UK government ditches rail contract
Wednesday - 10/3/2012, 8:11am ET
LONDON (AP) - The British government's rail policy was thrown into chaos Wednesday after it canceled a controversial contract to run one of the country's busiest lines following the discovery of "unacceptable mistakes" in the way it awarded the franchise.
The announcement is a partial victory for the line's present operator, Sir Richard Branson's Virgin Group, which lost out on the 13-year contract to run the west coast London-to-Scotland service in August to rival operator FirstGroup.
Transport Secretary Patrick McLoughlin called off the contract because of "deeply regrettable and completely unacceptable mistakes" made by his department in the way it managed the bidding process.
The errors were uncovered as the department was preparing to deal with a High Court challenge brought by Sir Richard, who disputed the contract's award.
McLoughlin said staff had been suspended and an investigation had been launched. The bidding process will be run again.
The government's errors related to how the level of risk in the bids was evaluated. The department said in a statement that "mistakes were made in the way in which inflation and passenger numbers were taken into account."
The Virgin chief Wednesday praised transport authorities for reconsidering their decision. He said he was hopeful Virgin, which had been running the route since 1997, could continue operating the franchise.
FirstGroup said it was "extremely disappointed" at the news. Its shares plunged as much as 20 percent Wednesday morning in London trading.
The uncertainty over the line's franchise has prompted concern about the economy in the region. Adam Marshall, director of policy at the British Chambers of Commerce, said that the government needed to move quickly to ensure that investment in the railway network does not suffer.
`'The West Coast line is one of Britain's most important business corridors, and companies in cities up and down the country will be concerned that this situation could affect both current services and future investment in critical passenger services," he said.
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