Transport Secretary Patrick McLoughlin has cancelled the competition to run trains on the West Coast Main Line following discovery of “significant technical flaws” in the way the franchise process has been conducted. He has also ordered two independent reviews –the first to look into what went wrong with the West Coast competition and the second to consider the wider rail franchise programme. Three officials involved in the competition have been suspended.

Other rail franchise competitions beyond the WCML one have been put on hold until completion of the reviews later this year. Department for Transport will reimburse costs to the four companies who bid for the 13 year West Coast franchise – a sum thought to be around £40M.

Incumbent rail operator Virgin Trains had lost out to FirstGroup in August for the right to run services on the London to Glasgow route from the end of this year. Virgin had bid £4.8Bn for the franchise, with FirstGroup bidding £5.5Bn. Virgin immediately challenged the decision and had sought a judicial review in the High Court.

Sir Richard Branson, founder of the Virgin Group said in a blog last night: “We were convinced the process was flawed but despite our best efforts we were met with silence by the Department for Transport. From the moment we found out that FirstGroup had been made preferred bidder with a completely unrealistic bid, we questioned the way the offers had been assessed.”

FirstGroup said in a statement that it was extremely disappointed with the cancellation of the West Coast franchise competition and awaits the outcome of the DfT’s inquiries.

The Institute of Directors’ director general Simon Walker said: “It is shocking that such a crucially important process has gone so seriously wrong. Businesses need a stable, reliable rail network and certainty in the provision of key infrastructure. Government tendering processes must be whiter than white, or firms will be deterred from applying to take contracts on which will harm service delivery."

Read the Department for Transport’s statement in full at http://www.dft.gov.uk/news/press-releases/dft-press-20121003a

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