A HS2 worker walking through one of the newly built tunnels for the project in West Hyde © Leon Neal/Getty Images
A HS2 worker walking through one of the newly built tunnels for the project in West Hyde © Leon Neal/Getty Images

Merger among HS2 contract bidders 'could lead to higher costs'

20 July 2022

The UK's competition watchdog has warned a merger between firms competing for HS2 contracts could lead to tender delays and additional costs for taxpayers.

The Competition and Markets Authority (CMA) said the £6bn merger of cable supplier Bouygues UK and rival Equans, part of the Engie Group, could “undermine” the tender process. Both are bidding for a contract to supply overhead power systems for trains.

As the HS2 tender is in the final stages and the merging businesses are two of the bidders, the CMA said it was concerned two bids coming under the control of the merged business could make the tender process “less competitive”.

The CMA said: “[We are] concerned that this reduction in competition could result in a higher-cost final contract, which would have an adverse knock-on effect on taxpayers.”

The tender is to supply the high-speed rail project with catenary systems – the overhead power cables used to supply electricity to trains – the only such contract in recent years.

Bouygues and Equans are two of four companies left competing for the contract.

Colin Raftery, senior director at the CMA, said: “Competitive tenders help make sure that taxpayers get the best possible deal when large public works, like HS2, are undertaken.

“The HS2 tender for overhead catenary systems is at an advanced stage, but the remaining bidders are continuing to compete on the final aspects of the contract. It’s important to ensure that this process isn’t undermined, as this could result in unnecessary additional costs, ultimately leaving taxpayers worse off.”

A HS2 spokesperson told Supply Management: “We are committed to running open and fair procurement competitions with robust processes in place to deliver the best value for the UK taxpayer. Strong competition across the rail and construction industry is vital and we support the Competition Markets Authority’s interest in this area.”

The firms now have five working days to submit proposals to address the CMA’s competition concerns.

The CMA will then have an additional five days to consider whether it will pursue an investigation into the matter, which could delay the tender process. 

Mark Thurston, chief executive at HS2, previously told the Public Accounts Committee the pandemic had added an additional £400m-£700m to the cost of HS2 due to inflationary supply chain pressures hitting costs.

He said HS2 was working alongside the Treasury to “get a handle” on managing the impact of inflation.

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