Stagecoach disqualified from three franchise competitions

[Journeyman]

DfT have been smarting ever since Virgin challenged them over the West Coast fiasco, that's why Stagecoach lost SWT and now the DfT are punishing them over this. It's not unheard of, during the tender process, for the DfT to ask a tenderer if they meant what they said in their bid or if they want to reconsider something rather than throw them out at the first hurdle.

Me thinks DfT getting their own back!

Stagecoach lost SWT because the DfT let the SWR franchise on very different terms, that Stagecoach were decidedly unenthusiastic about. SWT wasn't just a cash cow to Stagecoach, it was an entire herd of them. They made an absolute fortune out of it, but SWR was let on a much, much more stringent basis with far higher premium payments. Stagecoach didn't think it was worth the risk, and given the problems SWR have, they were probably right.

 

[hwl]

Stagecoach lost SWT because the DfT let the SWR franchise on very different terms, that Stagecoach were decidedly unenthusiastic about. SWT wasn't just a cash cow to Stagecoach, it was an entire herd of them. They made an absolute fortune out of it, but SWR was let on a much, much more stringent basis with far higher premium payments. Stagecoach didn't think it was worth the risk, and given the problems SWR have, they were probably right.

Agreed, no old school profit margins and low-ish risk any more

 

[TT-ONR-NRN]

So that basically means the guaranteed end of Virgin Trains as a brand. That's quite big news.

This is absolutely heartbreaking. I feel very disappointed that the unfair play of Stagecoach has led to the demise of Virgin Trains, it’s just so unfair and upsetting to my mind.

 

[Bletchleyite]

I certainly won't miss their themed departure announcements at Euston, I cannot understand why the other two TOC's allow it to happen!

What themed departure announcements at Euston? It's ATOS Annie.

 

[PR1Berske]

lets see if Stagecoach lodge a legal challenge.

I suspect they will.

 

[Glenn1969]

I'm sure they will. They may let EMT go but I don't think they will take being kicked off West Coast without a fight. Is it a case of Branson and Griffiths saying See you in Court Mr Grayling?

 

[Kite159]

Did someone within Stagecoach see the potential timebomb of the pension scheme and decided it wasn't worth the risk?

I suspect Stagecoach might join National Express in not bothering in the future with any GB railway franchise, focus on their bus/coach network both in the UK & abroad.

 

[Journeyman]

Did someone within Stagecoach see the potential timebomb of the pension scheme and decided it wasn't worth the risk?

I suspect Stagecoach might join National Express in not bothering in the future with any GB railway franchise, focus on their bus/coach network both in the UK & abroad.

I think you're spot on there. I suspect what they've done is decide what level of risk they were willing to take, and if it wasn't good enough for the DfT, they'd walk away.

I get the impression that the Stagecoach bus/coach business is in good shape, so it's probably enough to keep things ticking over nicely for now.

 

[Glenn1969]

Take it this will also mean the end for Megabusplus and its integrated Coach/Train service from Yorkshire to St Pancras via East Midlands Parkway if Stagecoach decide not to challenge the decision?

 

[Robertj21a]

This could put an even bigger hole in rail franchising as a policy.

Did someone within Stagecoach see the potential timebomb of the pension scheme and decided it wasn't worth the risk?

I suspect Stagecoach might join National Express in not bothering in the future with any GB railway franchise, focus on their bus/coach network both in the UK & abroad.

Quite agree. Stagecoach have always appeared to have the most professional approach to most things. Knowing there's a big issue at stake concerning pensions should be recognised by any tenderers as a potentially costly minefield.
Perhaps the foreign operators are just a bit more cavalier with the finances. It could come back to bite them.
Stagecoach are sufficiently astute to usually avoid such minefields.

 

[NoMorePacers]

Take it this will also mean the end for Megabusplus and its integrated Coach/Train service from Yorkshire to St Pancras via East Midlands Parkway if Stagecoach decide not to challenge the decision?

Most likely yes, although it will be a shame to lose it, considering it's quite a bit cheaper than going by train the whole way. I got my first HST ride back in August as a result of it, so I'll have some fondness for it.

 

[swt_passenger]

I notice the BBC story headlines are now using “barred from” rather than “disqualified from”. Does that suggest a scaling back of opinion?

 

[RealTrains07]

Meanwhile Govia get to continue as normal.

They are even worse than stagecoach

 

[NoMorePacers]

They are even worse than stagecoach

Exactly.

 

[talltim]

So that basically means the guaranteed end of Virgin Trains as a brand. That's quite big news.

No, they run trains in the US https://www.virgin.com/richard-branson/unveiling-virgin-trains-usa

 

[RealTrains07]

DfT have been smarting ever since Virgin challenged them over the West Coast fiasco, that's why Stagecoach lost SWT and now the DfT are punishing them over this. It's not unheard of, during the tender process, for the DfT to ask a tenderer if they meant what they said in their bid or if they want to reconsider something rather than throw them out at the first hurdle.

Me thinks DfT getting their own back!

Not surprised, its the governments fault that pensions for rail workers is a serious issue across the rail network

 

[PR1Berske]

I notice the BBC story headlines are now using “barred from” rather than “disqualified from”. Does that suggest a scaling back of opinion?

It's likely the nature of on line news reports. The first to get on the top of FB or Twitter gets the likes and retweets, so the headline can be rushed because it needs maximum impact. Any amendments can be made after the initial social media buzz has dampened.

 

[RealTrains07]

I certainly won't miss their themed departure announcements at Euston, I cannot understand why the other two TOC's allow it to happen!

Mainly as virgin own a lot of the big stations on the WCM

 

[RealTrains07]

Clearly you don't understand tendering. If you submit a non compliant bid you will, in all likelihood, find your bid rejected. It isnt about being petty. It is about fairness and rules.

BTW - nice to see you think railway workers being paid their pensions is something petty.

Iam not saying pensions is a petty issue, the government is being petty for using such a big issue that they caused as a result of the broken franchise system to shame and blame stagecoach. This is basically another punishment for stagecoach. Yes they should have been more careful with their bids but at the same time:

1) the government had had months to make stagecoach aware of the issue so they can fix the bid

2) this issue should have been flagged when all the bids were rejected for the SE franchise and had to be resubmitted

Yes stagecoach made mistakes but so have the government and bigger franchise owners like arriva and govia.
Abellio ain’t gonna be a decent replacement for stagecoach on EM considering their performance on GA and WMR

 

[hwl]

It's likely the nature of on line news reports. The first to get on the top of FB or Twitter gets the likes and retweets, so the headline can be rushed because it needs maximum impact. Any amendments can be made after the initial social media buzz has dampened.

Stagecoach used the word "disqualified" unfortunately the meaning to the general public is different to the bidding one which is probably why the BBC changed it. " Bids Rejected" might be the best term for general news articles.

 

[RealTrains07]

I just hope stagecoach can iron out the issues with the bid and re submit in time for SE and West Coast. They should just let EM go at this point

 

[PR1Berske]

Stagecoach used the word "disqualified" unfortunately the meaning to the general public is different to the bidding one which is probably why the BBC changed it. " Bids Rejected" might be the best term for general news articles.

Got you. Thanks.

 

[sleepy_hollow]

I just hope stagecoach can iron out the issues with the bid and re submit in time for SE and West Coast. They should just let EM go at this point

Interesting process this railway franchise bidding. My experience of bidding, entirely outside the railway industry, is that the first you hear about not getting the work is in the official announcement of the winners, and marks awarded. The only hint you may get that you have been completely ruled out is if everything goes quiet between submission and award, with no questions or requests for clarification.

Could this situation with DfT and Stagecoach be interpreted as DfT being sufficiently keen to have a bid from Stagecoach that they are prepared to ask for clarification before completing the award process?

 

[wildcard]

Assuming the reports are correct - I guess Stagecoach assumed that the other bidders would also fight shy of the pension commitment , so their bid wouldn't be disadvantaged. Ooops.
How to railway pensions work ? Assuming a long time rail employee retires now - who pays the pension ? Behind the scenes is it a proportional contribution from each of the funds set up by the franchisee's they used to work plus the State if they started as a youngster working for BR. Or does the current franchisee pick up the whole liability if there's a pension shortfall ( most final salary schemes are in deficit currently ) - in which case there would have been a pension asset transfer / financial settlement from the previous TOC's pension fund . Both systems sound highly bureaucratic and likely to be burdened with excessive admin costs. Another hidden issue with the franchise model ?

 

[hwl]

Iam not saying pensions is a petty issue, the government is being petty for using such a big issue that they caused as a result of the broken franchise system to shame and blame stagecoach. This is basically another punishment for stagecoach. Yes they should have been more careful with their bids but at the same time:

1) the government had had months to make stagecoach aware of the issue so they can fix the bid

2) this issue should have been flagged when all the bids were rejected for the SE franchise and had to be resubmitted

Yes stagecoach made mistakes but so have the government and bigger franchise owners like arriva and govia.
Abellio ain’t gonna be a decent replacement for stagecoach on EM considering their performance on GA and WMR

1) they did - Stagecoach's response was that they didn't agree with DfT pension analysis. Stagecoach are now very risk averse and it seems the bid was based on lower returns to DfT with DfT retaining the pensions risk resulting in a very non compliant bid. For DfT getting the pension risk out of DfT and on the the Franchisee is a mandatory that they aren't willing to compromise on.

2) it was - again Stagecoach didn't want to take on the pension risk

 

[Carlisle]

This is good news. Has Grayling at last got something right?

Stagecoach decided to ignore the commercial rules of the franchise bid, Stagecoach got put in it's place. Stagecoach needs banning for good.

I’m sure there’s a lot of merit in that argument but assuming rail franchising continues In a similar vain DFT needs the likes of Stagecoach as much as they need the DFT in order to carry out even remotely competitive future bidding processes

 

[hwl]

Interesting process this railway franchise bidding. My experience of bidding, entirely outside the railway industry, is that the first you hear about not getting the work is in the official announcement of the winners, and marks awarded. The only hint you may get that you have been completely ruled out is if everything goes quiet between submission and award, with no questions or requests for clarification.

Could this situation with DfT and Stagecoach be interpreted as DfT being sufficiently keen to have a bid from Stagecoach that they are prepared to ask for clarification before completing the award process?

For rail franchises it can easily be guessed by how much interaction is going on with DfT given the level of questions...

For stockmarket reason DfT are usually very keen for it all to be annouced officially pre 0730 one morning but they also don't wan the losing bidders announcing early as that gives them less power to negotiate with the bidder in 1st place

 

[krus_aragon]

At a very lay level, how would the government offload pension liabilities to the franchisee? I can't see how they could do anything that lasts longer than the franchise period, as the keys will be handed back to the government (or passed on to the next franchisee) at that point.

 

[edwin_m]

It's interesting that the Stagecoach is saying: https://www.bbc.co.uk/news/business-47877858

"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."

The bold (mine) suggests that they would have expected DfT to come back to them and negotiate on this issue. Along with the concurrent announcement of the East Midlands winner, the implication is that DfT may have decided the bid was unacceptable a long time ago but not announced until now so as to keep the other bidders honest. I would say they are at least laying the ground for a legal challenge, although if this is genuinely the first they have heard of it then it will take them some time to decide whether to go ahead and for the lawyers to draw it up.

 

[Bantamzen]

And Arriva, whose TOCs (and bus operations) are/were all utter dross. Chiltern excepted, but that'll take a while for them to foul up.

The thing is if Stagecoach, Arriva, & maybe First all got shoved out of the next round of franchising, who would be left to make bidding at least a bit competitive? Whatever anyone's feelings to towards one or more of the big names, take them out of the equation & you might start to struggle to get bids in. Sometime ago when the EC franchise was torn up I predicted that there would be an increasing risk that the franchising model might quickly become so unattractive that DfT would struggle to rebid franchises. And whilst it is right and proper that Stagecoach have been locked out for their erroneous bid, this is one step closer to my prediction. Who knows, maybe after having thrown their hat into these bids, Stagecoach have deliberately thrown their bid? Stranger things have/are happening!