InterCity West Coast

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InterCity West Coast

Class 390 Pendolino speeds through Tamworth
Current operator: Virgin Trains
Main Route(s): West Coast Main Line
Franchise dates: 9 Mar 1997 – 29 Apr 2017
Stations called at: 44
Stations operated: 17
Web site: dft.gov.uk/intercity-west-coast

InterCity West Coast is a railway franchise for passenger trains on the West Coast Main Line in the United Kingdom between London Euston, the West Midlands, North Wales, Manchester, Chester, Liverpool, Preston and Glasgow. It was formed during the privatisation of British Rail and transferred to the private sector on 9 March 1997 when Virgin Trains, the current and only franchise-holder to date, commenced operations.

The franchise was due to be re-let in December 2012 and FirstGroup was announced as the winning bidder, a decision that was reversed due to irregularities in the franchise letting process. In December 2012 Virgin was awarded a management contract to run the franchise until November 2014. In March 2013 Virgin was awarded a further extension until April 2017.

1997 franchise

Main article: Virgin Trains

The initial franchise was awarded by the Director of Passenger Rail Franchising for 15 years from 9 March 1997 to Virgin Rail Group, beating Sea Containers and Stagecoach.[1]

2012 franchise process

During 2011–2012 the Department for Transport conducted a franchise competition, announced a winner, then cancelled the competition and refunded the costs of bids before any contracts were signed.

Bidding competition

With the franchise awarded in 1997 scheduled to end on 31 March 2012, the Department for Transport started the refranchising process in January 2011 by inviting expressions of interest in the Official Journal of the European Union[2] for a franchise from 1 April 2012 for 14 years to March 2026. The award of the franchise was stated to be based on the "most economically advantageous tender in terms of the criteria as stated in the specifications".[3] The franchise was the first to be offered under a new scheme rather than the previous "Cap and Collar" system, which provided for risk-sharing with government regarding future demand. The new scheme is intended to provide greater incentives for cost reduction by operators.[4][5][6] Because of the increased future risks carried by operators under the new scheme, the government requires a large financial surety to discourage early contract default.[7]

In March 2011 the Department for Transport announced that Abellio, FirstGroup, Keolis/SNCF and Virgin Rail Group had been shortlisted for the franchise, which would run for up to 15 years.[8] In May 2011 a Draft Invitation to Tender was issued to the shortlisted bidders, which stated the franchise start date had been postponed until 9 December 2012.[9] In October 2011 the Department for Transport announced that Virgin had been granted a franchise extension until 8 December 2012.[10] In January 2012 the Department for Transport issued the Final Invitation to Tender to the shortlisted bidders.[11] Since January 2012 rail consultancy firm WS Atkins and legal firm Eversheds had been providing technical services to the department.[12][13][14] On 15 August 2012 the Department for Transport announced FirstGroup as the successful bidder for the franchise,[15] promising 11 new six-carriage electric trains, direct services to Blackpool in 2013, and to Telford, Shrewsbury and Bolton in 2016.[16]

Challenge

On 10 August 2012 a report produced by financial consultants Europa Partners and commissioned by Virgin Rail Group, detailing problems with the franchising evaluation process, was handed to the Department for Transport.[17][18][19] After the announcement of FirstGroup as winners, Richard Branson, head of the Virgin Group, was quoted extensively calling the tender process an auction,[20] a fiasco,[21] and comparing it to a circus.[20] Tim O'Toole, head of FirstGroup, referred to Branson's comments as "histrionics".[22] Branson also received criticism from Justine Greening, Secretary of State for Transport, who suggested that Virgin had raised no issue with the franchise process until they lost.

An e-petition was created to urge the government to reconsider its decision and to debate the bids in the House of Commons. The petition was set up independently, but backed by Virgin, and attracted large support, gaining 50,000 signatures within two days. The 100,000 signatures required for the petition to be considered for debate in Parliament was exceeded. The petition was backed by many celebrities including Lord Alan Sugar, Jamie Oliver, Mo Farah, Amanda Holden and Derren Brown, from Tom Harris MP, the Shadow Environment Minister and former Parliamentary Under-Secretary of State for Transport.[23] The matter was debated in the House of Commons on 17 September 2012.[24][25]

Following the public's response to Virgin's loss of the franchise, Louise Ellman, Chair of the Transport Select Committee, wrote to Greening, asking her to delay the signing of the new contract until the committee have had a chance to 'explore the matter'.[26] Virgin had offered to run the line on a 'not for profit' basis while this takes place.[27] Despite both public and political pressure for an independent review of the deal, the Department for Transport declared it would not delay the signing of the contract once the ten-day standstill period had expired. On 28 August 2012 Virgin Trains announced it would seek a judicial review of the franchise decision, preventing the contract being signed, claiming civil servants had "got their maths wrong with FirstGroup". The Department for Transport responded stating that they were confident the selection process was robust.[28][29] In September 2012 the Department for Transport began making arrangements for the franchise to pass temporarily to West Coast Main Line Limited, a subsidiary of Directly Operated Railways, had a judicial review been granted.[30][31]

Cancellation

On 3 October 2012 the government announced it was cancelling the franchise competition after discovering significant technical flaws in the bidding process, cancelling the decision to award it to FirstGroup. The entire bidding process is to be re-run after the government admitted getting its figures seriously wrong. It was stated that civil servants had made significant mistakes in the way in which the risks for each bid had been calculated,[6] leading to a too low default surety being required of bidders.[7]

Two independent inquiries were announced; one headed up by Sam Laidlaw of Centrica, with Ed Smith, both from the Board of the Department for Transport; and the second headed up by Richard Brown of Eurostar.[32] Three civil servants were also suspended.[33][34]

During September 2012 the newly appointed Secretary of State for Transport, Patrick McLoughlin, had been warned of potential issues. During the afternoon of 2 October 2012, McLoughlin took the decision to cancel the franchise award:

“ I arrived in the department just under four weeks ago, I was told at that stage there might be some technical points; it became more serious as time went on—when I saw the full extent of the advice that I got yesterday afternoon, I took the decisions which I've taken and put the whole process on pause so we can learn the lessons and see what went wrong in this particular area … ”

—Patrick McLoughlin, Today, BBC Radio 4, 3 October 2012[35]

At around 19:30 on 2 October 2012 Branson was warned to expect a call later that evening from McLoughlin.[33] At 22:00 McLoughlin called Tim O'Toole of FirstGroup[21] who was in Philadelphia and about to travel back to London.[36] At 23:30 Patrick McLoughlin spoke with Richard Branson, who was in New York City at the time,[33] followed by Brian Souter of Stagecoach.[36] Thirty minutes after speaking with Branson, the cancellation press release was issued by the Department of Transport at 00:01 on 3 October 2012.[34][37] The Department of Transport had been due to submit their defence evidence to the High Court on 3 October 2012 in response to a Judicial Review sought by Virgin Trains. O'Toole and McLoughlin met at midday on 3 October 2012.[36]

On 5 October 2012, one of the three suspended civil servants, Kate Mingay, released a statement to correct the reporting of her role in the franchising process.[38][39] Mingay began legal proceedings against the Department for Transport over her suspension, with a High Court hearing on 29 November 2012 rejecting her claim to have her suspension lifted.[40] It was announced on 6 December 2012 that all three of the suspended civil servants, including Mingay, would return to work.[41]

On 8 October 2012 it was reported that the Department for Transport had advised Virgin (through their lawyers) that three options were being considered:[42]

  • hand over to Directly Operated Railways on 9 December 2012
  • management contract for Virgin Trains until Department for Transport is ready to hold a fresh bid, when the franchise would transfer to Directly Operated Railways
  • management contract for Virgin Trains until Department for Transport is ready to hand over the franchise to the new operator, likely to be 18–24 months

The government decided it would reimburse the four bidders for all costs incurred. This amounted to £39.7 million with a further £4.9 million paid to FirstGroup as reimbursement for mobilisation costs incurred.[43]

Franchise extension

On 15 October 2012 the Department for Transport announced Virgin Trains would continue to operate the franchise for between 9 and 13 months until a short-term interim franchise for the West Coast could be run.[44][45][46] In December 2012 Virgin was awarded a 23-month management contract until November 2014.[47] In March 2013 the Secretary of State for Transport announced the franchise would again be extended until 29 April 2017.[48]

References

  1. ↑ Harrison, Michael (31 January 1997). "Virgin pledges tilt trains for West Coast". The Independent. Retrieved 4 October 2012. 
  2. ↑ "Official Journal of the European Union notice for InterCity West Coast franchise". Department for Transport. 11 January 2011. Retrieved 10 October 2012. 
  3. ↑ Department for Transport (11 January 2011). "OJEU Notice for the InterCity West Coast Franchise". Department for Transport. Retrieved 8 October 2012. 
  4. ↑ Wright, Robert (March 2011). "Goodbye to the cap-and-collar". Rail Professional. Retrieved 3 October 2012. 
  5. ↑ Hammond, Philip (5 August 2011). "New franchising programme". Department for Transport. Retrieved 3 October 2012. 
  6. ↑ 6.0 6.1 "West Coast Main Line franchise competition cancelled" (Press release). Department for Transport. 3 October 2012. Retrieved 3 October 2012. 
  7. ↑ 7.0 7.1 Odell, Mark; Jacobs, Rose (3 October 2012). "How franchise hit the buffers". Financial Times. Retrieved 5 October 2012. 
  8. ↑ "Shortlisted Bidders for Greater Anglia and Intercity West Coast Rail Franchises" (Press release). Department for Transport. 24 March 2011. Retrieved 29 September 2012. 
  9. ↑ "Draft Invitiation to Tender for the InterCity West Coast franchise". Department for Transport. 19 May 2011. Retrieved 10 October 2012. 
  10. ↑ "West Coast passengers in line for 28,000 extra seats as franchise extension signed" (Press release). Department for Transport. 27 October 2011. Retrieved 4 October 2012. 
  11. ↑ "Invitation to Tender for the InterCity West Coast franchise". Department for Transport. 20 January 2012. 
  12. ↑ Spanier, Gideon (6 October 2012). "Market Report: WS Atkins damaged in West Coast row". The Independent. Retrieved 6 October 2012. 
  13. ↑ Fletcher, Nick (5 October 2012). "WS Atkins drops 4% after its role in West Coast franchise fiasco". The Guardian. Retrieved 8 October 2012. 
  14. ↑ Lea, Robert; Hipwell, Deirdre (5 October 2012). "Spotlight on key advisers in inquiry into franchise fiasco". The Times. Retrieved 8 October 2012. "Atkins and Eversheds, who between them have earned tens of millions of pounds from working for the Department for Transport, were hired in January" 
  15. ↑ "New operator for West Coast rail passengers" (Press release). Department for Transport. Retrieved 15 August 2012. 
  16. ↑ Merton, Flora (15 August 2012). "Delivering real and tangible benefits for customers" (presentation). Intercity West Coast rail franchise award (FirstGroup plc): 8. http://www.firstgroup.com/assets/pdfs/investors/presentations/InterCity_West_Coast_franchise_award_presentation_150812.pdf. Retrieved 8 October 2012.
  17. ↑ Osborne, Alistair (4 October 2012). "Europa report alerted Government to West Coast flaws". Daily Telegraphy. Retrieved 7 October 2012. "report from corporate finance advisers Europa Partners was commissioned by Virgin Rail as it grew increasingly concerned … was handed to the DfT on August 10, five days before" 
  18. ↑ Islam, Faisal. "How a flawed process sank the government's rail strategy". Channel 4 News. 
  19. ↑ "Department for Transport was warned over Main Line contract". The Week. 5 October 2012. Retrieved 7 October 2012. 
  20. ↑ 20.0 20.1 Haigh, Philip (5–18 September 2012). "War on the West Coast as Virgin starts legal action". In Haigh, Philip. RAIL (704): pp.6–7. 
  21. ↑ 21.0 21.1 "West Coast Main Line franchise process a 'fiasco' says Branson" (in-page video interview). BBC News Online. 3 October 2012. Retrieved 4 October 2012. "[Tim O'Toole] I received a call [at] 10 o'clock last night informing me of the decision" 
  22. ↑ Haigh, Philip, ed. (5–18 September 2012). "Quote... unquote". RAIL (704): pp. 9, 11. 
  23. ↑ Preston, Jack (23 August 2012). "Celebrities back Virgin Trains e-petition". Virgin Travel News. Virgin. 
  24. ↑ "MPs get three hours to debate ICWC franchise". Railway Eye. 14 September 2012. Retrieved 29 September 2012. 
  25. ↑ "E-petition relating to the West Coast Mainline franchise decision" (video recording). Westminster Hall Archive. Parliament of the United Kingdom. 17 September 2012. Retrieved 29 September 2012. 
  26. ↑ Transport Select Committee; Ellman, Louise (23 August 2012). "From Mrs Louise Ellman MP, Chair" (letter to Justine Greening). Parliament of the United Kingdom. Retrieved 29 September 2012. 
  27. ↑ "Virgin Trains offers to run West Coast 'for free'". BBC News Online. 26 August 2012. Retrieved 29 September 2012. 
  28. ↑ "Virgin Trains takes West Coast Main Line court action". BBC. 28 August 2012. Retrieved 4 October 2012. 
  29. ↑ Milmo, Dan; Topham, Gwyn; Watt, Nicholas (28 August 2012). "Rail and air transport policy left in chaos". The Guardian. Retrieved 29 September 2012. 
  30. ↑ Millward, David (18 September 2012). "Government team in place to run West Coast Main Line". Daily Telegraph. Retrieved 29 September 2012. 
  31. ↑ West Coast Main Line Company Limited 04659516 (Report). Companies House. http://data.companieshouse.gov.uk/doc/company/04659516. Retrieved 29 September 2012.
  32. ↑ Trotman, Andrew (3 October 2012). "Government cancels West Coast Mainline contract due to 'flaws' in bidding process". Daily Telegraph (London). Retrieved 3 October 2012. 
  33. ↑ 33.0 33.1 33.2 Osborne, Alistair (3 October 2012). "West Coast Main Line: total chaos as government scraps franchise deal". Daily Telegraph (London). Retrieved 4 October 2012. "Sir Richard Branson was looking out across the Hudson river from in his room on the 17th floor of New York's Standard hotel. … The Virgin founder had been put on alert, four hours earlier, to expect a call at 11.30pm London time. It would be from Patrick McLoughlin, Britain's new Transport Secretary … three officials have been suspended." 
  34. ↑ 34.0 34.1 Massey, Ray; Roberts, Hannah (3 October 2012). "Three civil servants suspended after government is forced to rerun bidding process for West Coast rail route because it got its sums wrong". Retrieved 7 October 2012. "The news of the humiliating U-turn was sneaked out at one minute after midnight." 
  35. ↑ McLoughlin, Patrick (3 October 2012). Today. Interview with Sarah Montague. BBC Radio 4.
    "Today" (originally broadcast on The Today Programme, offset 5:14–5:35). BBC Online. 3 October 2012. Retrieved 4 October 2012. 
  36. ↑ 36.0 36.1 36.2 Osborne, Alistair (6 October 2012). "West Coast Main Line: scrapped bid reveals chaos at the heart of government". The Independent. Retrieved 7 October 2012. 
  37. ↑ Hutton, Will (7 October 2012). "This railway fiasco reveals all that's wrong with the Tories". The Observer. Retrieved 7 October 2012. "Ministers, releasing the news at midnight to set the terms of the news story" 
  38. ↑ Topham, Gwyn (5 October 2012). "West coast mainline row: civil servant hits out at Department for Transport". The Guardian. Retrieved 6 October 2012. 
  39. ↑ Massey, Ray; Mcdermott, Nick (5 October 2012). "Suspended director blows cover in protest over West Coast franchise fiasco saying she had no responsibility over finances". Daily Mail. Retrieved 6 October 2012. 
  40. ↑ Osbourne, Alistair (29 November 2012). "West Coast rail: Kate Mingay accuses Government of making her a 'public sacrifice'". The Telegraph. Retrieved 30 November 2012. 
  41. ↑ "West Coast Mainline deal failure criticised". BBC News. 6 December 2012. Retrieved 6 December 2012. 
  42. ↑ Osborne, Alistair (8 October 2012). "West Coast rail franchise options pose threat to Virgin". Daily Telegraph. Retrieved 16 October 2012. 
  43. ↑ Annual Report 31 March 2013 page 186 Department for Transport
  44. ↑ "Virgin in talks on West Coast route contract extension". BBC News Online. 15 October 2012. Retrieved 15 October 2012. 
  45. ↑ Odell, Mark; Parker, George (15 October 2012). "Virgin set for West Coast extension". Financial Times. Retrieved 15 October 2012. 
  46. ↑ "Department for Transport to negotiate with Virgin on temporary operation of West Coast rail services" (Press release). 15 October 2012. Retrieved 15 October 2012. 
  47. ↑ Two-year extension for Virgin Rail after West Coast chaos The Telegraph 5 December 2012
  48. ↑ "Railway plan puts new focus on passengers" Secretary of State for Transport statement 26 March 2013

External links

Current and future franchises
Former franchises
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