthen the UK rail supply chain so that UK-based companies are better able to win work here and abroad. Train components are being sourced in the UK and jobs have been created for the construction of very significant depots for the maintenance of the trains.

6.3 HS2 Ltd.’s supply chain will include a relatively small number of large Tier 1 suppliers, with substantial indirect opportunities for small and medium sized enterprises (SMEs). HS2’s approach to procurement is consistent with the Crossrail programme where 97% of suppliers originated from the UK and 58% were SMEs.

7: Committee of Public Accounts conclusion The department still lacks the skills needed to manage complex procurements.

Recommendation:

The department must develop, set out and implement a clear strategy for developing the capability needed to deliver its rail strategy and address the concerns the Committee has raised over many years about its senior management capacity and its commercial skills.

7.1 The Government agrees with the Committee’s recommendation.

Recommendation implemented.

7.2 The department will continue to regularly review skills requirements to ensure appropriate skills are available. The department’s recent skills audit for the Civil Service Capabilities Plan shows good progress. A Commercial Capability Strategy, launched in 2014, includes a fast track programme providing direct commercial exposure for civil servants drawn from an annual graduate cohort. The department is also enrolling Government Major Projects Portfolio SROs and Project Directors to the Major Projects Leadership Academy and developing a Senior Network for sharing advice.

Thirty Third Report of Session 2014-15 Department for International Development Oversight of the Private Infrastructure Development Group Committee’s Summary The department believes that infrastructure investment stimulates growth, which is a pre-requisite for cutting poverty. It has identified a need for substantial infrastructure investment in developing countries which cannot be met by public funding and aid alone. PIDG, which invests in infrastructure projects in developing companies, is a multilateral agency founded by the department and three other donors in

2002. PIDG is now governed by development agencies from eight countries and the World Bank. The department’s total contributions to PIDG, which are expected to reach £860 million by 2017, have represented 70% of PIDG’s funding since 2002 and 88% of the funding in the last two years.



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