China Northern trumped Hillside in filling KiwiRail orders, Auditor-General says

Friday 8th February 2013

China Northern Locomotive and Rolling Stock Industry Corp easily outbid KiwiRail's Hillside workshops in tenders to supply new rolling stock, the Auditor-General says in ruling out an investigation of the contracts.

The Auditor-General reviewed documents dating back to 2005 after Labour Party and Dunedin South MP Clare Curran last August asked the body to investigate four purchases of rolling stock from China Northern because of concerns about value for money and the impact on KiwiRail's Hillside facility.

Dunedin-based Hillside has been split up after KiwiRail failed to find a buyer. The foundry operation is being sold to ASX-listed manufacturer Bradken for an undisclosed sum and other operations progressively closed with the loss of jobs.

In the tender for the June 2009 purchase of 20 DL locomotives Hillside's bid ranked sixth and was deemed "uneconomic due to its longer delivery time and higher cost structure." China Northern completed the order in June 2011.

In the December 2010 tender for 300 container flat top wagons, Hillside's proposal was ranked third and documents noted that Hillside "could not meet the delivery schedule and would require KiwiRail to carry out all performance, warranty and cost risk itself."

"We did not identify any material departure from good practice process or any unfairness in the way the Hillside tender was treated," the Auditor-General said in a statement.

In early March 2011, KiwiRail varied the December 2010 contract to increase the order to 500 wagons and contracted to buy 20 more locomotives. While KiwiRail considered Hillside's ability to supply the additional rolling stock, China Northern was "significantly faster and cheaper" and the Dunedin facility was already behind on a separate wagon order. Hillside hadn't built locomotives "for some years."

Defects found in rolling stock had been remedied at China Northern's expense, it said.

BusinessDesk.co.nz

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