First win Intercity West Coast franchise

HH · 28 Aug 2012

FT article:

Virgin Rail has launched a legal challenge to the governments decision this month to award the companys rival FirstGroup with the contract to run the intercity West Coast rail line, heaping new pressure on embattled transport secretary Justine Greening.

Virgin, the incumbent on the London to Glasgow line, is questioning whether the Department for Transports evaluation procedure properly weighed the risk associated with each bid.

The request for a judicial review caps almost two weeks of uproar over the decision, during which Sir Richard Branson whose Virgin Group is the controlling partner in the Virgin Rail joint venture accused the government of insanity for choosing what many see as an extremely aggressive bid.

MPs and others have also raised concerns that the quality of service will fall if FirstGroup whose Great Western franchise is poorly rated by passengers compared with the West Coast line takes over. Louise Ellman, chair of the transport select committee, wrote to Ms Greening last week urging her to delay the signing of the contract.

By the start of this week, more than 135,000 people had signed a petition asking for the decision to be reconsidered, in a rare example of the public swinging behind a single company.

The row is creating fresh headaches for Ms Greening, the transport secretary, who is already caught in the political crossfire over whether or not to expand Heathrow airport.

The government and FirstGroup are due to sign the West Coast contract at midnight on Tuesday night, well ahead of a December start date for the franchise. But Virgins move could delay that.

Virgin expects a high court judge to decide within the coming month whether the case is worth hearing. Lawyers for the Branson business spent the Bank Holiday weekend going through whether or not they had a potential case against the government.

Patrick Twist, a partner at the law firm Pinsent Masons, said the case was not a shoo-in. [Sir Richard] will need to show that there was something wrong with the process or that the department could not reasonably have come to the decision it did. That will be a very high hurdle to leap

The company says its bid promised higher premium payments to the government in the early years of the franchise, while FirstGroups overall offer was 15 per cent higher thanks to steeper payments in the later years.

We question whether FirstGroups bid has been correctly risk adjusted by the Department given all of its supposed incremental value is delivered after 2022, said Virgin.

A spokesman added: Were looking for an evaluation procedure that can say money in 12 years time is only worth, say, 20 per cent of money in a years time.

The group also argues that the money FirstGroup had promised the government should it default on the contract about £235m goes no where near covering the level of risk.

The company said on Tuesday: We have tried for three weeks to get clarity over the Department for Transports decision and to have a number of key questions answered. On each occasion we have been refused information. We are left with no choice but to commence court proceedings.

Virgin Rail is 49 per cent owned by Stagecoach. It is unclear whether the partners will bid for further franchises together following the West Coast loss.

RailUK Forums

dosxuk · 28 Aug 2012

I don't see this as ending well for Virgin.

Lets say they do win this case, the only thing that can then happen is for the franchise to be retendered from scratch, opening it to all again, meaning a new pre-qualification stage. Virgin's current actions, especially them effectively claiming that First intend to go bankrupt or default on the franchise before the real payments start, are very damaging to the entire process, possible grounds for the DfT to block them at that stage.

As many have already said, if Virgin believed the process was this broken, they should have raised their complaints before the award was made.

Interesting that Stagecoach are still remaining tight lipped.

Pen Mill · 28 Aug 2012

HH said:
FT Article extract
A spokesman added: “We’re looking for an evaluation procedure that can say money in 12 years’ time is only worth, say, 20 per cent of money in a year’s time.”

Twit !
The figures published by First have been converted to Net Present Value , these people shouldn't be allowed out without their guardians

HH said:
FT Article extract
The company said on Tuesday: “We have tried for three weeks to get clarity over the Department for Transport’s decision and to have a number of key questions answered. On each occasion we have been refused information. We are left with no choice but to commence court proceedings.”
.

I'm backkk !

Good for them , the announcement was only made 2 weeks ago , a little bit of legal insider trading then ?

If this is the quality of legal assistance then arggggggggh

Aictos · 28 Aug 2012

Realfish said:
First offered the highest premium for sure - but backloaded to the end of their franchise. Up to March 2022, Virgin's bid offered the taxpayer the better deal.

Planning on getting New trains? So were Virgin

Additional services to new destinations? So were Virgin

Greening also added this morning that First were investing in Stations. A p*** poor £22m, according their PR blurb. That wouldn't buy more than a coat of paint.

Virgin have been in charge of the West Coast since 1997 so why do they still manage stations on the top 10 Worse Stations list?

Warrington Bank Quay, Preston, Wigan North Western, Crewe and Stockport are all on this list, Virgin has had plenty of time to invest BUT haven't!!!

Wath Yard · 28 Aug 2012

HLE 13 said:
Virgin have been in charge of the West Coast since 1997 so why do they still manage stations on the top 10 Worse Stations list?

Warrington Bank Quay, Preston, Wigan North Western, Crewe and Stockport are all on this list, Virgin has had plenty of time to invest BUT haven't!!!

They have done plenty of whining though, and demanding the government pays to upgrade them to enhance the Virgin brand, at no cost to them obviously.

Realfish · 28 Aug 2012

The Planner said:
Showing up on BBC that Virgin have gone for court action.

Some legal guy on Radio 5L, has just said that Virgin will now need an injunction to stop the agreement being signed and it would need to be on some substantial grounds.

That's not what the process or EU law says. The process says that DfT will sign their part of the agreement (First have already signed their bit), if the 10day standstill period has been successfully concluded, or will return the papers (to First) in the event of a legal challenge.

Under EU law, this challenge results in an automatic suspension of the process until the review body (court?) makes it's decision. Under these rules, if the DfT were to plough on, the contract would be deemed ineffective.

sonorguy · 28 Aug 2012

dosxuk said:
I don't see this as ending well for Virgin.

Lets say they do win this case, the only thing that can then happen is for the franchise to be retendered from scratch, opening it to all again, meaning a new pre-qualification stage. Virgin's current actions, especially them effectively claiming that First intend to go bankrupt or default on the franchise before the real payments start, are very damaging to the entire process, possible grounds for the DfT to block them at that stage.

As many have already said, if Virgin believed the process was this broken, they should have raised their complaints before the award was made.

Interesting that Stagecoach are still remaining tight lipped.

From Virgin's point of view this is a win-win. Branson is a clever chap and will have thought this through thoroughly. He hasn't got the renewed franchise currently and if he loses he still won't have the franchise so all he loses are the legal costs, small beer to his company even if he has to pay DfT's as well. He also gains the 'customer service focussed company fighting against government and profit driven company' sympathy vote, which amongst the public is probably substantial. If he loses he's seen as taking on rapacious business and 'the man'. He's done this before and has had BA through the courts a few times.

He knows many of the travelling public, ie at least those who've signed the petition and probably many more, are behind him, as are the Labour party.

If there was a retendering then Virgin can't be blocked if they meet criteria for acceptance for consideration. A fit of pique by DfT because Virgin slagged off the process and winner first time round would just end up back in court and Virgin's bid would have to be considered on its merits, just like all the others.

The Virgin bid was described inside the DfT as more deliverable and affordable so he hasn't got a lot to lose here.

Oswyntail · 28 Aug 2012

swt_passenger said:
On the contrary, there are detailed instructions on exactly how to lay out the bid so that they are comparable - even down to font size, and numbers of pages allowed for each section. The info on exactly how to prepare bid documentation is cross referenced in the ITT, and includes all sorts of DfT financial templates and models, but they're not directly available on the DfT website....

Blimey - at least this will mean it is easy for a true comparison to be made. I very much doubt that the DfT will have left many obvious flaws in its application of process.

PHILIPE said:
Whatever we think of Richard Branson, he is merely lodging an appeal if you look at it in that sense. I know there is no provision for appeals in the franchising system but should there not be.

Agreed, there should be. But we seem to have entered a phase of civilisation where the throwing of toys out of the pram is seen as a respectable business strategy (See also: Bombardier)

PHILIPE said:
The Government always say value for money or good deal for the taxpayer as though passengers don't matter. Good to see somebody taking on this arrogant government.

I know this is the line that many are taking, stirred up by the "Opposition". But this is unlikely to be a "Government" decision, as much as a "day to day running the country" decision which is in the hands of the Civil Service. It is sad but unsurprising that it is being turned into a party squabble, because that simply muddies the waters. The question is: is it the right business decision taken according to law and due process? Nothing to do with party or even "Government".

SkinnyDave · 28 Aug 2012

Justine Greening has this and is taking a kick in over Heathrow all in one day..

Who would be a politician??

DarloRich · 28 Aug 2012

@Phillipe/Oswyntail - why should there be an appeal to a FAILED tender? What, therefore, is the point of a tender exercise if the failed bidders can merely appeal.

The whole point is that you lay out your bid against the defined criteria. All bidders knew what the criteria were at the outset. The success criteria and weighting are there for all to see.

F Great Eastern · 28 Aug 2012

First Statement:

We understand that Virgin Rail Ltd a subsidiary of Virgin Rail Group, the joint venture between Virgin Group and Stagecoach Group plc, has brought a legal challenge against the Department for Transport in relation to the recent award of the InterCity West Coast rail franchise to FirstGroup.

We have every confidence in the DfT’s process which is rigorous, detailed and fair and in which bids are thoroughly tested. There has been no complaint about the process, which was carefully described in advance, until Virgin Rail Group had lost commercially.

Our plans for the new InterCity West Coast franchise include faster journeys, new trains, more seats and more direct services from London than currently on offer. There will be improved WiFi, better catering, refurbished stations and Standard Anytime Fares will be reduced by 15% on average within the first two years. We look forward to welcoming passengers to their new and exciting InterCity West Coast service in December and creating a better railway for all.

Our focus is to ensure a smooth transition with continuity for staff and passengers alike. We want to get on with delivering the many benefits and improvements we are offering without delay or disruption. We will continue to prepare for a successful start up of the new franchise on 9 December 2012.

Realfish · 28 Aug 2012

sonorguy said:
From Virgin's point of view this is a win-win. Branson is a clever chap
He knows many of the travelling public, ie at least those who've signed the petition and probably many more, are behind him, as are the Labour party

Not just the labour party, but many Conservative MPs and Minister are reported to have expressed their concerns.

Having met a number of the 'Sir Humphry's' in the DfT, I wouldn't be as confident in their commercial nouse and Greening seems to be. I hope that she doesn't come to regret this.

bangor-toad · 28 Aug 2012

Realfish said:
That's not what the process or EU law says. The process says that DfT will sign their part of the agreement (First have already signed their bit), if the 10day standstill period has been successfully concluded, or will return the papers (to First) in the event of a legal challenge.

Under EU law, this challenge results in an automatic suspension of the process until the review body (court?) makes it's decision. Under these rules, if the DfT were to plough on, the contract would be deemed ineffective.

Completely agree with this.
I've run EU tenders previously and there is a fixed period where a challenge can be issued after the decision is announced. It's part of EU law. If the contract is signed within this "Standstill" period and there is a formal challenge issued then the contract cannot go ahead.

That's the process part and is the legal right of any unsuccessful bidder.
The hard bit is proving that the decision was flawed.

My tender choices were challenged like this. It was 100% expected and I'd kept top notch records and the decision making matrix was fully filled out. The facts were examined and the challenge was dismissed.
I'd imagine the DfT have either been paranoidly careful to follow the rules, in which case the Virgin challenge will fail quickly, or the opposite is true and there will be much uncertainty for a fair while...

Jason

pemma · 28 Aug 2012

There were threats of legal action etc. from Bombardier after Siemens got the Thameslink contract. Bombardier don't seem to have got anywhere and the only delay I know about has been down to financing.

AndrewP · 28 Aug 2012

The move to legal action is worrying.

As for how the bids have been assessed the success criteria has to be determined before tender so that assessment is fair. The basis for selection was based on MEAT - the Most Economically Advantageous Tender. The OJEU advert has been in the public domain for a long time:

assets.dft.gov.uk/publications/intercity-west-coast.../ojeunotice.pdf

I think Virgin are likely to be citing transparency in weighting following the success of Mears vs. Leeds City Council case last year. The risk is that procurement managers will end up giving out so much information that they will be receiving identical responses without innovation or ideas.

Also, regarding investment in stations, this would likely be in addition to repairs and maintenance which is revenue spend and not capital spend or investment.

Regarding who is best - I have had good and bad experiences with both.

HH · 28 Aug 2012

sonorguy said:
The Virgin bid was described inside the DfT as more deliverable and affordable so he hasn't got a lot to lose here.

Deliverable yes; affordable no. Anyway, affordable to who?

WatcherZero · 28 Aug 2012

Siemens filed an appeal after losing the IEP contract to Hitachi on the grounds that reducing the order from 1,200 trains to 600 fundamentally changed the economics (contrary to belief they didnt actually challenge the change in spec of the trains), they withdrew it after a few weeks though and didnt pursue it when it became clear they were offering their trains at a 30% premium to Hitachi's bid and had failed to meet the tender requirements to provide technical information of the the trains in their bid (since it was a joint bid they hadnt actually designed them just pledged performance figures and agreed to split the work and merge their existing designs while Hitachi had done the work and offered technical blueprints and data of its designs).

notoemt · 28 Aug 2012

Can't really stand the bearded one, the less of I see of him the better. However, good for him. There is something fishy about this. Knowing senior civil servants as I do, they're very good at drafting rules and procedures and then ignoring them. Also most of the one's I have the misfortune to run into are completely detached from reality and busily brown-nosing. They're not particularly commercially competent either as evidence by the over reliance on consultants.

F Great Eastern · 28 Aug 2012

As I have pointed out several times, if we accepted the most deliverable bids, offers or contracts in every industry we would be stuck in the dark ages in the country because the most radical, forward thinking and creative new ideas tend to be more challenging (therefore harder to deliver) than keeping the status quo or making minor tweaks (which is obviously easier to deliver)

For example, my boss tells me that he would like me to undertake a project, should I do the minimum require, because it's much easier for me to deliver it or should I aim to do a very good job, making i the best it can be, even if it would require more effort to deliver it?

Also should we review the planned electrification on the network, and cancel the sections that are more complex and add other lines that are easier, based on the fact it's easier to deliver solutions on some lines than others and disregarding all other factors?

Badger · 28 Aug 2012

Two ways a review could go: 1. Virgin turn out to be the better bid and keep it, which is a good thing. 2. Virgin turn out to be the worser bid and lose it, and pay the legal fees, which is also a good thing.

WatcherZero · 28 Aug 2012

3. Now contract is delayed its debated in Parliament and with divided Government benches the contract is postponed or retendered with the Government claiming its not a 'u-turn' it just needs 'more time to reflect on the concerns raised'.

Realfish · 28 Aug 2012

apx068 said:
I'd imagine the DfT have either been paranoidly careful to follow the rules

Which is why, I think, that the DfT have been steadfast in their refusal to answer any of VTs questions.

That, or it's a cultural thing. In my Civil Sevice days we always made a point providing the very minimum of information / rationale for our decisions, knowing, as my first boss used to say, 'the more you tell 'em, the the more ammunition you give 'em!'

F Great Eastern · 28 Aug 2012

Badger said:
Two ways a review could go: 1. Virgin turn out to be the better bid and keep it, which is a good thing. 2. Virgin turn out to be the worser bid and lose it, and pay the legal fees, which is also a good thing.

How can Virgin keep the franchise? They're arguing that the criteria is flawed therefore the whole process is not valid. If that is the case then the tender will have to be restarted under new criteria to make it fair to all parties.

Virgin cannot be awarded the franchise, because there would be no basis to judge their bid, considering the original criteria is now invalid. Therefore they are saying it was not a far contest, and it wouldn't be fair if Virgin was awarded the franchise for a further term as they have no basis to ask for this.

There would have to be a new tender, and bids would need to be invited again because the other bidders including First would say it is not their fault that they had the franchise they were warded taken away from them, it was that of the DFT so why should they be punished, First just followed the system that existed.

In any case if Virgin o win their court case, you then could see First also taking legal action against the DFT for compensation.

PR1Berske · 28 Aug 2012

This one is going to run and run and run....

cjmillsnun · 28 Aug 2012

TBH if there is a delay, then Virgin should be forced to hand the franchise to DOR until the Judicial Review is complete.

If there are irregularities in the bidding process then the franchise should be awarded to DOR and branded "West Coast" or preferably "INTERCITY West Coast". If however the Judicial Review finds no or very minor irregularities then First should take their franchise.

I detest First but I also can't forgive Branson for allowing VT to deliberately run the old trains into the ground before the Pendos arrived. When BR handed over to Virgin the coaches and locos were in reasonable condition. The coach interiors needed the refresh (that they got), but mechanically they were fine (if old). The service rapidly went downhill and the trains became dirty and unreliable.

VT Also placed Railtrack in an impossible position when it came to upgrading the WCML (Although they didn't help themselves either)

I also cannot agree with the publicity he's milking right now. He didn't spend on those trains, the RoSCos did, Railtrack/Network Rail upgraded the line, and TBH IC250 would've been a better train had it gone ahead (along with the improvements to the track that BR planned).

tbtc · 28 Aug 2012

I guess the consolation for First is that they can securely win the new Greater Western franchise by offering a tiny premium with little investment, if we have now established that the incumbent can play their Joker should someone else come along with a better/ higher bid? :lol:

Oswyntail said:
we seem to have entered a phase of civilisation where the throwing of toys out of the pram is seen as a respectable business strategy (See also: Bombardier)

I'm not a big fan of Bombardier, but they were careful not to throw their toys out of the pram - they let MPs/ Unions/ newspapers etc kick up a fuss, but Bombardier stayed pretty silent
--- old post above --- --- new post below ---

cjmillsnun said:
TBH if there is a delay, then Virgin should be forced to hand the franchise to DOR until the Judicial Review is complete

:: stands back and waits for the first person to say that this would give DOR a monopoly over the two main London - Scotland franchises, which would be anti-competative::

:lol:

WatcherZero · 28 Aug 2012

I dont think people realise that DoR is actually a contracted private management company held on retainer and paid to have staff ready to takeover quickly and not 'the state'. Its gets paid £30m a year to just be on standby, before the East Coast collapse they had operated for years without doing anything.

jon0844 · 28 Aug 2012

The ignorance from some people here is quite amazing, but with so many things in life these days - the people who know how things work are less important than people with good PR.

Wath Yard · 28 Aug 2012

They don't realise it because it isn't true. DOR's website explains their history.

WatcherZero · 28 Aug 2012

Wath Yard said:
They don't realise it because it isn't true. DOR's website explains their history.

Lol, thats just the trading company to operate East Coast, DoR has been around a lot longer operating Connex SE in 2003.

First win Intercity West Coast franchise

Established Member

RailUK Forums

Established Member

Member

Established Member

Member

Member

Member

Established Member

Established Member

Veteran Member

Established Member

Member

Member

Veteran Member

Member

Established Member

Established Member

Member

Established Member

Member

Established Member

Member

Established Member

Established Member

Established Member

Veteran Member

Established Member

Veteran Member

Member

Established Member