Public Accounts Committee blames Department of Transport on handling of West Coast franchise deal

MPs have criticised the Department of Transport (DoT) over its handling of the West Coast franchise deal that was cancelled in October due to errors in the procurement process, costing millions to the exchequer.

The Public Accounts Committee said in a report, examining the cancellation of the franchise deal, that the department's "complete lack of common sense" in the way it handled the franchise deal will cost taxpayers "£50m ( $76m, €58m) at the very least". The bulk of the amount will be spent on compensating bidders.

The final cost will be much larger if delays in investment on the line and the potential knock-on effect on other franchise competitions are taken into account, the MPs warned.

"The department made fundamental errors in calculating the level of risk capital it would require bidders to put on the table and it did not demand appropriate levels of capital from both bidders. Faced with the possibility of legal challenge, it cancelled the competition," Margaret Hodge MP, Chair of the Committee of Public Accounts, said in a statement.

Hodge added that the department failed to learn from previous disasters while dealing with the project that also lacked leadership. It also failed to heed the advice of its lawyers and to respond effectively to early warning signs that things were going wrong.

"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," Hodge added.

The rights to run the £5bn London-Manchester-Glasgow service awarded to FirstGroup was scrapped on 3 October after rival bidder Virgin Trains' legal challenge against the decision revealed some mistakes in the contract.

In December, the National Audit Office estimated that there would be a "significant cost to the taxpayer" as a result of the cancellation.

Given the failure, the MPs were doubtful about the handling of future contracts for high speed rail and Thameslink by the department.

"The department needs to get its house in order and put basic 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," Hodge said.