Government cancels decision to award rail franchise for West Coast Main Line to FirstGroup

[whole diary]

[JayMac]

Sorry Justine, but ignorance is no defence. Neither is buck passing.

[Electric train]

.......... yet when a CEO^▸ (Chief Executive Officer) of a Bank "does not know why something was done in a large company" the politicians hang them out to dry and demand resignations yet a politicians feel is fine to use such an excuse

[ellendune]

.......... yet when a CEO^▸ (Chief Executive Officer) of a Bank "does not know why something was done in a large company" the politicians hang them out to dry and demand resignations yet a politicians feel is fine to use such an excuse

The said CEO, was I think, held to be responsible for the culture that brought about the incident.  So the question is what was the cause of the Civil Servant's error? 

1) Was it overwork due to the massive staff cuts at a time when the number of franchises renewals was incresing? - If so then Ministers are to blame. 

or

2) Was it the culture of civil servants moving jobs every couple of years so that they never learn anythign about the matters they are dealing with. - If so who is responsible for this?  I don't think it would be the Minister. 

or perhaps there are other reasons. 

[TonyK]

It looks from things written in the Times today that the government will back Justine Greening. She is a politician, who dictates policy, but looks to others to implement it. She would not be expected to have the skills to decide the matter without advice. In any case, she knew there were problems, but may have been advised they were minor.

Margaret Beckett was on Radio 4 at 7am (does she never sleep?), though, to explain that the civil servants don't have in-depth knowledge, either. To climb the greasy pole, you need to move jobs frequently, so don't get anything more than generic training in skills that may be needed - be it transport planning, accountancy, law - whatever. If a civil servant did have all the acumen needed, he or she wouldn't be in that job, but earning double the salary at Virgin or First. So who does have the skills? (Not me, but I'll have a bash, if it helps). Or do we involve the hated consultants, and if so, who has the skills to know which ones? Who designed the system in the first place? If it can only be understood by someone with the economics ability of John Maynard Keynes, rather than codified once and for all, is it fit for purpose? Answers on a spreadsheet, please.

With these questions still to be answered, it's difficult to see how this will be resolved in the near future. Simply having someone else go over the same figures would leave the possibility of legal action by the loser. Are the other applicants also to be considered again, as well as First? Running the process from scratch again doesn't look any more sensible than re-playing the same poker hand, as all those commercially sensitive ideas are out in the open now.

Dirty job, politics, but somebody's got to do it.

[JayMac]

or perhaps there are other reasons. 

Another possible reason is the political and ministerial pressure put onto the Sir Humphreys at the DfT^» (Department for Transport - about). HMG wanted from the bidders the largest possible amount of money paid into the Treasury over the life of the franchise. That approach, relegating other aspects of the bids, may well have clouded the judgement of those responsible for assessing the bids. The civil servants are ultimately answerable to their ministers and if those ministers are asking loaded questions they are likely only to get the answer they want to hear.

[Gordon the Blue Engine]

During the Railtrack Shareholders' Court Case against the Government in 2005 many emails were disclosed (rememebr Shriti Vadera and the "grannies"?) which showed just how much pressure the Treasury put on the DfT^» (Department for Transport - about) to reduce the costs of the railways - the Treasury didn't like the fact the the SRA^» (Strategic Rail Authority - about) had the power to "award" tax payers' money to railway companies ie Railtrack/NR^» (Network Rail - home page) and the TOCS etc.  In the Court case the Treasury managed to hide behind the DfT and Stephen Byers, who took the brunt of the blame for the way that Railtrack was put out of business.

I wonder whether we will see that the Treasury is still pulling the strings - maybe they leaned on DfT to award the WCML^▸ (West Coast Main Line) to the highest bidder, and persuaded the DfT to discount its own calculations on risk and non-financial issues which may have tipped the balance towards Virgin.  If the Treasury has played the game again they've probably learned the lessons of the 2005 Court case and made sure there's no email trail this time.

[eightf48544]

Gordon you are right the Treasury is the problem.

They know the cost of everything and the value of nothing.

Going for the lowest cost or greatest supposed reward options they often end up with a poor solution which ends up costing us taxpayers far more in the long run.

If I can spot that 10% growth is not sustainable year on year for 15 years why didn't the Treasury.

Exponential curves don't exist in the real world . It may be exponetial to start with but then it will inevitably flatten out, at some point a long way from infinity. The clever bit is guessing that turning point before it happens

[Andrew1939 from West Oxon]

Soon after the coalition government came into being it said that micro-management of the rail industry by government should go and that detailed specifications over such things such as the detail of what services should be run (or less detail) would not be included in tender invites. It also said that the rail industry had better knowledge of what the rail user needed and left it open to bidders to specify what enhancements they felt were desirable and include them in their bids.
As a result the bidders put in their various offers in their bids but each included different enhancements. Some while back in this thread someone has posted just what Virgin included in their bids and also First Group for the WCML^▸ (West Coast Main Line) franchise and set them down side by side. I just cannot understand how anyone assessing these bids could have placed cash values on these offers as it would have been like comparing apples with oranges. Any comparison could only have been made as a value judgement and not as a cash value. Civil servants seem to have made major technical errors in assessing the tenders but I sympathise with them in how they came to their overall judgement and recommendations to ministers. It seems to me that both ministers and civil servants have each contributed to this fiasco but the ministers want to put the blame onto the staff. The situation on allowing differing enhancements and the problems arising was very predictable and in fact rumours had been circulating that the whole process of tender judgement had been delayed because of this.
A member of my family is a civil servant, not in the DfT^» (Department for Transport - about), but is facing the common problem of falling staff numbers due to existing staff leaving or retiring but replacement post offers being denied. They are being told that they must increase their efficiency to cope with similar levels of work with fewer members of staff and that usually means cutting corners in doing their work. I wonder if this has been a factor in the civil service blunder.

[TonyK]

The treasury holds control of the purse strings, and can influence anything involving public money by adjusting the tightness of those strings. That will affect private industry too, so the treasury can be said to be key to the whole economy of the country. The fact that there are always at least two correct answers to any problem (the Chancellor's and the Shadow Chancellor's), and given that it is conceivable that the Chancellor has never had a job outside of politics, then it's surprising that anything much gets done in the first place. In infrastructure projects like railways, the treasury funds capital projects and improvements, as well as subsidies for operations where they are needed, so it expects a return on its outlay, which is, I think, where the perception of a powerful treasury getting in the way comes from.

It may be true that the treasury put pressure on DafT to get the top dollar from the winner, but it's difficult to see why that would cause the error here. Robert Peston's blog - thanks, RichardB, for the link - was interesting in explaining more about what happened. Given that lower passenger numbers than expected did for GNER^▸ (Great North Eastern Railways) on the ECML^▸ (East Coast Main Line), it's easy to see how the further forward you look, the less likely it is that you are going to be right.

[JayMac]

From The Express:

JUSTINE GREENING FACING CALLS TO QUIT OVER RAIL FIASCO

JUSTINE Greening faced calls to resign last night for her role in the West Coast Main Line fiasco.
Britain^s rail industry was plunged into chaos after Transport Secretary Patrick McLoughlin pulled the plug on the new ^5.5billion franchise.

FirstGroup had been due to take over the London to Glasgow route from Sir Richard Branson^s Virgin Trains.

The deal was scrapped after Mr McLoughlin found ^unacceptable mistakes^ made by the Department of Transport in the bidding process while Miss Greening was in charge.

He admitted the mistakes will cost the taxpayer ^40million in compensation to bidding firms.

Graham Stringer, Labour member of the Commons transport committee, called for the new International Development Secretary to quit over her refusal to follow up concerns about the bidding process.

He said: ^Officials have clearly made mistakes but the prime responsibility lies with ministers.

^When the scale of the concerns about this process became clear Justine Greening should have called a halt to the process. I don^t think she can escape her responsibility just because she has moved department.

She has cost the British taxpayer at least ^40million and damaged the Government^s credibility. That should finish her career in Government.^

Mr McLoughlin has suspended three civil servants and frozen three other franchise bids ^ Great Western, Essex Thameside and Thameslink.

Miss Greening^s aides insisted she had ^acted properly at all times^.

[TonyK]

Had that story appeared in the FT, she would have been clearing her desk.

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

West Coast mainline and the mistakes that ended rail bid

The BBC has learned more details of mistakes made by the Department for Transport that led to the collapse of First Group's bid for the West Coast mainline.

As well as forgetting to take inflation into account, officials were responsible for double-counting. They also took short-cuts that were against the rules.

The system used to decide the contract was extremely complex, but the mistakes that killed it were simple.

Failing to include inflation assessing the level of risk in the bid is not such a problem when you are looking six months ahead. But it is a disaster if you are trying to predict the economy in 2025.

The computer models they used were specifically designed by the Department for Transport to deal with a whole bundle of franchise contracts due for renewal in the next few years.

This was the first big test.

We also now know that the fatal flaw wasn't discovered until last week - it then took until Tuesday of this week to unearth its true horror.

The fact that human error played such a part casts a shadow over previous franchise bids, although they would have been decided using a different computer model.

It will be some months before a review decides whether the whole system needs to be changed.

[TonyK]

So is it the system, the people, or the use of the system that is the big problem, and who designed the system?

Turning political will into commercial model is never going to be easy. "Privatise the railways!" is simple to say. Figuring out how to do it isn't, though.

[woody]

So is it the system, the people, or the use of the system that is the big problem, and who designed the system?

Turning political will into commercial model is never going to be easy. "Privatise the railways!" is simple to say. Figuring out how to do it isn't, though.

The railway franchise system is ^broken^ according to one of the architects of the privatisation of the industry in the 1990s.

http://www.telegraph.co.uk/news/uknews/road-and-rail-transport/9588882/West-Coast-fiasco-rail-franchise-is-broken-says-architect-of-privatisation.html

Even the right wing Adam Smith institute is asking the question "Are the railway franchises on the right track?"

http://www.adamsmith.org/blog/planning-transport/are-the-railway-franchises-on-the-right-track

While Shadow Transport Secretary Maria Eagle pointed to FirstGroup's decision to end its contract for the Great Western line three years early. One of her criticisms was the so-called 'gaming' of the system by operators, without being penalised.

http://www.thisisexeter.co.uk/story-17042162-detail/story.html

No wonder their are calls now for renationalization of the railways.

http://www.guardian.co.uk/commentisfree/2012/oct/04/public-want-railways-renationalised

[Andrew1939 from West Oxon]

Of course, as we all know, First Group did not end the FGW^▸ (First Great Western) franchise 3 years early. It will not end until the date specified in the contract. It is just that they did not choose to take up their option to extend the contract by 3 years in just the same way as the DfT^» (Department for Transport - about) did not refuse to take up its option not to give a 3 year contract extension. But this is what the politicians do dirty their political opponents and that applies certainly and equally to the two main political parties and what gives politics a bad name for twisting the truth.