'Flaws' in pounds 3bn Chunnel bid

Government's advisers linked to bank behind consortium seeking to build high-speed rail link

A DOSSIER suggesting that the bidding process for the pounds 3bn Channel tunnel high-speed rail link is "irretrievably flawed" will be submitted to the European Commission this week.

Three of four external advisers to the panel which will award the contract are connected to a bank that is backing one of the bidders, the dossier discloses.

Labour's rail spokesman, Henry McLeish, who compiled the dossier, is calling for an inquiry by the Commission and by Britain's Comptroller and Auditor-General.

The dossier will add to growing concern over the scheme, which has been hampered by delay and accusations of mismanagement. It shows preferential treatment for one of the consortiums, Eurorail, which was allowed to bid even though it breached the rules of the tendering process.

It also shows that the 11-strong adjudication panel, appointed by the Government, includes two directors of Hill Samuel merchant bank, Julia Prescot and Frances Kellett-Clark; and a representative of Maunsell, consultant engineers to the project.

Hill Samuel has a "correspondent" banking relationship with the Hongkong and Shanghai Banking Corporation (HSBC), which is backing Eurorail's bid. One of Maunsell's directors, Sir Charles Newton, is also a director of the HSBC.

Labour had already been concerned about other possible conflicts of interest. John MacGregor, the former secretary of state for transport, is a director of Hill Samuel, which is advising the Government on the high-speed rail link project.

The Eurorail consortium, now seen by Labour as the favourite, is chaired by Lord Parkinson, another Conservative former secretary of state for transport. Its backers include HSBC, Trafalgar House, National Westminster Bank and BICC. Both HSBC and Trafalgar House are believed to have been past donors to the Conservative Party.

The high-speed link is currently Britain's largest civil engineering project, and bidders are thought to be seeking more than pounds 1bn of public money in addition to being given the assets of European Passenger Services, which operates Eurostar trains.

The other group still bidding is London and Continental, including Bechtel, Ove Arup, National Express, and Virgin.

Hill Samuel rejected claims of a clash of interest, arguing that the "correspondent" status of HSBC is "purely a trading relationship". City experts say that correspondent banks can have a range of different relationships with each other, varying from small technical links to much larger partnerships.

Labour's Mr McLeish said: "The high-speed link is gripped by a funding crisis and already years behind its timetable. Labour now believes the competitive bidding process looks irretrievably flawed. Our research reveals an emerging scandal that threatens to undermine the public confidence in a major construction project."

Mr McLeish has already had informal talks with the cabinet of Neil Kinnock, the EU Transport Commissioner, in Brussels, which has encouraged him to pursue the issue.

At its suggestion, he will submit his file on the plan to the European Commissioner for the internal market and financial services, Mario Monti, who is the commissioner responsible.

Labour points to evidence that the Eurorail consortium has been favoured. Earlier this year, leaked minutes of the adjudication committee revealed that Eurorail had been allowed to proceed with its bid even though it did not comply with the rules of the tendering process for the project.

Mr McLeish said that the new Secretary of State for Transport, Sir George Young, should explain the "disproportionate influence of Hill Samuel" and the "web of links of other key players" in the rail link project.

The department has previously refused to respond to accusations on the grounds of commercial confidentiality.