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The Department for Transport ("DfT") announced On 15
August 2012, at the end of a 15 month procurement process, that it
intended to award the West Coast Main Line rail franchise
("the franchise") to First West Coast, a subsidiary of
First Group. On 3 October 2012 the DfT announced that it was to
cancel the award after discovering significant flaws within the
procurement process, leaving the procurement system in the UK in a
precarious position.
The Facts
Virgin Trains has run the franchise for the past 13 years, with
the current contract due to expire on 9 December 2012. After the
DfT announced that it was to award the franchise to First West
Coast, more than 150,000 people signed a petition which demanded
that the decision be reconsidered. Sir Richard Branson even went as
far as to offer to run the line on a not-for-profit basis, whilst
the DfT reviewed the competition.
The UK government was urged to delay the signing of the
contracts but insisted that there was "no reason" for any
delay. On 28 August, Virgin Trains began proceedings in the High
Court in England, demanding a judicial review of the decision. At
this stage the DfT insisted that the competition process would
stand up to any legal challenge.
However, as the Government's legal advisers began gathering
evidence for the court action they uncovered serious flaws within
the procurement process. In particular, mistakes were made into how
passenger numbers and inflation were taken into account, and how
much money the bidders were expected to guarantee as a result. The
DfT cannot say with confidence that without these flaws the outcome
would not have been different or that the four bidders for the
franchise would not have put in different bids.
As a result, they have announced that a new contract to run the
West Coast Main Line will not be awarded when the current contract
expires, and the DfT is no longer contesting the judicial review.
The DfT has also pledged to refund the bidders costs at an
estimated cost of Ł40 million.
The Fallout
The UK Transport Secretary, Patrick McLoughlin, has now ordered
two reviews into the fiasco: (1) a review in to what went wrong
with the West Coast Main Line competition and (2) a review in to
the entire DfT franchise programme. Additionally, the UK Government
has decided to defer the active franchise competitions for the
Great Western, Essex Thameside, and Thameslink services while the
review is undertaken.
In Scotland, the Scottish Government is also reviewing public
procurement across the board. This review includes measures to
ensure that public bodies use more streamlined processes in order
to extract ultimate value for money and to find ways to maximise
the impact of government expenditure on economic growth.
Ultimately, the UK and Scottish governments' reviews will be
judged by how well public procurement reforms aid both industry and
the public purse. Given the amount of time and money that has been
wasted by the West Coast Main Line procurement debacle, it is most
welcome that procurement reform appears to be on the horizon. And
with a new EU Public Procurement Directive making its way through
the European Parliament, reform most certainly is on the
agenda.
The material contained in this article is of the nature of
general comment only and does not give advice on any particular
matter. Recipients should not act on the basis of the information
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