Failed West Coast franchise competition will cost taxpayers £50m, says Public Accounts Committee

Its report into October's cancellation of the contract accused the department of lacking leadership and of failing to learn from previous franchising mistakes. It also "failed to heed advice from its lawyers" and "failed to respond appropriately to early warning signs that things were going wrong", committee chair Margaret Hodge said.

"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 £50m]," Hodge said.

"Given that the Department got it so wrong over this competition, we must feel concern over how properly it will handle future projects, including HS2 and Thameslink. The Department needs to get its house in order and put basis principles and practices at the heart of what it does, with an appropriately qualified and senior person in charge of the project throughout and an accessible leadership team ready and willing to hear and act on warning signs," she said.

The report is the latest in a series of reports to criticise ministers and civil servants for their role in the project. Earlier this month the House of Commons' Transport Committee condemned ministers for using the UK's "most complex piece of railway" to test reforms to the Government's franchising policy, while public spending watchdog the National Audit Office (NAO) concluded that the DfT's poor decisions would result in a "significant" final bill to the taxpayer. Two Government-commissioned independent reviews, of the cancellation itself as well as the Government's wider franchising programme, have also been published.

Transport Secretary Patrick 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.

The PAC was especially critical of the "lack of line management and leadership" on the West Coast project, as well as what it said was a failure by the department to implement recommendations on oversight and information-sharing the PAC made after the London Underground's private sector partner, Metronet, went into administration in 2007. Of particular concern was the fact that there was no single official responsible for the project. Policy development and the competition itself were overseen by separate parts of the DfT, it said.

Committee chair Margaret Hodge that without one single senior responsible owner (SRO), nobody involved with the project had to "live with the consequences of bad policy decisions".

"For three months, there was no single person in charge at all," she said. "Not only that, there was no senior civil servant in the team responsible for the work, despite the critical importance of this multi-billion pound franchise. We are astonished that the Permanent Secretary did not oversee the project because he was told he could not see all the information which might have enabled him to challenge the processes, although it was one of the most important tasks for which the department is responsible."