Claims by KiwiRail's chief executive that sending a $371 million contract overseas was because of a lack of skills locally is being disputed as inconsistent with its own internal tender process.
A source claimed to Herald on Sunday that Kiwi-based firms Fletcher and Downer NZ topped the capability criteria for their unsuccessful tender for the Papakura to Pukekohe rail electrification contract in South Auckland.
Last week, the Herald on Sunday reported the $371m Government contract had been awarded to a joint bid from Chinese-owned firm John Holland and South African-owned McConnell Dowell.
However, a source within Fletcher and Downer NZ claims KiwiRail informed the firms, in a debrief for their joint bid for the $371m contract, that their tender scored highest in the capability section.
This contradicts comments from KiwiRail chief executive Greg Miller this week that the decision to send the contract overseas had been down to the poor skill capability of New Zealand firms for rail infrastructure work.
• NZ firms Fletchers and Downer 'fuming' as $371m Govt KiwiRail contract goes overseas
• KiwiRail may ask the Government for help in covering the costs caused by Coronavirus
• KiwiRail has received an extra $1 billion from today's Budget to help rebuild NZ's rail network
• KiwiRail loss widens in 2018 on further writedowns
"This work is quite technical and quite specialised - not like your standard track maintenance that's done - the electrification process is specialised," Miller told RNZ.
"It's a tough one that and there's no blame to be given from me. I can only talk about our business, but over five generations it's been slowly wound down as an internal capability and it's been outsourced.
"Then we have to procure it back.
NZ firms 'fuming' as $371m KiwiRail contract goes overseas
More 'unreliable' Chinese locos needed to keep pace with freight volumes
Coronavirus having 'very significant' impact on KiwiRail
"There's technical expertise that New Zealand needs in this space and, as I said, a dozen odd jobs for international experts and 200-odd jobs for Kiwis is actually a pretty good outcome."
Miller said the electrification contract would employ about 220 people, broken down to around 15 roles of international expertise and 205 "Kiwis on the ground every day".
Miller said the decision to award the contract to John Holland/McConnell Dowell was "not just cost, it's capability".
KiwiRail's chief operating officer of capital projects David Gordon said the weighting applied for the contract was 70 per cent for non-price attributes and 30 per cent for price.
The capability section judges design, employment and warranty criteria.
However, the Herald on Sunday's source claims it was not accurate to say the Fletcher/Downer NZ bid was lost because of their lack of capability.
"The Fletcher/Downer team scored highest in the capability section. They were told by KiwiRail in the debrief," they said.
When questioned this week whether Fletcher/Downer NZ scored highest in the capability criteria a KiwiRail spokesperson said they had "no further comment to make on these contractual evaluations and negotiations".
Miller also said that all the tenders for the electrification contract were consortiums that have international shareholders.
"Whether it's Fletchers, McConnell Dowell, Downers. They are international companies. Several of them started as small New Zealand enterprises five decades ago and grew to be multinationals," Miller said.
Downer is Australian-owned but Fletcher has New Zealand ownership and has its headquarters in Auckland.
Successful bidders John Holland has about 10 employees in New Zealand and McConnell Dowell has about 500.
In comparison, Fletchers has around 9000 New Zealand-based employees, after cutting 1000 staff in February.
The Downer NZ arm of the company says it has around 5000 New Zealand staff.
It is understood if the Fletcher/Downer NZ bid had been successful it would have saved many of the 1000 local jobs slashed in response to Covid-19 economic losses.
Minister for State-Owned Enterprises Winston Peters, who is responsible overseeing for the KiwiRail company, this week indicated to the Herald on Sunday he was not happy with the criteria for awarding Government contacts.
"New Zealand First has long campaigned on favouring New Zealand businesses over foreign interests," Peters said.
"Upon forming the coalition government, we tested every opportunity and have done everything in our power to correct the current procurement rules.
"Unfortunately, the previous government signed New Zealand up to the Government Procurement Agreement, which restricts our ability to prioritise New Zealand businesses under the WTO [World Trade Organisation] rules.
"In spite of this, we continue to look for opportunities where possible to ensure that New Zealand jobs and New Zealand businesses get a fair go."
The Auckland Business Chamber also this week described the Papakura to Pukekohe KiwiRail contract decision as "unconscionable" and the Rail and Maritime Transport Union publicly denounced it.
The $371m project to electrify 19km of track is expected to begin at the end of the year and includes two more platforms at Pukekohe Station and future proofing for extra lines.
Only diesel trains can operate between Papakura and Pukekohe, so passengers from south of Papakura must switch trains to get to and from the city.
Electrification will improve commuter capacity.
The contract was one of three projects under KiwiRail's $1 billion Auckland Metro Rail Programme, which also includes the $315m third main line out of Auckland between Wiri and Quay Park, and further support for the $4.4b City Rail Link.
KiwiRail Holdings Limited is a New Zealand state-owned enterprise responsible for rail operations in New Zealand, and also operates inter-island ferries.