KiwiRail purchasing inquiry ruled out

The Office of the Auditor-general has ruled out an inquiry into the purchasing of rolling stock by KiwiRail, satisfied the state-owned enterprise has done nothing wrong.

In August last year, Labour Party MP for Dunedin South Clare Curran asked the Auditor-general to investigate four purchases of railway rolling stock by KiwiRail.

Ms Curran was concerned KiwiRail had not been fair in its tendering process, which ended with contracts awarded to a Chinese company over the South Dunedin Hillside Engineering Workshops.

Hillside's failure to secure the contracts had led to its demise and the redundancy of more than 100 staff, Ms Curran claimed.

There was also controversy about the quality of stock from the China Northern Locomotive and Rolling Stock Industry Corporation (CNR).

It was alleged Hillside staff were among KiwiRail workers assigned the task of repairing inadequate CNR stock once it arrived in New Zealand.

But yesterday, the Office of the Auditor-general (OAG) issued a statement refusing Ms Curran's request.

The OAG said it had reviewed a substantial amount of documentation dating back to 2005, and interviewed KiwiRail staff, and an inquiry was not warranted.

''We have carried out enough preliminary work to be satisfied there is nothing to suggest decisions to purchase locomotives and wagons from CNR were made for anything other than normal business and commercial reasons. The processes followed by KiwiRail appear reasonable, the relevant evaluations have been carried out properly, and we have seen no evidence to suggest improper influence over these decisions,'' the OAG said.

KiwiRail chief executive Jim Quinn was happy with the outcome.

''It confirms what we already knew, that our processes were robust. This has not impacted on our operations and we have, and always will, fully co-operate with these requests for information,'' he said.

The OAG found that in 2008 CNR was ranked first, and Hillside sixth, in KiwiRail's assessment of potential suppliers.

Hillside's proposal was deemed uneconomic because it would take longer and cost more.

KiwiRail contracted CNR to supply 20 locomotives, six of which were delivered in November 2010 and the remaining 14 in June 2011.

''We did not identify any unfairness in the way the proposal from Hillside workshops was treated,'' the OAG said.

In late 2010 KiwiRail received nine tenders for the supply of 300 container flat-top wagons, of which CNR's was ranked first and Hillside's third.

The OAG said Hillside's tender was the third most expensive, could not meet the delivery schedule, and would require KiwiRail to carry all performance, warranty and cost risk itself.

KiwiRail awarded the contract to CNR and in 2011 it ordered a further 200 wagons and 20 locomotives from the Chinese firm.

Hillside was considered, but again rejected because of cost and time issues.

KiwiRail told the OAG some stock defects were ''not unusual'' and the Chinese wagons could only be comprehensively tested once in New Zealand because of ''rail gauge differences''.

CNR had met all remedial costs associated with defects, as it was contracted to do, the OAG said.

''We have seen nothing to suggest the defects that have been encountered and fixed by CNR affect the original decision that CNR provided the best value for money,'' it said.

- rosie.manins@odt.co.nz