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Massive cock up - The Ex-Communicator

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October 3rd, 2012


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07:38 am - Massive cock up
In the UK, since John Major's privatisation of the railways, the railway system was split up into overlapping sections, and private companies have to bid to run them. They 'bid' by offering to pay the government money during the life of the franchise. This year the contract to run the West Coast rail was taken away from Virgin and given to FirstGroup. That is because FirstGroup promised to pay the government a mad amount of money - I forget how many billions - but all at the end of the franchise period. Basically the business plan of the owners was to make money up front, and then let the company go bankrupt in five years (or be bailed out by public money as usual). That meant they were technically the 'highest return' bid and they could undercut Virgin. I mean, I don't love Virgin but this was just cynical gaming of the system.

Anyway, Richard Branson announced he was taking them to court over it, and a lot of people thought that a lot would come out in court about the processes used, possibly about corrupt practices, I don't know.

Today The Government have announced the suspension of the franchise process. They have suddenly 'discovered' that there were flaws in the process. They are going to start again. They are compensating Virgin and the other companies involved to the tune of £60m.

This almost literally could not come at a worse time for the Government, because it is only a few hours since the leader of the opposition gave the best speech he has ever managed, focusing on the Government's incompetence, U-Turns and favouritism. So, my conclusion is that they must have been absolutely desperate to shut Branson down. He'll get the franchise now, and keep his mouth shut. He's a business man.

(16 comments | Leave a comment)

Comments:


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From:steepholm
Date:October 3rd, 2012 07:03 am (UTC)
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When I caught this on the midnight news last night, they mentioned that several ministry staff would be suspended, although I haven't heard them repeat that this morning. It will be interesting to see whether any civil servant is made to take the rap for this, and what (if it was in fact a political rather than an administrative error) their reaction will be in terms of defending themselves.
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From:communicator
Date:October 3rd, 2012 10:59 am (UTC)
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Yes. I think if for example corners were cut or a blind eye turned then this was not some junior who made the decision in isolation from the Ministerial steer.
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From:gfk88
Date:October 3rd, 2012 07:37 am (UTC)
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Maybe I'm naive, but I assume cock-up rather than conspiracy. Though that makes me more cross, not less. These people have between them wasted huge amounts of our money, through simple laziness and incompetence. Nothing less than wholesale sackings across government (that includes you, Cameron), civil service and parliamentary oversight committees will do now. Don't suppose I'll get them, though !
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From:the_magician
Date:October 3rd, 2012 10:11 am (UTC)
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If we fired every person in government/civil service that was lazy or incompetent, we'd probably have to hire some competent people ... and we've spent the last 20 years getting rid of as many of those as possible ...

... plus I'm not convinced that getting in competent but inexperienced people to replace the experienced but incompetent is going to save much over the next couple of years, and then there's an election ... where things get reshuffled again (whoever gets in, it's unlikely to be the current coalition)
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From:communicator
Date:October 3rd, 2012 11:01 am (UTC)
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One reason I think there is something beyond mere carelessness is the panic in avoiding a legal challenge. It has given a lovely gift to the Labour party. Why did they have to do it today - the worst possible day.
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From:iainjcoleman
Date:October 3rd, 2012 12:34 pm (UTC)
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Tucker's Law in action.
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From:tehomet
Date:October 3rd, 2012 08:05 am (UTC)
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This year the contract to run the West Coast rail was taken away from Virgin and given to FirstGroup. That is because FirstGroup promised to pay the government a mad amount of money - I forget how many billions - but all at the end of the franchise period. Basically the business plan of the owners was to make money up front, and then let the company go bankrupt in five years (or be bailed out by public money as usual). That meant they were technically the 'highest return' bid and they could undercut Virgin. I mean, I don't love Virgin but this was just cynical gaming of the system.

Anyway, Richard Branson announced he was taking them to court over it, and a lot of people thought that a lot would come out in court about the processes used, possibly about corrupt practices, I don't know.

Today The Government have announced the suspension of the franchise process.


I literally had no idea at all about any of this - I mean, I'd heard that Branson was irked about losing the franchise and was going to go to court over it, but had no clue about the background. Fascinating.
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From:communicator
Date:October 3rd, 2012 11:03 am (UTC)
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I am of course describing it from my own perspective which is anti privatisation. But it does seem Branson's challenge is not being contested. and he said it was an unrealistic sum.
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From:julesjones
Date:October 3rd, 2012 07:25 pm (UTC)
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My political views are not Communicator's, but I'd have described the episode like that, only less politely. Frankly, when I heard the original decision I wondered if there'd been backhanders, and/or who in the Cabinet had a large financial interest in First. First have form on extracting maximum profit for minimum service and then doing a bunk when the bills come due, and whatever I may think of Beardie, he's made a serious effort to run his bit of the railway both cost-effectively and competently. I'd believe his bid was the one that was actually the best option for both the taxpayer and the traveller. I live in Manchester and thus have Virgin as my primary mainline company but occasionally travel on First trains elsewhere, and was highly unthrilled with the prospect of First taking over the current excellent service to points south.
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From:tehomet
Date:October 3rd, 2012 11:38 pm (UTC)
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Thank you for this! Your perspective is very interesting.
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From:espresso_addict
Date:October 3rd, 2012 03:33 pm (UTC)
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The rules for bidding on government contracts in general are simply ludicrous. There seems to be only a minimal element of competence to do the job, with 99% of the decision resting simply on money.
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From:del_c
Date:October 3rd, 2012 04:25 pm (UTC)
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It's not just government contracts. Some contractors to our private sector employers have clearly had, as a model for bidding, "underbid our costs to the top brass, then recoup the loss by underperforming to the employees who have to work with us". The bosses don't see the effects of lowest-bidder-no-matter-what; they only see the lovely cost savings.

The idea is not unlike that of the vendors of collateralized debt obligations: separate out the bits so the buyer sees a low cost and a high value, and an apparently low risk. But the risk isn't low, it's just carefully made obscure to the buyer by the vendor.
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From:communicator
Date:October 4th, 2012 12:21 pm (UTC)
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So right. And you have to follow the procedure even while you are thinking 'this cost is not realistic at all'
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From:muuranker
Date:October 3rd, 2012 07:28 pm (UTC)
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I was really surprised that Virgin lost the contract, as it seemed to me that what enabled them to run it far more effectively than most competitors could was that it was part of the Virgin empire - and this created career pathways, and employee benefits which attracted better employees (at least, that is what I gathered from talking to train staff shortly after the beginning of the first contract).

I am also rather suprised that Virgin have not spotted that many of their passengers are, for one reason or another, taking a train rather than flying - and like their flying passengers, offering a range of service standards (all with their own flair) would be a good idea. Which would mean ditching first class, and offering business class, premium economy, and economy. And possibly sneaking 1st class back in, once people had forgotten that what they now buy as premium economy was once first class).





[User Picture]
From:communicator
Date:October 4th, 2012 12:22 pm (UTC)
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None of these things had occurred to me, very interesting, will definitely steal to use in my lessons :-)
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From:ninebelow
Date:October 4th, 2012 07:23 pm (UTC)
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I am absolutely fascinated to see how this will play out.

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