The Government has scrapped the bidding competition for the Great Western rail franchise and triggered a potential row with the industry by refusing to compensate bidders.
• Great Western bid cancelled • Essex Thameside franchise bid to resume in the summer • Thameslink/Southern pushed back two years • Goverment says companies responsible for their costs
Just months after it pulled the contract for the West Coast Main Line, costing the taxpayer more than £50m, the Department for Transport has awarded an extension to FirstGroup (LSE: FGP.L - news) , which currently runs the services connecting London to Bristol and Cardiff.
The Great Western competition was one of three franchise bids put on hold last October after the fiasco over the flawed awarding of the West Coast Main Line franchise. The others were Essex Thameside and Thameslink/Southern.
Patrick McLoughlin, the Transport Secretary, made clear on Thursday that he does not envisage payments to the companies involved.
"In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, the Secretary of State does not believe it would be appropriate to reimburse bidders," he said in a statement ,
This is likely to anger bidders who have already incurred costs on the bid. Those shortlisted for the Great Western franchise were FirstGroup, National Express (NYSE: EXPR - news) , Stagecoach, and Arriva (LSE: ARI.L - news) .
The current Great Western franchise will now run until October after the Department of Transport exercised its right to extend the current contract with First Great Western by 28 weeks. It will now enter talks for an additional two-year contract with longer-term proposals to be set out in the spring
An 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 unprecedented suspension of the rail bidding process in October threw the rail franchising system into chaos, with nine major contracts due to expire by the end of 2014.
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.
Mr McLoughlin said: "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.
"We have had to take some tough decisions regarding franchising, and while they may provide a challenge in the short term, I believe the lessons we have learnt will help deliver a more robust system in the future benefiting fare-payers and taxpayers alike.
"As always our priority is to ensure these changes will not impact on services or our commitment to improving the railways. Our latest step towards delivering a high-speed rail network which will link many of our major cities by a new fleet of state-of-the-art trains is testament to how we are delivering on that commitment."
Minister to blame for West Coast fiasco
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.”
The committee said that money which could have been spent on transport projects had instead gone to consultants, lawyers and review teams, on work which achieved nothing, and compensated train operators for the DfT's "incompetence".
Ms Ellman said: "This episode revealed substantial problems of governance, assurance, policy and resources inside the Department for Transport."
"Many of the problems with the franchise competition, detailed in the Laidlaw report, 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."
A DfT spokesman said: "Following the collapse of the West Coast refranchising programme, the Department for Transport was subject to two independent inquiries and an internal HR investigation. These have now concluded but the disciplinary process is ongoing."
Bob Crow, leader of the Rail, Maritime and Transport union, said: "The day the lid was lifted on the sordid fiasco on the West Coast the Government are at it again, doling out lucrative two-year contract extensions around the country with directly operated railways on hand to sweep up the mess if it all falls apart.
"The lies, deceit and racketeering of rail privatisation has to be called to a halt now."