Virgin in talks on West Coast route contract extension

[Omah]

http://www.bbc.co.uk/news/business-19809717

The bidding process for the West Coast Main Line rail franchise is to be re-run after the government admitted getting its figures seriously wrong.

The contract to run services on the line - one of Britain's busiest - was awarded to FirstGroup in August.

That decision was challenged in the courts by Virgin Trains, which lost out.

Now civil servants have found significant mistakes in the way they calculated the risks for each bid.

Justice for that nice Mr Branson ..... :thumbs2:

[Omah]

The August announcement that FirstGroup would take over train services on the line - one of Britain's busiest - in December had sparked a legal challenge from Virgin, which has run the franchise since 1997.

The Department for Transport said because of the decision to rerun the bidding process it would no longer be contesting the judicial review launched by Virgin Trains in the High Court.

And it said an announcement would be made about the suspension of staff while the investigation into the mistakes is carried out

Transport Secretary Patrick McLoughlin described the mistakes made by his department as "deeply regrettable and completely unacceptable".

He said: "A detailed examination by my officials into what happened has revealed these flaws, and means it is no longer acceptable to award a new franchise on the basis of the competition that was held.

"West Coast passengers can rest assured that while we seek urgently to resolve the future arrangements the trains that run now will continue to run with the same drivers, the same staff and timetables as planned."

He said one review would examine how the West Coast franchise competition went wrong, and what lessons can be learned.

The other review would look into the wider Department for Transport rail franchise programme, he added.

After losing the bid, the founder of Virgin Group, Sir Richard Branson, said he was convinced that civil servants had "got their maths wrong."

He asked that the signing of the contract could be delayed so that the process could be reviewed.

But Justine Greening, who was Transport Minister at the time, defended what she described as the "robustness of the process.".

Yet another Tory about-turn ..... :rolleyes:

Was there, perhaps, financial interest involved ..... ?

[Nedusa]

So now a Company can compete in the Bidding process, submit their bid , have it reviewed and checked and then after months of final clarifications they can win the franchise and have it announced by the govt to the nation.

They can then start spending thousands possibly millions of their own money in starting to set up the organisations and infrastructure needed to start the process...

And then the Govt turns round and says "I'm sorry we made a mistake with our numbers"...!!!! WTF...!!!!!

[Marc]

All commuters want to know is will it be cheaper? will it be faster?

If I used this line I wouldn't want to know who was running what. Just the financial implications

[Omah]

http://www.bbc.co.uk/news/business-19264614

FirstGroup will have to find an average of about £390m a year in premium payments to the government (it's much less at the start of the franchise and gets much bigger as the years roll on - £5.5bn at net present value over the franchise term). Virgin currently pays about £160m.

FirstGroup has said it would bring in key improvements for passengers, including cutting standard fares by 15%. If FirstGroup struggles (as is likely), it could be forced to hand back the franchise early, which will cost it a lot of money (£265m) and could put its other UK franchises at risk.

The West Coast Main Line route serves 31 million passengers travelling between London, the West Midlands, the North West, North Wales and the central belt of Scotland.

Virgin has run the franchise since 1997, during which time passenger numbers doubled.

Essentially, FG have "promised" the goverment loadsamoney and massive improvements in services while slashing fares and significantly increasing passenger numbers, none of which is likely to happen, leaving thetaxpayer to foot the bill ....

[Omah]

BREAKING NEWS:A number of civil servants suspended over mistakes assessing bids for West Coast Main Line

[Omah]

Sir Richard Branson's Virgin will be reimbursed for the cost of its bid

You can only imagine Transport Secretary Patrick McLoughlin's reaction when he discovered there had been a catastrophic cock-up over the West Coast franchise.

Just three weeks ago he appeared before the Commons Transport Select Committee, assuring it that "due diligence" had been carried out.

Now it turns out that the sums did not add up after all and, as Mr McLoughlin put it, "it's going to cost us a lot of money."

The Department for Transport - which means the taxpayer - will reimburse the companies for the cost of their bids to the tune of £40m.

It leaves significant questions about the entire bid process for private franchises.

Virgin's Sir Richard Branson says he was convinced from the start that the process was flawed but his concerns were ignored.

Individual ministers and civil servants will find themselves in the firing line in coming days, but most damaging for the government will be the charge of incompetence.

The coalition has criticised the last Labour Government for the way it oversaw Whitehall procurement and signed up to expensive contracts which failed to get value for taxpayers' money.

This embarrassing episode will make it much harder for ministers to make that argument in future.

Shambles ..... :rolleyes:

[Omah]

http://www.bbc.co.uk/news/business-19816359

What the Department for Transport appears to have got chronically wrong in the case of the West Coast Main Line franchise is its assessment of the risk that attaches to projections by bidders of revenues in the latter years of the 15-year franchise.

To put it in terms that we can all understand, if I expect to earn a pound from my work tomorrow, that pound is much more likely to materialise than a pound that I might expect to earn in 2025 (if anyone will still employ me then).

By extension, when First Group and Virgin made their bids to run the line that connects London with Manchester and Glasgow, it would have been reasonable to expect the Department for Transport to put a much greater weight on revenues the companies expect to generate in the first five to ten years than in the latter five years.

However the Department seems to have understated the long-term risks when awarding the contract to First Group.

Or to put it another way, the Department made unrealistic assumptions about the growth of passenger numbers and inflation towards the back end of the franchise period - which had the effect of making First Group's bid seem significantly more attractive, because First Group was massively more optimistic about how passengers and revenues could grow after 2021 than was Virgin.

This error seems to have occurred both when Virgin was eliminated from the bidding contest, and when First Group's bid was reassessed against the Department's own forecasting model for future revenues.

Rarely if ever in the history of private provision of public services has there been such a bungle by Whitehall in the awarding of a highly valuable and important contract.

There appear to have been two giant errors by the Department for Transport in the way it adjudicated on who should receive the 15 year contract to run the West Coast Main Line.

First it unfairly discriminated against the incumbent, Virgin, by attaching far too great a probability to the projections by the rival bidder First Group that its revenues in the later years of the contract would be much bigger than Virgin's.

This mistake was compounded in the department's own internal forecasting model, which also attached too little risk to the possibility that passenger numbers and inflation would be significantly different from what First Group was projecting after 2021.

As a result, the government demanded too little guaranteed money for taxpayers from First Group.

But perhaps all this can be forgiven as an unfortunate technical error. What is perhaps more shocking is that Virgin has been complaining about the flaws in the bidding process for months, and yet the government pressed on with awarding the contract to First Group.

It was only after Virgin demanded a judicial review - after it sued - that the department was forced to acknowledge that it had made an egregious error.

Junior heads may now roll - in that three department officials have been suspended. But some would say that it is incumbent on the permanent secretary, Philip Rutnam, and the previous transport secretary, Justine Greening - reshuffled out only last month - to explain how they came so close to awarding a contract worth around £5bn on such a flawed basis.

That sums up the sheer incompetence of those involved in the franchise fiasco and the naivety of the Tory members responsible ..... :pipe:

[Kizzy]

Sir Richard Branson's Virgin will be reimbursed for the cost of its bid



Shambles ..... :rolleyes:

Whats that the public bailout for another ill thoughtout government balls up?
When will people realise the only people who benefit from privatisation are those with the fingers in the pie.

[Omah]

http://www.bbc.co.uk/news/uk-19944782

Virgin Trains will be asked to continue to run services on the West Coast Mainline for at least another nine months after the latest decision on the route franchise was scrapped.

The Department for Transport says it will enter into negotiations with Virgin for the "temporary" contract.

A competition will then be run for a new franchise agreement.

The decision to give FirstGroup the route from December was withdrawn over "technical flaws" in the bid process.

In an announcement to the London Stock Exchange, the DfT said it hoped Virgin would remain as the West Coast Mainline operator for between nine and 13 months while a competition was run for an interim franchise agreement.

This interim agreement will then run until a new long-term franchise agreement is in place.

"The government believes that this is the best way to ensure services are maintained and that there is no impact on passengers," it added.

Temporary relief for passengers and that nice Mr Branson ..... :idc: