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06.12.12

‘Uncomfortable reading’ as Laidlaw report published

The DfT has finally published the Laidlaw report, which concludes that the West Coast franchise process failed because of an accumulation of significant errors.

The report, commissioned by transport secretary Patrick McLoughlin, highlights errors related to inadequate planning and preparation, a complex organisational culture and a weak governance framework.

Sam Laidlaw, head of Centrica, found that a flawed and inconsistent methodology when guiding bidders on the amount of risk capital needed to offer to guarantee their franchise against default meant that those figures then varied in a way that contravened franchise competition rules.

Ministers also made the original contract award to FirstGroup without being told about critical flaws, the report states.

Although the report found “inconsistencies” in the way FirstGroup and Virgin Trains were treated during the franchise process, Laidlaw did not discover any evidence of a “culture of bias” against Virgin. There was also nothing to suggest the flaws exist in any other DfT procurements.

The DfT has published a formal response to the report, setting out a series of actions to be implemented to enable it to resume the larger franchising programme.

These actions include ensuring future competitions are delivered at a good pace based on sound planning, a clear timeline, rigorous management and the right quality assurance, as well as creating a simpler and clearer structure and governance process. A single director general with responsibility for all rail policy and franchising will be appointed.

Laidlaw said: “Building upon and confirming the conclusions from my initial findings, the final report provides an in-depth analysis of the events that led to the flaws whereby the InterCity West Coast competition was cancelled. Alongside this I have also made a series of recommendations for the future.

“I have explained in detail the technical nature of certain errors, specifically around modelling flaws and the Subordinated Loan Facility sizing process. In addition, the report outlines an accumulation of contributory causes including a lack of transparency, inadequate planning and preparation, as well as a complex and confusing organisational structure with weak quality assurance and insufficient governance oversight.

“While it is clear that a number of serious and regrettable errors have occurred, I believe that if acted upon quickly and effectively, my recommendations will help to restore confidence in the DfT’s ability to conduct effective rail franchising and procurement.”

McLoughlin said: “The final report from the Laidlaw Inquiry makes extremely uncomfortable reading for the Department. It has identified precisely what went wrong, revealing serious failures, as well as offering us a number of sensible recommendations to put things right.

“We will not allow these mistakes to be made again and the Department is determined to ensure all future franchise competitions are conducted on the basis of sound planning, the rigorous identification and oversight of risk, and the right quality assurance.”

DfT permanent secretary Philip Rutnam said: “There is no question that this has been a serious blow for the Department and I am determined that we learn everything we can from this episode.

“We will implement all of Mr Laidlaw’s recommendations, and go further, to ensure we have the right set of skills, support and training to ensure failures like this do not happen again.”

(Image: Philip Toscano / PA Wire)

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