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Tuesday, 02 September 2014

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West Coast Mainline review set to make grim reading for transport department

An independent review of the West Coast rail franchise fiasco will be delivered to Whitehall this week.

Virgin train photo
Virgin train

Headed by senior business figure Sam Laidlaw, the review will make grim reading for the Department for Transport (DfT) where three civil servants have already been suspended.

Last summer, after a bidding process, the DfT decided to award a new 13-year West Coast franchise not to Sir Richard Branson’s rail company Virgin Trains but to rival company FirstGroup.

Sir Richard branded the bidding process “insane” and launched a legal challenge. Preparing a defence against the court proceedings Transport Secretary Patrick McLoughlin discovered what he described as “significant technical flaws” in the process.

Mr McLoughlin, who had not been in charge when the FirstGroup decision was made, called off the bidding process and announced Mr Laidlaw’s inquiry and a second, independent, inquiry into the whole franchise bidding system.

Mr Laidlaw has published a damning initial-findings report, which said “an accumulation of significant errors...resulted in a flawed process”.

This initial report said that the DfT decided to carry on with the bidding even though it was aware of a lack of transparency in the subordinated loan facility (SLF) process – the amount the successful bidder would have had to forfeit if unable to fulfil the contract.

Mr Laidlaw’s initial report said the DfT also went ahead accepting the risk of a legal challenge to the process.

The report said evidence strongly suggested that the DfT’s franchise process for West Coast “was developed late, in a hurry and without proper planning and preparation”.

The way the process had been conducted raised “potentially significant issues about the ability of the DfT effectively to conduct rail franchise competitions”, the report said.

Mr Laidlaw, who is a non-executive director of the DfT, is due to give evidence to the House of Commons Transport Committee next week.

Virgin has run the West Coast line since 1997, with FirstGroup having been due to take over on December 9 this year.

Following the scrapping of the bidding process, Mr McLoughlin announced that talks, which are still continuing, were under way for Virgin to remain as West Coast operator for between nine and 13 months while a competition was run for an interim franchise agreement.

Both Justine Greening, who had been Transport Secretary when the FirstGroup announcement had been made, and Mr McLoughlin had defended the bidding process when Sir Richard had challenged it.

Mr McLoughlin had also backed the department in the first of two recent appearances before the Commons Transport Committee.

In his second appearance before the MPs, Mr McLoughlin said taxpayers, who will have to fork out at least £40m for the failed bidding process, had “a right to expect better”.

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