Rail fiasco's 'fundamental errors' cost taxpayers £50 million

26 February 2013

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26 February 2013 | Adam Leach

A lack of common sense and a series of basic errors by the Department for Transport (DfT) left the taxpayer with a £50 million bill for the failed West Coast rail franchise tender.

A report published today by the Committee of Public Accounts (PAC), Department for Transport: Lessons from cancelling the InterCity West Coast franchise competition, blamed the failure to award the franchise for operating the London to Glasgow line on a series of “fundamental errors”. Although train operator First Group was selected as preferred bidder, the tender process was scrapped in October 2012 over fears it would not withstand a legal challenge lodged by Virgin Trains, which originally operated the service.

The report said in addition to not properly calculating the risk of each bid or the amount of capital required from each party, there was a lack of “common sense” and “basic errors”, which had led to the failure.

The PAC had previously criticised the DfT for failing to adequately manage risk on contracts with Metronet, a consortium of companies to deliver upgrades to the London Underground network, which went into administration after it was unable to meet its spending obligations.

Margaret Hodge, chairwoman of the PAC and Labour MP, said: “The franchising process was littered with basic errors. The department yet again failed to learn from previous disasters, like the Metronet contract. It failed to heed advice from its lawyers. It failed to respond appropriately to early warning signs that things were going wrong.”

The PAC identified a series of specific failings it believed contributed to the downfall of the franchising process, including, a lack of leadership, with no single person responsible from beginning to end. It also said it was “astonished” the department’s permanent secretary could not see all the information required because he did not oversee the project.

The report also identified a lack of key skills within the department, resulting from staff reductions and cuts to consultancy budgets, as a contributing factor. It said the scale of the failure prompted concerns over the ability of the department to carry out future franchises and said it must “get its house in order”.

In response, a spokesman for DfT said the independent Laidlaw review of the process had identified the “unique and exceptional circumstances” that led to the failure and how it could be prevented in future.

“The department has accepted all the recommendations and has taken immediate steps by bringing together all rail activity under a single director general and recruiting a senior director to lead the franchising programme, as well as improving internal governance and strengthening oversight and accountability.”

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