Wales’ rail contract bids: financial details revealed
BIDDERS for the Wales and Borders rail contract were told to spend at least £325m on electrifying the Valley Lines, newly released information reveals.
Usually companies bidding for public sector contracts compete to offer the lowest prices, but Transport for Wales set a minimum price to ensure the UK Government’s Department for Transport (DfT) delivers on its 2014 pledge to contribute £125m towards electrifying the Core Valley Lines (CVL).
“The current scope of the CVL capital works is different to the scope at the time that the DfT commitment was made,” said Transport for Wales (TfW) in the formal invitation for companies to tender for the £5bn Wales and Borders contract. Changes since 2014 include a new technique which avoids rebuilding bridges for electrical safety clearances, and removal of the Valley Lines south west of Cardiff from the project.
TfW was the Welsh Government’s franchising authority in the procurement which selected KeolisAmey to take over from Arriva Trains Wales on 15 October.
“To ensure that the maximum contribution is achieved from the DfT, the authority and the bidders will need to ensure that the DfT requirements for the scheme are met,” TfW told bidders. “To this end it is a requirement that the estimated cost of the capital works directly relating to electrification of the CVL achieve a minimum threshold of £325m.”
However, this was not an invitation to bidders to inflate prices artificially, and the winning bid includes cost-saving innovations. The whole electrification project is likely to cost significantly more than £325m, the overall budget being £738m.
TfW placed a £25m cap on preparatory costs, including design work and surveying the assets which Network Rail is due to transfer to the Welsh Government next September.
The financial information TfW gave bidders last year has only now come to light. TfW withheld the tender invitation documents until two months after KeolisAmey had signed the contract. The version published last month had every financial figure redacted – including the £125m contribution publicly announced by the UK Government in 2014.
TfW was unable to justify the redactions when asked to do so, and released the main document in full last week.
The information sheds further light on TfW’s actions to avoid problems which have hit DfT-awarded rail franchises, where bidders were encouraged to submit the lowest prices based on expectations of increasing passenger numbers. TfW defined the subsidy available over the 15-year contract and bidders competed to offer the best package for that money.
TfW specified the “affordability envelope” for each period. The first period runs from October 2018 to March 2023, with about £143m a year subsidy available.
From April 2023 to March 2026, the annual subsidy available was defined as £155m. The increase probably reflects the costs of operating additional services – including trains from Liverpool to Cardiff and Llandudno and a 22% increase in Sunday train mileage. On weekdays and Saturdays, trains from the Heads of the Valleys to Cardiff will increase to four per hour.
From April 2026, the subsidy available reduces slightly, to £150m a year. The figures are in 2016-17 prices.
The tender document also reveals that £250m of the CVL budget must be spent by the end of 2022, to secure European Union funding. The Welsh Government will need to demonstrate to the EU by 31 December 2023 that the enhanced train services are delivering “a range of improvements for citizens”.
The main criterion is improved access to Cardiff and five other “key centres” for people living within 15, 30 and 45 minutes’ travel time.
TfW told bidders: “Any slippage could result in clawback of part or all of the funds.” The warning was sounded amid major delays on Network Rail electrification projects, including London to Cardiff.
The EU money will be focused on two areas of the CVL – lines north of Pontypridd and between Cardiff Bay and Queen Street. The planned launch of tram-trains on those lines from the end of 2022 also requires construction of a depot in Taff’s Well for the new fleet.