United Kingdom’s Department for Transportation is in trouble over a plan to transfer the franchise to run passenger trains over the London-Glasgow West Coast route from Virgin Trains (which is 49 percent owned by Stagecoach) to rival First Group. After fifteen years, Virgin Trains’ franchise is set to expire in December, and when the government put a new franchise up for bid, First Group had the low bid (meaning it asked for the least subsidies).
A Virgin Train. Photo by Andrew Butcher.
Virgin argued that having the low bid should not be the only factor in selecting a winner, and hired Europa Partners to evaluate the bidding process. The consultant’s report (a full version of which doesn’t seem to be available on line) argued that selecting the low bidder carried a high risk that the operator would go bankrupt, thus disrupting rail service.
The government awarded the contract to First Group anyway, leading Virgin to sue. Thanks in part to a timely appeal from Virgin’s Richard Branson to Prime Minister David Cameron, the government withdrew its award the night before it was supposed to defend it in court, saying that it had found irregularities in the bidding process, just as Europa had indicated. Now the government may be on the hook for millions of pounds to First Group, which says the reversal injured it and that its share value fell by 240 million pounds after the government withdrew the contract.
