THE COALITION’S rail policies have been left in disarray by the collapse of the West Coast handover, after “terrible mistakes” in the bidding process were uncovered.
Department for Transport officials met with erstwhile winning bidder FirstGroup and current operator Virgin Trains yesterday to make peace and ensure the intercity rail route continues to run after Virgin’s contract runs out on 9 December.
The government has also paused bidding on three other routes, leaving a number of firms in limbo.
Significant errors, thought to be linked to collateral offered by the bidders based on long-term inflation and passenger projections, were uncovered while the DfT was preparing to fight a judicial review brought by Virgin.
New transport secretary Patrick McLoughlin said the mistakes were “wholly and squarely” made by his department, and promised to pay back around £40m spent by train firms on their proposals. He said he was not told about the full extent of the widespread problems until Tuesday, despite the looming court case.
Three unnamed civil servants have been suspended pending two investigations. A probe into the West Coast franchise will be completed by Centrica boss Sam Laidlaw and former PwC exec Ed Smith by the end of the month, while Eurostar chairman Richard Brown will report on the entire franchising process by the end of the year.
Sir Richard Branson said of the decision: “I respect the new minister for taking it on the chin... and agreeing to move the process forward.”
But Tim O’Toole, chief executive of FirstGroup, has not yet ruled out legal action, after his company’s shares crashed 21 per cent yesterday.
The transport select committee plans to recall McLoughlin and his permanent secretary to explain why just a few weeks ago they repeated that the process was “robust” – a term often used by Justine Greening, the transport secretary until last month’s reshuffle.
Labour leader Ed Miliband called on the government to consider renationalising the route as part of its efforts to get to the bottom of the “fiasco”.
“David Cameron has got to get a grip on this government. It’s just yet another chapter in incompetence, and it’s the British people picking up the bill,” said Miliband.
Business groups warned that the shock collapse could prompt firms to rethink bidding for work in the UK. “Government tendering processes must be whiter than white, or firms will be deterred from applying to take contracts on, which will harm service delivery,” said Simon Walker at the Institute of Directors.
Others, including ousted Welsh minister Cheryl Gillan, said the franchise disaster casts doubt on the future of the proposed High Speed 2 (HS2) route between London and the North.