Lessons from cancelling the InterCity West Coast franchise competition : Department for Transport

The Department for Transport competition to let the Intercity West Coast franchise lacked management oversight and the governance of the project was confused, according to the National Audit Office.

The full cost to the taxpayer is unknown but likely to be significant, with at least GBP1.9 million in staff and adviser costs, GBP2.7 million in legal costs and GBP4.3 million on external advisers for the reviews that it has commissioned.

The refranchising process was a major endeavour, with considerable complexity and uncertainty.

The objectives of the Department for Transport were insufficiently clear during the franchise competition.

The Department delayed the issuing of the invitation to tender by eight months because it had not finalized how it would implement recent policy changes.

There was also confusion among Department staff about some aspects of the process.

The subordinated loan facility was a particular area of confusion.

A subordinated loan is capital provided by the parent company which guarantees franchise payments will be made to the Department should the franchisee get less passenger revenue than expected. However, there were significant errors in the tool the Department used to calculate how big a loan it would require bidders to have.

The competition lacked strong project management and there was no clear route for the project team to get approval for major issues.

No one person oversaw the whole process or could see patterns of emerging problems.