InterCity East Coast: Doomed to Fail?

[F Great Eastern]

The sad thing is the power ALWAYS seems to be with the franchisee. Why cant the government agree better or fairer terms? Why is that we as tax payers always have to bail out these people?

Unfortunately the DFT made a contractual promise it was not able to keep - contracts work both ways and if a party initially breaches a contract and it effects the other parties ability to carry out contracted work, then the wronged party would be able to go to court and fairly easily win on the ground of breach of contract.

The fact is the DFT did a deal because if they didn't they would have been most likely taken to court and VTEC would have won that battle with ease. The blame purely lies with the DFT here. If they would have delivered what promises they made to Virgin the franchise wouldn't be ending early.

thats funny! When I asked the bank for help they screwed me. You are worse than excrement to them. Not billionaire transport moguls mind. They get a nice backhander from their governmental chums. It makes me a touch angry.

As has been pointed out to you this is a completely invalid comparison.

VTEC made a bid for the franchise on the contractual basis that they would pay a certain amount of money to the state on infrastructure that the DFT was contractually bound to provide. The DFT have not provided this infrastructure and are in breach of contract.

In the case of a home owner there isn't usually anything in your mortgage contract that relates to services to be carried out by the lender.

 

[F Great Eastern]

EDIT - I find it really hard to stomach another bail out when people are struggling to make ends meet and the government apparently cant afford to pay for enough operations in the NHS. It stinks. And you all know that.

1) It isn't a bail out - it's the DFT ending a contract earlier to avoid getting sued.

2) Would it be better for Virgin to sue the DFT and win and the government have to pay a massive amount of compensation? Because they will win. Easily.

 

[DarloRich]

Call it what you like. This is a bail out that ensures rich men who are very happy to rip us off at every opportunity are not out of pocket and ensure the Tories save face. It ensures the government don't have to admit the truth: That privitisation doesn't work for anybody BUT those rich men. Why are you not angry that we as tax payers are being screwed again?

Of course the government will lose in court. The contracts seem to be set up to ensure that happens and the risk of failure is borne by the government. Why cant they negotiate a better contract? They have had long enough to get this right!

If this bail out is the best possible deal come out and show us why. Show us the failed contractual terms, explain exactly what they are and why they have been failed, show us the legal advice telling the government to settle and show us the suggested cost for failing to do so. It is, after all, our money the Tories are giving away

the whole things stinks - why cant you admit it?

 

[F Great Eastern]

Call it what you like. This is a bail out that ensures rich men who are very happy to rip us off at every opportunity are not out of pocket and ensure the Tories save face. It ensures the government don't have to admit the truth: That privitisation doesn't work for anybody BUT those rich men. Why are you not angry that we as tax payers are being screwed again?

Contractual law doesn't discriminate and apply one rulebook to people/groups that you like and apply another rulebook to the people/groups that you do not like.

I despise the Tories and I also despise Branson and the Virgin brand, but they were wronged here, however much I don't like them, I acknowledge that they were.

I work on a factual basis rather than an emotive one that is twisted to suit my political ideology.

Of course the government will lose in court. The contracts seem to be set up to ensure that happens and the risk of failure is borne by the government. Why cant they negotiate a better contract? Thye have had long enough to get this right!

The risk of failure was not bore by the government - the government failed to meet it's obligations and as such was in a position of either being sued for breaching a contract or coming to a settlement that no doubt included an agreement for Virgin not to take the matter to court.

We should be asking why the government time and time again has deferred and delayed infrastructure because regardless of who operates the railways, that is a problem.

 

[DarloRich]

Contractual law doesn't discriminate and apply one rulebook to people/groups that you like and apply another rulebook to the people/groups that you do not like.

I despise the Tories and I also despise Branson and the Virgin brand, but they were wronged here, however much I don't like them, I acknowledge that they were.

I work on a factual basis rather than an emotive one that is twisted to suit my political ideology.

Thanks for the lecture - I am not a moron. Why we are in this position is clear. I am simply angry at being ripped off and frustrated at yet another failure.

I would love to see exactly what the breached terms are and the contractual penalties associated with those breaches.

Could you also admit that this wanton waste of tax players money is unacceptable and has to stop? Where are the lessons learned from the previous ECML failures? It annoys me greatly we seem to suffer from the same mistakes time and again. Those mistakes cost us lots of money and simply seem, to many people, to be a backhander to keep the rich blokes ( who don't care to share our burden of tax) sweet. We have to stop making these costly mistakes. It is disgraceful this situation has happened again. We have better things this money could be spent on.

The risk of failure was not bore by the government - the government failed to meet it's obligations and as such was in a position of either being sued for breaching a contract or coming to a settlement that no doubt included an agreement for Virgin not to take the matter to court.

it looks like it is from the outside. Please show me the terms upon which the government can hold the franchisee to account for failure? Do you think the government would be as keen as VTEC to enforce those terms?

We should be asking why the government time and time again has deferred and delayed infrastructure because regardless of who operates the railways, that is a problem.

because they are Tories!

 

[WatcherZero]

The two companies have put £100m in so far and taken no dividends, they are hardly laughing to the bank. When the current franchise ends they will still have been out of pocket, its hardly a government bailout.

 

[DarloRich]

The two companies have put £100m in so far and taken no dividends, they are hardly laughing to the bank. When the current franchise ends they will still have been out of pocket, its hardly a government bailout.

Lets see shall we..........

 

[MG11]

The two companies have put £100m in so far and taken no dividends, they are hardly laughing to the bank. When the current franchise ends they will still have been out of pocket, its hardly a government bailout.

They will have the portfolio though, which may come in handy when bidding for other franchises, Stagecoach have just lost the South Western franchise, so I predict they will bid for others, possibly with Virgin, given Virgin's WCML success.

 

[jon0844]

I work on a factual basis rather than an emotive one that is twisted to suit my political ideology.

I wish everyone was like that. Society would be a far better place, because there can be good and bad from any political party or organisation (or indeed, person).

 

[jon0844]

They will have the portfolio though, which may come in handy when bidding for other franchises, Stagecoach have just lost the South Western franchise, so I predict they will bid for others, possibly with Virgin, given Virgin's WCML success.

Presumably only ever long distance services, as I doubt Virgin would ever want to be associated with services running primarily for commuters who are never going to be happy.

 

[LNW-GW Joint]

The VTEC shareholders may not get a "bail out".
Yes, the franchise will terminate early, but DfT will be negotiating a direct award, and it may not be favourable to Virgin/Stagecoach.
It's not long since Stagecoach refused a direct award at SWT, claiming it was not viable for them, and now they have lost it.
The 2-year plugging of VTEC losses by Virgin/Stagecoach takes us beyond the competition for WCP, which is in many ways the big one.
Win that, and they won't care about losing ECP to someone else.
Lose it, and they are in big trouble.
The stakes are much bigger than VTEC.
First Group will be paying a lot of attention.

 

[hwl]

First Group will be paying a lot of attention.

Indeed as they have done the same on TPE and possibly SWR... And then there is what happens at GWR.

 

[F Great Eastern]

Indeed as they have done the same on TPE and possibly SWR... And then there is what happens at GWR.

Have the DFT breached the franchise agreement of Transpennine Express, South Western Railway and Great Western Railway?

If not then First is going to have almost zero leverage.

 

[Domh245]

Have the DFT breached the franchise agreement of Transpennine Express, South Western Railway and Great Western Railway?

Certainly on TPE and GWR, they've lost their appetite for electrification with all the associated costs that the TOCs will then have to bare with regards to operating any new trains for longer periods on Diesel (+ any passenger number impact down to the sparks effect being lost, etc).

It was interesting to see the debate about legal action. If (when) VTEC won the legal action, it'd set a precedent, and then all of the TOCs who've had to changes as a result of issues caused by the DfT would have likely also then taken them to court - so the view in some quarters is that they are taking the pain with VTEC's early cancellation, but making considerable savings from a lack of subsequent legal action.

 

[coppercapped]

Deleted.

Certainly on TPE and GWR, they've lost their appetite for electrification with all the associated costs that the TOCs will then have to bare with regards to operating any new trains for longer periods on Diesel (+ any passenger number impact down to the sparks effect being lost, etc).

It was interesting to see the debate about legal action. If (when) VTEC won the legal action, it'd set a precedent, and then all of the TOCs who've had to changes as a result of issues caused by the DfT would have likely also then taken them to court - so the view in some quarters is that they are taking the pain with VTEC's early cancellation, but making considerable savings from a lack of subsequent legal action.

To your first paragraph. As the DfT made the IEP contract for the supply of train services on the Western with Agility Trains, not the TOC with a ROSCO, I suspect that the extra payment will have to come out of the DfT's coffers rather than GWR's.

I say this on the assumption that GWR has a contract with the DfT for the franchise and the subsidy/premium profile will be based on the planned costs of operation. If, because the DfT's subsidiary Network Rail was not able to complete the electrification in the time scheduled, the costs increase then the DfT will have to re-negotiate its agreement with First Group to allow for the changed situation.

There have been no reports of this happening.

 

[Kingsbury Jn.]

Whilst not a direct comparison, isn't Leeds sort of the ECML equivalent to Birmingham? (Yes, I know its further away from London and smaller* - but you get the idea). Which makes you wonder if the potential of Leeds services is being diluted by too much emphasis on Newcastle and points north thereof? Its interesting that London - Edinburgh is now generally 2tph with more to come through Open Access, whereas London - Glasgow is a solid 1tph (and probably doesn't merit anything more to be honest)?

* Although if you look at Birmingham+Coventry+Wolverhampton and compare with Leeds+Bradford+Wakefield there's not that much in it

Quite close. Only 3.4 million difference

 

[Elecman]

Leeds would be the same as Manchester so West Coast Still has the bigger market even with competition from West Mids and Chiltern

 

[jayah]

Have the DFT breached the franchise agreement of Transpennine Express, South Western Railway and Great Western Railway?

If not then First is going to have almost zero leverage.

I would have thought most of Great Western is in the same boat because of the delayed upgrade.

 

[jayah]

Certainly on TPE and GWR, they've lost their appetite for electrification with all the associated costs that the TOCs will then have to bare with regards to operating any new trains for longer periods on Diesel (+ any passenger number impact down to the sparks effect being lost, etc).

It was interesting to see the debate about legal action. If (when) VTEC won the legal action, it'd set a precedent, and then all of the TOCs who've had to changes as a result of issues caused by the DfT would have likely also then taken them to court - so the view in some quarters is that they are taking the pain with VTEC's early cancellation, but making considerable savings from a lack of subsequent legal action.

I see Branson is promising to share 'disturbing details' about the franchise with the Commons PAC.

The government has hardly recovered from the last time he decided to open his guts over them.

 

[Starmill]

I know Tory fan boys try to twist that the the competition being about winning a franchise ( even if the quotes at the time were very clear) but anyone with a brain knows what competition means. Business v business in a fight for trade. Surely that is the essence of the capitalist free market society in which we live.

I'm strongly against the current franchising system, but what about competitive tenders is not in-keeping with a neo-liberal capitalist vision?

 

[DenmarkRail]

Would it be perhaps sensible to franchise both WCML, and ECML as one franchise, but then give (I don’t know) 30% of their combined paths to an open access operator?

 

[yorkie]

I wonder: what is the optimum amount of disruption for a TOC to be profitable?

...VTEC have been torpedoed by a number of things outside of their control and the assumptions that were made on their bid have clearly fallen apart with the increasing unreliability of the ECML infrastructure...

http://www.independent.co.uk/news/b...lips-deeper-into-financial-crisis-411481.html

...Sea Containers blamed GNER's under-performance on the terror attacks in London a year ago, a slowdown in the UK economy, and an improvement in Network Rail's performance, which meant that it was having to pay the infrastructure operator more than it had budgeted...

Too much unreliability and it causes too many problems, but some disruption is good for the TOCs because the payments from Network Rail far exceed the small amounts paid out in Delay Repay compensation (the majority of passengers do not claim).

Interesting paradox!

Would it be perhaps sensible to franchise both WCML, and ECML as one franchise, but then give (I don’t know) 30% of their combined paths to an open access operator?

This does not make sense. I think you misunderstand rail franchising and the complete contrast of open access operators.

The Government does not want any open access operators!

 

[Tetchytyke]

I see Branson is promising to share 'disturbing details' about the franchise with the Commons PAC.

That they gave the franchise to him and Brian when anyone with half a brain* knew it was going to be an unmitigated disaster.

I said at the time that I'd eat my hat of they paid the promised premiums. I'm glad I was right. I like my hat. Keeps my head warm.

(*Naturally this excludes Patrick McLoughlin, whose IQ would undoubtedly increase with a lobotomy).

 

[Agent_Squash]

That they gave the franchise to him and Brian when anyone with half a brain* knew it was going to be an unmitigated disaster.

I said at the time that I'd eat my hat of they paid the promised premiums. I'm glad I was right. I like my hat. Keeps my head warm.

(*Naturally this excludes Patrick McLoughlin, whose IQ would undoubtedly increase with a lobotomy).

They’ve paid all their premiums due so far?

 

[B&I]

I am still wondering what these contract terms DfT breached are. Am I ever going to find out from this thread?

 

[Agent_Squash]

I am still wondering what these contract terms DfT breached are. Am I ever going to find out from this thread?

Network Rail failed to deliver infrastructure upgrades, such as Power Supply Upgrade (North) and some quad tracking.

 

[Chrism20]

I have a bit of sympathy for Virgin/Stagecoach as they bidded based on the assumption that the planned works would have been done. The fact they haven’t been done would screw anyone’s forecasts etc - to an extent.

What reduces the amount of sympathy I have is them admitting they overbid.

I personally wouldn’t have reduced the length of the franchise but I would have reduced the amount payable in lieu of the work not completed.

Things really need to be looked at carefully before the next ITT for the ECML though. Are the expected returns simply too high? We’ve had two franchises go pear shaped and one where the franchise length has been cut. Something isn’t right here.

I also don’t think virgin/stagecoach have exactly endeared themselves to passengers on the East Coast. It’s not like the West Coast where they followed a state owned operator who had run things into the ground. In the case of East Coast they followed a state operator who in most people’s eyes have been the best operator of the line in the last twenty five years. The we are going make things awesome line just hasn’t worked on the East because things weren’t crap to start with. Unlike the West Coast we can remember when things were good pre-virgin.

The removal of one of the most generous travel loyalty schemes and seriously restricting advance quotas from day one done them no favours whilst they have destroyed what was a very good onboard product albeit it has improved recently. You can’t do this when a huge chunk of your revenue is discretionary leisure travel.

 

[Tetchytyke]

I have a bit of sympathy for Virgin/Stagecoach as they bidded based on the assumption that the planned works would have been done.

Maybe I'm too cynical, but I think the opposite: they bidded believing there'd be a bit missing. This is the lever they use- and have done on every single franchise either partner has ever had- to wriggle out of their promises and get a non-competitive direct award on preferential terms.

All this wibble about losing money just, for me, shows that Grayling has done a dodgy deal with them to preserve his dodgy ideology.

Why stay if it's so bad? Either they're misrepresenting how bad it is (as they always do) and/or there's a sweet treat for them later.

 

[DarloRich]

I'm strongly against the current franchising system, but what about competitive tenders is not in-keeping with a neo-liberal capitalist vision?

Nothing - but quotes at the time of privitisation clear spoke of on rail competition not some secret back room weighing of bids

I am still wondering what these contract terms DfT breached are. Am I ever going to find out from this thread?

No one seems to know these terms.

Network Rail failed to deliver infrastructure upgrades, such as Power Supply Upgrade (North) and some quad tracking.

Is there a schedule of works with detailed plans, dates,contracts and authorised ring fenced funding attached to these upgrade schemes or did dft just expect, like many here, to make it so?

 

[route:oxford]

The only way to stop this from happening again is to ban the operator of the ECML from employing a legal team that are better educated and more intelligent than civil servants and MPs.

Richard Branson has been head of the Virgin Business through the reign of 9 Prime Ministers and probably at least 100 leaders of the various UK opposition parties. His partner at Stagecoach around 6/80.

They remain the leaders of their business - because they are good at what they do and employ the best people to do it.