InterCity West Coast

InterCity West Coast is a railway franchise for passenger trains on the West Coast Main Line in the United Kingdom between London Euston, the West Midlands, North Wales, Manchester, Chester, Liverpool, Preston and Glasgow. It was formed during the privatisation of British Rail and transferred to the private sector on 9 March 1997 when Virgin Trains, the current and only franchise-holder to date, commenced operations.

The franchise was due to be re-let in December 2012 and FirstGroup was announced as the winning bidder, a decision that was reversed due to irregularities in the franchise letting process. In December 2012 Virgin was awarded a management contract to run the franchise until November 2014. In March 2013 Virgin was awarded a further extension until April 2017.

1997 franchise
The initial franchise was awarded by the Director of Passenger Rail Franchising for 15 years from 9 March 1997 to Virgin Rail Group, beating Sea Containers and Stagecoach.

2012 franchise process
During 2011–2012 the Department for Transport conducted a franchise competition, announced a winner, then cancelled the competition and refunded the costs of bids before any contracts were signed.

Bidding competition
With the franchise awarded in 1997 scheduled to end on 31 March 2012, the Department for Transport started the refranchising process in January 2011 by inviting expressions of interest in the Official Journal of the European Union for a franchise from 1 April 2012 for 14 years to March 2026. The award of the franchise was stated to be based on the "most economically advantageous tender in terms of the criteria as stated in the specifications". The franchise was the first to be offered under a new scheme rather than the previous "Cap and Collar" system, which provided for risk-sharing with government regarding future demand. The new scheme is intended to provide greater incentives for cost reduction by operators. Because of the increased future risks carried by operators under the new scheme, the government requires a large financial surety to discourage early contract default.

In March 2011 the Department for Transport announced that Abellio, FirstGroup, Keolis/SNCF and Virgin Rail Group had been shortlisted for the franchise, which would run for up to 15 years. In May 2011 a Draft Invitation to Tender was issued to the shortlisted bidders, which stated the franchise start date had been postponed until 9 December 2012. In October 2011 the Department for Transport announced that Virgin had been granted a franchise extension until 8 December 2012. In January 2012 the Department for Transport issued the Final Invitation to Tender to the shortlisted bidders. Since January 2012 rail consultancy firm WS Atkins and legal firm Eversheds had been providing technical services to the department. On 15 August 2012 the Department for Transport announced FirstGroup as the successful bidder for the franchise, promising 11 new six-carriage electric trains, direct services to Blackpool in 2013, and to Telford, Shrewsbury and Bolton in 2016.

Challenge
On 10 August 2012 a report produced by financial consultants Europa Partners and commissioned by Virgin Rail Group, detailing problems with the franchising evaluation process, was handed to the Department for Transport. After the announcement of FirstGroup as winners, Richard Branson, head of the Virgin Group, was quoted extensively calling the tender process an auction, a fiasco, and comparing it to a circus. Tim O'Toole, head of FirstGroup, referred to Branson's comments as "histrionics". Branson also received criticism from Justine Greening, Secretary of State for Transport, who suggested that Virgin had raised no issue with the franchise process until they lost.

An e-petition was created to urge the government to reconsider its decision and to debate the bids in the House of Commons. The petition was set up independently, but backed by Virgin, and attracted large support, gaining 50,000 signatures within two days. The 100,000 signatures required for the petition to be considered for debate in Parliament was exceeded. The petition was backed by many celebrities including Lord Alan Sugar, Jamie Oliver, Mo Farah, Amanda Holden and Derren Brown, from Tom Harris MP, the Shadow Environment Minister and former Parliamentary Under-Secretary of State for Transport. The matter was debated in the House of Commons on 17 September 2012.

Following the public's response to Virgin's loss of the franchise, Louise Ellman, Chair of the Transport Select Committee, wrote to Greening, asking her to delay the signing of the new contract until the committee have had a chance to 'explore the matter'. Virgin had offered to run the line on a 'not for profit' basis while this takes place. Despite both public and political pressure for an independent review of the deal, the Department for Transport declared it would not delay the signing of the contract once the ten-day standstill period had expired. On 28 August 2012 Virgin Trains announced it would seek a judicial review of the franchise decision, preventing the contract being signed, claiming civil servants had "got their maths wrong with FirstGroup". The Department for Transport responded stating that they were confident the selection process was robust. In September 2012 the Department for Transport began making arrangements for the franchise to pass temporarily to West Coast Main Line Limited, a subsidiary of Directly Operated Railways, had a judicial review been granted.

Cancellation
On 3 October 2012 the government announced it was cancelling the franchise competition after discovering significant technical flaws in the bidding process, cancelling the decision to award it to FirstGroup. The entire bidding process is to be re-run after the government admitted getting its figures seriously wrong. It was stated that civil servants had made significant mistakes in the way in which the risks for each bid had been calculated, leading to a too low default surety being required of bidders.

Two independent inquiries were announced; one headed up by Sam Laidlaw of Centrica, with Ed Smith, both from the Board of the Department for Transport; and the second headed up by Richard Brown of Eurostar. Three civil servants were also suspended.

During September 2012 the newly appointed Secretary of State for Transport, Patrick McLoughlin, had been warned of potential issues. During the afternoon of 2 October 2012, McLoughlin took the decision to cancel the franchise award: I arrived in the department just under four weeks ago, I was told at that stage there might be some technical points; it became more serious as time went on—when I saw the full extent of the advice that I got yesterday afternoon, I took the decisions which I've taken and put the whole process on pause so we can learn the lessons and see what went wrong in this particular area …

At around 19:30 on 2 October 2012 Branson was warned to expect a call later that evening from McLoughlin. At 22:00 McLoughlin called Tim O'Toole of FirstGroup who was in Philadelphia and about to travel back to London. At 23:30 Patrick McLoughlin spoke with Richard Branson, who was in New York City at the time, followed by Brian Souter of Stagecoach. Thirty minutes after speaking with Branson, the cancellation press release was issued by the Department of Transport at 00:01 on 3 October 2012. The Department of Transport had been due to submit their defence evidence to the High Court on 3 October 2012 in response to a Judicial Review sought by Virgin Trains. O'Toole and McLoughlin met at midday on 3 October 2012.

On 5 October 2012, one of the three suspended civil servants, Kate Mingay, released a statement to correct the reporting of her role in the franchising process. Mingay began legal proceedings against the Department for Transport over her suspension, with a High Court hearing on 29 November 2012 rejecting her claim to have her suspension lifted. It was announced on 6 December 2012 that all three of the suspended civil servants, including Mingay, would return to work.

On 8 October 2012 it was reported that the Department for Transport had advised Virgin (through their lawyers) that three options were being considered:
 * hand over to Directly Operated Railways on 9 December 2012
 * management contract for Virgin Trains until Department for Transport is ready to hold a fresh bid, when the franchise would transfer to Directly Operated Railways
 * management contract for Virgin Trains until Department for Transport is ready to hand over the franchise to the new operator, likely to be 18–24 months

The government decided it would reimburse the four bidders for all costs incurred. This amounted to £39.7 million with a further £4.9 million paid to FirstGroup as reimbursement for mobilisation costs incurred.

Franchise extension
On 15 October 2012 the Department for Transport announced Virgin Trains would continue to operate the franchise for between 9 and 13 months until a short-term interim franchise for the West Coast could be run. In December 2012 Virgin was awarded a 23-month management contract until November 2014. In March 2013 the Secretary of State for Transport announced the franchise would again be extended until 29 April 2017.