FirstGroup lose West Coast Main Line rail as government cancel the deal

A cancellation cost of £40 million has resulted from a railway franchise bid being scrapped due to governmental flaws...

The bid for the franchise of West Coast Main Line rail is to be presented to competitors again following FirstGroup’s blow - that the government has reportedly made errors with the contract and it is to be cancelled.

The news came early on Wednesday, ahead of Virgin’s High Court legal challenge - as explained by the BBC - and it will cost £40million to cover the scrapping of the deal. The newly appointed Transport Secretary, Patrick McLoughlin, admitted was “significant technical flaws” made during the whole process. 

According to reports, Mr. McLoughlin confirmed in September he saw no problems with the bid and that it was thought to be fair, despite objections that asked for the decision to be re-addressed. This came from the likes of FirstGroup’s rivalries Virgin, including a petition that saw thousands of signatures oppose the notion. 

Mr. McLoughlin said, as quoted by the BBC: “A detailed examination by my officials into what happened has revealed these flaws, and means it is no longer acceptable to award a new franchise on the basis of the competition that was held.”

The Department of Transport is understood to have admitted to “completely unacceptable mistakes.”

The BBC report also states that Mr. McLoughlin’s department has said the “flaws stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result.”

The rail network, which covers travel between London and the north-west, west midlands, north Wales and parts of Scotland, was the multi-billion-pound franchise awarded to FirstGroup in August.

With it being one of the busiest train service links in the UK, competition for the suspected 13-year contract came from Virgin in December, who reportedly have ran the lines for the last 15 years approximately.

It is understood that Richard Branson, the founder of Virgin, has acknowledged the error and welcomes the change, as he said on his blog that ministers would hopefully “accept that Virgin Trains should carry on running the West Coast Main Line”. 

Two investigations have been ordered to check where the franchise competition blundered, with a report expecting to be issued at the end of October. A wider review is being looked in to by Eurostar Chairman Richard Brown, and is expected to be concluded by the end of 2012.