FIRSTGROUP'S £5.5 billion bid for the Intercity West Coast franchise may face critical scrutiny from several directions in the next few weeks. Reports say that two Parliamentary committees have expressed concern about the bid, while loser Virgin is understood to have just over a week in which to decide whether to press for a judicial review.
A war of words has also broken out between Virgin founder Richard Branson and FirstGroup chief Tim O'Toole, who has described Virgin's reaction to losing West Coast as 'hysterical'.
It is understood that two committees of MPs are looking closely at the Department for Transport's calculations, amid concern that the contract signed by First delays the bulk of the premiums due until later in the franchise than the competing proposal from Virgin.
Attention is expected from both the Transport Committee and the Public Accounts Committee. Meanwhile, Virgin is taking urgent advice from lawyers on the strength of its case for a judicial review.
The Public Accounts Committee has previously accused the DfT of failing to show 'due diligence' over the granting of a major intercity contract.
The East Coast franchise ended prematurely in November 2009 after National Express said it would have to surrender the contract because revenue had been less than expected, and East Coast is still being run by a government-owned company as a result. The Government intends to return East Coast to the private sector in December 2013.
The latest developments on West Coast suggest that a crisis may be looming. First should now be preparing to take over West Coast on 9 December, and its plans could be jeopardised should Virgin gain permission from the High Court for a judicial review.
Criticism from Parliamentary Committees cannot in itself stop the transfer of West Coast to FirstGroup, but if the Department attempted to back out of last week's contract First could now be expected to launch a legal challenge of its own, accompanied by a claim for substantial compensation.
Meanwhile, FirstGroup chief executive Tim O'Toole has responded to bitter criticism of the decision from Virgin founder Richard Branson by describing his stance as 'hysterical'.
Sir Richard had accused the Department for Transport of 'insanity' after Virgin lost the bid, and said it was 'extremely unlikely' that Virgin would bid for any more rail franchises under the present system.
But Mr O'Toole dismissed the Virgin founder's attack, saying that his reaction showed that Richard Branson is a 'poor loser', who had 'spread fear' among staff on West Coast.
The FirstGroup chief told the Financial Mail: "Branson has lost and he is off the field now. What he is saying is simply not true. We are not going to be cutting staff – staff levels will be about the same.
"But there are two things which are particularly outrageous. Had he won, he was planning to cut twice as much as he said we would have cut. And if he had won with his bid, he would have made a huge amount of money. Maybe that explains his hysteria."
Sir Richard has not been available for further comment after making his statement last week.