U.K. Rail Franchise Process ‘Littered With Errors,’ Panel Says

The Department for Transport’s franchising process for Britain’s main rail route was “littered with basic errors,” raising concerns over future projects, lawmakers said.

The contract to run the West Coast main line was initially awarded to FirstGroup Plc and subsequently withdrawn after the incumbent, Richard Branson’s Virgin Trains, complained that it was based on flawed calculations. The process failed because no one in the department took overall charge, the House of Commons Public Accounts Committee said in a report published in London today.

“Given that the department got it so wrong over this competition, we must feel concern over how properly it will handle future projects,” including the planned high-speed link between London and northern England, the panel’s chairwoman, opposition Labour Party lawmaker Margaret Hodge, said in an e- mailed statement. “The department needs to get its house in order and put basic principles and practices at the heart of what it does.”

Britain’s franchising system, under which companies have competed for routes since the rail network was privatized in the 1990s, was suspended after the flawed award. A report by Eurostar Group Ltd. Chairman Richard Brown, published on Jan. 10, recommended that the process resume with some modifications. Virgin was handed an interim deal to run the West Coast route in December for a further two years.

‘Knock-On Effect’

“If you factor in the cost of delays to investment on the line, and the potential knock-on effect on other franchise competitions, then the final cost to the taxpayer will be very much larger” than the 50 million pounds ($76 million) estimated, the committee said.

The panel criticized the Department for Transport for “fundamental errors in calculating the level of risk capital it would require” from bidders for the franchise and for failing to heed advice from lawyers and not responding to “early- warning signs that things were going wrong.”

Today’s report comes less than a month after the Commons Transport Committee said ministers were lied to and must take their share of the blame for the West Coast franchise process.

The line connects London with Birmingham, Manchester, Liverpool and Glasgow.

To contact the reporter on this story: Eddie Buckle in London at ebuckle@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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