It's also been reported that the cost of leasing an AT300 is substantially less than the equivalent government procured order which says a lot about the DfT» .
Because there seemed little immediate prospect of run-on orders and the concept really only being a
UK▸ thing, the first batch of trains would have carried much of the development costs so they would be more expensive. The clever thing would have been for DfT to negotiate a reduction in the cost of their order if other UK orders were to follow. Anyone know if they did this?
That is a partial explanation for the high Train Service Provision payments. Don't forget that the DfT has purchased a number of nominal 'diagrams' for delivery by Agility Trains, not trains. Agility Trains has converted this to the number of train sets it thinks it will need and purchased these from Hitachi. This contract is not at all like normal leasing contracts - the only similar one is for the Thameslink stock which has also raised questions about the DfT's competence.
The Intercity Express Programme covers more than the supply of trains - it includes raising, and paying for, the finance for the design, development, testing, manufacture, shipping and assembly and for the supply, kitting out and operation of the maintenance depots. By the time the trains enter service the first payment will be made some 8 years after Hitachi was selected as the preferred bidder. Just think how big the interest payments alone will be on 8 years of borrowed money...
So even if the development costs were to be spread over a bigger number of train sets the reduction in the Train Service Provision payments will not be significant as the development expenses will be masked by all the other costs. In my experience the cost of development of a product is small compared with the costs of setting up the production line, training the manufacturing staff, buying the components and systems, ramping up production, shipping, marketing, cost of returns and so on and so forth.
But it would be interesting to see if the DfT can get a reduction in the Train Service Provision payments...or even if it would tell us about it!