West coast fiasco to cost taxpayers ‘at least £50m’

There was a lack of leadership at the Department for Transport (DfT) and a failure to “get basic processes right” over the west coast fiasco, the report from the House of Commons public accounts committee said.

MPs said they were concerned that these basic mistakes could be repeated in future projects such as the London to Birmingham high-speed HS2 scheme and the London Thameslink project.

The report said the department failed to learn from mistakes made in previous projects and senior managers failed to apply common sense during the west coast bidding process.

They also said senior managers had “missed clear warning signs, including from the (rail) industry, that there were serious problems with the (bidding) competition”.

The committee said: “We are astonished that there was no senior civil servant in the team despite the critical importance of this multi-billion pound franchise”.

‘No detailed understanding’ of competition

The MPs added that they were also “astonished that the (DfT) Permanent Secretary (Philip Rutnam) did not have a detailed understanding and oversight of the (franchise) competition”.

After DfT errors in the process had been identified, Transport Secretary Patrick McLoughlin scrapped the bidding which had seen Virgin Trains lose out to rival transport company FirstGroup in the battle for a new, 13-year west coast franchise.

Instead, Virgin is carrying on running the west coast service until November 2014, with a new bidding process starting after that.

In the report, the committee said it was concerned that the department “could yet again fail to apply basic processes, which could affect its future projects, including HS2 and Thameslink”.

The MPs said the DfT made a number of mistakes when identifying the amount of risk capital it required from bidders to balance the riskiness of their bid.

‘Blinkered and rushed approach’

The report said the department’s “blinkered and rushed approach meant the competition was not run properly” and that it had been a mistake “not to have a single person responsible for the project from beginning to end”.

Launching the report, the committee’s chairman, Labour MP Margaret Hodge said: “The DfT’s complete lack of common sense in the way it ran the west coast franchise competition has landed the taxpayer with a bill of £50m at the very least.

“If you factor in the cost of delays to investment on the line, and the potential knock-on effect on other franchise competitions, then the final cost to the taxpayer will be very much larger.”

She went on: “The franchising process was littered with basic errors. Senior management did not have proper oversight of the project. Cuts in staffing and in consultancy budgets contributed to a lack of key skills.

“We are astonished that the permanent secretary did not oversee the project because he was told he could not see all the information which might have enabled him to challenge the processes, although it was one of the most important tasks for which the department is responsible.

Concern over future project handling

“Given that the department got it so wrong over this competition, we must feel concern over how properly it will handle future projects, including HS2 and Thameslink.”

Maria Eagle MP, Labour’s shadow transport secretary, responding to the report, said: “It is time that David Cameron took responsibility for the rail franchising fiasco, instead of allowing ministers to hide behind their civil servants.

“The government must accept the finding of the public accounts committee that it was the short-sighted decision by ministers to axe external audits of multi-billion pound contracts that ended up with at least £50m of taxpayers’ money going down the drain.

“It is a disgrace that every politician responsible for the bungled franchise deal has either remained in the cabinet or been promoted to it.”