Virgin, FirstGroup battle for west coast rail

“If this decision is allowed to stand it will be bad for the country,” Sir Richard Branson told the Transport Select Committee reviewing the bid process.

Sir Richard argued that not only was Virgin’s bid more financially robust and easier to deliver, but he accused the government of ignoring its own rules in awarding the franchise to its competitor. This is the fourth time Virgin has lost a competitive tender, and in each case the winner either went bust or fell into difficulty operating the rail service, he said.

Sir Richard said the government had accepted FirstGroup’s bid despite it being the most risky and least attractive for customers. Virgin has argued that FirstGroup‘s bid was not correctly risk adjusted by the department given that its incremental value was to be delivered after 2022.

FirstGroup ‘keeping the keys’

FirstGroup Chief Executive Tim O’Toole, who spoke after Sir Richard, said he had every confidence in his company’s ability to deliver on its bid and handle the risk.

“I don’t see any chance of our handing them (the keys to the franchise) back,” Mr O’Toole told the committee.

But he stopped short of saying he would return all of the company’s government franchises if FirstGroup failed to deliver on the west coast commitment. Mr O’Toole said that type of condition would be a decision for the government, not his company.

“I don’t mean to be coy and I don’t mean to be giving the impression this is simple and this is in the bag,” Mr O’Toole said.

“This will require hard work,” he added, stressing that he believed his company would successfully handle the franchise despite Sir Richard’s offer to run the service on a non-profit basis until the government and new transport minister could review the decision.

West coast review

FirstGroup had been preparing to operate the line from December, but Virgin filed court documents in August to pressure the government to rethink its decision to sign FirstGroup’s 13-year contract.

Virgin has operated the west coast line for 15 years and its application for judicial review delayed the signing of the new franchise agreement by then Transport Minister Justine Greening.

Judicial review involves a judge reviewing the lawfulness of a decision made by a public body. It is a challenge to the way the decision was made – rather than a ruling on whether the decision was correct – so nothing would prevent the government from making the same decision again as long as it was deemed lawful.