Introduction

The Department for Transport ("DfT") announced On 15 August 2012, at the end of a 15 month procurement process, that it intended to award the West Coast Main Line rail franchise (“the franchise”) to First West Coast, a subsidiary of First Group. On 3 October 2012 the DfT announced that it was to cancel the award after discovering significant flaws within the procurement process, leaving the procurement system in the UK in a precarious position.

The Facts

Virgin Trains has run the franchise for the past 13 years, with the current contract due to expire on 9 December 2012. After the DfT announced that it was to award the franchise to First West Coast, more than 150,000 people signed a petition which demanded that the decision be reconsidered. Sir Richard Branson even went as far as to offer to run the line on a not-for-profit basis, whilst the DfT reviewed the competition.

The UK government was urged to delay the signing of the contracts but insisted that there was "no reason" for any delay. On 28 August, Virgin Trains began proceedings in the High Court in England, demanding a judicial review of the decision. At this stage the DfT insisted that the competition process would stand up to any legal challenge.

However, as the Government's legal advisers began gathering evidence for the court action they uncovered serious flaws within the procurement process. In particular, mistakes were made into how passenger numbers and inflation were taken into account, and how much money the bidders were expected to guarantee as a result. The DfT cannot say with confidence that without these flaws the outcome would not have been different or that the four bidders for the franchise would not have put in different bids.

As a result, they have announced that a new contract to run the West Coast Main Line will not be awarded when the current contract expires, and the DfT is no longer contesting the judicial review. The DfT has also pledged to refund the bidders costs at an estimated cost of £40 million.

The Fallout

The UK Transport Secretary, Patrick McLoughlin, has now ordered two reviews into the fiasco: (1) a review in to what went wrong with the West Coast Main Line competition and (2) a review in to the entire DfT franchise programme. Additionally, the UK Government has decided to defer the active franchise competitions for the Great Western, Essex Thameside, and Thameslink services while the review is undertaken.

In Scotland, the Scottish Government is also reviewing public procurement across the board. This review includes measures to ensure that public bodies use more streamlined processes in order to extract ultimate value for money and to find ways to maximise the impact of government expenditure on economic growth.

Ultimately, the UK and Scottish governments’ reviews will be judged by how well public procurement reforms aid both industry and the public purse. Given the amount of time and money that has been wasted by the West Coast Main Line procurement debacle, it is most welcome that procurement reform appears to be on the horizon.  And with a new EU Public Procurement Directive making its way through the European Parliament, reform most certainly is on the agenda.