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West Coast franchise debacle to cost £50m

West Coast franchise debacle to cost £50m

The UK Public Accounts Committee has warned the disaster in awarding the InterCity West Coast franchise could cost taxpayers at least £50 million.

On the basis of evidence from the department for transport the committee said a “complete lack of common sense” has precipitated the failed process.

Margaret Hodge, chair of the Committee of Public Accounts, also warned: “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.”

On October 3rd 2012, the department for transport cancelled its own decision to award the InterCity West Coast franchise to First Group due to errors in the procurement process.

The process has been restarted, with incumbent Virgin Rail asked to maintain services during a new tenure process.

“The department made fundamental errors in calculating the level of risk capital it would require bidders to put on the table and it did not demand appropriate levels of capital from both bidders,” added Hodge.

Faced with the possibility of legal challenge, the department decided to cancel the competition.

“The franchising process was littered with basic errors,” continued Hodge.

“The department yet again failed to learn from previous disasters, like the Metronet contract. It failed to heed advice from its lawyers. It failed to respond appropriately to early warning signs that things were going wrong.”

The report added improvements must be made if the same mistakes are not to hit future projects, including HS2 and Thameslink.