Stagecoach disqualified from three franchise competitions

[Masboroughlad]

The big surprise here is a Tory government apparently backing the rail pension scheme...

The BBC West Midlands news gave the impression that the Government are pushing pensions on to the operators, rather than 'own' them theirself.

 

[sleepy_hollow]

The announcement today, on the DfT website about Abellio and E Midlands I find more comprehensible. It suggests that the DfT has awarded that work, and presumably, verbally told other bidders that they are not getting it, with a short debrief on their marking, or non-compliances, Stagecoach being avowedly non-compliant being 'disqualified', 'barred', 'rejected' or whatever, from having their proposal price and any other features considered.

https://www.gov.uk/government/news/...s-for-passengers-on-new-east-midlands-railway

 

[AndrewE]

This still fundamentally comes down to the risk of a Defined Benefit pension lying with the employer. With a Defined Contribution pension there wouldn't be this whole argy-bargy about the trustworthiness of the company - once the money is in there, it's not going anywhere, and it's down to the person whose pension it is to ensure that there's enough in there.

But if the employer does a runner without paying in then the staff are left in the lurch. That has been the problem, and is why some companies are being required to pay more in. Network Rail was mentioned as one that will not have to pay more in.
I wonder how you will "ensure that there's enough in there?" Maybe stop eating or going on holiday to put extra money away?

Except the government didn't give that cast iron guarantee as any former member of the Jarvis & Fastline Section will tell you. They wriggled out by claiming the relevant legislation never considered what would happen if a section employer went bust!! I know as I lost a considerable amount of money from my 34 year pension.

Something stinks there, never trust a politician.

The BBC West Midlands news gave the impression that the Government are pushing pensions on to the operators, rather than 'own' them their self.

and don't imagine that journalist get much right either. It's the Regulator - supposedly independent - who is saying that the fund needs to be protected from iffy employers.
"They" are pushing the risk to the pension fund onto the perceived source of that risk. It's what privatisation and capitalism is supposed to be about.
I am surprised they didn't deal with it by making the extra charge, but letting the employer have the premium back at the end of the franchise period if they completed it and had paid in in full.

 

[Agent_Squash]

The announcement today, on the DfT website about Abellio and E Midlands I find more comprehensible. It suggests that the DfT has awarded that work, and presumably, verbally told other bidders that they are not getting it, with a short debrief on their marking, or non-compliances, Stagecoach being avowedly non-compliant being 'disqualified', 'barred', 'rejected' or whatever, from having their proposal price and any other features considered.

https://www.gov.uk/government/news/...s-for-passengers-on-new-east-midlands-railway

It has been made clear already that Stagecoach have been disqualified from West Coast and South Eastern as well - so today's announcement from the DfT is only part of a maze.

 

[sleepy_hollow]

It has been made clear already that Stagecoach have been disqualified from West Coast and South Eastern as well - ....e.

The maze being that it is not yet clear how that has been made clear, possible just by Stagecoach drawing the obvious conclusion from their non-compliance on the EMT one.

 

[Deafdoggie]

During the holidays 'Keswick Calling' etc and other special events (Railway Children) there are cheesy announcements per specific Service destination. The announcement is usually a well known voiceover person and the recording is uploaded to Atos. It's annoying and for overseas visitors who expect Atos Annie probably misunderstand what it's all about.

I thought that was a Network Rail thing? It happens at a lot of Network Rail managed stations. Not aware of it at Virgin managed stations.

 

[Agent_Squash]

The maze being that it is not yet clear how that has been made clear, possible just by Stagecoach drawing the obvious conclusion from their non-compliance on the EMT one.

Why haven't the DfT denied it, then? If Stagecoach were still in the running then the DfT would be desperate to stop this unfolding PR mess.

 

[infobleep]

Meanwhile Govia get to continue as normal.

Perhaps that's be aude their bid was compliant in terms of pensions. 8 may not think much of them but if their bid was compliant, it was compliant.

 

[edwin_m]

but surely that is absolutely correct to maintain a fair competition.

Indeed. The bids must be evaluated strictly by the criteria set out in the invitation to tender, and if a bidder ignores a mandatory requirement then they will fail the evaluation. Any other outcome and the other bidders will be lawyering up and claiming unfair competition. However, I have some experience of bidding for franchises (not for DfT) and other contracts, and sometimes dialogue takes place after submission to ensure that the offer is clear and understood. In something as large and complex as a franchise bid it's not surprising if a few bits are unclear, and probably in everyone's interest that those items are clarified rather than leaving them to create a dispute later on or summarily dismissing the bid and potentially being left with none that are compliant.

We don't know the detailed terms and conditions for these cases, or whether any post-submission dialogue took place. But, extrapolating somewhat from my previous paragraph, Stagecoach may be able to argue that DfT should have but didn't come back to them to revise and re-price the bid in a form that was compliant with the pension requirement. Or at the very least DfT could have told them they were disqualified early on when they checked the mandatory requirements, and DfT's failure to do so would have incurred some amount of cost to Stagecoach.

I repeat I'm not saying that's what happened, but Stagecoach may advance a legal argument along these lines.

 

[LOL The Irony]

So this could've all been Stagecoach getting the wrong end of the stick?

 

[ForTheLoveOf]

But if the employer does a runner without paying in then the staff are left in the lurch. That has been the problem, and is why some companies are being required to pay more in. Network Rail was mentioned as one that will not have to pay more in.
I wonder how you will "ensure that there's enough in there?" Maybe stop eating or going on holiday to put extra money away?

Planning appropriately. There are far too many people out there who don't think about their pensions because it's a problem for "older me", so to speak. Defined Benefit pensions encourage this kind of thinking, as opposed to Defined Contribution pensions which encourage the pension holder to consider their options and plan.

If all Defined Benefit pensions were insured by the Government against the risk of defaulting employers, that would be fine. But that is a risk (and ultimately, a cost) that it is not fair for the Government to be expected to take on, and so they remain a fundamentally risky mechanism that isn't really suited to the idea of a private sector employer managing it and paying into it.

 

[LNW-GW Joint]

As far as I can see there was nothing in today's DfT announcement about the bidders for South Eastern and West Coast.
If Stagecoach/Virgin had been formally removed you'd have expected DfT to say so.
In any case there's still water to go under the bridge for these franchise decisions (cf Williams review etc), and further extensions on the current franchises can't be ruled out as events unfold.
Otherwise Virgin has 12 months left on its current franchise.
It nominally only leaves two bidders for West Coast - the groups led by First and MTR.
DfT can't be certain how the HS2 situation will unfold in the next year or so.

South Eastern is left with bids from Govia and Abellio (and partners).

If Stagecoach wanted to get back into rail franchising quickly, they could always buy Arriva from DB.
Though that might bring competition problems on the bus side.

 

[Bletchleyite]

If Stagecoach wanted to get back into rail franchising quickly, they could always buy Arriva from DB.
Though that might bring other problems on the bus side.

They could of course buy Arriva then immediately put the bus operations up for sale.

 

[hwl]

As far as I can see there was nothing in today's DfT announcement about the bidders for South Eastern and West Coast.
If Stagecoach/Virgin had been formally removed you'd have expected DfT to say so.
In any case there's still water to go under the bridge for these franchise decisions (cf Williams review etc), and further extensions on the current franchises can't be ruled out as events unfold.
Otherwise Virgin has 12 months left on its current franchise.
It nominally only leaves two bidders for West Coast - the groups led by First and MTR.
DfT can't be certain how the HS2 situation will unfold in the next year or so.

South Eastern is left with bids from Govia and Abellio (and partners).

If Stagecoach wanted to get back into rail franchising quickly, they could always buy Arriva from DB.
Though that might bring other problems on the bus side.

Stagecoach press release via Reuters

Stagecoach Group said on Wednesday it was disqualified from three UK rail franchise bids after officials informed the train and bus operator that its proposals did not meet some requirements related to pensions risk.

The company said its independent bid for East Midlands and its joint bids with Alstom for South Eastern and with Virgin Group and SNCF for West Coast have been rejected.....

Dft don't like mentioning drop outs because it gives those remaining more power.

 

[DarloRich]

and sometimes dialogue takes place after submission to ensure that the offer is clear and understood. In something as large and complex as a franchise bid it's not surprising if a few bits are unclear, and probably in everyone's interest that those items are clarified rather than leaving them to create a dispute later on or summarily dismissing the bid and potentially being left with none that are compliant.

Agreed - but clarification is very different to correction

Or at the very least DfT could have told them they were disqualified early on when they checked the mandatory requirements, and DfT's failure to do so would have incurred some amount of cost to Stagecoach.

Agreed - however we don't know what terms were agreed at the start of the process. lets see if they sue.

 

[jfollows]

Indeed. The bids must be evaluated strictly by the criteria set out in the invitation to tender, and if a bidder ignores a mandatory requirement then they will fail the evaluation.

Absolutely, and I agree with the rest of your post also.

I had experience of responding to tenders, then experience of writing tenders, I changed jobs, poacher turned gamekeeper if you like. Nothing to do with DfT, mind you.

In the first case, I remember a £100 million tender we won, on which I was not involved until the last week, when I was asked to work with the bid team to ensure that we had correctly responded to all the questions.

So I start to wonder why a non-compliant bid would be submitted. Perhaps it's to make a point, but then I remember a much smaller bid which I initially advised against competing for. My company couldn't work this out, so spent a lot of time and effort putting together a bid which eventually it never submitted. My failing for being unable to make my point clearly enough, I guess. Too many other people with a mindset of "we must try to win this business" in some way. So either a big mistake or an expensive way of making a point by being deliberately non-compliant, or possibly a hope that all responses would be non-compliant in the same way?

As gamekeeper I remember receiving a response which could be read as non-compliant. We asked the supplier a very careful question in which we asked them to clarify, but trying not to give the game away or giving them an unfair advantage. They answered correctly and went on to win the business. We didn't want to disqualify them on a "technicality" but needed a better answer than they had given to ensure they were compliant. However if they'd given the wrong answer we would have disqualified them.

 

[LNW-GW Joint]

Going back a bit, I remember First (one of the then incumbents at GE) failing to win the initial Greater Anglia franchise because of non-compliance, and being exceedingly miffed at the DfT.
First Group then went on to win almost a clean sweep of the next few franchises, replacing National Express as the dominant owning group.
But it was more than a decade ago, in a different economic and political world.

 

[StaffsWCML]

How well costed are the other bids though? Will these operators have to learn the hard way?

Franchising is a mess, the system is not fit for purpose that much is sure.

I wonder how many of these franchises will fail/end early due to not being properly costed.

 

[RealTrains07]

The reason why the previous west coast bid went the way it did was First groups fault. They would have kept the west coast if they had sorted their finances properly in the bid

 

[The Ham]

Planning appropriately. There are far too many people out there who don't think about their pensions because it's a problem for "older me", so to speak. Defined Benefit pensions encourage this kind of thinking, as opposed to Defined Contribution pensions which encourage the pension holder to consider their options and plan.

If all Defined Benefit pensions were insured by the Government against the risk of defaulting employers, that would be fine. But that is a risk (and ultimately, a cost) that it is not fair for the Government to be expected to take on, and so they remain a fundamentally risky mechanism that isn't really suited to the idea of a private sector employer managing it and paying into it.

Quite, there are many people who think that they don't need to save for a pension until they're in their 40's and forget that is no longer the early 2000's and they are no longer in their mid 20's.

 

[221129]

The reason why the previous west coast bid went the way it did was First groups fault. They would have kept the west coast if they had sorted their finances properly in the bid

In the same way that Stagecoach have disqualified themselves by making non compliant bids.

 

[WatcherZero]

Bit of misinformation going on here. Yes the pension funds are explicitly linked to the franchises, they make the payments into the fund and are responsible for any shortfall in the pension fund by being required to make top up payments to it. When a TOC's franchise ends the company isn't dissolved its put into hibernation with enough cash in the bank to meet its assumed pension contribution and compensation/liability responsibilities (e.g. accident and injury claims) previously this commitment only applied to a TOC company rather than Railway industry pensions. Final salary pensions are ruinously expensive and employees and employers haven't been putting aside enough to cover the underperformance of those funds both financially and due to rising life expectancies. The Railway Pensions Scheme has a historic deficit currently estimated at £5-6bn due to these factors (for instance in 2017 employees had to make £11m extra and employers £51m in top up funding) presently the requirement for top ups only falls on the date they are due (e.g. if the fund is £10m short of money to pay out that year then the present incumbents have to make up that £10m in that year and their responsibility ends when their franchise ends) in the current round of franchising the Government has been asking the franchises to take over the role of guarantor from the state with lifetime deficit liability (i.e. if they had an 8 year franchise then the company would be responsible for that share of the employees pension deficit until the day they die).

Stagecoach is balking at making an unquantified commitment to top up underperforming pension funds which the Railway Pensions Regulator itself doesn't know the exact figure for.

Its not much better at NR which had a £1.3bn pension deficit last I heard.

 

[TheNekomancer]

I am glad to see a stand be made on the issue of pensions, if Stagecoach don't meet the rules, then it's only right that their bids are considered non compliant.

 

[BR67]

The reason why the previous west coast bid went the way it did was First groups fault. They would have kept the west coast if they had sorted their finances properly in the bid

Rubbish. It was DfT failure, as explained here: https://publications.parliament.uk/pa/cm201213/cmselect/cmtran/537/53705.htm
(but we're well off topic, so no need debate this further here)

 

[duffield]

...
Final salary pensions are ruinously expensive and employees and employers haven't been putting aside enough to cover the underperformance of those funds both financially and due to rising life expectancies.
...

I'd agree with the second part of this but not necessarily the first. If there hadn't been contibution holidays by employers and too-low contributions by employees when the railway pension scheme/s were in temporary surplus, they might be affordable today.

 

[pt_mad]

So that basically means the guaranteed end of Virgin Trains as a brand. That's quite big news.

Would it not have ended anyway though with a transferrable brand being required in most new franchises?

 

[StaffsWCML]

In the same way that Stagecoach have disqualified themselves by making non compliant bids.

But are the things they are being asked to comply with reasonable?

To commit to topping up a pension fund that no one has any idea how much the figure will be seems a bit ridiculous for any business to commit to. The other businesses may be compliant to a broken franchising system, but will they actually be able to meet their obligations or will they have to pull out when the going gets tough.

Stagecoach has the benefit of hindsight does MTR/Guangshen Railway Co have it? Really not sure how Abellio can be given more franchises when its Scot Rail services are absolutely appallingly bad.

Two of the best performing UK rail companies for customers, have been removed from the network based on pie in the sky government franchise models, that quite frankly don't work.

I would put money on some of these companies going to the wall like Carillion/Interserve by complying to this nonsense.

The franchising system makes no sense.

As long as you say you can comply with something on a document you can get the deal, but your service can be awful and expensive. Those with proven track records of garbage service should also be excluded from bidding. Abellio, Govia etc should not be allowed anymore till they sort out their current crock.

 

[Bletchleyite]

Would it not have ended anyway though with a transferrable brand being required in most new franchises?

I think a specific brand is still allowed, but at the cost of the TOC having to put it back over to a transferrable one at the end of the franchise?

 

[pt_mad]

I think a specific brand is still allowed, but at the cost of the TOC having to put it back over to a transferrable one at the end of the franchise?

Or perhaps something like 'West Coast Mainline, by Virgin Trains' in a similar way to what Arriva have done with their brands.

 

[pt_mad]

There seems to be doubt amongst this thread as to whether Stagecoach have actually been excluded from West Coast and Southeastern. Is there actually any cast iron evidence that they are?