Virgin Trains: procuring a fight

30 August 2012

Virgin Trains’ judicial review of the Department of Transport’s (DoT) decision to award the West Coast Main Line franchise to FirstGroup is the latest salvo in its bid to save the franchise it has run since 1997. However, the courts may not be as sympathetic as the 150,000 members of the public who have signed Virgin’s online petition.

Virgin has not yet released its grounds for general publication and the DoT has not yet issued its response, but judging from the tone of the competing side’s press releases, the government is fairly confident it has the upper hand.

Transport Secretary, Justine Greening, is bullish in her defence of the tender process saying, “It’s a process that Virgin themselves have been involved in for the last 15 months and have raised no concerns about [it] until it became clear they had lost the bid.” On the other side, Richard Branson’s statements appear to be more speculative, but characteristically upbeat, “Judicial reviews are difficult to win but we feel we have a shot.”

Virgin’s challenge appears to be based on the grounds that the DoT has failed to take into account relevant considerations when evaluating tender bids, leading to an incorrect risk adjustment of FirstGroup’s bid. Reportedly, Virgin’s bid offered higher payments to the government in the early years of the franchise, whereas FirstGroup’s bid offered a greater overall return because it offered higher payments in later years. The thrust of Virgin’s argument – gleaned from press releases – is that the DoT ignored the increased risk involved in FirstGroup delivering its bid over the course of the franchise and then attached insufficient weight to the fact that Virgin’s bid was more deliverable and lower risk.

The court hearing Virgin’s claim will have to carefully scrutinise whether the DoT properly turned its mind to the effect of risk on the identification of the most economically advantageous bid. Richard Branson is right to have an air of caution – the courts have allowed public bodies a degree of flexibility in adjusting for risk and will be slow to interfere in the bid evaluation process. However, as is so often the way in judicial review litigation, the devil is in the detail, and it might just be that Justine Greening’s bullish attitude will not prevail.

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