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You won't believe this, but it's all true
Those who accuse me of rose tinted spectacled nostalgia when it comes to British Rail conveniently overlook this column's relentless exposure of the inanities, gaucheries and downright stupidities of British Rail's traction and rolling stock procurement. Above all, there was a naïve belief that there was always some firm somewhere who would meet the specification and deliver cheaper and faster that the established suppliers who were axiomatically rip-off merchants.
This attitude came through privatisation undiminished. For example, when quizzed on the affordability of the European Train Control system (Informed Sources July 2004, SRA suggested that one way of reducing costs would be to open the market to more suppliers. That it, outside the consortium of European signalling majors who have developed the hardware and software and might even know what they are doing.
This column has satirised this attitude by suggesting that the mythical wonder-suppliers will be found in Azerbaijan . But, as professional satirists have known for years, you shouldn't try to compete with real life.
It all started on 3 September when it emerged that preferred bidders Serco/NedRail had failed to agree final terms for the new Northern Franchise, previously scheduled to start on 17 October.. Two days before, in its Interim Financial Results, Serco had said its share of Northern would be £2billion over the eight years and nine months of the franchise term. The business was characterised as ‘high subsidy and low capital investment'.
On 7 September, two phone calls within a couple of hours got the Informed Sources network humming. The story was that Serco/NedRail were offering 200 Pacer replacement diesel multiple unit vehicles from a Chinese builder as part of the Northern franchise offer.
And indeed they were. And not only from a Chinese builder, but from the CSR Ziyang Locomotive Works which, according to its web-site has not built DMUs before. Delivery in 18 months.
According to Informed Sources, this spiffing wheeze is driven by the Dutch half of the consortium. NedRail reckons that train maintenance in the new franchise is so expensive that it would be cheaper to replace existing stock with 200 new, vehicles.
Central to this policy are the lease rental costs of the new stock which in turn depends on the new stock being cheap. How cheap? Well, initially, the Dutch reckoned around £500,000 per vehicle.
This compares with the average of £1.15m per vehicles across all the DMUs ordered since privatisations. And when a Korean builder was asked if it could build a high specification 500 grand DMU for Northern it declined.
So now we have CSR Ziyang, which, according to Informed Sources is offering their the factoriy's first DMU for around £650,000. Said Sources also comment that if it does everything it says in the specification the new vehicles will be ‘absolutely stunning', including MTU engines and Voith drives. Naturally, there are reliability guarantees and an incentive regime with payments for unreliability.
But does it all add up financially?
Well there will be 663 vehicles in the Northern fleet, including 158 Class 142 vehicles owned by Angel, 46 Class 144 owned by Porterbrook, plus 10 centre cars owned by West Yorks PTE. That is suspiciously close to the 200 vehicles proposed by Serco/NedRail.
Now, as a rule of thumb, the lease rental per month of new traction and rolling stock is 1% of capital value. That is £6,500 for the new trains. This is similar to the rental for a Pacer in the original 10 year leases with which the ROSCOs were sold.
Since the current 7 year leases on the Pacers take them up to the end of their nominal service life of 25 years, rentals will have come down since there is no residual risk to price or provision to be made for major overhauls.
In other words you would have to save a couple of thousand pounds a week on maintenance with the Great Leap Forward to break even with the total cost of a Nodding Donkey. Put it another way, on a 20 year lease, the Chinese DMU would be 20% cheaper than a Turbostar.
Meanwhile the trains have to be financed and all the ROSCOs are sharpening their calculators and sucking their teeth like mad. Actually, NedRail has its own ROSCO equivalent, but I understand that the use of Dutch tax credits to buy Chinese trains for the north of England might be a bit too political.
Remember that the ROSCOs are all about pricing risk. And the Serco/NedRail Chinese DMU is risk on wheels. On the other hand, it's just the sort of thing to appeal to the SRA. At least until the Azerbaijani Multiple Unit Collective puts in a better bid.