IT has always been an embarrassing mystery for Whitehall officials: how have their French and German counterparts got away with handing almost all big rail contracts to their home-based firms without breaking EU rules?

By following the very same rules, designed to support a free market, UK ministers have handed contracts to firms in other countries, claiming they are bound to do so by EU law and then shrugging their shoulders as British industry shrinks.

Up to the start of this year, officials at the Department for Transport (DfT) appeared clueless as to why it was happening. In France 100% of the trains bought by SNCF are French-made and 98% of those bought by Deutsche Bahn are German.

But in Britain, as manufacturers struggled and the economy was on its knees, the Government gave a major train-building contract to an overseas firm, which could have saved hundreds of jobs in Derby had it gone to Bombardier.

The contract in question was the £1.4 billion Thameslink deal, for which German firm Siemens was named preferred bidder – a decision followed by Bombardier's announcement that up 1,400 jobs were at risk and that it was launching a review which could see the firm leave the country altogether.

The furore that followed forced the Government to admit it was lagging behind France and Germany in its understanding of EU rules and its ability to use them for the national benefit.

In the summer, a senior source told the Derby Telegraph: "We don't know exactly how they're doing it. That's a question that we have to pursue and to direct resources to answering."

So a major review of the practice of procuring Government contracts was launched which saw civil servants investigating what goes on in Europe.

Papers now seen by the Derby Telegraph reveal ministers are finally learning how European governments do what they do.

The picture being painted of the future is one of civil servants undertaking detailed work to engineer tenders in such a way that by the time it gets to the point that companies begin bidding for contracts, the deal can only conceivably go to one competitor, or a small number of them.

One method the Government has been using relates to the "bundling" of contracts within a particular tender. When ordering a product, the Government tends to lump in the manufacturing, maintenance and financing of a deal into one contract.

In the example of Thameslink, this also included a requirement that the cost of raising finance be taken into account. If the competition had simply been about delivering trains the contest would have been closer, but because it was far cheaper for a firm like Siemens – which owns a bank – to raise finance, Bombardier was disadvantaged from the start.

In France and Germany however, governments break up the contract into different parts, making it easier for officials to design a particular part of the deal to go to a particular firm.

But Government papers suggest such massaging of contracts goes far deeper.

EU rules prevent a nation from awarding a contract to a company simply to provide jobs in its own country; a point often repeated by UK ministers to counter anger when contracts have gone to non-UK based firms.

Yet French and German tenders often specify that the firm making a product must have a presence in their country – not to provide jobs but for other contractual reasons. These might include "risk management" for example. The government in question could argue it has a contractual right to reduce the risk of the product not being delivered.

If the winning bidder was in another country, a government could argue it may be subject to conditions that increase that risk, foreign economic policy for example.

So a government can demand the winning bidder builds the product in its own country to minimise risk, thus avoiding breaking rules saying contracts cannot be granted to bolster home employment, while inadvertently ensuring jobs are provided in its own nation.

But according to the information which the UK Government has taken into account in redesigning its own procurement processes, that is still just the start.

Previously in the UK, bidders were made aware of an up-and-coming contract through advertising and limited consultation with suppliers.

But ministers have discovered that in France and Germany the corresponding process is completely different. European governments are in close contact with suppliers from a much earlier stage, working with them to design the specifications of the product they will eventually buy way before the tender even opens.

This means that when the Government eventually launches the tender it already has a very specific product in mind, one which a firm, or a set of firms, has already designed and costed for.

Ministers have been told that European governments use this process to develop a range of specific requirements that go into the tender.

For example, a government may carry out heavy pre-tender work with a particular designer who pioneers a particular aesthetic style of train, then in the tender it will say the product must be designed in that style.

The firm which employs that designer (who coincidentally comes from the government's home country) is then in the best position to win the contract.

Insert several of these requirements – relating to anything from aesthetics, to technical specifications, to providing apprenticeships – and it is possible to create a combination of demands which substantially narrows the field of competitors best able to fulfil them.

Governments may also demand that the winning bidder offers a specific number and type of subcontracts – each with its own array of tender requirements.

Officials can then design a contract and set of sub-contracts that relate to such a limited field of companies, that it can only reasonably be awarded to one firm or consortium, which inevitably happens to be the one from its home country.

But has the UK Government taken these things on board, in particular in designing the tender for the £1billion Crossrail deal?

If Bombardier believes it can win that contract, which is up for grabs in 2012, it will probably retain its factory at Derby's Litchurch Lane.

Ministers now say they will undertake a far more thorough pre-tender engagement process with suppliers like Bombardier. This indicates they are aware that it gives them more control over where the contract ends up.

But, publicly, they have been reluctant to go further and are eager to point out they are not pursuing protectionist policies.

Cabinet Office Minister Francis Maude said: "We are determined to remove the anti-UK bias in the way our public sector does its shopping, so UK-based firms actually have a level playing field on which to compete.

"This is not about protectionism. Our commitment to the single market is unshakable."

He added: "We will follow the example of our EU neighbours, and indeed best practice in the private sector, by making it easier for our suppliers to do business with us."

Their reluctance to publicly commit further to helping UK firms is to be expected, as any hint of protectionism may leave them open to legal challenges from non-UK based firms which believe they are being shut out of work.

The truth is we won't truly know just how much the Government has learned until the tender for Crossrail is launched.