British rail plans thrown off track

on 03/10/2012 08:14:19

Future Government rail plans were thrown completely off track today after ministers scrapped a deal which would have seen Richard Branson's train company lose its West Coast franchise.

Branson had mounted a legal challenge to the decision by the Department for Transport (DfT) to award a new 13-year franchise for the West Coast not to Virgin Rail but to rival transport company FirstGroup.

The DfT had intended to contest the matter in court and was still hoping FirstGroup would take over the London to Scotland route as planned on December 9.

But early today, in an embarrassing U-turn for the Government, Transport Secretary Patrick McLoughlin said he was cancelling 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".

Mr McLoughlin said the DfT would no longer contest the judicial review and had paused all outstanding franchise competitions pending two independent reviews he has set up.

Sir Richard, who had described the bidding process as "flawed" and "insane", welcomed the decision and said he he was hopeful Virgin would carry on running the franchise which it has been operating since 1997.

FirstGroup said it was "extremely disappointed" at the news, saying it had submitted "a strong bid, in good faith and in strict accordance with the DfT's terms".

House of Commons Transport Committee chairman Louise Ellman MP said she was "astonished" by the development and said it put the whole franchising process "in disarray".

An announcement is expected to be made later today about the suspension of Government staff while the department investigations are conducted.

Shadow transport secretary Maria Eagle MP said the West Coast franchise process had been a "fiasco" which had "yet again exposed the shambolic incompetence of this Tory-led Government".

Liberal Democrat party president Tim Farron, who is MP for Westmorland and Lonsdale in Cumbria, said "people must be held accountable" for the errors.

Bob Crow, general secretary of the RMT transport union, said: "The whole sorry and expensive shambles of rail privatisation has been dragged into the spotlight this morning and instead of rerunning this expensive circus, the West Coast route should be renationalised on a permanent basis."

Mr McLoughlin has inherited what has become a messy problem, having just taken over at the DfT from Justine Greening.

Until today, he and Ms Greening had said they were satisfied with the West Coast bidding franchise which culminated with the award, following a four-company bidding battle, to FirstGroup in August.

In an announcement put out at midnight last night, Mr McLoughlin said: "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.

"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: "West Coast passengers can rest assured that while we seek urgently to resolve the future arrangements the trains that run now will continue to run, with the same drivers, the same staff and timetables as planned.
"The tickets that people have booked will continue to be valid and passengers will be able to make their journeys as planned."

Officials have been asked to examine options for the operation of the service after December 9.

The other outstanding franchise competitions that have been halted are Great Western, Essex Thameside and Thameslink.

DfT permanent secretary Philip Rutnam said: "The errors exposed by our investigation are deeply concerning. They show a lack of good process and a lack of proper quality assurance.

"I am determined to identify exactly what went wrong and why, and to put these things right so that we never find ourselves in this position again."

The first "urgent" independent review will focus on what lessons are to be learned from the DfT's handling of the flawed competition process.

It will be conducted by independent advisers and overseen by Centrica chief executive Sam Laidlaw and former PricewaterhouseCoopers strategy chairman Ed Smith, both DfT non-executive directors.
An initial report is expected to be delivered by the end of October.

The second review, undertaken by Eurostar chairman Richard Brown, will examine the wider DfT rail franchising programme and look in detail at whether changes are needed to the way risk is assessed.

The bidding and evaluation processes will also be examined, with a report expected by the end of December.

Evidence of significant flaws in the DfT's approach emerged while officials were gathering evidence for the High Court legal proceedings involving Virgin Rail, the department said.

It said the flaws stemmed from the way the level of risk in the bids was evaluated.

Mistakes were made in the way inflation and passenger numbers were taken into account and how much money bidders were then asked to guarantee as a result, the DfT added.

The department said it could not be confident that the 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.

All the bidders have been contacted by the DfT and will have their bid costs reimbursed, it added.

The Government said a fresh competition will be started as soon as "the lessons of this episode are learned".