Network Rail invites private firms to bid for Jarvis contracts

The state-backed Network Rail has incurred the wrath of rail unions by saying it was likely to invite other private contractors to take over the maintenance contracts that Jarvis announced yesterday it was surrendering.

The state-backed Network Rail has incurred the wrath of rail unions by saying it was likely to invite other private contractors to take over the maintenance contracts that Jarvis announced yesterday it was surrendering.

Network Rail said the decision to take the £180m of contracts back in-house was an "interim measure" forced on it after Jarvis decided to pull out because of the "reputational damage" it had suffered from incidents such as last month's King's Cross derailment.

Ian Coucher, Network Rail's deputy chief executive, added: "We will now consider the options and retendering is a very probable outcome."

He added that Network Rail has already received "quite a few phone calls" yesterday morning from other maintenance firms interested in taking on the Jarvis contracts.

Bob Crow, general secretary of the RMT rail union, said any attempt to place the contracts back in the private sector would be "retrograde and foolhardy". He said the decision by Jarvis presented a "golden opportunity" to ensure maintenance was properly conducted.

"If they retender, whoever wins the contract will end up like Jarvis, under investigation and out of the industry," Mr Crow said. Other union sources said the comments by Mr Coucher probably amounted to little more than "spin" and any attempt to contract out again would be "politically inept".

Although Network Rail sources said Jarvis had "jumped before it was pushed" the company, which was at the centre of last year's Potters Bar disaster, insisted the decision was taken on commercial grounds rather than any acceptance that its maintenance record was sub-standard.

Kevin Hyde, Jarvis's chief executive, said: "The decision followed a review of the risk-reward profile after the King's Cross incident. Our judgement was we wouldn't generate the returns that would justify remaining in that business."

Mr Hyde added that profit margins on rail maintenance were 6 to 7 per cent, but new conditions being introduced by Network Rail, including punitive "fault clauses", meant that the contracts could potentially become loss-making.

The not-for-profit Network Rail will be taking the three Jarvis contracts back in-house - Central, which covers Yorkshire and Lincolnshire; the London to Edinburgh east coast main line; and the Liverpool, North Wales and Merseyside region. The organisation is already directly responsible for the Reading area, and was also set to take charge next month of East Midlands, as well as Wessex, which covers London to Dorset.

When the exercise is complete, Network Rail will control nearly a third by value of the maintenance contracts.

Robert Kendall, group finance director at Jarvis, said: "It is fair to say that the decision to exit rail maintenance has been influenced by the reputation issues which have had the effect of overshadowing the bulk of the group's operations. We are happy to stand up and be counted on our record in maintenance and the things we have achieved."

The chief executive of Network Rail, John Armitt, said that, following the Jarvis decision to "exit" rail maintenance, he had concluded the best way forward was to bring the contracts in-house. "We will work closely with Jarvis to ensure a smooth transition."

Pressed on the record of Jarvis, he conceded: "There have been some issues which have developed into controversy." He said that, as far as he was aware, Jarvis had been making a profit, but acknowledged there had been "two or three incidents" where the company was the maintenance contractor.

"Perhaps they felt that was impacting on the rest of their business. But that doesn't mean that the process of carrying out maintenance on the railways should necessarily be a complex and controversial one for other companies."

Balfour Beatty, the other major contractor, said it had no plans to follow the lead of Jarvis.

Steward Francis, chairman of the Rail Passengers Council, said: "I think passenger confidence in Jarvis had been shaken due to a number of incidents on the railways. "Passengers don't care who maintains the railways as long as they are delivered safely and their trains run on time."