Friday, 7 December 2012

Laidlaw Report on West Coast Franchise

The independent inquiry into the cancelled West Coast Main Line franchise competition has concluded that the project failed because of an accumulation of significant errors related to inadequate planning and preparation, complex organisational structure, and a weak governance framework.
Pendolino near Tebay heading north
 click to enlarge picture
Transport Secretary Patrick McLoughlin asked Sam Laidlaw, the chief executive of Centrica and a non-executive DfT board member, to conduct an urgent investigation following the discovery of unacceptable flaws in the procurement process that led to the competition being cancelled on October 3rd.

His final report, published yesterday by the Department for Transport, finds that:
  • the DfT used flawed and inconsistent methodology when guiding bidders on the amount of risk capital (known as the Subordinated Loan Facility) they would need to offer to guarantee their franchise against default (Inquiry report paragraph 4.31, p22)
  • the Subordinated Loan Facility figures resulting from the flawed methodology were then varied in a way that contravened franchise competition rules (3.4, p11)
  • ministers made the original August 14 provisional contract award without being told about the critical flaws (2.12, p8) and having been given “inaccurate reports” (3.8, p12)
But the Laidlaw Inquiry also concluded that:
  • the report’s recommendations to strengthen accountability and governance structures “if acted upon quickly and effectively, will help to restore confidence in the DfT’s ability to conduct effective rail franchising and procurement” (paragraph 8.6, p79)
  • while there were inconsistencies in the way First Group and Virgin Trains Ltd were treated during the franchise process, the report finds that there is no evidence of a culture of bias against Virgin at the DfT (paragraph 2.6, p7)
  • there is nothing in the report to suggest that the flaws discovered in this franchise competition exist in any other DfTprocurements (paragraph 8.3, p79)
The DfT is today publishing its formal response to the report which commits the department to implementing swiftly a series of actions that will enable it to resume the franchising programme, with the confidence of the rail industry, as soon as possible.
These include:
  • ensuring future franchise competitions are delivered at a good pace based on sound planning, a clear timeline, rigorous management, and the right quality assurance
  • creating a simpler and clearer structure and governance process for rail franchise competitions, including the appointment of a single director general with responsibility for all rail policy and franchising
  • ensuring we have the right mix of professional skills, in-house, and where necessary from professional external advisers.
DfT Permanent Secretary Philip Rutnam said:
There is no question that this has been a serious blow for the department and I am determined that we learn everything we can from this episode.
We will implement all of Mr Laidlaw’s recommendations, and go further, to ensure we have the right set of skills, support and training to ensure failures like this do not happen again.

Read more here
Read the full report  here
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