Rumours are that negotiations are fraught. I bet; Virgin have the DfT stretched over a barrel...
IMO McLoughlin made a significant error in admitting that DOR was not an option so early in the process.
I thought that DOR was going to struggle to take over from December the 9th and that the DfT didn't want to end up running all the franchises when they were supposed to end.
Therefore if Virgin make it difficult, expensive, etc. don't rule DOR out. As otherwise the DfT would be in the same place with the next franchise.
It maybe difficult to have the right team in place before December 9th, but soon after they take over there maybe some Virgin head office staff looking for work. As well as those contractors who work on bids for companies who's future employment calender is looking a little a bare!