Q41 Chair: In-house?
Philip Rutnam: No, I do not think they make the trains themselves but I think they buy the trains. Equally, Deutsche Bahn in Germany has a different industry structure where there continues to be one very large, state-owned railway operator which has a very large capital base. We have a different industry structure in this country. One consequence is that perhaps paradoxically since privatisation, the central Government Department responsible for funding railways has played in some ways a bigger role in terms of specifying what is needed from providers and making sure that certain key assets are provided. It may not have been quite what was intended but it is, if you like, a paradoxical result.
Q42 Chair: Shall we stick to rolling stock? Why the hell has it gone so wrong? This bit of the project has taken you three years, and you have not signed the contract yet. I completely understand that you are in the middle of a contractual negotiation so you are limited in what you can say to us; nevertheless it seems to be the one area that I do not think will be finished by 2018. We might call Michael Hurn back if it is not. It is the one area that has gone badly, badly wrong. Three years is crazy.
Philip Rutnam: I have to say that I do not accept everything you have said. Let us start with the facts in relation to the extent of delay. You said that there has been a delay of three years. You are right that there has been a delay of three years in terms of getting to contract award.
Q43 Chair: The Report says that there has been a delay. There is a chart in the Report that you signed off, which talks on page 30 about a three-year delay. It is not something that I have got off the top of my head.
Philip Rutnam: No, but can I just make one or two observations on that chart? The three-year delay is compared with the timetable that was set in the invitation to tender in 2008. If you look at the first column, "Planned delivery (set in the ITT)", the ITT was issued in 2008, with contract award in March 2010. You are right. We are more than three years on from that point. In fact, we are three years and three months on from that point. However, in the interim, as the Report also observes, in 2010 the whole project was reset because of the spending review, but also because of the need to set a new timetable for the infrastructure works. As part of that reset, the planning date for getting to contract award was moved from March 2010 to October 2011, which is 19 months difference.
Q44 Chair: I think that is a bit pedantic. Given that we started this conversation saying that it has taken you 30 years, you are now saying, "Part of the delay"-
Philip Rutnam: Can I continue?
Q45 Chair: I hear what you say. No doubt if we look to 2012, your delay will be even less.
Philip Rutnam: It is important to be clear about the facts in relation to the extent of the delay that really has occurred on the rolling stock project. When the project was reset in 2010, a point that elsewhere the report praises as realistic, the date for awarding the contract for the rolling stock was also moved back. Indeed, in terms of the real delivery of the trains-the date that actually matters-at the point when we were replanning the project in 2010 we expected the last train to be delivered in, I believe, July 2017. Our present expectation is that the last train will be delivered in June 2018. I will accept that there has been a delay, but I have to say that it is not fair to accuse us of a three-year delay. The delay that I see in relation to the delivery of the rolling stock compared with the dates that were planned in 2010 is about a year or, to be precise, 11 months.
Q46 Chair: Let me just challenge you on that. First, it depends on whether you meant the last train, not the first train. For the first train, I see three years, three years, three years. You signed off on this report, Mr Rutnam. I have to keep reminding permanent secretaries when they appear here that they cannot challenge the facts. If you thought that that was unfair, you should have challenged it at the time the report was being written. I challenge you on it. You have taken a different baseline. That is pedantry; I am much more interested in reality.
One of the reasons why you are being optimistic and saying that they will all come by 2019-
Philip Rutnam: December 2018.
Q47 Chair: Well, we will come back to 2018. I take that with a pinch of salt. You have reduced the length of time that you expect to deliver each train. Originally, you thought that it would take more than three years for each carriage to be delivered? Am I right-three years and three months? Now you are saying, "Two years and seven months". What is the basis of that?
Philip Rutnam: Just to be clear, when you say that I am taking a different baseline, I am saying that the delay that we have experienced should be compared with the reset of the project in 2010, which was to put it on a realistic basis.
Q48 Chair: Yes, but one of the reasons why you are saying that it is only a year overall is that you think each train will be delivered more quickly. Well, given that everything else has been late, where on earth do you get the confidence that each train will come in eight months earlier than you said you thought it would? I do not know quite where it is in the report, but somewhere it talks about "three years and three months" and "two years and seven months".
Philip Rutnam: Yes, it says that Siemens and Cross London Trains have assured us that they can deliver in two years and seven months.
Q49 Chair: But where is your confidence? You are running the project. I don't want to hear what Siemens says, I want to hear what you say-you are the project manager.
Michael Hurn: I am very confident that Siemens can deliver those trains within that timetable.
Q50 Chair: Why? What has changed?
Michael Hurn: They have done some design work at their own risk-I stress, at their own risk. In terms of their technical advisers who are helping with lending from the banks, they are also very confident that Siemens has the capability to deliver these trains within those time scales.
It is also important to get across the way the structure works. When a train is accepted into use, there is a lease payment arrangement. That lease payment only kicks in when the train is accepted, so Siemens are on risk for that train in terms of delivery and will not get paid by the train operator until the train is delivered. There is huge incentive for Siemens to deliver the train within those parameters.