West Coast Main Line franchise process a 'fiasco' says Branson

Virgin's Richard Branson: "We’re hopeful that Virgin Trains can be back in the process"

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Sir Richard Branson says the bidding for the West Coast Main Line franchise had been a "fiasco" but welcomed the decision to restart the process.

He told the BBC he was hopeful his Virgin Trains company could now keep running the route "for many years".

The government has scrapped a decision to let FirstGroup take over the route from Virgin after "technical flaws" were found in the competition process.

Three Department for Transport civil servants have been suspended.

They face possible further disciplinary action pending an investigation.

Transport Secretary Patrick McLoughlin said the mistakes in evaluating the relative merits of the four bids received to run the route had been made by Department for Transport staff and the "fault lies wholly and squarely" with the department.

Labour leader Ed Miliband said it was a "disgrace" the estimated cost of reimbursing the companies for their bids was £40m, and demanded Prime Minister David Cameron "get a grip" on his "incompetent" cabinet.

Analysis

This dramatic, midnight admission by the government that it failed to judge the West Coast Main Line bid properly is deeply embarrassing.

When the franchise was handed to First Group the then Transport Secretary Justine Greening insisted the government would push on with a process it insisted had been robust and fair - in the face of angry objections by Virgin, the Labour Party and the thousands of people who signed a petition calling for the bid to be reconsidered.

She lost her job in the reshuffle. The new Transport Secretary, Patrick McLoughlin, told the Commons as recently as 12 September he was satisfied all bids were considered fairly and with "due diligence".

Now, the day before Virgin's High Court legal challenge was due to start, the Department of Transport has admitted to "completely unacceptable mistakes."

Its rail franchising policy is in chaos.

FirstGroup said it was "disappointed" with the decision to scrap the multi-billion-pound contract. The company had beaten Virgin Trains to win the 13-year franchise and was due to start operating services from December. Its share price ended the day 21% lower.

Its chief executive, Tim O'Toole, said the company will bid again and urged the government to restart the process as soon as possible.

The West Coast route serves 31 million passengers travelling between London, the West Midlands, the north-west of England, North Wales and the central belt of Scotland.

Sir Richard called for a new bidding system for rail franchises, saying the current process had been flawed for some time.

"We've been seeking a better system that operators can feel comfortable if they're told 'you haven't won'... and if they're told 'you have won', they can feel comfortable as well," he added.

Virgin, which has run the franchise since 1997, will continue to operate the line while the situation is resolved, but when asked if the government could step in, Sir Richard said: "If they can't run a process, then it'll be even more difficult to run a railway."

FirstGroup's Tim O'Toole: "We think we will, once again, put together a winning bid"

"If it is a proper bid process, Virgin will be there bidding alongside others. We are hopeful that if we offer a similar kind of bid [to its last one] that we will win going forward."

Bids by Virgin, FirstGroup, Dutch train operator Nederlandse Spoorwegen, and a joint bid from French companies Keolis and SNCF were submitted 15 months ago.

The announcement in August that FirstGroup would take over in December had sparked a legal challenge from Virgin.

Three other franchise competitions had also been "paused" in light of the West Coast Main Line situation.

Start Quote

It was only after Virgin demanded a judicial review - after it sued - that the department was forced to acknowledge that it had made an egregious error”

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The DfT said the "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 DfT was using a new model for evaluating bids, a spokesman told the BBC. The mistakes appear to have been down to errors made in the inputting of the data, rather than with the model itself, he said.

The BBC's business editor, Robert Peston, said some would say it was incumbent on the government's permanent secretary, Philip Rutnam, and the previous transport secretary, Justine Greening to explain how they came so close to awarding a contract worth around £5bn on such a flawed basis.

The government has ordered two reviews, one to examine how the West Coast franchise competition went wrong, and what lessons could be learned. The other will look into the wider Department for Transport rail franchise programme.

West Coast Main Line franchise

  • 15 August 2012 Virgin Rail loses franchise as FirstGroup awarded it by Department for Transport
  • 26 August Virgin Rail boss Richard Branson offers to run franchise "for free" while process is reviewed
  • 28 August Virgin Rail launches legal challenge over contract process
  • 3 October Department for Transport unexpectedly scraps contract with FirstGroup after flaws in process discovered. Two reviews ordered, and process to be re-run
  • 9 December New contract for West Coast Main Line due to begin, lasting till 2026

Shadow transport secretary Maria Eagle said it would now be difficult for FirstGroup or Virgin to take on the West coast franchise when the current franchise expires on 9 December.

She said Labour would support Mr McLoughlin in allowing a "not-for-private-profit government-owned company to run the the West Coast Main Line whilst all of these reviews report".

Meanwhile, Scotland's Transport Secretary Keith Brown has called for urgent talks, saying the West Coast Main Line was a "critically important service" to Scotland.

And 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 and, instead of re-running this expensive circus, the West Coast route should be renationalised on a permanent basis."

West Coast Mainline map

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