West Coast Train Franchise – so how would you improve the procurement process?

Terrible isn’t it!

Awarding the West Coast train operating contract to First Group rather than that lovely chap Richard Branson! How could Department for Transport make such a stupid decision?

I mean, he’s never done anything for personal gain has he, he’s pretty much a saint what with his humble Caribbean Island, his humble  mansion in Holland Park, his humble cars, balloons, boats.. It’s all Mike Oldfield’s fault of course...

The start of Branson's Fortune

Notice how the other partner in Virgin Trains keeps a pretty low profile – Stagecoach, who readers of Private Eye will know have featured just as much over the years as First Group for various reasons. And the chart below shows moving annual average of public performance measures — the standard measurement for rail franchise performance —suggesting that Virgin Trains has been performing worse than other First Group lines.

Ask my friend who lives in Manchester and does a mid-weekly Tuesday – Thursday stay in London. “How do you find the train” I asked him.

“I don’t use Virgin Trains, it’s too expensive. I fly, it’s half the price even with the cost of getting into London from Heathrow” he said.

But most of all, before commentators sound off about the decision, I’d suggest they go though this document – the “core” tender document for the contract. (It’s in the public domain,  I haven’t stolen it)!

I haven’t looked at it carefully as yet  but you can see immediately how detailed, thoughtful and extensive it is. So before anyone claims that “DfT haven’t taken this into account” or “DfT aren’t considering  that”, they should take a look at the 93 pages here – and all the related documents - and see if that actually is the case.

Now it’s quite legitimate to criticise the whole strategy behind our railways – should they be re- nationalised? Is there a totally different model that might work better? But if you accept that this franchise had to be awarded, and that had to be done fairly and transparently, my question to anyone who criticises the decision is simply this.

So just how would you have made the decision? How would you explain the £ billion less into the public purse if you chose Virgin?

Practical suggestions for improving the procurement process are constructive – subjective comments based on rather liking smiling, bearded men in sweaters who are brilliant at PR are not.

Voices (13)

  1. Graham Hooper:

    No I’m not

  2. John Diffenthal:

    Now we see why Branson chose the PR route rather than a direct challenge to the tender process. He now has enough signatories to an e-petition to trigger a hearing in Parliament. I despair.

    http://www.bbc.co.uk/news/uk-politics-19366438

  3. Graham Hooper:

    A couple of points. Virgin soaked up far more taxpayers money than all other First Franchises combined. First Capital Connect for example contributes more to the Government than it receives in subsidy. FGW did not walk away from the franchise. It was to run until April 2013, (now July 21st 2013) First did not take up the OPTIONAL 3 year franchise extension. The disruption due to the total route modernisation was not in the original franchise agreement. Yes First avoided paying £793m, but it also avoided receiving about £1.2bn in compensation payments for the disruption from Network Rail (taxpayer). The DfT and the Treasury were very happy about this. In 2002 Virgin threatened to walk away from it’s VWC franchise unless it received more subsidy, happened again in 2005 and in 2006 they lost Cross Country to a company willing to put some longer trains into service after Virgin refused. The network cannot afford to have “cherry pickers”, it needs operators prepared to take on the commuter routes and the socially necessary services as well. Virgin went for Inter City services only. First have a large rail engineering department, many of them ex-Virgin staff who were made redundant by Virgin contracting out, and it’s the engineering expertise that will make the difference in cost control.

    1. Odd Wellingtons:

      You’re not the Graham Hooper from COI by any chance?

  4. Marco:

    I travel to London twice a week and have always found the service on Virgin Trains to be excellent and with their Traveller scheme, fares were very good value. You watch, First Group will no doubt struggle to reach their ambitious targets. Branson was the best choice, simple as that,

  5. Final Furlong:

    It states in the ITT that the page limit for the ‘Executive Summary’ in Bidders’ submissions was 1500 pages!! ‘War and Peace’, at 1446 pages, has fewer pages…

    Somehow, they read, absorbed, evaluated, scored and negotiated these massive submissions in a three month period (May to July) while setting aside the whole of August to take it through governance (Secretary of State consent), presumably, while most of Treasury, ERG et al were abroad on their holidays.

    Just four months for mobilisation of a 14 year train franchise.

    No stopping at any red signals for this train…

    1. life:

      Ha ha ha – excellent observations. It’s all so silly. Anyone can claim anything, but it doesn’t make it so, and let’s hope the team allowed for some sort of risk assessment based on the history of similar claims. I would love to know the size, qualifications and experience of the team that pulled off this gargantuan assessment in the timeframe – even in an olympic year gongs must surely beckon!! War and Peace at one end and then at the other, with all the legitimately huge public, economic and political issues at stake, the press chooses to use up the few passing moments allowed for headlines of such stories to run by presenting the inner turmoil and indignation of the “coiffured one”, usually accompanied by a photo of him leaning on a train that occupies more space than the discussion itself!

  6. Dan:

    When it comes to public procurement, people do seem to think that the best form of defence is attack.

    “we’ve lost out on more business and you’re all going to suffer for it! We are clearly the best choice, but those damned procurement people, with their ‘rules’, are just getting in the way of the right decision being made by the people we’ve been buttering up for months! Well yes, I suppose it does mean that our bid wasn’t as good. Yes, it probably would have cost the taxpayer more, but what’s that got to do with anything?”

    See also Bombardier Trains.

  7. John Diffenthal:

    If Branson felt that he had a solid case then he should have contested the award of the tender, not gone on a PR assault on the headline writers.

  8. clark kent:

    Great to see that Branson will only bid again once Cameron apologises! The arrogance is breathtaking.

  9. roger newman:

    Hi Peter,
    Thank you for providing the link to the tender document, its interesting to note that the DfT intend to publish a redacted version of the contract four weeks after the franchise agreement is signed so I guess that this story still has a little way to run.
    To provide some background to my response to your question regarding how the procurement could have been improved, the following is taken from the HOC library briefing paper on Railway franchises:
    ——
    In May 2011 First Group informed the government of its intention to utilise the break point in its franchise agreement to terminate the Greater Western franchise in April 2013. As indicated above, over the course of the franchise First were scheduled to pay the government over £1 billion in premia, but the company has been in recent of revenue support payments in recent years due to the larger than expected decline in passenger numbers. Even with this support, First have said that the premia payments to government are unsustainably large for the company to bear.23 Consequently, the franchise will be re-let in April 2013.
    —–
    Even though what First Group did was totally legal, I think that the general population would be very uneasy about the idea that a company could do this and then be allowed to bid for further business.
    Perhaps the legal advisors to the procurement team would have vetoed the idea but how about a simple question in the PQQ along the lines of: ‘Have you ever handed back a franchise early or used a contractual breakpoint to avoid paying the Government revenue that you jointly forecast when bidding for the franchise?’
    A follow up question (to help weed out any undesirable bidders): Please list all of the occasions in the last three years when the national press have written about your company describing either poor service or dubious business practise and please explain what you did to remedy the situation. Please provide web links to each of the stories.

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