Rail franchise lessons
Familiarity with procurement law is vital.
Last year I wrote about the opportunities for the construction industry presented by the proposal for longer rail operator franchises. Talk at the time was for franchises of 15-plus years to incentivise train operating companies to invest in infrastructure.
Barely 14 months later, two secretaries of state for transport have come and gone and the government’s franchise policy is in disarray following the collapse of the tender process for the West Coast Main Line.
This is clearly not good for those in the construction industry dedicating time and resources to exploring and preparing for these opportunities. So what sits behind the recent upheaval?
The collapse of the West Coast tender process, which was due to be the first of the new longer franchises, came about when the incumbent, Virgin Trains, challenged the Department for Transport’s (DfT’s) award of the franchise to FirstGroup.
The new secretary of state, only in the job a matter of weeks, stopped the franchise award due to apparent errors in the procurement by the DfT, pending a review of the entire franchise process. The results of the review are to be reported by the end of this year.
Until that report is received, Virgin will continue to operate the West Coast route. All other franchises that were due to be re-let in the near future (including Great Western and Thameslink) are on hold.
The West Coast debacle follows another recent major rail related procurement dispute between Eurostar and Alstom in which losing bidder Alstom challenged Eurostar’s decision to award the contract for its new trains to Siemens. Eurostar saw off the challenge. My firm acted on both these disputes so I cannot comment on either.
However, there is a common theme both in rail and wider infrastructure projects. Bidders invest a huge amount in tendering for major projects and are increasingly willing to challenge the legitimacy of procurement processes.
This is coupled with an increasingly regulated area of business for the public sector and utilities and the fact that disgruntled bidders are forced into challenging immediately or facing losing the opportunity to do so at all due to very tight time constraints on any legal action.
The balance of getting contracts let and seeing justice done to all bidders is clearly a difficult one. It is, however, far easier if all parties play properly by the regulations.
The DfT’s decision in relation to the West Coast franchise is a case in point.
The abortive costs of £40M referred to in the press are likely to be an underestimate and are unlikely to take full account of the costs to the supply chains and industry as a whole which all have to be paid for, one way or another.
To muddy the picture still further, the European Commission is currently carrying out a review of its procurement rules which may lead to fundamental change on the current law including in the rail sector.
In the meantime, it pays to ensure you are familiar with them, whichever side of the fence you are on so that, hopefully, the industry can concentrate on the job of delivering infrastructure.
- Will Gard is a chartered civil engineer and partner at Burges Salmon