Britain’s West Coast train line debacle that emerged yesterday highlights the issues encountered when a complicated regulatory regime is applied to an even more complicated procurement conundrum. These issues are not limited to central government tenders – challenges to procurement processes generally are doubling year on year.
The somewhat scant facts revealed to date hint at a process mired in practical and legal issues. Letting a rail franchise falls outside the majority of the regulated procurement regimes as it would qualify as a ‘concession contract’ -- services or works contracts in which the consideration consists of or includes the right to exploit the works or services provided. In this case, the operation of the franchise gives rise to a direct revenue stream from paying passengers without significant fees from the UK’s Department for Transport to the operator.

Breaking down barriers

The regulated regime is derived from EU principles dating back over 50 years. These seek to break down barriers to trade across EU borders and where there is such a cross-border interest, certain behaviours are mandated by the Treaty on the Functioning of the EU. They include the most commonly litigated -- implied duties of equality of treatment and transparency.
The franchise-holder in this case, Virgin, is unable to raise treaty issues because of geography and so its ability to challenge the process is immediately restricted. Although perhaps outside the mainstream procurement legal regime, such activities are not immune to challenge, as the transport department has learnt, with Virgin seeking judicial review leading to the abandonment of the current process.
While the grounds of the judicial review have not been disclosed, the fact that the British government would in due course be forced to justify its decision-making process in minute detail, kick started an internal investigation that appears to have discovered significant technical flaws in the way the franchise process was conducted.

Assessment flaws

The department statement on the tender’s cancellation contains clues as to the nature of the challenge, stating that flaws in the assessment ‘stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result’.
The implication is that the assessment methodology was fundamentally flawed in the first place, and that view is supported by the department’s move to launch an investigation into ‘whether changes are needed to the way risk is assessed and to the bidding and evaluation processes’.
The statement that ‘the department cannot be confident that these flaws would not have changed the outcome of the competition or that any of the four bidders would not have chosen to submit different offers’ hints at another legal issue -- breach of the principle of transparency in the assessment regime.

Altered outcomes

It also implies that not only was there a legal transgression, but that transgression could have altered the outcome of the process. This is a crucial step, as claimants must establish a causative effect to have significant impact on a procurement process.
Around 80 per cent of the challenges made against procurement processes are based on an unsuccessful bidder alleging that its bid would have been different if it had been aware of the full facts and/or assessment regime. Most, like the West Coast Main Line franchise, do not progress to final hearings as the contracting authorities are mindful of cost, risk and delay.
Rerunning a process, albeit costly and time consuming, is an easier choice to make if, as in this case, the claimant is not pursuing a damages claim but is merely seeking a rerun. But the true cost can ultimately be one of credibility.