Government cancels decision to award rail franchise for West Coast Main Line to FirstGroup

[whole diary]

[Ollie]

From BBC^» (British Broadcasting Corporation - home page) Homepage,  no article yet.

"Government cancels decision to award rail franchise for West Coast Main Line to FirstGroup"

[Zoe]

DfT^» (Department for Transport - about) announcement at http://www.dft.gov.uk/news/press-releases/dft-press-20121003a

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 when the current franchise expires on December 9. It is consequently no longer contesting the judicial review sought by Virgin Trains Ltd in the High Court.

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 Government is resolving urgently the future arrangements for operation of the West Coast and will ensure that train services continue uninterrupted. Mr McLoughlin stressed today that passengers will continue to be served by the same trains and frontline staff.

The Transport Secretary has also:
Ordered two independent reviews to be undertaken urgently: 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, both overseen by leading business figures;
Asked officials to examine the options for the operation of the West Coast service after December 9, taking into account procurement and competition law;
Paused all the other outstanding franchise competitions (Great Western, Essex Thameside and Thameslink) pending the independent reviews which are designed to ensure future competitions are robust and deliver best value for passengers and tax payers.

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.^

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 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 CBE, 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.

Evidence of significant flaws in the Department^s approach emerged while officials were undertaking very detailed evidence-gathering in preparation for legal proceedings in the High Court.

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.

The Department cannot be confident that these 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.

The DfT has spoken to the four bidding companies to inform them of the flaws that the Department discovered. The DfT 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.

All other franchise competitions (including Great Western) are now on hold pending two independent reviews so this is likely to delay the award of the Great Western franchise.

[JayMac]

Oh dear. It appears that Virgin and Sir Richard did have a strong case. Very bad news for First Group and the whole franchise process.

Likely to be Directly Operated Railways then or even an extension for Virgin, with the whole process having to be restarted. Justine Greening and Theresa Villiers also need to be called to account. Very convenient that they are no longer at the DfT^» (Department for Transport - about) though. The whole thing stinks.

[Zoe]

Likely to be Directly Operated Railways then or even an extension for Virgin, with the whole process having to be restarted. Justine Greening and Theresa Villiers also need to be called to account. Very convenient that they are no longer at the DfT^» (Department for Transport - about) though. The whole thing stinks.

There may well also be an extension for FGW^▸ (First Great Western) if the reviews can't be completed in time.

[EBrown]

A hold on all franchises. I foresee some DOR on the GW^▸ (Great Western) then!

It seems DfT^» (Department for Transport - about) have set off a small thermo-nuclear device in the franchising process. They're even reimbursing bid costs!

[thetrout]

Ouch ! ! !

Well, My personal views on the whole Beardie vs. O Toole has changed completely. If the DfT^» (Department for Transport - about) have completely suspended the other 3 franchises that are up for grabs, then potentially something must have gone horribly wrong... It's interesting how the DfT have seemingly admitted there were huge faults, which I suspect Beardie knew (that is not defense).

I'm wondering now what happens between FirstGroup and Virgin? Is it possible they could now both sue the DfT thus costing the tax payer even more money that it has done already??!!

However, It does beg to bring the question that is there something much more underhat here? I'm always intrigued into conspiracy theories, and I have 1 or 2 regarding this recent press release. One of which when compared to another Intercity Route is entirely plausible and I cannot be the only one who's thought it?!!

East Coast is now under Public Ownership as part of DOR. It was meant to be re-franchised; but to date it hasn't (NXEC^▸ (National Express East Coast) went bang a number of years ago.) Sparking the rumor that the Government was receiving a tidy sum from it's running. So is it completely unrealistic to say, that someone high up the food chain has realised they could potentially make more money from a nationalised WCML^▸ (West Coast Main Line) in a similar way to ECML^▸ (East Coast Main Line)? Personally, I can see how somebody has realised this and has effectively covered it up. (Sounds wrong, but has been done before in cases not exclusively to the railways)

If this all takes a considerable time to resolve, we could potentially be seeing other franchises pass into Public Ownership (GWML^▸ (Great Western Main Line) etc).

Either way... Looks like a lot of 'big names' (and I use that term very loosely) are more than just in the dog house........

[tounge in cheek=on]
I guess I've lost the game with the ladyfriend trout in terms of boycotting c2c now that GMWL bidding is suspended! (Don't want NX to get it after having the infamous pleasure of travelling with NXEA^▸ (National Express East Anglia) and NXEC!
[tounge in cheek=off]

In all fairness, apart from toilets that hardly ever work... c2c are fairly good

[JayMac]

Simple solution. Switch the process to Gross Cost Tendering.

I await with interest the press release from the bearded one. One hopes he isn't too smug with his, "I told you so."

[thetrout]

Indeed. I've often wondered why the DfT^» (Department for Transport - about) doesn't just revert to Intercity, Regional Rail and NSE^▸ (Network South East). But in an identical model to the London Bus Operations. Which are all run with the same costs and livery but different contracts to First Group, Stagecoach, Abellio and Go-Ahead??

I could see that being a very well run and workable model. It would also stop the potential nonsense of "Can't use your ticket on this train without authorisation from the TOC^▸ (Train Operating Company)" during times of disruption!

I've had an experience where because XC^▸ (Cross Country Trains (franchise))/FGW^▸ (First Great Western) wouldn't cover me for transport down to Salisbury during a Signal Blackout at Macclesfield. I ended up having to go on to London Euston and then Waterloo arriving at Salisbury 2 hours late and then Virgin had to provide a taxi onwards from there.

So in actuality, Where I could have arrived with XC/FGW on time thus probably being entitled to a good will gesture for having to sit in Stoke for well over an hour. I ended up being 2 Hours late which got me the ticket refunded for 100% of the journey, and a ^100 Taxi covered by Beardie

[Ollie]

http://www.virgin.com/richard-branson/blog/virgin-trains-back-on-track

We also appreciate the DfT^» (Department for Transport - about) publicly acknowledging these errors, and are hopeful they will now accept that Virgin Trains should carry on running the West Coast Main Line and ensure that passengers continue receiving our team's award-winning service.

Quoted the interesting bit, so they don't actually know if they will continue to run it.

[thetrout]

From the BBC^» (British Broadcasting Corporation - home page): http://www.bbc.co.uk/news/business-19809717

West Coast Main Line deal ditched
Breaking news

Ministers have scrapped the decision to award the West Coast Main Line rail franchise to FirstGroup saying the bidding process was flawed.

The contract - awarded in August - was immediately challenged in the courts by Virgin Trains, which lost out.

Ministers say there were "significant technical flaws" in the way the risks for each bid were calculated and say the bidding process must be rerun.

They have also ordered two independent reviews into what happened.

One will examine how the West Coast franchise competition went wrong, and what lessons can be learned.
'Deeply regrettable'

The other review will look into the wider Department for Transport rail franchise programme.

Transport Secretary Patrick McLoughlin described the mistakes made by his department as "deeply regrettable and completely unacceptable".

He said: "A detailed examination by my officials into what happened has revealed these flaws, and means it is no longer acceptable to award a new franchise on the basis of the competition that was held.

"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."

FirstGroup was due to take over train services on the line - one of Britain's busiest - in December.

The Department for Transport said because of the decision to rerun the bidding process it would no longer be contesting the judicial review launched by Virgin Trains in the High Court.

And it said an announcement would be made about the suspension of staff while the investigation into the mistakes is carried out.

[TonyK]

Simple solution. Switch the process to Gross Cost Tendering.

I await with interest the press release from the bearded one. One hopes he isn't too smug with his, "I told you so."

I don't think he will be too smug, although a certain saintly smugness is to be expected. He is first and foremost a businessman, who will be keen to win the contract, plus any others that may be up for grabs. Rubbing the government's nose into the mess won't help. He can smile quietly for once, and let other people tell us how he saved the nation from the very brink of calamity.

I didn't see this one coming. Entrenched positions are usually defended to the hilt in goverment, so there must be a real howler in the deal somewhere. I'm going to watch this one with great interest. We may even see Virgins going from Bristol to London (that seems the wrong thing to say just now). Villiers, I predict, will be left in her job at Northern Ireland. I don't think her involvement would have been critical in this. Greening, however, may up for more stick. It was widely assumed that her move, which apparently didn't go down well with her, was the result of her opposition to a third runway at Heathrow. Maybe it wasn't. Maybe she will be the sacrificial lamb for this. She has been pre-sacrificed already, though, as international development is a step(change) down from Transport.

Heads will roll at DafT, though. Whether the executions will be public or private will depend on how much of this is down to civil service incompetence, how much is down to consultants and advisors, and how much is down to flawed government policy. This process will have started before the last election, so political mud slinging will be intense, and may take the flak away from the government.

The Bearded One offered to run the WCML^▸ (West Coast Main Line) for no profit until this was sorted out. A clever way forward would be to say "Thank you, Lord Branson of Necker and Somewhere Taxable, we accept. Would you like to help in other areas of Britain too?"

[JayMac]

Wise words FTN.

Glad to see that Sir Richard hasn't gloated at all following this news.

Virgin have now evidently proved the process was flawed and I suppose we should be thankful those flaws have been exposed. This will hopefully lead to a much better and more transparent bid process and, as I said earlier, I really do hope HMG seriously consider Gross Cost contracts for all subsequent franchise tenders.

I do wonder though whether the mistakes would have come to light had Virgin's bid been successful.

[TonyK]

bignosemac

I say first and foremost that it was a great pleasure to meet you in person over the weekend, and even have a beer. I am afraid, however, that the knowledge you have of accountancy far exceeds mine, even though I operate a small business as well as my day job.

As a layman, I find the whole business of franchising etc very bewildering. Why can't a train company buy its own trains? Because they have a life of (if extended) anything up to 60 years in the case of the HSTs^▸ (High Speed Train). So it must it lease them  from a leasing company, rather than buy whatever it thinks fit? Wouldn't it be good, if the operating company decided that it would buy the rolling stock, operate it over the routes it thought fit, and knew it could sell it on to the next user, but only if it thought it was useful?

I cannot accept the model that looks to the Train Operating Companies leasing  trains from ROSCOs^» (Rolling Stock Owning Company - about) for thirty years on a franchise that only lasts 10 years will help in the slightest. Either let them buy their own trains, or tell them tha they must run their services according to  a national timetable.

[thetrout]

Or perhaps stop buying different trains which don't cooperate with each other and have carriage sets and then locos each end + some DMU^▸ (Diesel Multiple Unit)/EMU^▸ (Electric Multiple Unit)'s for much smaller grade lines?

Similar technologies run on the Spanish Railways. I've probably posted it before. But the Montpieller - Lorca service runs under wires from Montpieller to Alicante hauled by an Electric Loco. They then change it to a Diesel Loco already sat waiting in the platform @ Alicante for the remaining 2 hours of the journey. This is done in around 5 minutes. I've seen the train and caught it when it's arrived late (has 20 minutes or so slack there presumably to allow some of the loco DMU's to get out of the way!) But even if it arrives late. Chances are very high it'll get to Lorca bang on time if not early

The carriages between Altaria and Talgo trains are rather similar. So why can't the UK^▸ (United Kingdom) buy trains in a similar style to this almost like the HST^▸ (High Speed Train) or Electra Sets. Then swap out a carriage when it has a wheel flat. If an engine goes bang, then swap it for another one. Thus you a potentially maximizing the sets you have and can increase/decrease depending on the required capacity but also have resilliency in the planning for some units that will break down/require repair.

Also the idea then is that everything will be compatible with everything else! Heard of the issues that SWT^▸ (South West Trains) are having trying to connect the 458's to the 460 Carriages? Same type of train almost... Good Plan... Didn't work...!! (Yet...) (Sorry I'll put my film coat in the cupboard now )

Perhaps in a dream work hey? Sounds too much like a KISS^▸ (keep it simple, stupid!) option........!

Keep it simple stupid......

[grahame]

Why can't a train company buy its own trains?

Trains aren't a free market commodity that are easily bought and sold at will, and if a train operating company was allowed to own its own trains it would then be in a position to decide who it sold them to, and at what price, and it would have a commercial interest in posturing as it did so at the change from one franchise to the next.  And that would make it very difficult indeed for a switch from one TOC^▸ (Train Operating Company) to another to happen at all.  At least that's what I understand as the main reason.

There are "grey areas" around this ownership.  First Great Western does in effect own five HST^▸ (High Speed Train) sets (via another company in the First group) [discussion on effect on next franchise] and I believe that the Cardiff Bay and Aylesbury bubbles may be owned by Arriva; when it comes to open access I believe the rules aren't so tight, although I think that a RoSCO^▸ (Rolling Stock Owning Company) is almost entirely used due to the problem of getting longer term capital investment in the stock on what's a commercial risk that's taken over a shorter time span.  And I think that West Coast Railways may also be both a TOC and a RoSCO.