By Vivienne Russell | 3 October 2012
Transport Secretary Patrick McLoughlin has scrapped the West Coast Main Line rail franchise competition, citing ‘unacceptable mistakes’ by his department.
Rights to run trains on the London-Glasgow line for the next 13 years were awarded to First Group in August following the company’s £5.5bn bid. First was due to take over operation of the line in December.
But current operator Virgin disputed the award, questioning the viability of First’s bid. It had sought a judicial review of the decision, which was due to begin tomorrow.
Today, McLoughlin said the competition would be re-run after preparation for the legal case uncovered flaws in the conduct of the procurement. Mistakes were made in the evaluation of risk, specifically how inflation and passenger numbers were taken into account and the money bidders were asked to guarantee as a result.
The department said it ‘cannot be confident that these flaws would not have changed the outcome of the competition or that any of the four bidders would not have chosen to submit different offers’.
The cost of reimbursing the four bidders is estimated to be £40m.
‘I have had to cancel the competition for the running of the West Coast franchise because of deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process,’ McLoughlin said.
‘A detailed examination by my officials into what happened has revealed these flaws and means it is no longer possible to award a new franchise on the basis of the competition that was held.’
Department for Transport permanent secretary Philip Rutnam said that the errors that had come to light were ‘deeply concerning’. He added: ‘They show a lack of good process and a lack of proper quality assurance.’
The transport secretary has ordered two urgent independent reviews. The first will examine what went wrong with the West Coast competition and report by the end of the month. The second second will look at the wider rail franchise programme and report by the end of December.
All outstanding rail franchising decisions have been halted pending the outcome of the reviews. These are for services on three lines: Great Western, Essex Thameside and Thameslink.
A spokesman for the Virgin Rail Group welcomed McLoughlin’s ‘frank announcement’ and his acknowledgement of flaws in the competition process.
‘We are ready to play a full part in assisting the review to help deliver a franchising system that better serves passengers, taxpayers and the interests of all bidders,’ he added.
A statement from First Group said that, until late last night, the company was unaware that there were any issues with the franchise process.
The statement went on: ‘We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries. The DfT have made it clear to us that we are in no way at fault, having followed the due process correctly. We submitted a strong bid, in good faith and in strict accordance with the DfT's terms.’
McLoughlin has confirmed that trains on the West Coast line will continue to run as normal, drivers and train crew will remain in post and advance tickets remain valid.
An announcement will be made later today regarding the suspension of DfT staff.
