West Coast Main Line franchise shambles - possible impact on Great Western franchise?

[whole diary]

[John R]

No, the majority of franchises haven't had the same structure of the FGW^▸ (First Great Western) one. In fact, I can't think of any that were set up in the same way, but I may be wrong.

[grahame]

So where does that leave the Greater Western tender process, still in the sidings or back on track?

Presumably on hold awaiting the findings of the Brown review which is looking into the franchising system in general.

Confirmed ... http://www.thisisexeter.co.uk/story-17525335-detail/story.html says:

A DfT^» (Department for Transport - about) spokesman said: ^No decision on the Great Western franchise will been taken until we have considered the Brown report, but the Great Western invitation to tender states that each bidder shall be responsible for all costs, incurred whether or not the bid process is varied or terminated.^

[swrural]

Hopefully the restart for GW^▸ (Great Western) franchise can now be soon.  In response to a query I deposited recently elsewhere on customer care, I read this in Brown's report (which I have just collected from the WY metro site).

 1.17 Bids should also be explicitly scored on their proposals for improving service quality for passengers and their approach to management. Their score should form part of the evaluation process. I recommend that a weight of 20-40% (which will vary depending on the nature of the franchise) should be attached to quality in the final evaluation. This should include bidders^ proposals to invest in training and workforce development and engagement. National Passenger Survey (NPS^▸ (National Passenger Survey)) scores, which directly reflect what passengers say, should be more closely reflected in franchise commitments and subsequent monitoring of franchise performance.

If you recall, I was wondering how a new entrant could compete with those who have a track record.  I don't know whether this answers that point?   

[Chris from Nailsea]

I'm not aware of any previous franchise invitation to tender that has included a requirement that any bidder must have a track record - nor, indeed, that any bidder with any sort of track record (good or bad) has been judged on it.

Indeed, I would have thought it would be discriminatory to include any requirement for a potential bidder to have a track record: that would exclude any new entrants to the process - particularly those from the European Union - and would be anti-competitive and therefore unlawful. 

[ellendune]

But since almost all the staff concerned are TUPE^▸ (The Transfer of Undertakings (Protection of Employment) Regulations 2006.)'d across, it is improving customer service from the last franchisee.  So there is no discrimination.

[Super Guard]

The DfT^» (Department for Transport - about) had a requirement to tell FGW^▸ (First Great Western) that they were needed to continue the franchise in the short term by the end of December 2012, and FGW have agreed to postpone this deadline until the end of January, so the Government reports into franchising can be announced etc.

[Chris from Nailsea]

From the Telegraph:

Government faces 'challenge' to recruit vital rail experts

Attracting private sector rail experts to run government franchise teams in the wake of the West Coast Main Line fiasco will be a ^challenge^, the chairman of Eurostar told MPs^▸ (Member of Parliament).

Richard Brown, who last week published a report into the future of rail franchising, warned lower pay and the limitations of working in the civil service will make it difficult for the Government to recruit skilled staff from the private sector.

The Department of Transport has been told to strengthen its teams working on multi-billion pound rail contracts after it bungled the competition for the West Coast franchise last year - at a ^55m cost to the taxpayer.

Mr Brown told the Commons Transport Select Committee there were plenty of experts within the rail industry with experience of dealing with complex rail franchises. However, persuading those individuals to enter the civil service wouldn^t be easy, he suggested.

^I think there is a particular challenge for the department [of Transport], as there would be for any other government department, in getting those sorts of people to come and work within a civil service structure,^ Mr Brown said. ^They [the DfT^» (Department for Transport - about)] will have to take some difficult decisions about terms and conditions and pay, and give reassurances they will be given the headroom to actually deliver what the government want.^

Mr Brown was asked by the Transport Secretary, Patrick McLoughlin, to review how major contracts to run Britain^s railways should be handled, following the discovery of ^significant errors^ in the way the DfT managed the franchise competition for the West Coast Main Line.

The Eurostar chairman concluded the ^quickest and simplest^ way to resolve the crisis would be to leave responsibility with the DfT, despite calls for the creation of an arms-length body that could circumvent some of the pay restrictions within the civil service.

Mr Brown stressed to MPs on Tuesday that there is no need for a complete overhaul of the system. ^There is no need to go down the road of restructuring the industry,^ he said.

The Transport Secretary is shortly expected to announce how the Government intends to proceed with the three rail franchise competitions suspended in the wake of the West Coast debacle, which cover Great Western, Thameslink and Essex Thameside train services.

Mr Brown said he expects train companies to be asked for far more risk capital in future to insure against the possibility of defaulting on a franchise.
However, he said the Government must tolerate the fact there will always be a risk train companies could hand back the keys to a franchise. This happened in 2009 when National Express said it could no longer afford to run the East Coast Main Line.

^You have to accept that happens because the cost of insuring that will never happen^is an uneconomic cost,^ Mr Brown said.

He added: ^If you are asking private sector bidders to bid, the nature of the private sector is that from time to time you do get failures.^

[stebbo]

The comment about the Civil Service attracting private sector workers reminds me of a job offer I received from BT back in the 1980s. They offered me a slightly better salary than I was getting in my existing job but I had a company car which was worth a bit. When I pointed this out, I was told "Well we do season ticket loans and our canteen is subsidised". (I never did go to work for BT).

[JayMac]

From the BBC^» (British Broadcasting Corporation - home page):

West Coast Main Line franchise fiasco 'to cost at least ^50m'

A "complete lack of common sense" in the Department for Transport's handling of the West Coast Main Line franchise deal will cost taxpayers "^50m at the very least", MPs^▸ (Member of Parliament) have said.

The cost might be "very much larger", the Public Accounts Committee warned. The committee accused the department of making "fundamental errors" and failing to learn from "previous disasters".

A spokesman said the department had taken steps to ensure there could be no repeat of the failure.

But Labour accused ministers of "hiding behind their civil servants".

Explaining why the total cost might prove to be higher than previous estimates, Labour MP Margaret Hodge, who chairs the committee, said: "If you factor in the cost of delays to investment on the line, and the potential knock-on effect on other franchise competitions, then the final cost to the taxpayer will be very much larger."

'Astonished'

Unveiling her committee's latest report, Mrs Hodge said: "The franchising process was littered with basic errors. The department yet again failed to learn from previous disasters, like the Metronet contract. It failed to heed advice from its lawyers. It failed to respond appropriately to early warning signs that things were going wrong. Senior management did not have proper oversight of the project. Cuts in staffing and in consultancy budgets contributed to a lack of key skills. The project suffered from a lack of leadership. There was no single person responsible from beginning to end and, therefore, no one who had to live with the consequences of bad policy decisions. For three months, there was no single person in charge at all. Not only that, there was no senior civil servant in the team responsible for the work, despite the critical importance of this multi-billion pound franchise."

The committee had been "astonished" that the Department for Transport's top civil servant had been "told he could not see all the information which might have enabled him to challenge the processes, although it was one of the most important tasks for which the department is responsible".

'Stench'

Mrs Hodge added: "Given that the department got it so wrong over this competition, we must feel concern over how properly it will handle future projects, including HS2^▸ (The next High Speed line(s)) and Thameslink [rail routes]. The department needs to get its house in order and put basic principles and practices at the heart of what it does, with an appropriately qualified and senior person in charge of the project throughout and an accessible leadership team ready and willing to hear and act on warning signs."

In October, the government scrapped its decision to award the ^5bn franchise to FirstGroup.

The mistakes in the West Coast process came to light after rival bidder Virgin Trains launched a legal challenge against the decision. Virgin will continue running the service until November 2014, when a new long-term franchise will begin.

In December, the National Audit Office calculated that there would be a "significant cost to the taxpayer" as a result of the fiasco.

It said costs for staff, advisers, lawyers and the two reviews into the fiasco added up to ^8.9m, on top of the estimated ^40m it will take to reimburse firms for the cost of their bids.

Bob Crow, the leader of the RMT^▸ (National Union of Rail, Maritime & Transport Workers) union, which represents rail workers, called for wholesale renationalisation of the railways.

"The stench from the fall-out of the West Coast franchise continues to hang over Britain's transport industry as it becomes clearer with every examination that the ministers responsible for this shambles could not be trusted to run a whelk stall let alone multi-billion government contracts," he said.

'Strengthening oversight'

"Privatisation is a corrosive and expensive political project doomed to repeated and costly failure, twice on the East Coast and now on the West," he added.

"Fiddling with processes won't work. It's the whole, rotten policy that needs dumping with a return to public ownership."

But a Department for Transport spokesman said: "The independent Laidlaw inquiry published in December identified the unique and exceptional circumstances which led to failures in the West Coast franchising programme and crucially what steps the department should take to prevent this from happening again. The department has accepted all the recommendations and has taken immediate steps by bringing together all rail activity under a single director general and recruiting a senior director to lead the franchising programme, as well as improving internal governance and strengthening oversight and accountability. Not only will these reinforce the franchising process but will also protect rail infrastructure projects such as HS2 and the biggest programme of rail electrification."

Maria Eagle, the shadow transport secretary, called on Prime Minister David Cameron to "take responsibility for the rail franchising fiasco, instead of allowing ministers to hide behind their civil servants."

"The government must accept the finding of the Public Accounts Committee that it was the short-sighted decision by ministers to axe external audits of multi-billion pound contracts that ended up with at least ^50m of taxpayers' money going down the drain," she added.

"It is a disgrace that every politician responsible for the bungled franchise deal has either remained in the cabinet or been promoted to it."

Richard Hebditch of Campaign for Better Transport, which fights for better public transport, said the report showed the biggest problem was the franchising system itself.

"Franchising needs to be completely reformed so that what counts are improvements to the service on offer, rather than complex calculations of profit and loss that don't stack up," he said.

[JayMac]

From the BBC^» (British Broadcasting Corporation - home page):

Great Western franchise: Rail firms start legal action

By Richard Westcott
BBC transport correspondent

Four train companies have started legal proceedings against the government after it cancelled the bidding process for a rail franchise and then refused to pay compensation.

Ministers ditched bids to run the Great Western rail franchise in January, saying they wanted a rethink.

FirstGroup, Stagecoach, Arriva and National Express have gone to court in an effort to get their money back.

If they are successful, it could cost the government ^40m.

When the government called off the Great Western bidding process it said it wanted to re-evaluate it following the high profile collapse of the West Coast mainline deal a few months before.

The Great Western franchise operates between south Wales and London.

Options open

I have learned that there will now be a "stay" in the legal proceedings until the end of March, giving both sides the chance to thrash out a compromise. So there is a way to go yet before this gets legally nasty.

But these companies are very angry that they will not be compensated for what they see as the government's mistakes.

Ministers are compensating bidders who lost out on that defunct West Coast deal, and that, say the rail firms, is inconsistent and unfair.

Each firm will have spent about ^10m on the bidding process for the Great Western franchise, hiring large teams of experts and lawyers to put together their submissions.

Nigel Harris, the editor of Rail Magazine, says: "A refusal to refund may conform to the letter of the contract rules but utterly fails the 'right thing' test."

"It makes no sense to penalise innocent bidders - especially when you want and need them to re-bid!"

I am told it does not mean the rail companies will definitely sue the Department for Transport, but it is certainly piling on some legal pressure, and giving them the option of going to court if both sides cannot agree a deal.

However, lawyer Patrick Twist at Pinsent Masons, does not think it will get that far,

"By lodging papers with the High Court the bidders are keeping open their ability to pursue the Department for Transport for the costs they wasted on bidding for the cancelled Greater Western franchise procurement," he said.

"The department will strongly resist any claim and the same bidders will have the opportunity to rebid when the franchise is reprocured. So it would be surprising if this really does lead to litigation."

Further claims?

At the moment, the government does not look ready to budge.

In January, Transport Secretary Patrick McLoughlin said: "In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, the Secretary of State does not believe it would be appropriate to reimburse bidders."

In fact, if you wade through the Invitation to Tender (not an easy read I grant you), this is what it actually says: "Each bidder shall be responsible for all costs, expenses and liabilities incurred by it in connection with the Great Western franchise letting process, whether or not its bid and/or associated negotiations are ultimately successful or the process is subsequently varied in any way or terminated."

It is impossible to say where all of this is heading. But if ministers do end up compensating these firms, even if it is just for a fraction of their costs, they can expect a lot of flack for the fact that yet more taxpayers money has gone on compensation, rather than improving the trains or cutting fares.

Remember, the government has already spent ^50m (and counting) cleaning up the West Coast mess.

There is also the possibility that it will open the door to claims from those companies affected by long delays to two other big franchises, Essex Thameside and Thameslink, Southern and Great Northern. Both have been postponed for a couple of years in the wake of the West Coast problems.

[grahame]

And the view from Christian Wolmar

http://www.christianwolmar.co.uk/2013/03/a-bluff-that-the-train-companies-can-only-lose/

I can't help wondering if at the end of the day, it'll be you and me (the British taxpayer) or you and me (the train traveller) who ends up footing the bill for all the aborted bids - by whatever circuitous route we pay.

[JayMac]

I have to agree with Christian Wolmar. It would seem that the TOCs^▸ (Train Operating Company) are on a hiding to nothing. Whilst it was the DfT^» (Department for Transport - about) who cocked up the ICWC^▸ (InterCity West Coast) franchise which then led to the cancellation of the Greater Western tender, it is also the DfT who have a fairly watertight clause in the bid process that allows them to do what they've done.

FirstGroup, I feel, have to tread particularly carefully. It is they who are in negotiation with the DfT over the two year management contract for the Greater Western franchise that will run from October 2013 until the next franchise's delayed start date. Negotiating with the DfT whilst also taking them to court.... that can't be a particularly harmonious state of affairs.

[ellendune]

And the view from Christian Wolmar

http://www.christianwolmar.co.uk/2013/03/a-bluff-that-the-train-companies-can-only-lose/

I can't help wondering if at the end of the day, it'll be you and me (the British taxpayer) or you and me (the train traveller) who ends up footing the bill for all the aborted bids - by whatever circuitous route we pay.

It will be anyway - since they will have to factor it into the profit on future bids if they don't get it from the DfT^» (Department for Transport - about).

I have to agree with Christian Wolmar. It would seem that the TOCs^▸ (Train Operating Company) are on a hiding to nothing. Whilst it was the DfT who cocked up the ICWC^▸ (InterCity West Coast) franchise which then led to the cancellation of the Greater Western tender, it is also the DfT who have a fairly watertight clause in the bid process that allows them to do what they've done.

FirstGroup, I feel, have to tread particularly carefully. It is they who are in negotiation with the DfT over the two year management contract for the Greater Western franchise that will run from October 2013 until the next franchise's delayed start date. Negotiating with the DfT whilst also taking them to court.... that can't be a particularly harmonious state of affairs.

Should be fairly safe while they are all going for it.  The problem comes if they break ranks.

 

[didcotdean]

Over the days when I was regularly involved with tendering to government / quasi government I have lost count of the number of times tendering was aborted, right up to just before contract signing. Sometimes there were good reasons behind it, mostly there weren't. Worst was when the initiator had moved on during the process or that they had never actually secured the budget for the work but went ahead in hope they would have before having to contract. A cost of business maybe, but it has to be paid for in the end.

[JayMac]

Not a great surprise. A certain union leader has given his opinion on the current turn of events.

From the Western Daily Press:

Snubbed train companies ^acting like lottery losers^

Four train companies trying to sue the Government for halting the process to bid for the right to run the West^s railways have been accused of acting like ^lottery losers demanding the price of their ticket back^.

Union leaders are furious that transport firms Stagecoach, Arriva, National Express and the current franchise holders First are taking the Government to court and are demanding as much as ^40 million in costs.

Earlier this year, the Government called a halt to the process where train companies bid for the franchise to run services out of Paddington to the West Country and South Wales, following the debacle surrounding the aborted process for the West Coast mainline, which runs from London to the North West. Ministers said they wanted to re-evaluate the process for the Great Western line ^ which serves London to Swindon, Bath, Bristol, south Wiltshire and Somerset ^ as a result.

The four companies that had submitted bids for the Great Western franchise claim they have spent around ^10 million submitting their cases, which involved hiring experts, lawyers and compiling their submissions.

Their case will be heard at the end of the month, giving a couple of weeks for the Government and the train companies to thrash out a deal.

The decision by the firms to sue has not impressed rail union leader Bob Crow, who said: ^These rail companies are acting like a lottery loser demanding the price of their ticket back. They are quite happy with the casino franchising process until they draw a losing hand. This latest nonsense will end up costing the taxpayer tens of millions of pounds and yet again exposes the insanity of rail privatisation. Only full renationalisation of our railways can end this circus.^

The rail companies appear to be facing an uphill battle in getting their costs back ^ the original invitations to tender included the line: ^Each bidder shall be responsible for all costs, expenses and liabilities incurred by it in connection with the Great Western franchise letting process, whether or not its bid and/or associated negotiations are ultimately successful or the process is subsequently varied in any way or terminated.^

The Great Western main line is about to undergo the biggest renovation in 100 years, with electrification starting at London and arriving in Bristol by the end of the decade. But the line is also the most overcrowded in Britain and has suffered a series of crippling delays caused by signalling problems, as well as problems caused by severe weather and flooding in Devon and north of Bristol.

The tagline for ATOCs^» (Association of Train Operating Companies See - here) 'National Rail' brand is, "Britain's train companies working together". At least with this court action the TOCs^▸ (Train Operating Company) are abiding by that sentiment.