The following entry is a record in the “Catalogue of Catastrophe” – a list of failed and troubled projects from around the world.
Department of Transport – UK
Project name : West Coast Rail Franchise Competition
Project type : Tendering process for operations of passenger rail system
Date : Sep 2012
Cost : £40 to £100 Million estimated
Operated by private companies, the British rail system is divided into a number of distinct regions. The contract for the West Coast line linking London, Birmingham, Manchester and Scotland had been successfully operated by partnership lead by Sir Richard Branson’s Virgin Group since 1997. Based on a 15 year franchise the contract was due for renewal in Dec 2012. The British Department of Transport announced in Sep 2012 that bidding processes for the next 15 year contract had been won by rival First Group.
Following an appeal by Virgin, the government was forced to admit that the tendering process was flawed. The contract award was cancelled and the government forced to repay the bid costs for the 4 companies that had participated in the process. Following the cancellation £225M was wiped off the market value of First Group.
Analysis of the rival bids showed that errors had been made on anticipated “passenger numbers, inflation and growth forecasts.” In addition different bids handled risk costs (required bond type costs) in different ways resulting in apples-to-oranges bids that allowed the tendering process to be won by First Group unfairly. The process as further called into question after it emerged that a report on bidding flaws in the competition had been published prior to the announcement of First Group’s win, however that report had been ignored.
Contributing factors as reported in the press:
Inappropriate management of communications during bidder process. Failure to ensure all bidders were given equal access to information during the bid process. Lack of quality control measures to ensure fairness.
Reference links :
- West Coast Main Line: total chaos as government scraps franchise deal
- Europa report alerted Government to West Coast flaws
- Cabinet Ministers Under Pressure Over Costly West Coast Mistake
- Scrapping West Coast Main Line deal ‘will cost £40 million’ (video)
- West Coast Mainline – Wikipedia