Virgin Takes Legal Action Over Train Deal

Virgin Takes Legal Action Over Train Deal


Virgin Trains goes to court in a bid to stop the Government awarding the West Coast main line franchise to a rival.


7:07pm UK, Tuesday 28 August 2012



Video: Branson: Court Was The Last Option
Virgin Trains is launching court proceedings in a bid to hold on to its West Coast main line franchise.


The move came hours before the Government was due to sign off a controversial deal giving responsibility for the route to FirstGroup.

Virgin said it had tried for three weeks to get "clarity" about the decision by the Department of Transport but had been "refused information".

A spokesman said: "We are left with no choice but to commence court proceedings as we believe the procurement process has ignored substantial risks to taxpayers and customers of delivering FirstGroup's bid over the course of the franchise."

The company claimed the bidding process had been geared to selecting the highest risk tender and that the procedure needed to be independently audited.

Virgin boss Sir Richard Branson said in a statement: "We had hoped that Parliament or an external review would be able to scrutinise this badly-flawed process before the franchise was signed.

"However that opportunity would be denied if the DfT follows through with its determination to rush through the process before Parliament returns next week.

"That ignores the wishes of more than 150,000 people who signed the Downing Street e-petition in 10 days, the Labour Opposition, two important Commons committees and many backbench Conservative MPs who wanted a debate before the decision is taken, not a post-mortem afterwards.

"We have not taken this decision lightly, but it is the only course now available to try to unravel this sorry process."

Transport Secretary Justine Greening had said earlier that the contracts would be signed despite MPs wanting to examine the new arrangement.

Ms Greening also insisted that Virgin would have been "perfectly happy" with the bidding process had they won the right to run the line for the next 13 years.

FirstGroup echoed the reaction in a statement on the legal challenge.

A spokesperson said: "There has been no complaint about the process, which was carefully described in advance, until Virgin Rail Group had lost commercially."

Virgin Trains has managed the route for 15 years but the Government controversially awarded the new contract to FirstGroup last week.

Sir Richard called the bidding process "insane" and later offered to run the route free of charge to allow for the decision to be re-examined.

Labour has backed calls for a review and tens of thousands, including Mo Farah, Lord Sugar and Jamie Oliver, have signed an online petition calling for a rethink.

However, Ms Greening said on Tuesday that the Government plans to "push on with signing the contract with FirstGroup".

She added: "Although I have a huge amount of respect for Virgin and the work they have done on the line, I suspect that, had they won the bid, they would have been perfectly happy with the process."

Labour said MPs had been denied the chance to raise concerns about the deal because it was announced during the Commons summer recess.

In a letter to Mrs Greening, shadow transport secretary Maria Eagle also suggested FirstGroup's bid had only been accepted because it was worth more than Virgin's.

She also warned about the impact on fares and levels and quality of services, as well as the risk of the contract being cut short

Sour grapes.....he's like Murdoch.....he wants to own everything.

The Government has not yet signed off a new contract for the West Coast mainline rail franchise due to a challenge from Virgin.

Transport minister Theresa Villiers said "competition remains live" after it emerged the Government had not yet completed the deal with FirstGroup because of a legal challenge from Sir Richard Branson's Virgin Rail, which currently operates the route.

But she said the coalition would "robustly" defend the case following its controversial decision to award the West Coast mainline contract to rival bidders FirstGroup.

The announcement was made in a written statement to the Commons.

It said: "As a result of a legal challenge, which the Government intends to defend robustly, we have not yet signed the contract with First West Coast, and consequently the competition remains live."

Virgin Rail has accused Transport Secretary Justine Greening of acting "unlawfully", "irrationally" and against EU law by awarding the £13.3bn contract to FirstGroup.

But Ms Villiers told MPs the bid by FirstGroup would offer "significant improvements" for passengers.

She said: "The West Coast Main Line is one of the most important intercity rail passenger routes in the country and it is also a valuable public asset.

"Over the last decade and more, taxpayers have invested £9bn to upgrade the infrastructure.

"It is a profitable franchise for the current operator and after significant public investment in the line the Government is rightly seeking to get a substantial return for passengers and taxpayers."

FirstGroup's bid would provide more trains on the route, with 12,000 extra seats per day from December 2016, new services and station upgrades.

"Taken together, I believe that the commitments in First West Coast's bid represent significant improvements for passengers and will provide a good return for the taxpayer," she said.

But she added: "I cannot give the full commercial details of the winning bid, or indeed of the other bids.

"Nor is it usual or appropriate - once litigation proceedings have commenced - for the Government to comment on the detail of that, other than to say that our legal advisers are fully engaged in addressing and responding to those proceedings."

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EVERYTHING'S ON HOLD

Richard Branson went to Parliament today to officially to complain about First Group winning the bid. In the meantime, Cameron moved the Transport Minister who awarded the bid to FirstGroup to another dept....he really is a s***.!!!

Branson was interviewed tonight on Channel 4 by Kathy Newman and started giving out facts and figures about how FirstGroup were quoting sales which he said could never be acheived and he had started the line ffrom sctatch. Kathy was ready for him and fearless, pointing out that apart from some original tracklaying Branson had not spent any money on Capital expenditure in 13 years. Also, his claim that FirstGroup could not make profits of 4% in the first 2 years after spending on infrastructure , Kathy said, why not? you have been making profits of 10%. He was lost for words .

Branson Calls Rail Rival's Bid 'Preposterous'


Virgin boss Sir Richard Branson criticises the Department for Transport as he gives evidence to MPs.


9:54am UK, Tuesday 11 September 2012



Video: Branson Defends West Coast Action
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By Glen Oglaza, Political Correspondent

Virgin boss Sir Richard Branson has told the House of Commons Treasury select committee that the winning bid by First Group to run The West Coast was “preposterous”.

At least one MP accused him of sour grapes, while First Group's CEO Tim O'Toole claimed that Sir Richard was wrong in his assumptions because he hadn't seen First Group’s winning bid and doesn't know what was in it.

Since losing the franchise last month, Virgin has mounted a legal challenge, claiming the Department for Transport did not follow its own rules on risk assessment and deliverability.

Sir Richard told MPs that Virgin had lost rail franchises three times before, once for the Cross Country franchise and twice to run the East Coast line.

In 2009, the East Coast mainline from London to Glasgow was temporarily nationalised when GNER and then National Express failed to run it profitably.

Sir Richard said the time had come to “draw a line in the sand” and challenge the decision in the courts.

He claimed that had Virgin won the East Coast franchise, the trains and services would be better and the East Coast would be used by ten million more passengers a year.

Sir Richard said: "This bid by FirstGroup is absolutely preposterous. It's completely ridiculous. It is literally taking the system for a ride."

He added that Virgin had asked the Transport department many questions about the decision to strip Virgin of the franchise, but replies "have not been forthcoming".

Conservative MP Kwasi Kwarteng said some people felt Sir Richard was taking the decision badly, and that in taking legal action Virgin is "bringing in the heavy artillery", with Branson himself "using your prestige and fame" to force the government to change the decision.

Sir Richard replied that across various modes of transport he had "created a number of ventures with the principle aim of making a real difference to those sectors".

He went on: "The profit motive is not important to me. I am lucky enough to be able to afford breakfast, lunch and dinner every day for the rest of my life." But he said the decision was bad for passengers and bad for the country.

The Virgin legal challenge has forced the government to delay the signing of the new West Coast franchise which had been due to start in December.

After Sir Richard gave evidence, it was the turn of First Group's CEO Tim O'Toole, who challenged Virgin's version of events, saying that Sir Richard and his executives were wrong about First Group's bid because they had never seen it.

The allegation that the First Group model "was back loaded", ie would only return substantial profits to the government in the last three years of the franchise, was incorrect, and the Department for Transport had thoroughly assessed risk and deliverability and had awarded the franchise to his company as a result.

He cited First Group's success in running the Trans-Pennine line, which had seen “fantastic growth” which he hoped to replicate on the West Coast line.

Sir Tim said his proposals included a new class of travel, below First Class but offering enhanced services compared to Standard Class.

He said he expected fares to rise in line with inflation, and that staffing levels would remain the same, at least for the first five years.

Asked if First Group might fail as the operators of the East Coast line had failed, Mr O'Toole replied: "I don't think there is any chance of our handing back the keys."

Sour grapes......you lost, get over it.

Shame on you Cameron for removing the very competent Transport Minister as soon as you knew Branson was to appeal!!.

P.S. I am becoming more inclined to think Boris would make a good PM, he has a rapport with the public that Cameron and Osborne have never had.

Incompetence or yet more corruption?

West Coast Franchise Is Thrown Off Track


The future of one of the country's busiest railways is in chaos after ministers scrap the bidding process and start again.


8:03am UK, Wednesday 03 October 2012



Video: Virgin's current franchise deal ends in December
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The decision to award the West Coast Main Line franchise to FirstGroup has been cancelled due to flaws in the way the process was conducted.

In a major embarrassment for the Government, Transport Secretary Patrick McLoughlin was forced to admit that his department had made "deeply regrettable and completely unacceptable mistakes".

The flaws uncovered by the Department for Transport (DfT) relate to how officials evaluated the level of risk in the different bids.

Mistakes were made in the way inflation and passenger numbers were taken into account and how much money bidders were then asked to guarantee as a result.

Virgin Trains, who lost out in the bidding process to FirstGroup, had warned the amount offered by its rival would have made the deal unprofitable and branded the result "insane".

Its boss Sir Richard Branson had been seeking a judicial review of the Government's decision. The cancellation of the new contract came just 24 hours before the a High Court hearing in the case.

The mistakes were revealed by officials gathering evidence for the High Court proceedings, suggesting they may not have been uncovered for some time had the contract gone ahead.

DfT permanent secretary Philip Rutnam said: "The errors exposed by our investigation are deeply concerning. They show a lack of good process and a lack of proper quality assurance.

"I am determined to identify exactly what went wrong and why, and to put these things right so that we never find ourselves in this position again."

Sky News political correspondent Sophy Ridge said she understands Mr McLoughlin only found out about the problems two days ago.

Civil servants are now expected to be suspended and two independent reviews into the competition process have been launched.

FirstGroup had been due to take over the running of the London to Scotland line on December 9 when the current franchise runs out and run the service for at least 13 years.

The Government says it is now "resolving urgently" what will happen now and attempted to reassure passengers.

Mr McLoughlin said: "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.

"The tickets that people have booked will continue to be valid and passengers will be able to make their journeys as planned."

All the initial companies vying for the deal will have to have their bid costs refunded and an initial review into the fiasco will report by the end of the month.

Meanwhile, all the other outstanding franchise competitions (Great Western, Essex Thameside and Thameslink) have been suspended.

FirstGroup, whose shares were down 15% in early trading, said it had no clue there was anything wrong with the franchise process until it was contacted by the Government.

""We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries," a spokesman said.

"The DfT has made it clear to us that we are in no way at fault, having followed the due process correctly. We submitted a strong bid, in good faith and in strict accordance with the DfT's terms."

Virgin welcomed the "frank announcement" and pledged to help out by continuing to run the service until the independent reviews are completed.

Sir Richard, writing on his blog, said Virgin had always been convinced the process had been flawed and called FirstGroup's bid "completely unrealistic".

Shadow transport secretary Maria Eagle called on Mr McLoughlin to reveal the full details about what happened and how much the "shambles" will cost the taxpayer.

"The West Coast rail franchise fiasco has yet again exposed the shambolic incompetence of this Tory-led government," she said.

The Government has canelled the bidding for West Coast trains, CEO of First group is furious. Three members of staff

in the Transport dept, have been suspended , apparently the terms of the bid was flawed.

75% OF PEOPLE IN A MSN POLL SAID THEY WANTED RAILWAYS NATIONALISED

Panda wrote:The Government has canelled the bidding for West Coast trains, CEO of First group is furious. Three members of staff

in the Transport dept, have been suspended , apparently the terms of the bid was flawed.

Isn't there some question of the failed Bombardier bid of 2008 for 1400 railway carriages being flawed and the same members of staff involved?

malena stool wrote:

Panda wrote:The Government has canelled the bidding for West Coast trains, CEO of First group is furious. Three members of staff

in the Transport dept, have been suspended , apparently the terms of the bid was flawed.

Isn't there some question of the failed Bombardier bid of 2008 for 1400 railway carriages being flawed and the same members of staff involved?

Hi malena, don't know anything about that....do tell.!!

The Railways Union Guy was interviewed and he said the Railways should never have been privatised, especially because, there are so many different Companies involved, one for track maintenance , several different companies operating various routes etc. The Interviewer argued that since the Railway was privatised the trains are on time , train stations are cleaner etc.

Panda.

Panda wrote:

malena stool wrote:

Panda wrote:The Government has canelled the bidding for West Coast trains, CEO of First group is furious. Three members of staff

in the Transport dept, have been suspended , apparently the terms of the bid was flawed.

Isn't there some question of the failed Bombardier bid of 2008 for 1400 railway carriages being flawed and the same members of staff involved?

Hi malena, don't know anything about that....do tell.!!

The Railways Union Guy was interviewed and he said the Railways should never have been privatised, especially because, there are so many different Companies involved, one for track maintenance , several different companies operating various routes etc. The Interviewer argued that since the Railway was privatised the trains are on time , train stations are cleaner etc.

Panda, I think I may have caught the back end of the report on East Mids TV news, added 2+2 ands came to the completely wrong answer. What I believe was reported was:-
Quote.

http://www.bbc.co.uk/news/uk-england-derbyshire-19832874

Bombardier contract review demanded by MPsMid Derbyshire MP Pauline Latham said there was now an opportunity to revisit the decision.

Six MPs are calling for a review of a contract which snubbed Derby trainmaker Bombardier.

In 2011, the £1.4bn deal for carriages for London's Thameslink project was awarded to German firm Siemens.

This prompted fears for the future of the 3,000-strong Bombardier workforce and even the factory's existence.

Now, with the rethink over the West Coast mainline franchise, the MPs have demanded the Department of Transport's (DoT) decision be looked at again.

The loss of the Thameslink contract led to a series of protests in Derby and Westminster, claiming it undermined British manufacturing.

Despite this, the government insisted the selection process had been fair and there would be no U-turn.

But earlier this week the Transport Secretary Patrick McLoughlin suspended the awarding of the West Coast franchise, admitting the process was flawed.

This was only weeks after he appeared before the Commons Transport Select Committee, assuring it that "due diligence" had been carried out.

Four Conservative MPs; Mid Derbyshire's Pauline Latham; Amber Valley's Nigel Mills; South Derbyshire's Heather Wheeler and Burton's Andrew Griffiths have now written to Mr McLoughlin to ask for the signing of the Thameslink contract, due in January 2013, to be postponed.

Mrs Latham said: "The Department for Transport isn't working properly for the benefit of taxpayers and I do believe this is a limited opportunity, but an opportunity, for that department to look again at the contract they awarded to Siemens.

"It hasn't gone through yet, it hasn't been signed, and I think they could and should look again at the contract because I don't want any more jobs to be lost from this area because it is very important to the economy of Derby."

Backing the demand are Derby Labour MPs Margaret Beckett and Chris Williamson.

A DoT said: "We have every confidence in the evaluation process that was undertaken in 2011 for new fleet of new trains for the Thameslink project.

"Siemens was awarded preferred bidder status as its bid was best value for money."

By early 2012 Bombardier had laid off about 1,000 contractors and 200 permanent staff but said there was enough work to guarantee the factory's "short term" future.
Unquote...

Sorry for posting half heard unsubstantiated comments....

Morning malena, we all make mistakes , don't do it again.

Seriously now, I remember the trains contract and was furious at the time.

"In 2011, the £1.4bn deal for carriages for London's Thameslink project was awarded to German firm Siemens."

Bombardier is the only U.K. Train manufacturer left and the contract should have been awarded to them.

At least there is to be a review and I suggest the existing Transport Dept Staff are not fit for purpose and the Heads be sacked .

When you think about it, is there any Government dept that is efficient and far sighted.?.
"

Panda wrote:Morning malena, we all make mistakes , don't do it again.

Seriously now, I remember the trains contract and was furious at the time.

"In 2011, the £1.4bn deal for carriages for London's Thameslink project was awarded to German firm Siemens."

Bombardier is the only U.K. Train manufacturer left and the contract should have been awarded to them.

At least there is to be a review and I suggest the existing Transport Dept Staff are not fit for purpose and the Heads be sacked .

When you think about it, is there any Government dept that is efficient and far sighted.?.
"

Morning Panda, I've given deep thought to this question and yes there is a Department of the UK Government which is 100% on the ball and 200% efficient:-
The Department which Reviews and sets MPs Salaries.
http://www.politics.co.uk/reference/mps-pay-and-expenses
Follow the link and see how they've got their pay and pensions on a plate.

It's what you call looking after Number 1 malena.

Glen Oglaza

Political Correspondent

More from Glen | Follow Glen on Twitter


So Sir Richard Branson is exonerated and the Government has been left with buckets of egg all over its face.

This is not so much a U-turn as a total derailment.

When Sir Richard told the Transport Select Committee last month that the awarding of the West Coast franchise to FirstGroup was "absolutely preposterous", some put his outrage down to sour grapes at losing.

We had seen Sir Richard annoyed before - he was not best pleased when Virgin failed to win the franchise to run the National Lottery - but this anger was of an entirely different order.

Virgin had run the West Coast successfully and felt that the figures had not been correctly calculated by the Department for Transport and that it had also failed to properly assess the risk.

The then Transport Secretary Justine Greening - a professional accountant - insisted the process had been fair and robust, but she was wrong - a mistake that has left the taxpayer with a £40m bill.

Virgin challenged the decision and was due to have its case heard at the High Court on Thursday but, at the eleventh hour, the Government said it would not contest the judicial review being sought.

Ms Greening's successor, Patrick McLoughlin, was left to put out an abject statement in the middle of the night admitting officials had got their numbers wrong.

Two reviews have been launched and some civil servants have already been suspended.

The bidding process for three other rail franchises has also been put on hold as the inquest into the West Coast errors begins.

Mr McLoughlin has emphasised that neither Virgin nor FirstGroup, which won the franchise, was in any way culpable.

Labour has been quick to react to what it called another example of Government "omnishambles" (take another bow, The Thick of It).

Shadow Transport secretary Maria Eagle is describing the situation as a "fiasco" which has "yet again exposed the shambolic incompetence" of the Government.

Labour leader Ed Miliband told Sky News "the Government needs to get a grip", adding: "People will be appalled by the incompetence of a government wasting money at a time of austerity".

The announcement came just hours after the Labour leader called the coalition a "make-it-up-as-you-go-along, miserable shower" in his party conference speech.

Business chiefs have joined in the criticism, saying it is "shocking" that such a crucial deal could go so badly wrong.

Some 30 million passengers use the West Coast line every year so what about the long-suffering public?

The Government has already started discussions with Virgin, who will be keen to stay in charge while the mess is sorted out.

Passengers are being reassured that the line will continue to run as now, with the same trains, the same staff, and the same prices.

Even if that is true, the taxpayer is still having to stump up the significant cost of repaying the initial bidders - and the Government has been hugely embarrassed.

THE RAIL FIASCO COULD COST OVER £100 MILLION,I HAVE CALCULATED,I HAVE BETTER MATHS SKILLS THAN THE 3 CIVIL SERVANTS THEY SACKED!

Badboy wrote:THE RAIL FIASCO COULD COST OVER £100 MILLION,I HAVE CALCULATED,I HAVE BETTER MATHS SKILLS THAN THE 3 CIVIL SERVANTS THEY SACKED!

Badboy, the Transport Dept , like most other Government departments has shown it's incompetence. I can honestly say I

have never known such disasters as this Conservative Government is piling up.

Virgin Trains Secures West Coast Extension


After the shambolic West Coast franchise award to FirstGroup, Virgin Trains is to run the service temporarily.


7:41am UK, Monday 15 October 2012

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Virgin Trains has agreed to continue running the West Coast Main Line for up to 13 months while the government resolves the flawed process that saw FirstGroup initially awarded the franchise.

Virgin Trains Holds On To West Coast Line


Virgin will continue to run the West Coast franchise for the next 23-months, after the contract was withdrawn from FirstGroup.


7:23am UK, Thursday 06 December 2012

Virgin Trains has run the West Coast Main Line since 1997

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Virgin Trains says it has reached an agreement to operate services on the West Coast Main Line for the next 23 months.

It comes after an embarrassing U-turn by the Department for Transport (DfT), which admitted it got its sums wrong after initially awarding the franchise to rival FirstGroup.

Sir Richard Branson, the founder of Virgin, described the bidding process as "insane" and mounted a legal challenge to the decision.

Transport Secretary Patrick McLoughlin said: "We are determined to ensure not only that passengers continue to experience the same levels of service they have in the past, but that services improve.

"There will be a new hourly service linking Glasgow and London and we will also work with Virgin Trains to explore other service improvements."

Virgin said there will be up to 28,000 more seats each day on the line because of the delivery of 106 new Pendolino carriages.

==========================

It is reported that the botched bid will cost the U.K. Tax payer £100's of millions I smell a rat!!!! Another incompetent

Government department.........Monkeys could do better.!!!

Rail travellers hit by 10 per cent fares rise


Train operators have announced fare rises of up to 10 per cent, prompting accusations they were burying bad news on the day the Government’s handling of the West Coast Main Line franchise was criticised in two reports.








Train passengers face large fare rises






By David Millward, Transport Editor

6:18PM GMT 06 Dec 2012





The firms slipped out the increases on the day the Government's handling of the West Coast Main Line franchise was criticised in an official report.


The figures are usually released in November and passneger groups and unions yesterday (thurs) accused the Association of Train Operating Companies of delaying them to coincide with the Laidlow report into the fiasco.


While the rise in the cost of season tickets is capped by the Government, rail companies are given a free hand for the majority of other journeys, especially discounted tickets.


An analysis of the latest fare rises, which come into force in January showed passengers buying an off-peak return trip from Birmingham to London on Chiltern will face a 10 per cent rise with the cost of the journey going up from £25 – £27.50.


An “anytime” return trip between London and Norwich will go up by 9.2 per cent, from £98.60 to £107.70.



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First Great Western, a company whose performances in the past has triggered passenger protests, has pushed up the cost of a return trip between London and Plymouth from £103 to £111.50.

The rises were condemned by Anthony Smith, chief executive of the consumer watchdog, Passenger Focus.

“It’s disappointing that the restraint shown on season ticket prices has not been extended to all Off-peak and Anytime fares.

“In the current economic climate, already hard-pressed passengers who face these rises will feel the pinch.”

“The passenger going to buy their ticket on a cold January morning won’t be paying an ‘average fare’; they will be paying a fare that may have gone up by more than that.”

The average rise in unregulated fares is 4.2 per cent, which is more than the rate of inflation.

"It is insulting to their customers for the train companies to use the Government's franchise fiasco to bury an announcement on fare rises.,” said Maria Eagle, the shadow transport secretary.

“It's disingenuous for them to imply ticket price rises will be as low as they claim.”

Manuel Cortes, general secretary of the Transport and Salaried Staffs Association, was equally scathing.

"Not only do ATOC try to bury bad news by announcing fare increases on the same day as the West Coast franchise fiasco report, they then try to hide the massive hike in unregulated

off peak fares, three times more than inflation.

"Once again, they are hitting those who can least afford it the hardest, the old, the young and families who travel off peak because cannot afford what Philip Hammond called "eye wateringly expensive" regulated fares.

"They make Del Boy Trotter look like an honest businessman. These increases are normally announced in November but have been deliberately held back to avoid another own goal for

the private industry which relies on £4 billion of taxpayer subsidies every year."

A spokesman for the Association of Train Operating Companies denied it was exploiting the row over the West Coast Main Line to bury bad news.“We put our announcement back to avoid it clashing with the Autumn Statement.”








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Richard Branson is set to make £9 million a year until it is finally decided who gets the franchise, he has said he will give the money to charity.........another inept Government Dept.!!!

West Coast train line: Department for Transport officials broke their own rules over bid, damning report finds


Government officials gave “inaccurate reports” to ministers, broke their own rules and persisted with a flawed bid process they knew risked legal challenge, a damning report into the West Coast rail fiasco has found.








The Transport Secretary pulled the auction just hours before he was due in court to face a legal challenge from Sir Richard Branson's Virgin Rail Photo: AFP





8:12PM GMT 06 Dec 2012

27 Comments




The investigation by Centrica chief executive Sam Laidlaw into the shambolic franchise competition also found that minutes to crucial meetings had been mysteriously “replaced with even shorter final minutes” and briefings to the Prime Minister’s office and the Treasury failed to mention key “details or concerns”.


Officials on a key committee were also advised by an in-house lawyer that they could use discretion when evaluating a crucial component of bids – despite this being forbidden by guidelines.


The botched process forced Transport Secretary Patrick McLoughlin to pull the auction on October 3 and postpone all other rail bids, plunging the industry into chaos. He took his decision just hours before he was due in court to face a legal challenge from Sir Richard Branson’s Virgin Rail, furious at a process that had seen Mr McLoughlin’s predecessor Justine Greening award a 14-year contract to FirstGroup.


On Thursday a contrite Mr McLoughlin admitted the Laidlaw report made “extremely uncomfortable reading for the department”.


Louise Ellman, chairman of the House of Commons Transport Committee, said the report “begs serious questions about ministerial accountability”, highlighting how the poor reporting lines within the Department for Transport led to ministers being not “sufficiently aware” of problems or “even misled”.



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The key failings surround the calculation of the subordinated loan facility (SLF) – the amount bidders were required to pledge against the risk of them walking out on the contract. FirstGroup put up £190m – now deemed no more than half of what it should have – for a bid promising to pay £13.3bn over the contract, assuming a 20-month extension to 2028. Virgin pledged £40m against an £11bn offer.

The report found a “continuing lack of transparency” over a financial model used by the department and the one it told bidders to use, exacerbated by officials’ failure to adjust GDP forecasts for inflation.

This was compounded at a meeting on June 27 of the Contract Awards Committee, which decided the final amount of SLF.

Aside from discovering a “large degree of inconsistency” in officials’ accounts of that meeting, which the report called “surprising”, it also found advice was provided by an un-named in-house lawyer that “it was open to the DfT to exercise discretion in sizing the SLF requirements”.

The report found such advice was given “without taking into account the DfT’s own published guidance” forbidding the use of such discretion.

The meeting was chaired by Kate Mingay, one of three civil servants hastily suspended over the bid fiasco by Permanent Secretary Philip Rutnman, but reinstated on Thursday.

The report makes clear that a partner from the DfT’s external legal adviser Eversheds subsequently raised concerns.

The partner, understood to be Annie Harris, warned that there was “inconsistency between the way in which risk adjustments had been made to the various bids” and that the DfT may have “exercised a discretion in sizing the SLF... that was inconsistent with the SLF guidance”.

While the report says Eversheds should have raised the issue more vehemently, it is chiefly critical of the officials, noting: “This information appears not to have been formally escalated within the DfT by any of the participants in those discussions.”

It goes on to say that, despite having seven weeks between the meeting and the announcement by the then rail minister Theresa Villiers of the winning bidder, for officials to report concerns: “These opportunities appear not to have been taken.”

Indeed, “innacurate reports as to how the SLF numbers had been produced by the DfT were made to senior DfT decision makers and ultimately” to Ms Villiers.

Margaret Hodge, chairman of the Public Accounts Committee, described the DfT’s handling of the bid as “a first class fiasco”, costing the taxpayer £8.7m so far in staff time, advisor fees and legal costs – on top of the £40m of bid costs refunded to bidders.

MPs to probe 'inaccuracies' in West Coast rail bid reports


Sam Laidlaw will be quizzed on Tuesday over the precise nature of the “inaccurate reports” to ministers he identified in his investigation into the West Coast rail bid fiasco.








The deal will see 15-year incumbent Virgin Rail operate the London-to-Scotland line until November 2014 Photo: Alamy






By Alistair Osborne, Business Editor

9:30PM GMT 16 Dec 2012

8 Comments




The Centrica chief executive appears before MPs on the Transport Committee, who are keen to get to the bottom of issues he appeared to gloss over in his 84-page report.


A key issue is exactly what civil servants attending the June 27 Contracts Awards Committee (CAC) told their superiors, and ultimately former rail minister Theresa Villiers, over how they determined the size of the subordinated loan facility (SLF) put forward by bidders.


This is the amount the Department for Transport (DfT) required bidders to pledge against the risk of them walking out on the contract for the London-to-Scotland line. FirstGroup, which had been awarded the contract before Transport Secretary Patrick McLoughlin pulled the competiton on October 3, had pledged £190m. Incumbent operator Virgin Rail had offered a £40m SLF against a lower and less risky bid.


Mr Laidlaw’s report found that, contrary to the rules of the competition, an in-house lawyer had told the CAC that “it was open to the DfT to exercise discretion in sizing the SLF requirements”.


However, following the committee meeting, Annie Harris, a partner from the DfT’s external legal adviser Eversheds, warned that the DfT’s use of discretion may have been “inconsistent” with the rules of the competition.



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Mr Laidlaw pointed out that “there were a number of opportunities for a full and proper explanation as to how the SLF requirements had been sized to be formally escalated and reported within the DfT in the seven weeks after the CAC meeting and before the award announcement was made on 15 August 2012. These opportunities appear not to have been taken.”

He added that “inaccurate reports as to how the SLF numbers had been produced by the DfT were made to senior DfT decision makers and ultimately to the then Minister of State” – Ms Villiers, who has since been promoted to Northern Ireland Secretary.

Mr Laidlaw added: “The material on which these senior DfT decision makers and the Minister made their decisions to award the ICWC [Inter City West Coast] franchise to First included these inaccurate reports.”

Asked to explain the nature of these reports – and whether they were verbal or written – a spokesman for Mr Laidlaw declined to comment.

There is speculation that one such report is the minute of the CAC meeting. Mr Laidlaw’s report found that “unhelpfully” the “short draft minutes of the [CAC] meeting... were replaced with even shorter final minutes”.

The meeting was chaired by Kate Mingay, the DfT’s director of commercial and technical services, who was suspended the moment the West Coast auction was pulled. After a court fight, she is now returning to work.

Louise Ellman, chairman of the Transport Committee, said the “inaccurate reports” referenced by Mr Laidlaw were “certainly an area we will be looking at”.

Immediately after Mr Laidlaw’s report was published earlier this month, Ms Ellman noted it “raised serious issues about lines of responsibility and accountability within the department”, with the result that ministers could have been “misled” by officials.