Laidlaw Report on West Coast Rail procurement disaster – what a mess

(UPDATE: The National Audit Office have released a report on the topic - here if you want more).

The Laidlaw Report on the West Coast Rail franchising failure was published yesterday and my goodness, whilst it is impressive and thorough, it is shocking and depressing reading. I’ll come back to it next week in more detail but just a few early points, avoiding the obvious simplistic “appalling management” headlines you’ll get everywhere else.

When we commented on the interim report, we frankly just didn’t believe that mid-level officials in the Department for Transport (DfT) would have pressed ahead with what they knew was a flawed process without covering their own back – we said “I would be amazed if they didn’t go up to Ministerial or at least Permanent Secretary level for sign-off”.

I have to say, based on the full report, I was wrong. It appears that officials did keep their concerns to themselves, they didn’t escalate, and – according to Laidlaw – they continued to mislead Ministers even after Virgin started challenging the process. There are therefore certain people (or roles, because Laidlaw doesn’t name names given the parallel HR type review going on) who look like they will share some real culpability here. I wouldn’t like to be the internal DfT lawyers involved, or the project manager.

The external advisers however escape blame – Atkins and Grant Thornton clearly didn’t have anything to do with the issues. But in the case of Eversheds, the external legal advisers, it is less clear cut. “There is in my view a real issue as to whether Eversheds should have done more to ensure that its concerns as to the process followed by the CAC in sizing the SLF requirements were expressed more forcefully...” Laidlaw says. They did however point out some of the issues to DfT officials, so in the end, “Eversheds did discharge its agreed role”.

The DfT structure added to the problems here (DfT got rid of its dedicated Rail Division in 2010) and overall governance of the programme was shockingly bad. The project SRO just didn’t seem to be involved, and in fact Laidlaw hasn’t even been able to establish who the SRO was for part of the time!  The Board, including Permanent Secretary and Director General level leadership, didn’t give this exercise any focus, and it reads that they simply let middle level staff sink into a mire of confusion and lack of clear accountability, decision making and control.

Lin Homer, the Permanent Secretary until February 2012, basically got out just in time, leaving behind what sounds like an absolute mess of a Department (she was promoted to run HMRC – that bodes well for the huge changes they have to implement in the next couple of years).  And you have to question why the non-executives didn’t sense something wasn’t right given how Laidlaw describes the whole culture, governance, risk processes... words fail me. It might have been good for him as one of those non-execs to have at least mentioned that failure in his report with a small mea culpa at least.

Another shocking comment in the report explains that the most senior level full time person on this project was a Grade 7. That is 4 levels down from the Permanent Secretary  and most people at that level earn around £40-50K a year. Laidlaw also highlights cut-backs and Cabinet Office constraints on advisers and consultants as contributing factors to the obvious lack of both capacity and capability on the project.

Indeed, Cabinet Office doesn’t come out of it too well. Their Major Projects Authority failed to add any value whatsoever- one interim  review was Amber-Red, but there was no real follow up to it and the final Gateway was Green. And when the final cost of this fiasco is calculated, Cabinet Office should subtract that number from their savings claimed for “reduction in spend on contractors and consultants”. That has strongly contributed to however hundred millions of pounds this will finally cost the public purse.

Could this happen again? Yes.

Somewhere else in Government*, I’m sure there is an under-resourced project, reporting into a dispirited Board, who are all focusing on their next promotion or redundancy package, and a new Permanent Secretary who still can’t quite believe (s)he got the promotion. The project staff are scared stiff and out of their depth, but Cabinet Office won’t let them get anyone in to help who might know what they’re doing. So the team are basically keeping the problems to themselves  and giving re-assurance that everything is on track.  Gateways and MPA reviews get filed in the bottom drawer and forgotten.  And when it goes wrong, which it will, it’s going to cost us millions. Again.

(*I even have a theory as to the next one that will surface).


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