The reasons behind Virgin possibly losing the WCML franchise ?

[General Zod]

Please pardon my ignorance as am not as well versed with the inner mechanics and political workings of the various TOC's relationships with the DfT but why is there a general consensus of opinion that Virgin will lose the WCML when the franchise comes up for renewal ? I used Virgin quite frequently when they had the Cross Country route and admittedly there could have been considerable improvements on how the service was run. However, I've had the opportunity to use the WCML more and more often in the last year to eighteen months and have found this to be a reasonably pleasant and trouble free experience. Additionally, there also seems to be good availability of cheap, long distance advanced tickets ( on certain routes) provided you book at least 5-6 weeks prior to travel. What are the underlying factors which have caused Virgin to be on the back foot during renewal time ? Is the WCML the "poisoned chalice" of the rail network ?

 

[Failed Unit]

Although virgin will blame rail track look at the difference between what was bid and what we have now. It is viewed that Virgin screwed the taxpayer following the collapse of PUG2. They have often tried to blackmail dft. I think that is the viewpoint coupled with the fact they are a little shy of investing thier own money.

Does anyone have a copy of the PUG2 proposals and journey times?

 

[MidnightFlyer]

IIRC it's been said that Virgin and the DfT never got along, I think they held each other in contempt for ages.

 

[rail-britain]

I've had the opportunity to use the WCML more and more often in the last year to eighteen months and have found this to be a reasonably pleasant and trouble free experience. Additionally, there also seems to be good availability of cheap, long distance advanced tickets

I agree, the service reliability has vastly improved, overall
Equally, with that reliability have come frequency improvements, although these are of more benefit to those who cannot be flexible in their travel plans

However, as with all other TOC, passenger numbers have increased and this has stretched the current resources
There are already minor complaints that even with 11 car trains they are often full with people standing at peak times, and whether there is a 9 car or 11 car train is quite random (same service day to day)

The availability of cheap advance tickets is a combination of the above
However the long distance prices have almost doubled in the last few years
As an example Glasgow to Carlisle / Preston has increased from £12 to £22 (£24 to £44 return), with the lower fare at the end of Virgin Cross Country (although still travelling on West Coast)

 

[David10]

The decision on who wins the West Coast franchise will be made on who delivers the best bid, plain and simple.

All this claptrap about the DfT and Virgin not getting along, is made by people not fully aware of the facts. I'm sure there are people in both organisations who don't like each other, but that is likely to be the case with most groups.

If Virgin were no chance to retain the franchise, they wouldn't spend several million pounds preparing a bid. Yes the franchise has had its problems, some of Virgin's doing, some external. But considering the vast changes and growth levels that have far exceeded those forecast 15 years ago, overall Virgin has done a good job.

 

[Failed Unit]

history does factor. It shouldn't but if you have two similar bids you tend to go with the incumbent unless they have caused you problems in the past then you will try anyone new. I have worked in public sector procurement. We took a slightly more expensive bid because of problems in the past. It was harsh but fair as the incumbent had our own experience when the winning supplier would pick thier best customers for us to speak to about there service quality.

 

[rail-britain]

I'm sure there are people in both organisations who don't like each other, but that is likely to be the case with most groups

Very much so
I have often bid on work, not expecting to get it as the existing contractor appears to be making a good job
Equally, I have bid on an extension not expecting to get it due to known issues (which the other bidders may or may not be aware of), and also been awarded a new contract

The organisation awarding the contract will look at the overall merits of such a bid
In some cases they will invite each party to make a presentation, which will often clarify some of the points which that bid includes

 

[LNW-GW Joint]

VT have always had "attitude", and have got the wrong side of virtually everybody at some time (including me!).
They could have walked away at several points during the franchise, but they stuck with it despite the reputational cost.
At one time they were the lame duck of the Virgin group, but I think they are now highly respected for delivering (finally) something close to what was promised.
The government knows full well what was achieved and are very happy for Virgin to stay in rail.
The wider world hasn't much of a clue about most of the players in the rail industry, but it sure knows who Virgin are, and that's a plus for everybody.

The thing they took on more than anybody else was RISK.
Also don't underestimate the power of their franchise contract, negotiated by Tom Winsor who is now getting up the nose of the police industry.

 

[Failed Unit]

The thing they took on more than anybody else was RISK.
Also don't underestimate the power of their franchise contract, negotiated by Tom Winsor who is now getting up the nose of the police industry.

Risk? Virgin? Must be talking about a different company. They took no risk, when the brown stuff hit the fan they went onto a management contract and even worse charged us for the privalidge of using the virgin brand. (I would have called their bluff and told them to de-brand.)

Do they accept credit cards on board now at the shop?

 

[craigwilson]

Additionally, there also seems to be good availability of cheap, long distance advanced tickets ( on certain routes) provided you book at least 5-6 weeks prior to travel.

Generally, my experience with Virgin has been largely pleasant. I certainly have no complaints regarding journey times or the comfort of their trains.

I dispute the above statement though - at least for Kent - Manchester flows, even at that kind of notice it's hard to find cheap Advances. Maybe its because I'm booking "VWC+CONNECTIONS" Advances rather than VT Only tickets, and the quotas are lower for these tickets. I don't know. All I can say is that it has got worse over the past year for that.

 

[calc7]

Generally, my experience with Virgin has been largely pleasant. I certainly have no complaints regarding journey times or the comfort of their trains.

I dispute the above statement though - at least for Kent - Manchester flows, even at that kind of notice it's hard to find cheap Advances. Maybe its because I'm booking "VWC+CONNECTIONS" Advances rather than VT Only tickets, and the quotas are lower for these tickets. I don't know. All I can say is that it has got worse over the past year for that.

Try via Warrington/Wigan or splitting at Stafford/Crewe if you're willing to compromise a little on ease.

 

[David10]

..even worse charged us for the privilege of using the virgin brand.

Think it was one of those Daily Mail creating hysteria about nothing stories. As with any large organisation, Virgin's parent company recharges its expenses out to its subsidiary companies so that it breaks even and doesn't end up with tax losses. I recall the figure of about £1 million was Virgin Rail Group's share of these costs. I'm sure this would have been stripped out when the SRA calculated Virgin's management fee payable.

 

[General Zod]

If travelling to Scotland, the North West or the North East from "the South" I have the option of going via Banbury and Birmingham New St using XC. As of last year I found this to be an expensive and problematic exercise which persuaded me to explore alternative travel options via London using Virgin. If booking at least 5-6 weeks in advance I can usually pick up some very good deals - far far better than XC and with the added bonus of quicker journey times to Scotland. A Virgin Class 390 , whatever its drawbacks, is a more comfortable ride than its XC sibling.

 

[Oswyntail]

I wonder if being associated with Branson might not be a little toxic in some circles (like Murdoch in others). Of course, we all know that people make rational assessments based on data, rather than being distracted by popular ogres....

 

[Failed Unit]

Think it was one of those Daily Mail creating hysteria about nothing stories. As with any large organisation, Virgin's parent company recharges its expenses out to its subsidiary companies so that it breaks even and doesn't end up with tax losses. I recall the figure of about £1 million was Virgin Rail Group's share of these costs. I'm sure this would have been stripped out when the SRA calculated Virgin's management fee payable.

If it was the daily mail I would have ignored it. Private eye is a different matter and it was quoted to the city via stagecoach.

 

[HH]

Back to the OP; rumours abound about the bid, but are inconsistent, which suggests that nobody knows.

My own view is that Virgin have a better than even chance of retaining the Franchise. Probably the biggest threat comes from SNCF, who might particularly want this franchise, and who may have been able to do a deal with Alstom that others couldn't replicate.

 

[LNW-GW Joint]

Back to the OP; rumours abound about the bid, but are inconsistent, which suggests that nobody knows.

My own view is that Virgin have a better than even chance of retaining the Franchise. Probably the biggest threat comes from SNCF, who might particularly want this franchise, and who may have been able to do a deal with Alstom that others couldn't replicate.

In any case we are past the qualification stage - they made the short list.
It is now simply down to money between the 4 bidders.
Highest value wins.

 

[Failed Unit]

In any case we are past the qualification stage - they made the short list.
It is now simply down to money between the 4 bidders.
Highest value wins.

Surely it is the best value. Oh no wait this is dft. highest premium proposed.

 

[WCMLaddict]

I said it before and I should repeat myself again
Last franchise awarded has proved that DfT is very interested in premiums and financially strong bids are preferred. French bid will have lowest cost of raising funds as it's backed by government money really. I would expect them to submit the strongest bid.

 

[HH]

Surely it is the best value. Oh no wait this is dft. highest premium proposed.

It's not quite as simple as highest money wins. The new system is one of alternating "rounds" of money and quality where differentials of a certain size lead to a "winner". Then the DfT apply a "solvency" test on the bid, and may ask for additional funding if they deem the bid 'risky' (i.e. they think there's too high a chance of it going bust). The bidder will need to guarantee this additional funding or be deemed non-compliant. My guess is that this means every bidder will be kept "warm" until that has been achieved.
--- old post above --- --- new post below ---

French bid will have lowest cost of raising funds as it's backed by government money really. I would expect them to submit the strongest bid.

France had a change of President after bid went in. If DfT want additional funding to secure the bid, then the political change may decree that they don't get it...

 

[SprinterMan]

Although virgin will blame rail track look at the difference between what was bid and what we have now. It is viewed that Virgin screwed the taxpayer following the collapse of PUG2. They have often tried to blackmail dft. I think that is the viewpoint coupled with the fact they are a little shy of investing thier own money.

Does anyone have a copy of the PUG2 proposals and journey times?

Please excuse my ignorance, but what is PUG2?

Adam

 

[WCMLaddict]

Don't really know what you mean by additional funding.

Simple fact is that all bidders had to find money to finance the bid. Whatever the amount, they thought they will need, they will have to borrow it. Abellio and SNCF can go as other bidders to commercial banks to ask for money but they also can go to their governments. That's usually where they go as they normally would get much better rates, therefore making their costs of borrowing smaller. With the amount of money involved in this franchise, even a tenth of percent will make big savings which can be passed on to strengthen the bid. They can basically promise bigger premiums to DfT.
--- old post above --- --- new post below ---

Please excuse my ignorance, but what is PUG2?

Adam

PUG2 was a track access agreement between Railtrack and Virgin Rail. It must be available somewhere to read.
I don't know too much about it but from what I understand after Railtrack was gone, VT refused to negotiate the conditions and was seen as uncooperative. But maybe someone else can give more insight.

 

[HH]

Don't really know what you mean by additional funding.

Simple fact is that all bidders had to find money to finance the bid. Whatever the amount, they thought they will need, they will have to borrow it. Abellio and SNCF can go as other bidders to commercial banks to ask for money but they also can go to their governments. That's usually where they go as they normally would get much better rates, therefore making their costs of borrowing smaller. With the amount of money involved in this franchise, even a tenth of percent will make big savings which can be passed on to strengthen the bid. They can basically promise bigger premiums to DfT.

Well I did tell what additional funding might be required, but I'll try to explain it again. After determining the "winning" bid the DfT performs a solvency test, which determines whether the funding proposed by the bidder is sufficient to cover the risks inherent in the bid (such as an economic downturn). This previously was used to adjust the bid. Now the bid is not adjusted but DfT can ask for additional funding. The winning bidder will have to both bear the cost of this extra funding, but also suffer the additional loss if they hand back the keys. It is not a given that they will just cough it up. Certain bidders have known cashflow problems.

On to your second point. Without the solvency test adjustment the cost of capital is not actually that large, as there is not a significant capital investment and the franchise is cash rich. It's certainly nowhere near enough to determine a winning bid. Moreover, if you think that any European Government is idly handing over large wedges of cash to its state-owned railways to bid for risky foreign ventures then you are sadly mistaken.

 

[Pumbaa]

Back to the OP; rumours abound about the bid, but are inconsistent, which suggests that nobody knows.

My own view is that Virgin have a better than even chance of retaining the Franchise. Probably the biggest threat comes from SNCF, who might particularly want this franchise, and who may have been able to do a deal with Alstom that others couldn't replicate.

I agree. Rumours abound over all the bids - GoVia getting half their management staff on Southern to re-sign their contracts to include extra confidentiality clauses etc simply shows how keen these companies are to get these franchises.

Two key details from 2 separate bids for the WC keep emerging in the rumour mill; both have been oft speculated before but either would be equally as exciting.

 

[LNW-GW Joint]

Please excuse my ignorance, but what is PUG2?
Adam

PUG2 was the Virgin/Railtrack contract for 140mph services on the WCML south of Crewe (a private profit-sharing deal).
PUG1 was the earlier 125mph+tilt contract between Virgin/Railtrack/OPRAF (now DfT).
The original franchise was let on the basis of a core upgrade without a speed upgrade (110mph, no tilt).

It fell apart when Railtrack discovered it had no means of delivering 140mph.
Virgin then claimed compensation and the franchise went on Management Contract for some years until the PUG1 WCRM work was complete..

 

[HH]

One strong rumour is that one bidder has put in some Hitachi trains. I'd speculate that this would be First, but Virgin is possible. I'd be interested to know how the DfT viewed that, because at first sight it would be hard to see how this is compliant. I presume that this is one of your two.

Another rumour suggested services to Paris, but I have been told (by a reliable source) that this had no basis in fact. I suspect that there might be some deliberate disinformation out there.

 

[Ferret]

In any case we are past the qualification stage - they made the short list.
It is now simply down to money between the 4 bidders.
Highest value wins.

Not so - I believe Arriva outbid National Express for the East Coast franchise, but were rejected because it was not deliverable. And we all know what happened next!!!!

My personal opinion is that Virgin won't retain the franchise - after all, popular rumour seems to have been right every time (Arriva XC etc etc). We shall see though!

 

[LNW-GW Joint]

One strong rumour is that one bidder has put in some Hitachi trains. I'd speculate that this would be First, but Virgin is possible. I'd be interested to know how the DfT viewed that, because at first sight it would be hard to see how this is compliant. I presume that this is one of your two.

Another rumour suggested services to Paris, but I have been told (by a reliable source) that this had no basis in fact. I suspect that there might be some deliberate disinformation out there.

The core spec covers current services only with 390s and 221s.
The only scope to change rolling stock is with the 221s from 2016, for which I cannot imagine anything other than a 390 derivative.
I'm not sure Hitachi even have a tilt-capable offering (it isn't an IEP option).
Doesn't seem genuine to me.

If the WC franchisee wants to run services to Paris, a whole new set of rules apply, and is outside the scope of the franchise.
You could imagine SNCF being keen on this, but they would have to win the core franchise first and then add it later as an independent operation.
DfT and ORR cannot award routes through the Channel Tunnel on their own.
Eurostar would have a lot to say about it too.
Not credible as a franchise-winning gambit.

 

[ChiefPlanner]

PUG2 was the Virgin/Railtrack contract for 140mph services on the WCML south of Crewe (a private profit-sharing deal).
PUG1 was the earlier 125mph+tilt contract between Virgin/Railtrack/OPRAF (now DfT).
The original franchise was let on the basis of a core upgrade without a speed upgrade (110mph, no tilt).

It fell apart when Railtrack discovered it had no means of delivering 140mph.
Virgin then claimed compensation and the franchise went on Management Contract for some years until the PUG1 WCRM work was complete..

A fine summary.Much is covered in Modern Railways of the times - a key issue was the inability of Railtrack to ugrade the line in a proper manner (until strong direction from the SRA) , and the huge issues of RT being unable to path the requisite quantum of freight paths (42 London to Crewe from memory) as required in the Access agreement + the knock on effect on other operators such as Silverlink / Central / FNW / W&B / Scotrail etc etc. There is a business history book here .....

 

[LNW-GW Joint]

Not so - I believe Arriva outbid National Express for the East Coast franchise, but were rejected because it was not deliverable. And we all know what happened next!!!!

My personal opinion is that Virgin won't retain the franchise - after all, popular rumour seems to have been right every time (Arriva XC etc etc). We shall see though!

Yes, there certainly is a deliverability check.
I should have said "highest compliant bid wins".
But I would not expect VT to have deliverability problems after 15 years of practice on the patch...