Transport secretary Patrick McLoughlin has today announced that the competition to run trains on the West Coast Main Line has been cancelled following the discovery of significant technical flaws in the way the franchise process was conducted.
The decision means that the Department for Transport (DfT) will no longer be awarding a franchise contract to run the West Coast service to winning bidder First Group when the current franchise expires on 9 December. It is consequently no longer contesting the judicial review sought by losing bidder and incumbent operator Virgin Trains in the High Court.
The DfT said the flaws uncovered relate to the way the procurement was conducted by department officials. An announcement will be made later today concerning the suspension of staff while an investigation takes place.
The DfT added that it was “resolving urgently” the future arrangements for operation of the West Coast and said that it will ensure that train services continue uninterrupted until a new franchise is awarded. Virgin Trains boss Sir Richard Branson had said he would effectively run the line for free during any delay caused by any judicial review.
McLoughlin has ordered two independent reviews: the first into what went wrong with the West Coast competition and the lessons to be learned; the second into the wider DfT rail franchise programme.
All the other outstanding franchise competitions have been put on hold pending the independent reviews. These include Great Western, Essex Thameside and Thameslink.
“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,” said McLoughlin. “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.
“I have ordered two independent reviews to look urgently and thoroughly into the matter so that we know what exactly happened and how we can make sure our rail franchise programme is fit for purpose,” he added.
The first independent review will be an urgent independent examination into the lessons to be learned from the Department’s handling of this competition. Conducted by independent advisers and overseen by Centrica chief executive Sam Laidlaw and former PricewaterhouseCoopers strategy chairman Ed Smith, both DfT non-executive directors, this review will look as soon as possible at what happened and why with a view to delivering an initial report by the end of October.
The second independent review will be undertaken by Eurostar chairman Richard Brown, and examine the wider rail franchising programme. It will look in detail at whether changes are needed to the way risk is assessed and to the bidding and evaluation processes, and at how to get the other franchise competitions back on track as soon as possible. This will report back by the end of December.
The DfT said evidence of significant flaws in its approach emerged while officials were undertaking very detailed evidence-gathering in preparation for legal proceedings in the High Court.
It said these flaws stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result.
Three officials involved in the West Coast franchise competition were suspended while the full facts are established.
The DfT has spoken to the four bidding companies to inform them of the flaws that the it discovered. It will reimburse their bid costs and has assured them that a fresh competition will be started as soon as the lessons of this episode are learned.