Department of Transport scraps Great Western bidding competition plans

The Department for Transport today scrapped plans for a bidding competition for the franchise to run Great Western rail services.

The competition was one of three put on hold last October in the wake of the fiasco over the flawed awarding of the West Coast Main Line franchise.

Current operator First Great Western has had its contract extended until October and negotiations will start on a new two-year contract with the company, while plans for the longer term will be set out in the spring.

Meanwhile, operators of the two other franchises - Thameslink, Southern & Great Northern and Essex Thameside - will be offered interim two-year contracts while competitions are launched for longer-term franchises..

The department will grant a 28-week extension to the current Thameslink/Great Northern franchise operated by First Capital Connect after it ends in September and negotiate on a two-year extension. The franchise competition for a seven-year contract to run the service will be resumed

The competition for the Essex Thameside franchise, currently operated by c2c, will be resumed with a revised invitation to tender for a 15-year franchise issued to existing short-listed bidders over the summer.

The announcement was made in a statement to Parliament by Transport Secretary Patrick McLoughlin on the day of a highly critical report on the Government's handling of the £5 billion West Coast Main Line franchise competition.

FirstGroup was told it had won its bid to take over the franchise from Virgin Trains, but the decision was scrapped after the discovery of "significant technical flaws" in the way the procurement was conducted.

A committee of MPs today said the Transport Department embarked on an "ambitious, perhaps unachievable" reform in haste, and claimed that ministers and senior officials were lied to.

The DfT has estimated that the collapse of the competition and subsequent inquiries cost the taxpayer around £48 million, as companies demanded compensation for the cost of submitting bids.

But Mr McLoughlin today made clear that he does not envisage compensating companies involved in the three franchise competitions which were suspended last October.

In a statement, the DfT said: "In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, the Secretary of State does not believe it would be appropriate to reimburse bidders."

Today's announcement follows the publication earlier this month of the Brown Review, which found that the franchising system had made "a major contribution" to the rail network and should be restarted as soon as possible.

Announcing his decision, Mr McLoughlin said: "These plans mark an important step on the way to restarting the franchising programme, and while I am determined this should happen as quickly as possible we do need time to get this right.

"We have had to take some tough decisions regarding franchising, and while they may provide a challenge in the short term, I believe the lessons we have learnt will help deliver a more robust system in the future benefiting fare-payers and taxpayers alike.

"As always our priority is to ensure these changes will not impact on services or our commitment to improving the railways. Our latest step towards delivering a high-speed rail network which will link many of our major cities by a new fleet of state-of-the-art trains is testament to how we are delivering on that commitment."

Mistakes in the award of the West Coast Main Line franchise came to light after Virgin Trains launched a legal challenge to the decision to give the new contract to First Group.

Virgin has now been told it can run the service until November 2014.

A Government-commissioned report led by businessman Sam Laidlaw last month gave a damning indictment of how the competition was handled.

Three members of staff at the DfT were suspended over the episode.

The Transport Committee said in its report today that embarking on the reform of franchising on the UK's most complex piece of railway was "irresponsible" and needed greater senior executive involvement and more technical expertise.

"A more direct description of what happened is that ministers and senior officials were lied to about how the outcome of the franchise competition had been reached," said the MPs' report.

"We cannot categorically rule out the possibility that officials manipulated the outcome of the competition not only to keep First Group in the running for as long as possible, as Mr Laidlaw suggested, but to ensure that First got the contract.

"We recommend that the DfT find a way of undertaking a full email capture, reporting to someone suitably independent, to help get to the bottom of why DfT staff discriminated against Virgin and in favour of First Group during the franchise competition."

The committee said that money which could have been spent on transport projects had instead gone to consultants, lawyers and review teams, on work which achieved nothing, and compensated train operators for the DfT's "incompetence".

Louise Ellman, chairman of the committee said: "This episode revealed substantial problems of governance, assurance, policy and resources inside the Department for Transport.

"Embarking on an ambitious, perhaps unachievable, reform of franchising, in haste, on the UK's most complex piece of railway was an irresponsible decision for which ministers were ultimately responsible. This was compounded by major failures by civil servants, some of whom misled ministers.

"Many of the problems with the franchise competition, detailed in the Laidlaw report, reflect very badly on civil servants at the DfT. However, ministers approved a complex, perhaps unworkable, franchising policy at the same time as overseeing major cuts to the Department's resources. This was a recipe for failure which the DfT must learn from urgently."

A DfT spokesman said: "Following the collapse of the West Coast refranchising programme, the Department for Transport was subject to two independent inquiries and an internal HR investigation. These have now concluded but the disciplinary process is ongoing.

"Independent experts concluded the collapse of the West Coast franchise programme was caused by a number of failures, including inadequate planning and weak governance structure but not systematic failings in the Department. The examination of emails from key officials found no evidence that this was anything other than simple human error.

"We are putting in place measures that will prevent this embarrassing episode from happening again and the Secretary of State has given an undertaking to keep Parliament updated on costs.

"While we are currently working to minimise the impact on the taxpayer, we estimate the failure of the competition and subsequent independent inquiries is around £48 million."

PA