Latest Rail News

10.09.12

Franchise rule change raises questions over West Coast bid

A change to the Great Western franchise shows the terms of the West Coast bid were flawed, incumbent Virgin Rail has said – but the DfT says that each bid process is ‘unique’.

The bidders have been told they must put up extra bank-guaranteed risk capital that they will lose if they abandon the contract. If the same rules had applied to the West Coast case, winners FirstGroup would have had to bid nearly £400m rather than £265m for its performance bond, season ticket bond and subordinated loan facility (SLF).

Today the Transport Select Committee is taking evidence from Virgin and FirstGroup about the controversial contract.

All franchise bidders are required to put up a subordinated loan facility (SLF), which depends upon the DfT’s evaluation of risk from that company. FirstGroup had to bid £190m, compared to just £40m from Virgin.

Bidders on the Great Western franchise will be required to provide a higher SLF; previously 60% of the risk-adjusted figure, now it will be 100%.

The bidders are National Express, the Deutsche Bahn-owned Arriva, Stagecoach and FirstGroup.

A Virgin Rail spokesman said: “Such a significant change in the way the DfT assesses risk suggests that it now realises there were insufficient safeguards in place in the West Coast franchise process to protect the taxpayer and passengers from the kind of highly aggressive bid submitted by FirstGroup.”

But a DfT spokesman said: “It is not accurate to suggest that the Great Western franchise bid terms have in any way been influenced by the West Coast situation – they've been in place since before West Coast announcement was made. Each franchise is unique, terms differ to reflect this.”

Also today, it has emerged that the West Coast franchise could be nationalised if the contract with FirstGroup is not finalised before December 9. The Government could be forced to transfer the contract to the state-owned Directly Operated Railways, which operates the East Coast Main Line, if the judicial review launched by Virgin continues to delay the process, the DfT suggested.

Tell us what you think – have your say below, or email us directly at [email protected]

Comments

There are no comments. Why not be the first?

Add your comment

related

Rail industry Focus

View all News

Comment

The challenge of completing Crossrail

05/07/2019The challenge of completing Crossrail

With a new plan now in place to deliver Crossrail, Hedley Ayres, National Audit Office manager, major projects and programmes, takes a look at ho... more >
Preparing the industry to deliver trains for the future

04/07/2019Preparing the industry to deliver trains for the future

The move to decarbonise the rail network involves shifting to cleaner modes of traction by 2050. David Clarke, technical director at the Railway ... more >

Most Read

'the sleepers' blog

On the right track, Sulzer is awarded RISAS accreditation for Nottingham Service Centre

29/06/2020On the right track, Sulzer is awarded RISAS accreditation for Nottingham Service Centre

Following an independent audit, Sulzer’s Nottingham Service Centre has been accepted as part of the rail industry supplier approval scheme (RISAS). The accreditation reinforces the high-quality standards that are maintained by Sulzer’s... more >
read more blog posts from 'the sleeper' >

Interviews

Andrew Haines, CE of Network Rail, tells BBC News his organisation could issue future rail franchises

24/06/2019Andrew Haines, CE of Network Rail, tells BBC News his organisation could issue future rail franchises

Andrew Haines, the Chief Executive of Network Rail, has told the Today programme on Radio 4's BBC’s flagship news programme that he would not rule out his organisation issuing future r... more >
Advancing the rail industry with management degree apprenticeships

08/05/2019Advancing the rail industry with management degree apprenticeships

In answering the pressing questions of how current and future generations of managers can provide solutions to high-profile infrastructure projects across the UK, Pearson Business School, part of... more >