Stagecoach legal action over franchise awards: Judgement now available

[GRALISTAIR]

But remember didn't businesses' take pension contribution holidays - I'd be surprised if the employees did.

Both did though some employees opted to add AVCs additional voluntary contributions- my father being one and also my boss at the time

 

[sleepy_hollow]

I do wish the terminology was less ambigous. 'Disqualified' to me points towards being removed from the short list, or not allowed on it, whereas 'rejected' means rejected a submitted bid for non-compliance, although I suppose telling a bidder not to bother submitting whilst they are preparing a bid could also be 'disqualified' or 'barred', but it is clear that the terms overlap about 100 %. The Railway Gazette article implies, to me, that the bids have been submitted and disqualified/rejected.

 

[Taunton]

As someone who has been involved in numerous construction bids for various companies one rule we always followed was...If we are submitting a non-compliant bid (as an alternative) we always submitted a compliant bid too.

So in this case, what I don't understand is why Stagecoach/Virgin didn't put a price together to cover the pension requirements, then add (say) 20% and submit that bid along with the alternative bid that didn't include the pension uplift.

In this case they can't add 20%, or any other percentage, because the Pensions Regulator has not made any announcement yet on what the additional figure might be. The bidders were being asked to put in fixed price quotes including something potentially hugely expensive which has not been announced yet.

Given that the Pension Regulator is a government organisation, and the DfT is a government organisation, it strains credulity that they have absolutely no idea what the figure is going to be. For businesses like rail it's a huge future risk.

I think the other bidders worked on the basis that they would expect to renegotiate the figure later, which is also not a good way to go about things (if you do construction bids you'll be used to this expectation on occasion as well).

Few bids are ever "totally compliant". There are always some things in the "mandatory" column that you can't, or don't want to, do. Likewise there are parts where the offer can exceed the request. That's why it takes a while to review them all. However, bids also suffer, even at the highest level of management/government, from "bottom right-ism", where the reviewers scarcely look beyond the lowest tender (or highest premium) figure in the bottom right cell of the spreadsheet, and the conditions you put in come second to that. It's essential to minimise that figure as well.

 

[Brissle Girl]

But remember didn't businesses' take pension contribution holidays - I'd be surprised if the employees did.

It’s not quite that simple. The government of the day thought that overfunded schemes were a devious wheeze for a company to squirrel funds away in a no tax environment. So it imposed rules which effectively mandated contribution holidays. The view was that as the employer took the long term risk, and was in other times paying far more than members, that it would take the holiday. Members accruing benefits were still paying much less than the cost of that accrual, so still had a good deal (many schemes were even non contributory for members in those times - a permanent contribution holiday if you like).

Of course then came the perfect storm of Gordon’s tax raid on pension funds, rapidly increasing life expectancy, and rapidly falling interest rates, which overnight (in pensions timescales) extinguished any surpluses and more in the space of a few years.

The rest, as they say, is history.

 

[Xenophon PCDGS]

Grayling might be rotated to another job, but it's unlikely a keen Brexiteer like him will not be around in the next government.

Is there anyone on this thread who would offer comment on the role of Grayling in his previous post, before moving over to the Transport ministry.

 

[Typhoon]

Is there anyone on this thread who would offer comment on the role of Grayling in his previous post, before moving over to the Transport ministry.

This seems (suspiciously) like an open goal. Offender supervision has had to be taken back into the public sector because of failures with the private providers (https://www.bbc.co.uk/news/uk-48288433 /url]). Newspaper articles pointing the blame (to Mr G) abound (such as https://www.independent.co.uk/voic...w-we-all-stand-to-pay-the-price-a6780826.html).

Between Justice and Transport he was Leader of the House of Commons, a non-job (well almost) which is why, presumably, Mrs Leadsom was the incumbent until a few days ago!

 

[Brissle Girl]

Privatisation of probation was Grayling’s idea. He went ahead despite everyone saying it was a bad idea, (the previous system had been formally recognised as actually being very good), and i think it is the only privatisation that is, despite the spin, being completely reversed, and within a few years too. Though not before hundreds of millions of pounds has been spent in the process and more than a few deaths as a result of offenders who didn’t get the monitoring that they previously would have done. Some CRCs thought a phone call every six weeks was adequate supervision of those released. Yes it sure saved money but wasn’t quite what was expected of the privatised companies.

Graylings failings in transport are shocking, but at least they haven’t cost lives.

 

[diffident]

The only way to deal with Graying's Failings now will be to cancel all future tenders and opt for DOR.

As each franchise elapses, they should then fold into DOR also.

The franchise system only serves to line the pockets of overseas investors and does not benefit the travelling public.

 

[Agent_Squash]

The only way to deal with Graying's Failings now will be to cancel all future tenders and opt for DOR.

As each franchise elapses, they should then fold into DOR also.

The franchise system only serves to line the pockets of overseas investors and does not benefit the travelling public.

How hasn’t the private investment by Chiltern/Virgin/c2c helped the railway?

How hasn’t the ability to fund transformative new stock privately helped the railway?

What is the part of the railway that fails the most (such as with electrification), and just so happens to be public ally owned?

Sure, privatisation has its downsides and the current system is as flawed as can be. But the last place Britain’s railways need to be is fighting for cash from the Treasury.

 

[43096]

The only way to deal with Graying's Failings now will be to cancel all future tenders and opt for DOR.

As each franchise elapses, they should then fold into DOR also.

The franchise system only serves to line the pockets of overseas investors and does not benefit the travelling public.

DOR no longer exists.

I have still yet to see any justification from anyone as to how transferring franchises to DfT (or bodies controlled by it) is going to make anything better when it is blatantly obvious that the biggest single issue in the railway industry is DfT.

 

[infobleep]

How hasn’t the private investment by Chiltern/Virgin/c2c helped the railway?

How hasn’t the ability to fund transformative new stock privately helped the railway?

What is the part of the railway that fails the most (such as with electrification), and just so happens to be public ally owned?

Sure, privatisation has its downsides and the current system is as flawed as can be. But the last place Britain’s railways need to be is fighting for cash from the Treasury.

One of the problems I have with private railways is overcrowding due to TOCs not owning enough rolling stock. I couldn't say if it would be better if publicly owned. Maybe not

 

[Bantamzen]

The only way to deal with Graying's Failings now will be to cancel all future tenders and opt for DOR.

As each franchise elapses, they should then fold into DOR also.

The franchise system only serves to line the pockets of overseas investors and does not benefit the travelling public.

"Grayling's Failings", what a wonderfully eloquent way to sum up the Minister's time in charge. Sadly given the current state of the administration, I don't see any light at the end of this tunnel. We'll soon have had PMs in 3 years, 3 years of Brexit chaos, more dodgy cabinets than IKEA. I really can't see anyone in the current setup that would have a hope in heck in turning around the failing franchise system. I just wonder how long it will be before one or more of the current big operators finally does pull out.

 

[Xenophon PCDGS]

One of the problems I have with private railways is overcrowding due to TOCs not owning enough rolling stock. I couldn't say if it would be better if publicly owned. Maybe not

Perhaps my advanced age of 74 still has never forgotten rail travel in the early 1950's on British Railways, where some ancient non-corridor compartment coaches used on trains running from bay-platforms 3-10 at Manchester Victoria (1 and 2 ignored as the Bury electrics used them) to long forgotten termini such as Middleton and Royton still seemed to have horsehair seat filling that caused much soreness in the skin of the back of my legs, notably at the back of the knees.

 

[43096]

One of the problems I have with private railways is overcrowding due to TOCs not owning enough rolling stock. I couldn't say if it would be better if publicly owned. Maybe not

And who controls what stock a TOC has and has to sign off any plan for additional stock? DfT.

 

[3141]

And who controls what stock a TOC has and has to sign off any plan for additional stock? DfT.

Let's take that a bit further. There's a contract between the TOC and the DfT, under which the TOC is due to pay premiums. If the TOCs leases additional trains, its expenses will increase. If its existing trains are overcrowded, passengers will benefit from more seats, but the TOC won't necessarily benefit from more passengers. The DfT will be concerned about whether the TOC will still be able to pay the premiums.

If the railways were publicly owned, and some trains were overcrowded, the National Rail Company would have to ask the government for more money to obtain more trains. The government would want to know whether providing the trains would lead to more income from the railway to the Treasury. Or might it alternatively lead to certain services needing more subsidy? These questions would need answers which the government regarded as satisfactory before any new trains were authorised.

Anyway, in some areas there's no room for more trains, or for longer trains, without infrastructure works which would be even more expensive.

 

[whhistle]

If the conditions are stupid and have no benefit to anyone they should be challenges.

But you cannot know the future and so you cannot say if a condition is "stupid" or not (assuming you're referring to the pension thing?).

I don't understand why Stagecoach would bid but leave out a key part and hope the government wouldn't notice.
Now that is stupid.

If you didn't like it, don't bid. Nobody is forcing them.
The fact the board are made of greedy money grabbing exec's is the reason they bid. They're not running services out of the goodness of their hearts - it's to make money.

I hope they win! The incompetence needs to stop now. We need good profitable businesses running our services, not people like Carillion, Interserve etc. If you want decent companies to tender you need the terms to be sensible.

Incompetence will be around until people in senior positions over the age of 50 are dead.
The problem is they pass their attitudes on to the younger generation who seemingly become as incompetent.

It's not just railway - it leeches into every aspect of life in the UK.

The government get bullied by companies and thus we're in the mess we are now. If they stood up for themselves and we voted in good people instead of the same people we always choose, we'd be better for it.

 

[pdeaves]

Let's see if I understand the basic problem under discussion. As I see it:

• There is a financial problem with pensions;
• Government does not want to pay to sort it out;
• TOC bidders are asked to sort it out;
• TOC bidders ultimately ask government for money to fulfill their contracts;
• Government therefore ultimately pays for the pension issue (amongst other things).

If that thought process is anywhere like correct then Stagecoach asking government for money to pay to the government must not be the root cause of Stagecoach's beef.

 

[Robertj21a]

Difference is that's what MAY happen. A company needs more reassurance than just hoping for a good outcome. The government can change, so can their policies.

 

[option]

But remember didn't businesses' take pension contribution holidays - I'd be surprised if the employees did.

Lots did, but the vast majority of that was in the 80s & 90s, which puts it back with DfT/BR.

Also remember that the franchises have only been around for 20 years, so when they do the sums for those that have already retired, & those due to do so in the next 5-10 years, if they've worked in the industry all their time, then at least half of their pension pot is the responsibility of the DfT/BR.

I assume that the employer contributions were written into the franchise agreements, so if those amounts are now considered to have been too low, then that is also the responsibility of the DfT.

 

[DynamicSpirit]

The fact the board are made of greedy money grabbing exec's is the reason they bid. They're not running services out of the goodness of their hearts - it's to make money.

More likely, they bid for contracts because they are in the business of running trains. Wanting to make money by doing whatever your business does doesn't make you bad or greedy money-grabbing. It just makes you a normal human being.

After all, practically everyone who is employed goes to work in order to make money. Hardly anyone goes to work out of the goodness of their hearts. Does that make every shop assistant and policeman and teacher and software developer and dustman and office worker and train driver a 'greedy money grabbing employee'?

 

[RT4038]

Let's see if I understand the basic problem under discussion. As I see it:

• There is a financial problem with pensions;
• Government does not want to pay to sort it out;
• TOC bidders are asked to sort it out;
• TOC bidders ultimately ask government for money to fulfill their contracts;
• Government therefore ultimately pays for the pension issue (amongst other things).

If that thought process is anywhere like correct then Stagecoach asking government for money to pay to the government must not be the root cause of Stagecoach's beef.

TOC bidders can only ask the Government for money to fulfill their contracts - Government may not give it to them or give it to them with strings and/or wipe out any profits that the TOC may make. Like VTEC, Government could force them (contractually) to make a massive loss and then chuck them off the franchise. Understandably the TOC bidder wants something more certain from the Government to pay for the pension deficit.

 

[IanXC]

I assume that the employer contributions were written into the franchise agreements, so if those amounts are now considered to have been too low, then that is also the responsibility of the DfT.

My understanding is that this entire problem relates to deficits accrued pre privatisation.

 

[adamello]

Lets not forget the policy of the Government is to offset costs and liabilities to another (third) party, beit commercial or arms length public sector. Then they can shout about how the country is on the up and we're no longer in austerity, when in fact it will still have to pay but looks better on paper

OT example, academy schools, Govt. allows them to run as private enterprises, but doesn't provided them with as much funding, its the Govt. still paying, but still making cuts, but they will now blame the Academies for mis-managment

 

[HH]

My understanding is that this entire problem relates to deficits accrued pre privatisation.

I'm not sure where you got that idea from.

The fact is that The Pension Regulator thinks that the RPS Trustee Plans to bridge the current shortfalls (largely caused by the recent recession and its affect on investments) are insufficient (and several TOCs have been resisting the increases called for in the last - 2016 - valuation) AND that current contributions are insufficient to cover future benefits. I believe that this view is coloured by what TPR sees as a relatively risky investment profile (higher risk investments tend to give greater returns).

 

[Tetchytyke]

The fact there is a shortfall in pensions is a disgrace. Modern day Robin Hood-Gordon Brown responsible for that by raiding the pension funds

Except that's not remotely true at all and shows a chronic lack of understanding.

The "deficit" is a guesstimate based on assumptions. For defined benefit schemes there's a very negative assumption on growth and a very positive assumption on life expectancy, i.e. the funds won't generate yields and everyone will die at 100.

As for the legal action, I'd love to see their legal case. "We submitted a non-compliant bid because we didn't like the terms on offer" doesn't seem the strongest legal argument. But then in Souter's world of Christian tolerance the lawsuit is just the first negotiating step.

 

[Tetchytyke]

How hasn’t the private investment by Chiltern/Virgin/c2c helped the railway?

What private investment? Virgin have taken billions OUT of the industry. They've not put a single penny of their own money in.

 

[GRALISTAIR]

Except that's not remotely true at all and shows a chronic lack of understanding.

If you had said not the full story and not completely true, I would be OK. But what you have said is not true either.

True cost of Labour's pension tax raid (and others since Seventies)
Gordon Brown's £10bn-a-year pensions grab from 1997 among policy-by-policy data showing four decades of tinkering by British chancellors

https://www.telegraph.co.uk/finance...sion-tax-raid-and-others-since-Seventies.html

 

[Brissle Girl]

If you had said not the full story and not completely true, I would be OK. But what you have said is not true either.
https://www.telegraph.co.uk/finance...sion-tax-raid-and-others-since-Seventies.html

Exactly. Three things have crippled defined benefit pension schemes. 1. Longevity improvements during the first decade of this century. 2. Fall in fixed interest investment yields since 2008. 3. Gordon Brown and his tax raid in 1997. The funding level (and thus surplus or deficit) is inevitably an estimate of what’s going to happen in the future, but these three factors have meant that most schemes have large deficits that hang round private companies like millstones, and is why they have closed to new entrants and usually any future accrual of existing members. Any schemes still open (such as the railway scheme) are even more exposed to massive swings in funding, and thus the requirement for employers to fund any shortfall. As an industry scheme, with multiple employers, there is even more uncertainty as to what they might be asked to pay. And that is the concern of Stagecoach, Arriva and others.

 

[whhistle]

More likely, they bid for contracts because they are in the business of running trains.

True, but you missed the point.
There's a significant difference between Stagecoach's board of directors and a teen at a McJob.
If Stagecoach didn't like the fact they'd have to take on pensions, why did they submit a bid?
Then cry like babies when it wasn't accepted!

 

[Robertj21a]

True, but you missed the point.
There's a significant difference between Stagecoach's board of directors and a teen at a McJob.
If Stagecoach didn't like the fact they'd have to take on pensions, why did they submit a bid?
Then cry like babies when it wasn't accepted!

I think it may be you that has missed the point.
From comments to date it appears that nobody indicated to Stagecoach (or Arriva ?) until the last minute that their bid would be automatically excluded.
It's quite common for non compliant bids to be submitted, usually leading on to discussions about alternative approaches.