The row over how public services are procured from private sector providers has been taken to another level following the announcement that Virgin Rail Group has lost its Intercity West Coast franchise to First West Coast.
Cold-headed reality and more transparency are needed in procurement, writes Mark Fox, chief executive of the Business Services Association.
The suggestion is that the quality of the service will suffer because the government has simply gone with the bid that was the cheapest.
But, according to the Department for Transport (DfT), the contract, which runs from 9 December 2012 to 31 March 2026, was awarded because it would provide more seats (between 12,000 and 28,000 extra seats a day), more services, better services, standard anytime fares reduced by 15 per cent over the first two years, improved stations and greater user of smart ticketing technology.
Also failing in the bid were Abellio InterCity West Coast of Holland and Keolis/SNCF West Coast.
The rail minister Theresa Villiers said: “This new franchise will deliver big improvements for passengers, with more seats and plans for more services. Targets to meet on passenger satisfaction will be introduced for the first time in an InterCity rail franchise and passengers will also benefit from smart ticketing and from investment in stations. The West Coast is the first of the new longer franchises to be let by the coalition which has helped us secure real benefits for passengers.”
Virgin insisted that its bid had been “strong, deliverable” and offered “significant benefits for the taxpayer through generous premium payments to government”. The company pointed out that it had achieved 91 per cent customer satisfaction, had more than doubled the number of customers from 13m to 31m, introduced over 70 new tilting trains at a cost of £1.5bn and paid £160m to the Treasury last year – one of the highest payments in rail.
Virgin boss Richard Branson wrote to staff: “I can hardly express my disappointment and frustration over the government decision. We did everything possible to put together a strong, deliverable bid and I know it would have brought fantastic benefits for customers, staff and taxpayers. But in the end the decision rests with government and we have to respect that, however much we disagree with the process behind it.”
Branson added that it was “heartbreaking” to see the franchise taken away when there were many more new ideas still to be introduced.
The news follows a statement by the Defence Secretary Philip Hammond that he was rethinking his attitude to private sector procurement following a major shortage of private sector security guards at the Olympic Games and the subsequent use of military stand-ins.
Security firm G4S had been contracted to provide 10,400 security guards for the Olympic Games but fell several thousand short, leading to some 4,700 extra military personnel being deployed to make up the shortfall.
The shadow defence secretary Jim Murphy said he welcomed Hammond’s rethink on public service procurement.
But Andrew Haldenby, director of Reform, has written in the Daily Telegraph that Hammond is wrong to suggest the private sector can’t be trusted to run some public services.
“The G4S cause célèbre has given the impression that the country needs a big public sector in case the private sector does not deliver. In fact the opposite is nearly always the case,” he wrote.
Highlighting the NHS hospital in Hinchingbrooke in Cambridgeshire, which had been turned around by the private company Circle, Haldenby went on: “Public sector workers work 36 minutes less per day than private sector counterparts, on average. They take more sick leave. They tend to be paid according to length of service, whereas the private sector tends to be paid by performance. The private sector has a tremendous amount to teach the public sector in terms of management, especially management of people.”