First will not take over West Coast from December

[tbtc]

Out of interest, how many people think First had the better bid or Virgin had the better bid?

Other than a token service to Stirling, I can't think of any advantage of the Virgin bid (in terms of railway operations, ignoring the premiums).

If the Government were as fixated on making a quick buck from the railways then wouldn't they be more tempted to go with the Virgin bid, which promised a more favourable deal for the tax-payer in the first few years of operation (since the back-ended First premiums would only have kicked in after a decade - by which time the political world will have changed.

TBH this does smack of scapegoating. In each case the most senior person in each area has been singled out. Now while I agree that carrying the can goes with being the boss, why does it stop precisely there in each case? And would any of them be responsible for carrying out the DfT's risk calculations, which are highly specialised?

Then again, if only those further down the food chain were being singled out then we'd have commentators on here complaining that nobody senior was having to take responsibility!

 

[jon0844]

It does seem that if the Government was simply trying to line its own pockets (as has been mentioned on various other forums where people are simply laying all the blame on the Tories) then they'd have gone with the Virgin bid.

 

[tbtc]

It does seem that if the Government was simply trying to line its own pockets (as has been mentioned on various other forums where people are simply laying all the blame on the Tories) then they'd have gone with the Virgin bid.

Exactly.

By the time the First back-loaded premiums kicked in we'd be a couple of Governments down the line, so I could have understood it if today's coalition would rather take "a bird in the hand" today.

 

[HH]

So it's probably the civil servants in the Treasury telling the civil servants in DfT to get the most money. Either that, or something more nefarious.

 

[Realfish]

So it's probably the civil servants in the Treasury telling the civil servants in DfT to get the most money. Either that, or something more nefarious.

Either that...or this bloke!

http://www.telegraph.co.uk/finance/...l-franchise-bids-or-risk-high-speed-line.html

 

[Masboroughlad]

Have the other two shortlisted bidders passed any comments yet?

 

[RobShipway]

Have the other two shortlisted bidders passed any comments yet?

I believe they have sensibily kept quiet, as they are receiving money for they expenses anyway.

 

[LNW-GW Joint]

Have the other two shortlisted bidders passed any comments yet?

They'll still be celebrating their bonuses from the windfall of refunded bid costs.
They've also found out the contents of the leading bids so they know how to get it right next time.

 

[Deerfold]

They'll still be celebrating their bonuses from the windfall of refunded bid costs.
They've also found out the contents of the leading bids so they know how to get it right next time.

Or not, seeing as those bids were selected by an apparently flawed process.

 

[The Ham]

They'll still be celebrating their bonuses from the windfall of refunded bid costs.
They've also found out the contents of the leading bids so they know how to get it right next time.

Especially as any work that they did before they can still use as a basis on which any future bid can be worked up from, which will make the cost of making a future bid cheaper.

 

[HH]

It is not a given that every bidder will bid again. Some will want to see the results of these DfT reviews. They may be feeling that both of the leading bids were hugely optimistic and both should have had huge subordinated loans.

They may feel that, but I couldn't possibly comment.

 

[Whistler40145]

Being honest, putting Virgin & First to one side, who in your opinion would be worthy of being a good franchisee?

 

[Pen Mill]

As we've all become touchline experts on sub-ordinated loans and 15 year forecasting , I'd like to see a massive simplification of the process.

The bids should be put together based on ONE (maximum 2) year's trading then adjusted mechanically by the Dft for growth factors taking out completely the finger in the sky approach.

By all means keep future investment proposals for station enhancements / stock changes / route enhancements in but stop this crass ludicracy about making a decision based on what's happening in 10-15 years time.

If the whole economy can go arsupards due to the well informed finance industry imploding , what chances have the poor railways got , none.

 

[YorkshireBear]

Surely it should be based on improvements they intend to make. For me if Hornby offered 3bn but were going to do very little with stations and only provide a few new trains. I'd be more likely to accept the 1bn from Bachmann with them doing a full refurb on every station, completely gutting the trains for new interiors, then offering at seat service in standard class, loads of new trains and introducing new services.

So it would be better if they didnt commit to the actual payment years in advance as that removes all risk, but they must commit to improvements! With then percentages of profit going to government depending on how much profit they make. But if they go under, and they said that they wouldn't the government shouldn't support them.

 

[LNW-GW Joint]

Being honest, putting Virgin & First to one side, who in your opinion would be worthy of being a good franchisee?

You'd expect Keolis/SNCF to have a bit of flair, and tap into its parent's skills.
But then you would also expect that of DB but it is not very visible in its Arriva franchises.

 

[Manchester77]

http://www.bbc.co.uk/news/uk-19830608

The collapse of the West Coast Main Line bidding process, after the government found significant flaws, has once again sparked calls in some quarters to renationalise Britain's railways - 17 years after they were privatised.

after ICWC BBC asks should the railways be renationalised?

 

[Royston Vasey]

http://www.bbc.co.uk/news/uk-19830608
after ICWC BBC asks should the railways be renationalised?

Paraphrasing Bob then:

"Look at the shambles the government has made of this process!"
"Let's make the government run all the railways in the country!"

 

[Cliveblackpool]

http://www.bbc.co.uk/news/uk-19830608
after ICWC BBC asks should the railways be renationalised?

Miss the BR jokes!
If the public are paying for investment and subsidies, in tickets & taxes surely we should own it!

It's going to be very difficult to set up a fair bidding process now. Will Virgin bid higher, will First bid lower!!! Maybe one of the others will get it.
Probably best to let Virgin run it for free??
failing that let Directly Operated Railways Limited to run it for at least a few years.

 

[jon0844]

I am wondering if the key reason the whole thing was dropped was perhaps because one of the other two bidders was eliminated incorrectly, perhaps having a better bid that should have won.

 

[Whistler40145]

That's a possibility, but it was kept quiet.

 

[HH]

I am wondering if the key reason the whole thing was dropped was perhaps because one of the other two bidders was eliminated incorrectly, perhaps having a better bid that should have won.

As I said in the previous page, possibly both of VRG & First should have had huge loans demanded, because both bids look risky to me - it's only a question of when they are at their riskiest. You could see that being very embarrassing to DfT, but also if the then winning bid was a lot lower, they might not want to take it, having been seduced by the much larger numbers on offer.

Still, the most likely explanation is that they felt that they couldn't exclude Virgin or First at this point.

 

[northwichcat]

But then you would also expect that of DB but it is not very visible in its Arriva franchises.

Germany doesn't have a franchising system like our franchising system.

 

[HH]

You'd expect Keolis/SNCF to have a bit of flair, and tap into its parent's skills. But then you would also expect that of DB but it is not very visible in its Arriva franchises.

A huge flaw in the current system is that the bidders have meetings with DfT ("bilaterals") in which they are given information, but told that this has no contractual standing. It's a heinous system, only there to protect the civil servants/government.

Are all bidders given the same information? You can see the potential for abuse by these functionaries. Bidders believe (rightly or wrongly, but I know on which my money goes) that if you upset DfT your 'cards are marked'. There have been other examples where the results of bids have been, how should I term it, 'suspected of manipulation'.

 

[The Ham]

Surely it should be based on improvements they intend to make. For me if Hornby offered 3bn but were going to do very little with stations and only provide a few new trains. I'd be more likely to accept the 1bn from Bachmann with them doing a full refurb on every station, completely gutting the trains for new interiors, then offering at seat service in standard class, loads of new trains and introducing new services.

So it would be better if they didnt commit to the actual payment years in advance as that removes all risk, but they must commit to improvements! With then percentages of profit going to government depending on how much profit they make. But if they go under, and they said that they wouldn't the government shouldn't support them.

The bidders could still offer different percentages of profit which may impact on who the government thought would be" best". Otherwise it seams a good idea.

The other factor that could be brought into play would be letting the market have more control of ticket prices on lower used services to get more people using trains, much like the Mega Train Tickets that SWT's ran for a time.

 

[HH]

The other factor that could be brought into play would be letting the market have more control of ticket prices on lower used services to get more people using trains, much like the Mega Train Tickets that SWT's ran for a time.

Sensibly DfT should look at alternative fare strategies to regulated/unregulated. This makes sense in many ways, but they are frightened of someone (read MP with election to win) getting upset.

 

[3141]

It's going to be very difficult to set up a fair bidding process now. Will Virgin bid higher, will First bid lower!!! Maybe one of the others will get it.
Probably best to let Virgin run it for free??
failing that let Directly Operated Railways Limited to run it for at least a few years.

I've also been wondering about those questions. Bidders in round 2 will know much more than usual about what was in the two leading bids in round 1. If you were First, and you put in the same level of bid, you would have be prepared to put up a much larger financial guarantee, which might be difficult to afford. If you were Virgin, you might be tempted to pinch First's idea of extra trains, but you'd need to be forecasting more passenger growth to justify them and make them pay, and you might be accused of the same sort of unrealistic forecasts for which you'd previously criticised First.

It's likely that the DfT will revise the ITT and its own forecasts which bidders have to take into account, and the longer the time until round 2 the greater the likely differences from round 1. So a simple re-hash of the round 1 bid won't be relevant.

Someone raised the question whether there might have been a mis-evaluation of the Keolias and Abellio bids. I guess that''s one of the things one of the DfT reviews should cover.

 

[Yew]

http://www.bbc.co.uk/news/uk-19830608
after ICWC BBC asks should the railways be renationalised?

Either of those sound better than the current system, although Mr crow seems to have taken this as a chance to go on a political rant instead of keeping to the facts of the system.

 

[Metrailway]

The Guardian is reporting that Kate Mingay, the corporate finance director at the DfT and former Goldman Sachs executive director, is the most senior person to be suspended.

West coast mainline fiasco may claim further victims
Civil servants at transport department braced for more suspensions amid warnings over true cost of reversal

Civil servants at the crisis-ridden Department for Transport (DfT) are bracing themselves for further suspensions as the investigation into the west coast mainline franchising fiasco unfolds, amid fresh warnings that the true cost of the reversal could make the £40m compensation bill so far look like "small change".

Questions were raised about the independence of the review, with fears that officials could be made scapegoats for mistakes that saw Virgin Trains block the award of Britain's most lucrative franchise to rival FirstGroup and leave rail policy in tatters. The UK's largest civil service union said blaming Whitehall staff for the debacle was deplorable.

Sam Laidlaw, the Centrica chief executive who sits on the DfT board, has been asked by the transport secretary, Patrick McLoughlin, to conduct an "urgent independent examination" of what went wrong in the franchising process.

Shadow transport secretary, Maria Eagle, said: "It is scandalous that this review of what is a huge failure of the government should be conducted by a senior figure in the department. We need a truly independent inquiry led by a figure unconnected to the DfT examining the role of officials from top to bottom – and including ministers. There must be no scapegoating."

A former senior figure in the department said Laidlaw was "absolutely inappropriate". He added: "Having an internal inquiry doesn't strike me as very independent. If you really wanted to get to the bottom of this, you'd have it done externally."

The Public and Commercial Services union, which represents one of the three suspended employees, said it would ensure that the DfT inquiry held ministers to account. "We will be ensuring the inquiries fully examine all the issues, including ministerial involvement and oversight of the bidding process," said Mark Serwotka, the PCS general secretary.

The most senior of the suspended civil servants has been identified as a former Goldman Sachs executive director, Kate Mingay, the corporate finance director at the DfT.

Investigations are likely to focus on a breakdown in procedure in the parallel conversations the DfT held with Virgin and FirstGroup towards the end of the bidding process. The rival train operators were led to interpret information differently about how risk would be assessed and calculated, modifying the sums both felt able to bid.

Virgin was aghast that FirstGroup had only put up a £190m bond against defaulting on larger premiums, but FirstGroup was confident Virgin was wrong to claim the figure should have been far larger. However, the problems have been traced back to the original invitations to tender that were templates for the whole current franchising process.

The former cabinet secretary Lord O'Donnell said government departments were suffering from "skills shortages", particularly in procurement and civil servants should be paid more to stem the Whitehall talent drain. According to estimates by the FDA union, one in four senior civil servants have left the DfT since 2010.

Rail insiders warned that the ultimate economic cost of the west coast reversal would far exceed the reimbursing of bidding companies because the compensation bill could reach £90m and the refranchising of Britain's railways could be delayed by a year. A senior industry source said: "The hit on the supply chain will be huge. The £40m is small change in terms of the overall impact."

FirstGroup had promised to order new trains immediately and similar investment would be expected from new winners of most franchises.

According to industry estimates, bidders for the three franchise contests that were put on hold by McLoughlin – Thameslink, Essex Thameside and Great Western – will have incurred total costs of about £50m and could seek to claw back that amount. The loss to taxpayers rises by a further £75m with the loss of franchise payments for the first years of delayed franchises.

The secretary of state and top officials consulted lawyers on Thursday over the immediate future of the line. One possible option being explored is that Virgin will continue to run the operation while technically under contract to Directly Operated Railways, the DfT's state arm, to minimise the risk of legal challenge from rival bidders.

 

[Xenophon PCDGS]

It's a heinous system, only there to protect the civil servants/government.

I have said it once and I will say it again. Our politicians are elected by us...not so with civil servants. We can vote politicians out of office....we have no such powers over civil servants.
--- old post above --- --- new post below ---

The Guardian is reporting that Kate Mingay, the corporate finance director at the DfT and former Goldman Sachs executive director, is the most senior person to be suspended.

This, of course, will be the same Goldman Sachs who were accused of improper prectices once the current global financial crisis exploded.

 

[WatcherZero]

The interesting thing is its now emerging there were two flaws found in the process, the current one that Virgin complained about in an independent report submitted 5 days before the award (seen by channel 4), dismissed by the Dft but then found by the PWC audit, and a seperate unknown 'minor flaw not expected to affect the result' that the Dft found a week before the award and Greening commissioned PWC to investigate (reported by Conservative Home). This PWC investigation while working on another task then uncovered the flaw of interest not being included in the computerised risk model (Guardian/BBC). Its also funny to watch how the different news outlets attack the story from different angles and find different insider sources and different aspects of the story in their investigations.

Also we know it didnt affect the other two bids because the flawed computerised risk model was only used on the Virgin and First Group bid, a different evaluation was done as a first stage which eliminated the other two. It seems now the reason First's figures agreed with the Governments figures is because they used the original ITT documentation to recreate the model and so theirs didnt include inflation either, Virgin meanwhile in backwards engineering the dft model did include inflation in theirs. So looks like First arent at fault afterall, they just were stupid enough not to notice inflation wasnt accounted for when backwards engineering the model in the same way the Dft didnt notice.