Stagecoach disqualified from three franchise competitions

[Bletchleyite]

So the TOCs can agree to above inflation pay rises year after year, far higher than most other workers get, and the tax payer can deal with their final salary pensions? I can’t see any problem with that at all.

TOCs could be charged a reasonable, contracted fee in their franchise agreement to cover the cost.

 

[gingerheid]

There were mass campaigns to keep VT. I don't think any other TOC has ever had such loyalty, nor is it likely to.

(I wonder what the generic brand will be? West Coast Railway is too close to the steam train operation, and London Northwestern is already taken).

GNER managed to stage the same. We survived without them...

 

[Taunton]

Given the potential extent of the pension liability, if the DfT were looking to palm that off on whoever happens to have the franchise at the time, Virgin will be glad to be out of it.

 

[theironroad]

So the TOCs can agree to above inflation pay rises year after year, far higher than most other workers get, and the tax payer can deal with their final salary pensions? I can’t see any problem with that at all.

Except that the RDG/Unions agreement of a few years ago prevents this for the most part. Check facts!

 

[LOL The Irony]

(I wonder what the generic brand will be? West Coast Railway is too close to the steam train operation, and London Northwestern is already taken).

London Midland Scottish/LMS. It's what happened on the other side.

 

[NoMorePacers]

There were mass campaigns to keep VT. I don't think any other TOC has ever had such loyalty, nor is it likely to.

(I wonder what the generic brand will be? West Coast Railway is too close to the steam train operation, and London Northwestern is already taken).

LMS perhaps?

 

[EE Andy b1]

Wonder whether a briefing has gone out to staff yet?

Yes it had by 0830 this morning and by 1000 we had management going round gauging staff feelings!!
Can't comment more though, obviously.

 

[LOL The Irony]

LMS perhaps?

You were saying?

London Midland Scottish/LMS. It's what happened on the other side.

 

[NoMorePacers]

You were saying?

I wrote that post just before you posted yours. You beat me to it.

 

[LOL The Irony]

I wrote that post just before you posted yours. You beat me to it.

Great minds think alike

 

[KashmireHawker]

LMS was trademarked by DfT in Nov 2017 as mentioned in other threads, so I believe it will be what the Department will do.

And they actually have stuck to the promise of actual names, for these future franchises as suggested a few years back...

 

[61653 HTAFC]

There were mass campaigns to keep VT. I don't think any other TOC has ever had such loyalty, nor is it likely to.

(I wonder what the generic brand will be? West Coast Railway is too close to the steam train operation, and London Northwestern is already taken).

The petition was a farce tbh, led by the mindless hero-worship of Dickie Pickle. If it had been Stagecoach West Coast Trains nobody would have cared.

LMS would get my vote too, seeing as LNWR is taken.

 

[Class 170101]

Danger now is, who is left to play. National Express have gone. First Group remain as a truly Private sector firm. The rest have the backing of State governments - some from the EU - will they remain post Brexit?

 

[Chester1]

Danger now is, who is left to play. National Express have gone. First Group remain as a truly Private sector firm. The rest have the backing of State governments - some from the EU - will they remain post Brexit?

Deutsche Bahn are trying to sell Arriva. It's likely it will end up on the London Stock Exchange with its global headquarters in Sunderland (Arriva manages Deutsche Bahn's non German operations). Go Ahead are a private British Company. Serco are too and they run the Caledonian Sleeper mini franchise. It's possible Virgin could takeover Stagecoach's stake and pressure the DfT to consider a revised (compliant) bid but they will probably exit the market too.

 

[talltim]

Still not European run though

The U.K. is in Europe (ignoring the EU side of things)

 

[Antman]

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.

Let me help here. This is from a different sector, but involves public sector pensions.

You take on the pension liabilities for the period you run the franchise and have the employees.

The public sector scheme refuses (for no good reasons at all other than Because it doesn’t like private sector employers in its turf) to accept you as an employer so you are required under your contract to offer a broadly comparable pension scheme (defined benefit). Entirely reasonable. At the end of your contract you are required to make a transfer back of the employees funds into the public sector scheme. All of that is agreed with the regulator. Up front. You have to fund your pension contributions properly, not just the headline rate the public sector and government pretend is real because you can’t have a relatively unfunded scheme.

Where is the problem ? When you run the broadly comparable scheme you are required to make payments into it at an agreed level. It is accepted and agreed by the regulator that there is naturally investment risk and growth in that pension is not guaranteed to be the same as predicted. It is in black and white in the contract. The government actuarial department sits there and makes up (relatively) its own investment returns based on flawed and skewed data. And they change their assumptions during the term of your contract. Without your consent. They do this because, for the public sector, it isn’t real money. And it suits them to do so. These have the effect of creating a large deficit between what you signed up for and agreed (remember you were refused you access to the public scheme so you can’t avail yourself of the standard (in reality stupidly low to reflect the benefit) contribution rate and let the scheme shoulder the risk) and the amount of money they demand from you to re enter the employee into the public scheme - they take the view that you have to give them the entire scheme value (reasonable) and make up the shortfall between the actual returns (agreed investment and risk remember) and what their view of what the returns should have been (which tend to be ludicrous assessments). You rapidly end up with enormous deficits.

Railway pensions are funded to a significant extent (relative rarity
In ex public sector) and pretty well funded (even more of a rarity - bar MPs and their ridiculously overfunded scheme, shock (not...)). I haven’t sat down with my pensions experts yet, who I gather may well have been involved in this (!), but I suspect that there is a major concern at Stagecoach about being asked to go on the same sort of
Risk profile as in other industries which deal with expublic sector pension schemes and potentially being asked to commit now to unknown future risk.

(I am four years into a dispute on one scheme. And the government response is always “we will negotiate, if you accept our terms of settlement”.). No one will make a decision. And we know there are 20 or 30 other similar disputes just sat waiting for ours to be resolved. And in the meantime, the poor employees (whom I have real sympathy for, can’t retire with any certainty).

Or you end up in situations where, if someone who is ex public sector redundant, even if VR, and let’s assume they are over 50, you could be required to pay into their pension in a lump sum as if they reached full retirement age and pension. So (rates etc are example only) if someone is on 50k, and contribution rate is 20%, you could be required to pay in cash 170k into the scheme, PLUS the contractual retirement entitlement of the employee to them. It coins easily cost you 350k as a lump sum hit if one person takes redundancy.

The pensions are a timebomb. And are, long term, unsustainable. Not the employees fault. At all. But they cannot continue as they are. Because they will swallow the entire industry unless large scale change is found (or miraculously we end up with a massive bull run on top of the greatest bull run in history in equities).

 

[Robertj21a]

Thanks for that extra clarification. As you suggest, something has to change if pensions are to be able to survive, with good returns, in the long term. I'm not sure that many people - anywhere - have grasped that reality.

 

[Megafuss]

Don't know if this has been covered already (I can't see another thread), but Arriva were also barred from the EMT franchise, according to to LBC and Telegraph

 

[whhistle]

Why do Virgin need a partner to bid for franchises though? Is anything stopping them bidding by themselves?

Because they're a brand.

Branson started by having businesses (planes, music), but slowly sold them off (raising loads of money in the process) and licencing the brand "Virgin". He'll appear at launches of things but never seems to settle on one business.

If it's not planes and trains, it's space travel, health clubs and water machines.

It seems if a business is struggling, he'll buy it, brand it, market it and sell it. Look at Northern Rock bank - he bought a load of branches, marketed as Virgin Money and will probably sell it off within 10 years, but licence the brand name so it can continue trading as "Virgin Money" having no real connection to Branson. Virgin Media is a good example of this.

 

[whhistle]

Mabye stagecoach can bid for cross country instead??

Haven't the bids already gone in?
Plus, it's hard to run a company without any company to help pay for their salaries.

For all we know the government could have changed the contract last minute

No, they didn't.
That wouldn't have been allowed.

 

[whhistle]

It is probably one of, if not the most iconic train company we have seen.

Remember, you're just taken in by the marketing.
Not many train companies have as big a budget for marketing like Virgin Trains do, and even their's is dwarfed by what Virgin Media have!
When it comes down to the details, Virgin are just like any other company.

 

[DarloRich]

The reason why the previous west coast bid went the way it did was First groups fault. They would have kept the west coast if they had sorted their finances properly in the bid

Same as stagecoach here then...........................

Regarding stagecoach losses with virgin, surely virgin could just partner up with SNCF and kick stagecoach out the bid??

For all we know the government could have changed the contract last minute

you really, REALLY, don't get this do you? Virgin cant just have another crack at the competetion with different partners. What you are suggesting now is the same as answering banana to the question what is the captial of Denmark, complaining no one told you it was wrong THEN expecting to be allowed to have another try at the question AFTER the deadline. Please do try to grasp this very simple concept.

And no, the government did not ( and in fact cannot) change the "contract" ( which is actually the wrong word for what is happening at this stage) at the last minute. They are not allowed to do so!

I know you wont read this but for anyone else interested the procurement rules are here: https://www.gov.uk/guidance/public-sector-procurement-policy

 

[Prober]

Remember, you're just taken in by the marketing.
Not many train companies have as big a budget for marketing like Virgin Trains do, and even their's is dwarfed by what Virgin Media have!
When it comes down to the details, Virgin are just like any other company.

Sums it up pretty accurately.

 

[hwl]

Same as stagecoach here then...........................





you really, REALLY, don't get this do you? Virgin cant just have another crack at the competetion with different partners. What you are suggesting now is the same as answering banana to the question what is the captial of Denmark, complaining no one told you it was wrong THEN expecting to be allowed to have another try at the question AFTER the deadline. Please do try to grasp this very simple concept.

And no, the government did not ( and in fact cannot) change the "contract" ( which is actually the wrong word for what is happening at this stage) at the last minute. They are not allowed to do so!

I know you wont read this but for anyone else interested the procurement rules are here: https://www.gov.uk/guidance/public-sector-procurement-policy

A general reminder of 2012 for everyone:
With the 2012 ITT; First spotted an error in a spreadsheet, didn't tell DfT and moulded its bid around the spreadsheet error as they were then much more likely to win that way. Virgin (or rather Stagecoach) also spotted the error, also didn't tell DfT but worked out what the correct number should have been and used that for their bid. First "won" and Virgin/Stagecoach screamed about the error on day 1 of the "Alcatel" Standstill period. As DfT had screwed up it was ITT cancelled, and bidder refunds all round after a quick trip to the High Court. [One of the key personnel at DfT was already know to the TSC for lack of attention to detail and not liking spreadsheets from their previous job and TSC encounters]

 

[hwl]

Sums it up pretty accurately.

Yep also see Crossrail and "on time on budget" for what massive and well spent media budget will do for you!

 

[jon0844]

It is probably one of, if not the most iconic train company we have seen.

Virgin is doing a good PR job of making it seem like we're going to not just lose Virgin as a brand, but somehow the trains or the service. That will get the general public outraged (even when in other circumstances, they'd be happy and calling for nationalisation) and fighting to have the decision overturned.

I think if it was pointed out that the trains will still run, the timetable will almost certainly be the same (give or take) and even the happy staff will just be wearing new uniforms, the publicity Richard has been getting since issuing that press release might drop.

 

[Bletchleyite]

Virgin is doing a good PR job of making it seem like we're going to not just lose Virgin as a brand, but somehow the trains or the service. That will get the general public outraged (even when in other circumstances, they'd be happy and calling for nationalisation) and fighting to have the decision overturned.

I think it was pointed out that the trains will still run, the timetable will almost certainly be the same (give or take) and even the happy staff will just be wearing new uniforms, the publicity Richard has been getting since issuing that press release might drop.

Though witness Northern for how much a change of management can adversely affect the morale of said staff, even though a lot of them have been there since BR...

 

[hwl]

Virgin is doing a good PR job of making it seem like we're going to not just lose Virgin as a brand, but somehow the trains or the service. That will get the general public outraged (even when in other circumstances, they'd be happy and calling for nationalisation) and fighting to have the decision overturned.

I think it was pointed out that the trains will still run, the timetable will almost certainly be the same (give or take) and even the happy staff will just be wearing new uniforms, the publicity Richard has been getting since issuing that press release might drop.

And it can be pointed out the LNER took over seamlessly post VTEC now so harder to play that card again. LM to WMT will also be visible to many in the VirginWC patch.

 

[jon0844]

Though witness Northern for how much a change of management can adversely affect the morale of said staff, even though a lot of them have been there since BR...

Oh of course. Staff morale can be hit hard by changes of management in a contract/franchise - although I'm sure there were big changes that affected BR staff over the course of their career too. Franchises are more obvious because a company comes in and says up front what it plans to do, while BR presumably made changes based on what the Government of the day wanted.

 

[StaffsWCML]

Here is that full statement from the above link, which demonstrates the record of Virgin and there knowledge (mostly) of the rules of the contest. However, if they have broken a competition regulation, then the DfT have taken some fair sounding action:

Same as stagecoach here then...........................





you really, REALLY, don't get this do you? Virgin cant just have another crack at the competetion with different partners. What you are suggesting now is the same as answering banana to the question what is the captial of Denmark, complaining no one told you it was wrong THEN expecting to be allowed to have another try at the question AFTER the deadline. Please do try to grasp this very simple concept.

And no, the government did not ( and in fact cannot) change the "contract" ( which is actually the wrong word for what is happening at this stage) at the last minute. They are not allowed to do so!

I know you wont read this but for anyone else interested the procurement rules are here: https://www.gov.uk/guidance/public-sector-procurement-policy

Question is are the 'rules' of said 'competition' fair? Its a bit like entering a competition to win 100k and being told when you win that actually you have to pay the person running the competition 150k. Like when companies convince people to dial a £1.50 a minute number to win a rubbish car.

The government, Grayling and the franchising system are an absolute joke. The whole lot should be put on hold awaiting the results of the Williams report. Its crazy to still be dishing out franchises now when it may all change. Williams could even suggest it is better to renationalise the lot.

If the government want train operators to foot the bill for pensions for staff they may only have on their books for 8 years, they need to reconsider how long a franchise should be issued for, which I believe Branson for his faults has raised previously. Longer franchises (if franchises are a good idea at all?) would allow more long term investment and planning, and a say a 15 year franchise might make it more appealing for companies to accept the pensions liabilities also. Why the hell would any sane private company want to take on pensions liabilities for staff who used to work for a different organisation during most of their service? it makes no real business sense. It makes me wonder if First or MTR have any idea what they have signed up for, or are they just irresponsible? Again not unlike the government to support irresponsible Private companies, Carillion, Interserve, Capita et al.

I am not sure First are in great shape financially to take this on, MTR are hauled up in Hong Kong on corruption, what impact could that have. Not exactly looking like a glowing future for the West Coast Main Line which has been one of the better services out there. I really think grayling will end up with Egg on his face here 'again' it will be like his issuing a ferry contract to a company with no ferries for instance.