IEP prospects fade further
A decision on whether new express trains will be introduced on two busy UK rail routes will now be made in October.
The IEP has been independently reviewed by Sir Andrew Foster, whose report recommends a period of reflection to consider alternative options.
The Department for Transport (DfT) said a decision on the future of IEP would be made at the same time as the Government's spending review announcement in October.
The DfT added: "As expenditure on all rail projects will be reassessed as part of the spending review, the Government believes that it would be irresponsible to make a decision on IEP in isolation at this time, particularly given the interdependencies between IEP and other major rail investments."
The preferred bidder for the IEP is Agility Trains, a consortium consisting of Hitachi Rail Europe, John Laing and Barclays Private Equity.
It was originally hoped that the new trains could be introduced by 2014. But earlier this year the then transport secretary Lord Adonis suspended the programme and announced Sir Andrew's review.
Agility Trains said it understood the Government's wish to make a co-ordinated decision on major rail projects, and to look again at the points raised by Sir Andrew Foster.
Agility went on: "We have confidence in the performance of our product as shown by our readiness to offer not only trains, but a guaranteed service level to our customers.
"The proposal provides a step-change in capacity with relatively minor expenditure on infrastructure, as well as the opportunity to bring a major manufacturing facility and state of the art technology to the UK.
"We have expressed our commitment to continue working with the DfT to respond to the points in the report, and to find an affordable solution which meets the Government's objectives."
In a Parliamentary Written Statement, Transport Secretary Philip Hammond said Sir Andrew, in his report, had suggested that the IEP was "positive and attractive" in a number of ways.
Mr Hammond went on: "He (Sir Andrew) suggests that the PFI-style (private finance initiative) funding arrangement is novel and well-aligned in terms of financial incentives, faster acceleration and longer carriages would have a positive impact on network and passenger capacity, and the specification has also taken network sustainability and environmental imperatives seriously."
Mr Hammond added: "While Sir Andrew's report acknowledges that the programme has exceeded the department's value-for-money thresholds, the value for money has declined over time, and Sir Andrew suggests that he is not convinced that all of the viable alternatives to the programme have been assessed alongside it on an equal footing. Therefore the Government will use the period up until the spending review is completed to give further consideration to the alternatives to IEP."
In his statement, Mr Hammond played down doubts over the technical feasibility of the bi-mode trains (with both electric and diesel traction) that were part of the DfT specification, describing the concerns as "a lesser issue".
The report also draws attention to widespread scepticism about the IEP programme within the rail industry, which had felt disengaged from the procurement process. Hammond said the Government recognised these concerns and was acting on them, adding: "We have already invited the industry to contribute to Sir Roy McNylty's review of costs in the rail sector".
Michael Roberts, chief executive of the Association of Train Operating Companies, said: "For projects to progress there needs to be a strong commercial case and they need to be able to demonstrate significant benefits for passengers and taxpayers."
He went on: "This kind of Government-led procurement is not a good way to deliver value for money to the taxpayer. It's deeply frustrating that this project has cost the DfT over £20 million in consultancy fees over four and a half years and has so far failed to produce a single train.
"Now the Foster Report points out that alternatives to these trains could provide better value for money and produce benefits much more quickly.
"We need a new system which gives train companies a greater role in obtaining their own rolling stock. This would get things done quicker and cheaper, ensure that the right trains get to the right parts of the country and greatly reduce the cost to the taxpayer.
"We welcome Mr Hammond's pledge to involve the rail industry more fully in decision making in the future and to look at alternatives."
The Foster Review is available on the DfT website.