Herbies drops Virgin West Coast JR bid in wake of franchise debacle

Virgin Rail Group’s lawyers at legacy firm Herbert Smith (now Herbert Smith Freehills) have dropped requests for a judicial review of the West Coast Main Line rail franchise bid after Transport Secretary Patrick McLoughlin today announced that the competition had been cancelled.

Earlier today, McLoughlin announced that the competition to run the lucrative West Coast Main Line, which Virgin failed to retain after losing out to First Group earlier this year (15 August 2012), had been cancelled following the discovery of technical flaws in the franchise process. The decision is expected to cost the taxpayer some £40m when the Government refunds all the parties who took part in the bid.

The Department for Transport (DfT) discovered the flaw as it was preparing to rebuff Virgin’s request for a judicial review of the decision to award First Group the contract. Virgin had instructed Herbert Smith, which also advised the company on the bid process, on the action. Dispute resolution partner Nusrat Zar led Herbert Smith’s team and had instructed Blackstone Chambers’ Michael Beloff QC and 11KBW’s Nigel Giffin QC.

The DfT had instructed Eversheds partner Mark Rhys-Jones who in turn instructed Monckton Chambers’ Michael Bowsher QC and Blackstone Chambers’ James Eadie QC for the judicial review.

Another Eversheds partner, Anne Harris, is advising the DfT on the tender process for the West Coast Main Line.

Speaking about today’s shock announcement from the DfT Bevan Brittan transport partner Martin Fleetwood said: “From what I gather the problem has been with the [DfT’s] evaluation process. The actual procurement process seems to have gone okay and followed procedure. The problem is with how they have assessed the bids, especially the amounts of premiums paid by the franchisees. The information coming out of DfT is that they didn’t do the risk analysis properly.”

According to reports, the DfT has indicated that staff involved with the bid will be suspended and an investigation launched. It is unclear who will run the West Coast Main Line when Virgin’s existing contract to manage the franchise expires in December while the Government arranges a new tender process. A source at Herbert Smith indicated that the firm expects to be once again appointed by Virgin on the bid.