Posted 19th July 2019 | 4 Comments

Arriva sues government for £200m over rejected East Midlands bid

THE disqualification of Arriva from the East Midlands franchise competition could cost taxpayers £200 million, if a legal claim succeeds.

The Department for Transport said Arriva’s bid for the franchise was ‘non-compliant’, because it had attempted to reduce possible risks from having to help fund railway pension shortfalls which could run into several billion pounds.

Stagecoach, Virgin and SNCF were all turned down for the West Coast Partnership and Stagecoach for East Midlands and South Eastern, for the same reason.

Court documents seen by City A.M. seek to recover compensation of £200 million after Arriva was barred from going any further with its bid for East Midlands.

Stagecoach has also started legal action, claiming compensation for losing its chances to run East Midlands, West Coast Partnership and South Eastern.

When the bids for East Midlands from Arriva and Stagecoach were both rejected, the only remaining bidder, Abellio, was awarded the contract.

Arriva said: ‘This effectively meant that the procurement was won or lost on the basis of the tenderers’ appetite to assume the risks which the pensions requirements sought to allocate to tenderers, as opposed to the content of the tenderers’ proposals in respect of price and/or quality.’ The claim also accuses the DfT of ‘manifest errors of assessment’ as well as ‘irrationality’ and ‘disproportionality’, and demands that the award to Abellio be cancelled. At the moment, the Dutch firm is due to take over East Midlands on 18 August.

After the news broke on 10 April, Stagecoach chief executive Martin Griffiths had said: ‘We bid consistent 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 £6 billion would be needed to plug the gap in train company pensions.

‘In contrast, the rail industry proposed solution would have delivered an additional £500 million to £600 million into the scheme. This 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.’

The DfT said: ‘We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.’

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Jez Milton, Manchester

    The pensions compliance issue is straightforward. Only one bid was compliant, and that bid won, offering better value for money to taxpayers than transferring operation to a public sector operator.

    If, on the other hand, there are other alleged procedural problems with the East Mids competition, as this story suggests, that is a different matter altogether.

    The sniping at DfT in some other comments here is really pretty pathetic. Let's wait to see how things pan out in court, shall we? And let's see how West Coast goes too.

  • Paul Harwood, London

    Speaking as an outsider brought to this site by the wonders of Google News - I find the whole attitude of the industry disgusting. If Arriva and Stagecoach cannot read why is that anyone else's problem? The bid is the bid and you have to be compliant - as I know from many years of infrastructure bids in the telco world. What they should have done is submit a compliant bid and a second, non- compliant bid to show the price difference. That is what did many times. But they were too arrogant and too greedy to do that. The rapacious destructive greed of the privatised rail companies continues top appall disgust the rest of us who pay the bills.

  • Chris Jones-Bridger, Buckley Flintshire

    So the soap opera continues. Millions of pounds are at stake irrespective of who wins the legal niceties.

    Back in the real railway world the daily business of trying to run a safe, punctual & efficient railway continues. These current legal procedures continue to highlight the costly farce that franchising has become with no benefit to the railway's ultimate users.

  • Neil Palmer, Waterloo

    So if the taxpayer could be on the hook for a £200 million claim from Arriva for losing the East Midlands franchise due to the DfT's incompetence and pig-headedness on the un-quantified pension funding issue, image how much Stagecoach & Friends will be after for losing three franchises. Time and again the DfT has proven they couldn't organize the proverbial p**s-up in a brewery, let alone manage franchising (though they seem pretty good at throwing away money on Brexit contingencies). Is this the final nail in the coffin for franchising as it currently exists? Do we go to operating concessions for all from now on? Stay tuned to this bat-channel for further news.