Competition is taking shape to supply Israel Railways with dozens of new passenger cars - to the chagrin of the financially strapped government company, which had already decided how it wanted to spend NIS 600 million allocated by the Finance Ministry two weeks ago to buy the rolling stock.
TheMarker has learned that Siemens demanded that negotiations begin immediately with Israel Railways over a contract in an attempt to derail the latter's intention to spend the entire budget buying 72 double-decker cars from Siemens' Canadian rival Bombardier. The treasury hadn't specified who the supplier should be.
Two years ago Bombardier won the railway's tender for double-deckers after remaining the sole bidder, supplying 150 cars for about 250 million euros. Israel Railways was left with an option to buy another 72 cars for NIS 600 million. The option has since expired.
Meanwhile, Israel Railways was forced to compensate Bombardier 1.2 million euros for canceling a maintenance contract it had signed with it after railways employees objected to outsourcing the work. Israel Railways is reportedly interested in reviving the option and throwing the fine into the deal as well.
But Israel Railways also has an outstanding option with Siemens, which won a tender in 2006 to supply 87 regular cars, with an option for up to 500 more. Two years ago Israel Railways used up part of its option to obtain an emergency supply of 31 additional cars.
Bombardier's cars are thought to be cheaper on a per-seat basis than Siemens'. The German company, however, sent off a memo to the treasury and the railway management claiming Bombardier's cars belong to a somewhat older standard and aren't suitable any longer for use by electric rail systems. Siemens asserted its regular cars are no more costly, or even cheaper, than those of Bombardier when taking into consideration all the associated operational, maintenance and electrical conversion costs.
Israel Railways CEO Boaz Zafrir has therefore decided that the company will allow Siemens to submit an offer for the immediate supply of passenger cars. Meanwhile, it is simultaneously conducting negotiations over the same requisition with Bombardier.
The new purchase of additional passenger cars is behind the decision by Israel Railways to spend NIS 150 million on nine new locomotives, which will begin arriving at the end of 2013.
