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West Coast franchise debacle to cost £50m

Mistakes made in the West Coast franchise competition will cost the taxpayer £50m, according to an MP report published on Tuesday.

The Department for Transport (DfT) cancelled bidding for the West Coast mainline service after FirstGroup secured the contract from Virgin Trains, due to “errors in the procurement process.”

The Committee of Public Accounts, chaired by Labour MP Margaret Hodge, said mistakes made by DfT would result in a direct £50m cost, most of which will be spent on compensation to the bidders.

MPs highlighted errors in “basic processes” such as the identification of risk capital and the inclusion of inflation in its calculations.

The report also said DfT applied discretion in deciding the amount it asked from bidders, which was not allowed in the stated process.

As a result of these oversights, FirstGroup was asked to supply a lower subordinated loan while Virgin Trains were asked to provide a higher subordinated loan, which MPs said left the Department open to legal entanglements and led to the ultimate failure of the process.

A lack of leadership was also blamed for the competition’s downfall and MPs further criticised the Department for not learning from previous mistakes and advice given in the Committee’s 2010 report, “The failure of Metronet.”

Margaret Hodge, MP for Barking, commented: “The Department for Transport’s complete lack of common sense in the way it ran the West Coast franchise competition has landed the taxpayer with a bill of £50 million 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.

“For three months, there was no single person in charge at all. Not only that, there was no senior civil servant in the team responsible for the work, despite the critical importance of this multi-billion pound franchise.

“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.

“The Department needs to get its house in order and put basic principles and practices at the heart of what it does.”

This was posted in Bdaily's Members' News section by Miranda Dobson .