DfT and Stagecoach clash
STAGECOACH’S disqualification from bidding for three existing franchises was confirmed by the Department for Transport on April 10, the same day Abellio was awarded the East Midlands franchise.
Government said it was because Stagecoach had submitted a noncompliant bid for each of the East Midlands, South Eastern and West Coast Partnership franchises.
Arriva was also disqualified from the EM bidding. It was not in contention for the other two deals.
In Parliament on April 11, Rail Minister Andrew Jones told Clive Betts (Labour, Sheffield South East): “Bidders were invited to bid on the basis of a pension deficit recovery mechanism. They knew that at the very start of the process. Stagecoach did not accept it and made some amendments as it submitted the bid. On what would happen if all companies refuse - clearly, by definition, they are not all refusing, so the question does not apply.”
Stagecoach has written to the DfT asking for a full explanation. It has also called for a full independent value for money review to be carried out into the issue without delay. RAIL understands that it has also called for a 14-day extension to the usual ten-day standstill period following the announcement of Abellio’s win, which takes the period to May 8.
A spokesman told RAIL: “We can confirm we have written to the Department for Transport seeking answers to the numerous legitimate questions many people have about their decision.
“We expect a prompt, full and transparent response to help restore public confidence in the integrity of the government’s procurement process, which has been badly shaken by this and other recent events.”
Stagecoach explained that a senior DfT official had told the company that it had been excluded from all three competitions for submitting non-compliant bids, principally in respect of the pensions risk.
It said bidders were asked to bear full long-term funding risk on relevant sections of the Railways Pension Scheme. Stagecoach said this was being asked at a time when The Pensions Regulator is seeking additional funding because of serious doubts over Government’s ongoing support for the industry-wide scheme.
Stagecoach Group Chief Executive Martin Griffiths said: “We are extremely concerned at both the DfT’s decision and its timing. The Department has had full knowledge of these bids for a lengthy period, and we are seeking an urgent meeting to discuss our significant concerns.
“We bid consistently with industry guidance issued by the Rail Delivery Group and shared with the DfT. Without ongoing Government support for the long-term funding of railway pensions, The Pensions Regulator has indicated that an additional £5 billion to £6bn would be needed to plug the gap in train company pensions.”
Griffiths said that in contrast, the rail industry’s proposed solution would have delivered an additional £500 million to £600m into the scheme. He said that would have provided better stability and security for members, and much better value for taxpayers.
“We are shocked that the Government has rejected this for a higher risk approach,” he said.
A DfT spokesman told RAIL: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that it submitted non-compliant bids for all current competitions, which breached established rules, and in doing so it is responsible for its own disqualification.
“Stagecoach chose to propose significant changes to the commercial terms for the East Midlands, West Coast Partnership and South Eastern contracts, leading to bids which proposed a significantly different deal to the ones on offer.
“We have total confidence in our process. We have awarded the East Midlands franchise to Abellio after it presented a strong, compliant bid.
“Stagecoach has played an important role in our railways, and we hope it will continue to do so post the conclusions of the Rail Review. However, it is entirely for Stagecoach and its bidding partners to explain why it decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”
DfT claimed the changes Stagecoach chose to make resulted in its disqualification from all competitions, in line with the terms of the published Invitations to Tender. It also said that the majority of bidders across the competitions and their owning groups accepted the Department’s
allocation of risk.
“A minority of owning groups did not, and this reflects their own appetite for risk - it in no way indicates that the commercial arrangements offered by DfT were flawed,” said a statement.
DfT also said it wants The Pensions Regulator to be satisfied that train operator pension risks are managed appropriately. It said Government wants train operator sections of the Railway Pension Scheme (RPS) that are fair, affordable and sustainable for a diverse range of employees, employers, the taxpayer and fare payers. And it explained that as the Designated Employer for the relevant section of the RPS, the train operator is best placed to manage much of this risk.
Regarding Arriva’s disqualification, the DfT explained: “Arriva chose to propose significant changes to the commercial terms for the East Midlands contract, leading to a bid which proposed a significantly different deal to the one on offer. The result is that it is responsible for its own disqualification from the competition in line with the terms of the published ITT.”
Following the announcement regarding Abellio and Stagecoach, RMT General Secretary Mick Cash wrote to Secretary of State for Transport Chris Grayling, saying: “In light of the decision to bar Stagecoach from bidding for franchises, I am writing to urge you now to bring to an end the franchising fiasco.
“The franchise system is now teetering on the brink and I would urge you to take urgent action to protect passengers and rail workers.
“The network needs to be returned to public ownership, and as the first step all Stagecoach contracts should be bought in-house immediately.
“I have to warn you that rail workers and their pensions will not be used as pawns in a row between your Department and the train companies, and we will take all necessary steps to protect our members.
“I am calling also for an urgent industry-wide summit to resolve this crisis and ensure the necessary protections are in place to protect rail workers and passengers.”
Speaking at a Scottish TUC event in Dundee on April 15, Cash reiterated the threat of action.
A spokesman for the Rail Delivery Group said: “Nobody wants to see disruption on the railway, which is why we remain committed to working with government, unions and train companies to find a suitable solution to the issues raised by The Pensions Regulator in relation to The Railway Pension Scheme.”