Out-Law News 3 min. read
01 Feb 2013, 9:19 am
Presenting a report into what led to October's cancellation of the competition, committee chair Louise Ellman criticised the DfT for using the UK's "most complex piece of railway" to test reforms to the Government's franchising policy.
"This episode revealed substantial problems of governance, assurance, policy and resources inside the DfT," she said. "Many of the problems with the franchise competition, detailed in the Laidlaw Report [an independent report into what went wrong], reflect very badly on civil servants at the DfT, However ministers approved a complex – perhaps unworkable – franchising policy at the same time as overseeing major cuts to the Department's resources. This was a recipe for failure which the DfT must learn from urgently."
However three of the eight members of the Committee disagreed with the majority report, saying in a separate statement that "ministers asked the right, penetrating questions during the process but were given inaccurate responses by officials".
The report, which calls on ministers to disclose relevant emails and provide a comprehensive breakdown of costs arising from the cancellation of the competition, was published as the Transport Secretary announced the future of three other rail franchise tenders. Competitions on the Great Western, Thameslink and Essex Thameside routes were suspended pending the outcome of an independent review of the rail franchising programme. The Great Western tender is to be cancelled while the other two competitions will resume shortly, Patrick McLoughlin said.
McLoughlin announced that the competition for the franchise to run the Scotland to London rail link would be cancelled on 3 October last year, following the discovery of "serious technical flaws" in the procurement process. FirstGroup had been announced as the Government's preferred bidder to run the line, for a period of up to 15 years, on 15 August. Evidence of the DfT's mistakes had emerged during the Government's evidence-gathering in preparation for a judicial review into the decision, brought by incumbent operator Virgin.
In his Government-commissioned independent review of the procurement process Sam Laidlaw, who is the chief executive of Centrica and a non-executive DfT board member, discovered an "accumulation of significant errors" related to inadequate planning and preparation, complex organisational structure and weak governance within the department.
However, the Transport Committee's report concluded that a "more direct description" of what had happened than that provided by Laidlaw could have been that civil servants "lied" to ministers about the reasons behind the decision to award the franchise to FirstGroup. It asked the Department to explain why ministers and senior officials were misled about the way in which the level of risk in the bids was calculated, if necessary with reference to a "full email capture" of relevant communications.
"We also want to hear from the Secretary of State what lessons he thinks current and future ministers must learn from this episode where policy ambition exceeded his department's capability and resources," Ellman said.
Infrastructure law expert Jonathan Hart of Pinsent Masons, the law firm behind Out-Law.com, said that the timing of the report "couldn't be better". He pointed out that it came just after the publication by the Treasury of its new Procurement Routemap, providing best practice guidance for the delivery of major infrastructure projects, for consultation.
"The committee rakes over the coals in the Laidlaw Report and serves as a useful reminder of some of the report's findings," he said. "A particularly salutary lesson for procuring authorities, both nationally and locally, is to recognise that successful procurements do take time and money to get right. There are a number of procurements currently ongoing where competitions have been launched to the bidding community with insufficient clarity as to scope and objectives and unrealistic resources being allocated to ensure a smooth procurement."
"In many of these cases, it is bidders that are left picking up the costs for avoidance increase to bidding expense and programmes. In the case of the West Coast franchise, the cost has been greater still - with the whole franchise programme continuing to be locked in a state of paralysis, as the existing franchises head towards their contractual end dates," he said.
In his statement to Parliament on the future of the three suspended franchises, McLoughlin said that the Great Western franchise competition would be terminated. This follows the recommendations, redacted from the original report, of Eurostar chairman Richard Brown's inquiry into UK rail franchising. The Government has exercised its contractual right to extend its current contract with operator First Great Western by 28 weeks, and will negotiate for an additional two-year contract with the operator. Longer term proposals will be set out in the spring, McLoughlin said.
The competitions for the Essex Thameside and combined Thameslink, Southern and Great Northern franchises are to be resumed. A revised invitation to tender for the Thameside franchise, addressing issues raised by Brown about capital requirements and the bid evaluation process, will be issued to the existing shortlisted bidders in the summer. A timetable for the resumption of the Thameslink competition will be published in the spring, as this franchise will now be run as "more of a management-style contract", according to McLoughlin.