In 2011, the Department for Transport (DfT) launched a competition for the West Coast rail franchise which gives the holder the right to run services from London to the North West of England and Scotland.

Various bids for the franchise were received, including from Virgin Trains and First Group. In August 2010, DfT announced its intention to award the West Coast franchise to First Group but this decision was subsequently challenged by Virgin Trains. Some weeks later, in October 2012, Patrick McLoughlin, the Secretary of State for Transport, announced that:

  • The competition to run the West Coast franchise had been cancelled following "the discovery of significant technical flaws in the way the franchise process was conducted"
  • The other outstanding franchise competitions (Great Western, Essex Thameside and Thameslink) has been "paused"
  • Several DfT officials had been suspended
  • Two independent investigations – the Laidlaw Review and the Brown Review – were to be undertaken into the West Coast franchise procurement and lessons to be learned for the upcoming franchising programme. The previous article in this Newsletter relates to the Laidlaw Review. The Brown Review should publish its finding next year

DfT have now signed an interim franchise agreement with Virgin Trains for 23 months to run from 9 December 2012. So what does this tell us?

Directly Operated railways

Put simply, DfT have a statutory duty to keep the trains running. In practice, they discharge this duty through the franchised operators which have become familiar to us or, as is the case of East Coast, through Directly Operated Railways (DOR), a company owned by DfT. When the West Coast franchise competition collapsed and the end date of DfT's existing franchise loomed on the horizon, DfT may have taken comfort from the fact that DOR could keep the trains running. One of the lessons from West Coast is that this is not as simple as it sounds. This is because in order to keep the trains running the operator needs to have certain arrangements in place, such as rolling stock leases, access agreements and safety authorisations. If DOR cannot put the full suite of arrangements in place in time then DOR is not the comfort blanket that it might seem.

Procurement challenges

Public authorities are often cautious when dealing with procurement issues for fear of a challenge and some might say that, given recent events, this caution has been justified. Virgin Trains' franchise agreement for the West Coast franchise was originally granted in 1997 and has been amended and restated on a number of occasions since but DfT have been nervous of anything other than a very short extension. The fact that DfT have got themselves comfortable with an additional 23 months may suggest an air of pragmatism in Horseferry Road. They may also have taken comfort from the fact that when the franchise was originally let in 1997 the franchise period was 15 years (to 2012) but with an option to extend the franchise by a further two years. The original "procurement window" therefore ran until 2014.

Franchising programme

12 of the 15 rail franchises are due to be let by the end of 2015 and even with Virgin Trains' franchise having been extended, four franchises are due to be re-let by the end of 2013 and a further four are due to be re-let by the end of 2014. The franchising timetable is already congested and before the process can recommence, DfT will want to see the findings of the second enquiry (the Brown Review), consider its options and possibly consult on its proposals. Following the cancellation of the competition for the West Coast franchise, DfT said that it was talking to Virgin Trains about an extension to its franchise of between 9 and 13 months. The fact that the West Coast franchise has been let for 23 months may be an indication of how long DfT consider they need to get the franchising programme back on track. It is clear that other franchises will need to be extended but it will be interesting to see what duration extensions are proposed by DfT.

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