FirstGroup vies with Virgin in west coast rail bidding war

[asylumxl]

Has he just lost the whole thing for Virgin?

Hardly.

It's no different to what we have been saying in this very thread, bar the spin. The First bid is a great deal more and as such seems rather unrealistic.

 

[tbtc]

he only way FirstGroup can justify its bid is to “drastically cut the quality of services”

What, like leaving stations tatty and unrefurbished whilst failing to employ enough staff to check tickets?

In his letter, Sir Richard draws comparisons with recent failures on the East Coast Main Line, where both GNER and National Express walked out on the contract after their bids proved far too optimistic. He claims Virgin was the runner-up bidder both times

It was widely reported that Arriva put in a higher bid than NXEC - does that mean Arriva didn't even make second place? Or is Mr Branson exaggerating?

“Our team has transformed the West Coast line over the last 15 years from a heavily loss-making operation to one that will return the taxpayer billions in years to come

Is that the head of Virgin, who have an interesting record on "tax avoidance" etc boasting about how much tax they pay to the UK treasury? Really?

I'm sure Railtrack/ Network Rail deserve some credit for transforming the WCML?

 

[SkinnyDave]

Strange to be so public whilst decision still being made though or very clever PR work.

 

[jon0844]

If Virgin knows it has lost on the value of the bid, it hardly has much to lose by talking about quality - and GNER and NX are good examples that hardly make him/Virgin out to be a sore loser.

But, at the same time, he's a businessman and we don't know that First would be unable to make a profit and keep up with the payments.

 

[tbtc]

Strange to be so public whilst decision still being made though or very clever PR work.

It's an interesting tactic - essentially using First's "advantage" in the bidding process (the fact that they are offering more money) against them.

However, as we don't know how the two bids differ on "quality", premium is all we can really compare them on.

Interesting to see Branson getting so personal about this before a decision has been reached, unlike Bombardier who never complained about losing a bid (despite the noises that others made).

 

[jon0844]

Virgin may well have a point about ridiculously high bids that fail. Of course, it's unfair to just assume First have bid too much - but hopefully there will be people who do try and do some calculations and make an informed decision.

Or, they just go with the highest bid and cross their fingers.

The upside is that IF it turns out First did bid too much and it all goes tits up, suddenly Mr Branson looks like a real passenger champion.

So, it's good PR and a shrewd move all things considered.

 

[Manchester77]

I really don't know why he does things like that? The government doesn't like being told what to do so they're to going to listen to him or probably do what he says

 

[tbtc]

Virgin may well have a point about ridiculously high bids that fail. Of course, it's unfair to just assume First have bid too much - but hopefully there will be people who do try and do some calculations and make an informed decision.

Or, they just go with the highest bid and cross their fingers.

The upside is that IF it turns out First did bid too much and it all goes tits up, suddenly Mr Branson looks like a real passenger champion.

So, it's good PR and a shrewd move all things considered.

Given that people complain about the "massive" profits made by TOCs its funny to see an argument developing about a company that wants to pay too much back to the Treasury.

I think that given First's other operations, they have a lot more to lose by defaulting than NXEC/ GNER did (if there's a danger of losing other franchises as a result). I'd be a lot more worried about a new entrant to the UK rail market "over bidding".

That said, over the fourteen year franchise, we are maybe only talking a tiny difference in percentages.

Interesting to see each bidder playing to their strengths (like the "Keolis-SNCF safety record 'is key to UK expansion'" headline here - http://www.guardian.co.uk/uk/2012/mar/14/keolis-sncf-safety-west-coast-main-line - what's the trade off between "safety"/ "customer service" and "profit"?).

Also interesting to see the RMT and Richard Branson - strange bedfellows! http://www.newsandstar.co.uk/news/u...est-coast-mainline-1.981188?referrerPath=news

 

[jon0844]

They might ignore him and go with the higher bid. If they do, what has Virgin lost by letting Richard have a rant?

If he's later proved right...

 

[YorkshireRider]

When NX took over the ECML there was a rule in place that prevented compulsary redundancies for the first 2 years, not sure if this is still the case now?

 

[BestWestern]

Sadly, this is what it has all come down to now, bid the most and win. Then try and sort out how not to go bankrupt once you have your foot in the door. Two successive franchises going down the pan on the ECML ought to have shown the folly in putting price before performance potential, let's hope that some lessons were learned.

 

[34Short]

I'm sure Railtrack/ Network Rail deserve some credit for transforming the WCML?

Credit for going overbudget and taking too long?

 

[fgwrich]

Sadly, this is what it has all come down to now, bid the most and win. Then try and sort out how not to go bankrupt once you have your foot in the door. Two successive franchises going down the pan on the ECML ought to have shown the folly in putting price before performance potential, let's hope that some lessons were learned.

Sadly, whilst i agree with you i don't think things will change. Note how there seems to be two different sides / departments of the DfT dealing with Franchises. There’s the Yes we'll admit (grudgingly) that we made mistakes and that you were right / we'll build the New GW Franchise around the current GW franchise DfT. And there’s the franchising side, Go faster, Bid Higher we want you, we want your money side that's prepared to take the money and sod the risks. Great isn’t it?

 

[WatcherZero]

It's an interesting tactic - essentially using First's "advantage" in the bidding process (the fact that they are offering more money) against them.

However, as we don't know how the two bids differ on "quality", premium is all we can really compare them on.

Interesting to see Branson getting so personal about this before a decision has been reached, unlike Bombardier who never complained about losing a bid (despite the noises that others made).

Well we do have an example with First proposing to cut catering staff from 800 to 300. If anything Bransons letter confirms the accuracy of the Guardians source as it confirms they got the numbers right.

 

[87015]

What happened to the bid teams (and parent groups) "lockdown" on not being allowed to comment on bids until the winner had been announced?

 

[SkinnyDave]

On a slightly related note there is a thread in this section about another TOC that promised the most premium payments struggling on a 2 year franchise.

Do not want this to happen on WCML and I hope First have done their sums

 

[LNW-GW Joint]

Strange to be so public whilst decision still being made though or very clever PR work.

A private letter is not public comment, even if leaked.
Nowhere in the quoted words does he use specific numbers or names or details of any particular bid.
It's just high-level lobbying, much as he does over Heathrow slots for Virgin Atlantic.
Unfortunately, the DfT and Treasury are obsessed with the premium, so he's likely to get the brush-off.
On top of which Tim O'Toole is a very highly regarded First MD, who also chairs the Rail Delivery Group which aims to deliver McNulty reforms across the industry.

 

[jon0844]

Sadly, this is what it has all come down to now, bid the most and win. Then try and sort out how not to go bankrupt once you have your foot in the door. Two successive franchises going down the pan on the ECML ought to have shown the folly in putting price before performance potential, let's hope that some lessons were learned.

That's how it works with most bids for huge contracts, from the likes of Serco, Veolia, Mears or whoever. Bid for a contract (in fact, if you're big enough you'll have a dedicated team doing nothing but searching out contracts to bid for throughout the EU) and THEN worry about how you'll manage the work.. which might be outsourcing it, or even using the same staff you've got allocated to other contracts (the client not likely to know either way).

Fortunately, I don't think the railway industry has quite got as bad as other industries - yet.

 

[All Line Rover]

Whoever win this franchise, I can envisage big cuts to the quality of service. Even Virgin are proposing an almost tripling of premium payments. With such staggering increases, where is the money going to come from to upgrade stations, which is one of the most pressing improvements needed for the WCML?

Imagine how much Virgin are spending to have approximately 800 catering staff. It's no wonder First are proposing to reduce this number to approximately 300! (Which still far from constitutes a complete withdrawal of catering, which the RMT and Branson are trying to imply).

 

[FManc]

Whoever win this franchise, I can envisage big cuts to the quality of service. Even Virgin are proposing an almost tripling of premium payments. With such staggering increases, where is the money going to come from to upgrade stations, which is one of the most pressing improvements needed for the WCML?

Imagine how much Virgin are spending to have approximately 800 catering staff. It's no wonder First are proposing to reduce this number to approximately 300! (Which still far from constitutes a complete withdrawal of catering, which the RMT and Branson are trying to imply).

The idea of getting rid of 500 jobs in this climate is absolutely ridiculous.

 

[All Line Rover]

The idea of getting rid of 500 jobs in this climate is absolutely ridiculous.

Why is it ridiculous? This is a private company not a charity. Many of the staff are likely to be on temporary and/or part time contracts. In any case, £21-£25k a year is an unusually high salary for someone who runs a checkout or acts as a type of "waiter." If First think some of these jobs aren't necessary I can't think of a valid objection to them shedding them.

 

[calc7]

The idea of getting rid of 500 jobs in this climate is absolutely ridiculous.

That argument holds no water economically.

We're talking about 500 jobs versus the difference in millions in payments to the DfT. The rate of value substitution just doesn't compare!

 

[tbtc]

Well we do have an example with First proposing to cut catering staff from 800 to 300. If anything Bransons letter confirms the accuracy of the Guardians source as it confirms they got the numbers right.

Fair enough, but I'm astounded that Virgin employ almost a thousand staff just in catering (not counting the drivers/ guards/ platform staff/ HR/ managers/ planners etc)!

Eight hundred staff to deal with food? That must make them employ more people in the food trade than Jamie Oliver could dream about...

(of course I presume that Virgin would keep all eight hundred in their WCML bid, and not be proposing cutbacks in this area)

 

[All Line Rover]

Fair enough, but I'm astounded that Virgin employ almost a thousand staff just in catering (not counting the drivers/ guards/ platform staff/ HR/ managers/ planners etc)!

Eight hundred staff to deal with food? That must make them employ more people in the food trade than Jamie Oliver could dream about...

(of course I presume that Virgin would keep all eight hundred in their WCML bid, and not be proposing cutbacks in this area)

Staff numbers as of December 2010 are available to view here. Almost 1200 onboard staff (2/3 catering sounds about right), over 500 drivers (imagine how much that must cost! hock, over 800 station staff and almost 500 other staff. Shedding 500 catering staff would, in an instant, eliminate almost 20% of the workforce.

 

[tbtc]

Two successive franchises going down the pan on the ECML ought to have shown the folly in putting price before performance potential, let's hope that some lessons were learned

In fairness to GNER (not a phrase I type often!), their problems were as much to do with the parent company (Sea Containers).

 

[PR1Berske]

The views on catering staff are harsh, but fair. That many people, on that amount of money can't be justified.

 

[jon0844]

I am sure many are part time, and Virgin might directly employ some people that First would outsource. Therefore there might not be as many cuts as implied.

It must be too early to tell at the moment.

 

[HH]

My notes say that VT has over 800 full time equivalent (FTE) staff; circa 280 are part time on various hours (so maybe there's 900 or so actual people) and a small number were on fixed term contracts. The average cost of each FTE, including NI & Pension, is north of £30k.

The question has always been, what happens to your revenue when you decimate your catering offer? Where you're in competition with air and road, then catering is part of your competitive advantage. OTOH when you look at how First Class has died on VT, and that most Standard Class passengers buy food on station, then this could be a very smart move. 500 staff at £30k a time is £15m a year.

However that accounts for only a fraction of the difference between the two bids. Virgin are somewhere north of £900m NPV behind First - which equates to over £100m a year.

 

[ANorthernGuard]

With this and all the other threads that have been going on, hasn't anybody actually realised what will happen?


There will only be Drivers and minimum wage G4S left on the railway

Congrats.

But what the heck if it saves a few quid.

It won't change prices (they will still go up)
and the only people to benefit won't be the Taxpayer but shareholders and Directors.

Welcome to Britain one of the few countries left where no one has any pride in their workforce.

On a serious note, Quality of service will Nosedive, 1000's more people will be unemployed and the railway will die a slow and painful death.

The people make the railway NOT the shareholders and certainly not a few bean counters.

I know within about 15 years I will probably be out of a job in about 30 years so will Drivers and maybe then, only then will people be happy.

Rant Over. (I feel better now)

 

[krisk]

800 covers all of the WC and includes spare cover, holidays, sickness, maternity, paternity, courses and briefings.

What looks like a lot isn't when you break it down that many.