Awards, contracts & appointments

13.05.19

Arriva Rail becomes second operator to sue DfT over East Midlands franchise

Arriva Rail has launched legal action against the DfT over its handling of the East Midlands rail franchise, the second operator in a week to sue the government.

Arriva, owned by Germany’s state-backed Deutsche Bahn, is suing the government after it lost its bid to run the franchise, which was awarded to Abellio in April, and has demanded more information on how the DfT assesses the bids.

This comes less than a week after Stagecoach, who were effectively disqualified from three separate rail franchises, launched their own legal action against the government over the handling of the East Midlands rail franchise.

The DfT awarded the East Midlands franchise to Abellio after all other bidders were disqualified, stating that Stagecoach’s bid was “non-compliant” with pension rules and ignored the operator’s protests as they had “repeatedly ignored the rules.”

Arriva said it was now “seeking to obtain more information relating to how the bids for the East Midlands franchise were assessed” after its bid for the franchise was also disqualified by the DfT.

Following the decision, Stagecoach said it was “shocked” that it had been disqualified because it had refused to accept a pensions risk “well in excess of £1bn,” whilst Virgin also criticised the DfT’s “baffling decision.”

The pensions regulator has warned that train operators face a pensions black hole of £7.5bn, whilst the RMT has threatened to strike over the deficit, and other train operators involved in the bids are also reportedly considering legal action.

The DfT said it would not comment on ongoing legal proceedings but said it had “total confidence in our franchise competition process.”

Stagecoach’s chief executive, Martin Griffiths, said last week his company had “no choice” but to pursue legal action against the DfT that it wanted to examine the “opaque decision-making.”

Image credit - wcjohnston

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