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Government cancels West Coast rail contract

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.

Reviews ordered

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.

Readers' comments (7)

  • Hi

    Why is the word corruption missing from this article ?

    Because there can be no other reasonable cause.

    The fact that HMG's lawyers pulled the plug because they found themselves in an indefensible situation also supports this contention.

    Corruption is endemic in Britain - see this whistle blowing web site - the current government is doing nothing about the matters raised here either viz fraud and corruption .....

    http://www.thetruthaboutsolitaire.co.uk/

    I have worked overseas in many countries, but never came across the level of scams that exist in Britain.

    Only someone as straight and wealthy as Richard Branson can afford to play the game challenging corruption.

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  • Michael Harfoot

    .......and will heads roll? Unlikely in today's political climate, to put it politely.

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  • If the Dft cannot get the sums right for a franchise, how can they be trusted to produce the correct values for HS2? Particularly with regard to inflation and passenger numbers.

    I suggest there should be another enquiry into the figures used for HS2 estimates.

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  • The least effort NCE could put in would be to get a stock photo actually showing West Coast Mainline stock in a West Coast Mainline station. Shoddy.

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  • First I thought Mr. Branson being a bit unreasonable and crying on his lost. But I was wrong... Mr. Branson knew whats happening behind the scene. And I like the first comment about "why Corruption is missing from the statements". A country like this can have such flaws...unbeleivable... What a shame

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  • Ian Walsh

    THe comment by David Watts above is spot on
    The HS 2 money could so much more fruitfully be spent on urgent highway upgrades like A14 Cambridge - A1, A21 dualling and A303 ( correspondents will know many more ) or the Heathgrow 3rd runway that are mired in prevarication All have infinitely better rates of reaturn and national benefit than this unnecessary railway.
    Politics is the enemy of good engineering solutions

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  • David Solan

    "Never attribute to malevolence what is merely due to incompetence"

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