3 Oct 2012

West coast rail franchise deal scrapped

Justine Greening, the former transport secretary, should have recognised there were problems with the rail franchise system “some months back”, Sir Richard Branson tells Channel 4 News.

Sir Richard, who lost out on a bid to continue running the west coast mainline in August, was speaking after the government admitted the process to award the franchise to FirstGroup had “significant flaws”.

Speaking to Krishnan Guru-Murthy, Sir Richard said: “We believe that she (Justine Greening) should have looked into the situation a bit more carefully and come to the same conclusions that have been reached today maybe some months back.

“The minister who was in charge at the time has been moved out of the Department of Transport, whether she was moved out in reality for this reason or not we’ll never know.

“All I’m saying is she’s moved, they can’t sack the minister because she’s already been moved on. The new minister at least has taken it on the chin, has cut his losses, and is trying to get this situation sorted out and I respect him for that.”

Virgin train (Reuters)

‘Completely unacceptable mistakes’

This morning the new minister in question, Patrick McLoughlin, announced that an internal investigation had found significant flaws in the procurement of an operator for the train line, which connects London, Manchester, Birmingham and Glasgow.

Three civil servants have been suspended for the flaws, which have not been publically identified by the government. The reversal on the decision to pass the contract from Virgin to FirstGroup is set to cost taxpayers around £40m.

“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,” Mr McLoughlin said today.

Mr McLoughlin (pictured, below), appointed to the role in David Cameron’s cabinet reshuffle last month, said that departmental officials will be suspended following the “deeply regrettable and completely unacceptable mistakes”. A detailed announcement is to be made later today with regard to the staff.

Mr McLoughlin also said the flaws “relate to the way the procurement was conducted by department officials”. The government did not specify what flaws it was referring to in today’s announcement.

“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,” Mr McLoughlin said.

Read more: west coast main line, what went wrong?

The contract was granted to FirstGroup on 15 August after Virgin’s rival made an offer of £5.5bn to run the line for 13 years. Following the decision to hand the franchise from Virgin Trains to FirstGroup, Virgin launched legal action against the decision. The DfT said, in light of the discovery of the flaws, it would no longer be contesting this legal action.

The government has told Sir Richard that it will meet his costs for the legal action and the failed bid, which will be a “significant amount of money”, but “not tens of millions”, Sir Richard said.

Sir Richard was furious with the decision, and told Channel 4 News that the government had had the “wool pulled over its eyes” by FirstGroup.

Virgin’s franchise agreement with the DfT expires on 9 December, but Virgin said it will continue to run the service whilst independent reviews into the procurement process are carried out.

Met with silence

Writing on his blog on the Virgin website, Sir Richard said: “From the moment we found out that FirstGroup had been made the preferred bidder with a completely unrealistic bid, we questioned the way the offers had been assessed, and asked the government to review and explain how it came to its decision.

“We were convinced the process was flawed but despite our best efforts we were met with silence by the Department for Transport.”

FirstGroup said today that it was entirely unaware of any issues with the process until it was told by the DfT last night.

“Until this point we had absolutely no indication that there were any issues with the franchise letting process and had received assurances from the DfT that its processes were robust and that it expected to sign the contract with FirstGroup soon,” the company said in a statement.

“We are extremely disappointed to learn this news and await the outcome of the DfT’s inquiries. The DfT has made it clear to us that we are in no way at fault, having followed the due process correctly. We submitted a strong bid, in good faith and in strict accordance with the DfT’s terms.”

Shambolic incompetence

Shadow transport secretary Maria Eagle said: “The west coast rail franchise fiasco has yet again exposed the shambolic incompetence of this Tory-led government.

“Ministers have spent weeks refusing to listen to Labour’s call to suspend the award of this contract to enable an independent review to take place.

“Only last week the transport secretary repeated his claim that the process was conducted properly and he would hand over the franchise to First on time, despite all the concerns that had been raised. The government’s belated admission that it ran a flawed tendering process will come as a surprise to no-one.”