A full report of an independent inquiry into the InterCity West Coast (ICWC) franchise fiasco was to be published shortly after we went to press, but even a cursory read of the interim report from the inquiry led by Centrica chief executive Sam Laidlaw reveals that the scale of the public sector’s procurement problems is vast.
Mr Laidlaw, a non executive director of the Department for Transport (DfT), was commissioned by the DfT to lead the inquiry after it cancelled its decision to award the 15 year franchise to FirstGroup and left it temporarily with the incumbent Virgin Trains. Legal actions from all sides look possible, even likely.
Although Mr Laidlaw has stressed that no firm conclusions should be made on the basis of his preliminary findings, enough fairly damning ‘significant errors’ have already been uncovered to suggest that a major procurement overhaul is long overdue. The errors include inadequate planning, weak governance, and an inadequate quality assurance framework, all contributing to a process that was described by the report, perhaps kindly, as ‘flawed’.
The fact that Laidlaw was prepared to issue an interim report, and that the DfT was prepared to allow it, at least suggests some public sector recognition that procurement is in crisis and that carrying on as before isn’t going to work. The interim report recognises that the ICWC franchising competition process is novel as well as complex, and has proven to be beyond the procurement skills of those civil servants involved, and their external advisers.
Laidlaw found that an accumulation of significant errors meant that the process was doomed. As well as the errors mentioned above, a complex organisational structure also played a role. Transport Secretary Patrick McLoughlin had to present these interim findings to the House of Commons, where he admitted that it made ‘uncomfortable reading’.
Other problems with the process, according to Laidlaw, included a lack of transparency in the bidding process, published guidance on how the bids would be processed was not complied with, there were inconsistencies in the treatment of bidders, and the model used to calculate the amount of capital that bidders had to provide to insulate against risk was flawed. He found that the DfT was aware of the lack of transparency in the process for determining the level of Subordinated Loan Facility (SLF) to be required of bidders in a complicated financing structure for operating the franchise, but decided to go ahead and accept the risk of a failed bidder mounting a challenge. Taking a risk isn’t the same as sensible risk management, a lesson that might profitably be learned.
Laidlaw said that some of the factors identified in his report raise ‘potentially significant issues about the ability of the DfT to conduct rail franchise competitions’. Recent events suggest this could be extended to many procurement activities across the public sector. Laidlaw concluded by saying that he believed there are practical steps that can and should be taken to address these issues; let’s hope so, and let’s see them rolled out elsewhere as well.
Nick Barrett
Editor