Big bill for taxpayer as Great Western rail bid is scrapped

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The Government has scrapped the bidding competition for the Great Western rail franchise, just months after it pulled the contract for the West Coast Main Line, costing the taxpayer more than £50m.

• Great Western bid cancelled • Essex Thameside franchise bid to resume in the summer • Thameslink/Southern pushed back two years

The Department for Transport (DfT) has awarded FirstGroup (LSE: FGP.L - news) , which currently runs the services connecting London to Bristol and Cardiff, an extension to its contract.

A bidding process had been started last year to re-let the 15-year franchise only for it to be suspended in the wake of the West Coast fiasco, which had seen Sir Richard Branson’s Virgin Rail Group controversially lose out to FirstGroup.

The whole competition for the Great Western Line has now been jetissoned, forcing the Government to reimburse - at huge expense to the taxpayer - the train companies that had bid for the contract.

The current franchise will now run until October after the department exercised its contractual right to extend the current contract with First Great Western by 28 weeks. The Department of Transport will now enter into talks for an additional two-year contract. Longer-term proposals will be set out in the spring

An operating extension on the Great Western line is a significant boost to FirstGroup after it was named as the winner of the West Coast competition in August - only to be denied the franchise two months later when the Government aborted the process, following the discovery of “significant technical flaws” in the way the process was handled.

The Government announced last March that, alongside FirstGroup, National Express (NYSE: EXPR - news) , Stagecoach, and Arriva (LSE: ARI.L - news) , a division of Deutsche Bahn, had been short-listed for the Great Western franchise.

However, the bidding process was suspended in October by Transport Secretary Patrick McLoughlin, along with two other franchise competitions to run Essex Thameside and Thameslink services.

The unprecedented move threw the rail franchising system into chaos, with nine major contracts due to expire by the end of 2014.

Awarding a new contract to run Great Western services is believed to be particularly problematic as the line is due to undergo a significant infrastructure upgrade, along with changes to some services and rolling stock.

Rail industry sources say the changes have made it difficult to accurately forecast future revenue and passenger numbers.

The bidding process to run the Essex Thameside and Thameslink services were also suspended in the wake of the West Cost main line fiasco.

The DfT said the competition for the 15-year Essex Thameside franchise would be resumed in the summer. In the meantime, an extension of up to two years is to be negotiated with current operator National Express (LSE: NEX.L - news) .

While the Thameslink, Southern and Great Northern franchise competitions will be pushed back by around two years, with the aim of issuing a seven-year contract. The current Thameslink contract is to be extended to bridge the gap.

"These plans mark an important step on the way to restarting the franchising programme, and while I am determined this should happen as quickly as possible we do need time to get this right," Mr McLoughlin said.

The news comes as transport ministers were blamed by MPs for a series of “irresponsible decisions” that led to the West Coast debacle.

Ultimate responsibility for the fiasco lies with Government ministers, who pressed ahead with a “complex” and “perhaps unworkable” franchising policy “in haste”, according to a committee of MPs.

A report from the Commons Transport Select Committee points the finger firmly at ministers, who have so far allowed DfT officials to shoulder most of the blame.

The select committee stops short of naming individual ministers but the findings put former Transport Secretary Justine Greening, her predecessor Philip Hammond and former Transport Minister Theresa Villiers in the frame.

Louise Ellman, chair of the transport committee, said: “Embarking on an ambitious - perhaps unachievable -reform of franchising, in haste, on the UK’s most complex piece of railway was an irresponsible decision for which ministers were ultimately responsible.”