As the government announces the competition to run the west coast mainline is to be re-run, Channel 4 News looks at why the franchise has to be re-tendered.
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The government has ordered two urgent reviews into what went wrong with the process to award the right to run the west coast route. One, to look at how the process to award the west coast franchise was conducted and a second to look at the Department for Transport's wider rail franchise programme.
Following the government's initial decision to award the west coast contract to Tim O'Toole's FirstGroup, Virgin launched a legal challenge. The DfT told Channel 4 News it was while the government was preparing its case for this that the errors in the franchise process emerged. So was the process of preparing a legal case more thorough than that which led to the awarding of the franchise?
At fault appears to be the calculation of the amount of money (in the form of a bond) which the transport companies commit to pay the government in the event they are unable to complete the 15-year contract.
How much this bond should be was decided by the government (based on some highly complex calculations) - the DfT decided Virgin would have to put up £40m whereas FirstGroup's bond was £200m. Virgin said the amount First would have to pay was too low. The department said the errors which have come to light relate to bond amount calculations involving inflation and passenger numbers.
But less than a month ago in evidence to the transport select committee, Transport Secretary Patrick McLoughlin stressed several times that the government would definitely press ahead and implement First group's bid for the west coast franchise.
So why the change? The Department for Transport has not, so far, revealed more specifically what was wrong with the franchise process but it has suspended three civil servants, and suspended the franchise process for three other contracts, an indication of the seriousness of the situation. However, despite this, the DfT told Channel 4 News there is not a problem with the franchise process per se.
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In the DfT's statement announcing the competition cancellation, Permanent Secretary to the department, Philip Rutman said: "The errors exposed by our investigation are deeply concerning. They show a lack of good process and a lack of proper quality assurance."
A rail industry source told Channel 4 News the cancellation is a "scandal". The source said the "unexpected volte face by the government would suggest a lot more" will emerge.
Meanwhile, the government has given assurances to passengers that their travel plans should be unaffected and is working to establish who will run the contract after 9 December when Virgin's franchise expires. Patrick McLoughlin said the only certainty is that "it won't be FirstGroup".
The DfT told Channel 4 News that tickets beyond 9 December will be honoured and that trains will definitely still operate. Virgin has offered to "assist the Department for Transport in ensuring continuity of service for the millions of customers who depend on train services on the west coast main line".
28 August 2012
03 October 2012