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Rail Professional interview: Steve Scrimshaw

March 2011

Katie Silvester

Rail Business Manager of the Year Steve Scrimshaw tells Katie Silvester about the trials and tribulations of bidding for rolling stock contracts in the UK

In the high stakes world of rolling stock manufacturing, where competition is tough and each multi-million pound contract is hard won, Steve Scrimshaw comes across as one of the nice guys in the rail industry. When Siemens lost the IEP contract to Hitachi, the first thing Scrimshaw did was to email Alistair Dormer, his counterpart at Hitachi, to congratulate him.

Like many in the rail industry, Siemens Mobility’s managing director of rolling stock did not start out on the railways. He began by doing an apprenticeship in mechanics and ended up in the power generation industry, where he was headhunted by Siemens’ power division. He was surprised, he says, to be asked to move across to Siemens’ rail business, but it is a role he has taken to with relish – and his achievements have just earned him the ATA Rail Business Manager of the Year award at the Rail Business Awards (see page seven of the RBA Review).

A native of Newcastle, Scrimshaw has a residence in London and a family home in the village of Fourstones, near Hexham, that he goes back to at weekends, to save relocating his wife and two children to the capital.

At the moment, Siemens’ rolling stock team is waiting to hear whether its bid for the Thameslink programme has been successful. The Thameslink procurement process has dragged on way beyond its original timetable – the winner was due to be announced more than a year ago. Siemens and Bombardier are the two bidders that have made it to the final stage.

So what’s the latest news?

‘Well, it’s good news that Thameslink is still going ahead after the spending review. The last bid went in on Monday – we’re very happy that we’re in the last two. The DfT have got everything that they need. It’s going to be around April time by the time they appoint the preferred bidder. It’s obviously a top priority for us.’

The nature of the rolling stock procurement in the UK since privatisation has become very much a ‘winner takes it all’ scenario, with large orders that are few and far between, which can leave the losers out of the loop for a while. Small orders do trickle through, such as Siemens’ Class 380s that it has just made for Scotrail. But it is the large orders – like the forthcoming Thameslink contract for up to 1,300 new vehicles – which give rolling stock manufacturers and their workforces long-term security. Companies like Siemens put huge resources into putting a major bid together. Alstom’s managing director Paul Robinson told Rail Professional (August 2009 issue) that each bid costs his company £10-15m. Scrimshaw is more circumspect about the cost of bidding. ‘I think it’s in millions, but it’s hard to quantify. You’ve got teams in Germany, teams over here, consultancy teams...’

Another order that seems destined to drag on for some time yet is the Eurostar order which Siemens unexpectedly won last year. Alstom, which is headquartered in France, had manufactured all of Eurostar’s trains up until that point – an arrangement that sat very comfortably with Eurostar’s shareholders – with 55 per cent of its shares being owned by SNCF. So, when Siemens’ Velaro platform was selected as the winning bid, the reaction from Paris was one of outrage. The French government itself intervened on the grounds that Siemens’ design did not meet the tunnel’s strict safety standards – the unspoken objection being ‘but Siemens is a German company!’ – and Alstom ended up going to the High Court in London to try to take out an injunction against Eurostar to stop the deal with Siemens going ahead.

Scrimshaw knows he has to be careful in what he says about the Eurostar deal. Siemens’ initial delight at winning the contract has become a bit more muted as the situation has slid into a diplomatic nightmare. Negotiations are now ongoing with the aim of pacifying the French, but the Siemens order is progressing in the meantime and Scrimshaw says the original delivery timetable won’t be affected. In the meantime, another legal challenge is impending. Alstom is to sue Eurostar for damages, with Siemens appearing as Eurostar’s co-defendant. The case is expected to come to court in October.

The crux of the safety argument revolves around the ability of trains to be split in two inside the tunnel in case of a fire. At the moment, the requirement is for a train to have a power car at each end, so that either half could get out of the tunnel under its own power if necessary. But this eventuality has never been used and Eurotunnel and the Channel Tunnel Intergovernmental Commission (a joint French-English safety body) are looking to revise this requirement. In anticipation of the rules being changed, both Siemens and Alstom had put in bids for trains using distributed traction, which would mean units would not be able to split in half. But this uncertainty about the required specification for the trains made the bidding all the more complex and Alstom is, therefore, alleging that there were flaws in Eurostar’s tendering process.

‘When the tendering came up, we thought long and hard, shall we go for it?’ says Scrimshaw. ‘It was Alstom’s to lose. We’ve got a Valero product platform that operates in China, Spain and Russia, and is soon to operate in Germany. I led the Eurostar project personally from start to finish and we thought we’d give it all our attention.’

He is very complimentary about Eurostar’s procurement process. ‘I’ve been involved in a lot of procurement processes, including on the power side, and I think their procurement process has been benchmark. It’s been well managed and well handled, and to think that they’ve been dragged through the courts.’

It was primarily for his achievements in winning the Eurostar bid that Scrimshaw was awarded the ATA Rail Business Manager of the Year Award in the Rail Business Awards. Was he surprised to win?

‘‘I’m absolutely delighted. What I would like to say is that it’s not about one individual, I’ve got a fantastic team at Siemens and I’m delighted to have them.’

Perhaps a more straightforward tender for which Siemens is hoping to pre-qualify is the Crosslink rolling stock order. ‘The deadline for prequalification was 7 February,’ says Scrimshaw. ‘I think whoever wins Thameslink will be in a very good position for Crossrail because some of the one-off costs involved in introducing new rolling stock into the UK will hopefully bring the overall cost down. But I think even the loser of Thameslink would be silly not to participate in Crossrail.’

Siemens has put forward a new generation of its tried and tested Desiro platform for both Thameslink and Crossrail, called the Desiro City. Designed specially for the UK market, the City is 25 per cent lighter than the current Desiro and features a driver advisory system to reduce fuel consumption. Unfortunately, though, the most recent Desiros to actually be manufactured have run into some minor difficulties. The introduction of the Siemens-built Class 380 Desiro in Scotland – a hybrid of the old Desiro design and the new City design which began delivery last year – has not gone as smoothly as Siemens would have liked. Software problems have plagued the fleet, with the result that Scotrail has held back from putting them into service until the issues are resolved.

‘You’ve seen there’s been some software issues etc,’ says Scrimshaw. ‘It was a very accelerated programme to deliver it in that amount of time. You can only do a certain amount of testing in Wildenrath, but the rest we are sorting out. I know Scotrail have said they’re not going to start using any more of the trains until it’s resolved and I can understand that because they’re answerable to Transport Scotland. As well as the software issues, there’s been the very bad weather. But the thing with Siemens is that, if there is an issue, we’ll stand behind it and we’ll fix it.’

Despite these teething problems, the Class 380 won the rolling stock category in the Rail Business Awards for its technological innovations (see RBA Review supplement).

Bombardier’s Colin Walton has been quite vocal in the past (Rail Professional September 2008 issue) about the difficulties of keeping costs down with the ‘feast and famine’ nature of rolling stock orders in the UK. He would like more of a steady stream of work, so that the workforce could be stabilised. Scrimshaw is less critical about the stopgo aspect, but has found delays during the procurement process frustrating.

‘It does cause some problems. If you look at the global outlook of the business, we invested €50m in developing the next generation Desiro, the City. Siemens look very carefully at how they are going to spend their own money and you compete for investment against all sorts of things – power, medical, basically all the other Siemens businesses – and if people see delay, they lose confidence and the management think carefully about that. But it’s a project-type business, there’s peaks and troughs, unfortunately.

‘In an ideal world, a steady order book would bring costs down, but would you have enough work for each manufacturer? If each company had consistent orders, a manufacturer could split his fixed costs across more projects.’

He adds that he feels sorry for Hitachi, with all the delays over the Intercity Express Programme (IEP) order – and the possibility that it may be cancelled altogether or change considerably in its specification (see page 5). Once a company is appointed preferred bidder, as Hitachi was for IEP, the costs still mount up, as contractual negotiations continue, which inevitably mean paying for lots of legal advice. Coming from another privatised industry, Scrimshaw has found rail contracts to be particularly complicated.

‘Before I left the power generation business, I signed one of the biggest modification and upgrade contracts, which was to modernise Drax. We signed that and it was probably three lever arch files. About two months after I started here we signed the London Midland contract and it was 38 lever arch files.’

Siemens builds its trains mainly in Germany and has no factory in Britain. Only Bombardier builds trains in the UK. Would Scrimshaw ever look at building in the UK?

‘I wouldn’t rule it out. Currently, all the tenders from the DfT don’t include requirements for UK manufacture. We have a model that works quite well. We have the factory in Krefeld-Uerdingen and then the test centre in Wegberg-Wildenrath. A lot of the DfT’s scoring is around deliverability and our trains work straight out of the box.’

With all the outsourcing of manufacturing to Asia that goes on in other industries, Germany is relatively close to home. But Chinese manufacturers are very interested in providing rolling stock to the UK market – a company called Chinese Sourced Railway Equipment has begun a low-key advertising campaign over here. Siemens has partners in China that are helping it to supply the Chinese market, so it already works with the Chinese. But is Siemens worried about competition from China in Europe?

‘They haven’t quite broken into the UK yet. You can see what they’re trying to do with their marketing, though. They’re trying to create an impression that traditional manufacturers are more expensive and, “by the way, you can buy cheaper from the Chinese”. But there’s no doubt that the Chinese are clever. Some people said Hitachi wouldn’t come into the UK market, but they did. So we should never say never.’

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