VIRGIN Trains is to keep the intercity West Coast operating contract for the time being, but the Department for Transport has scrapped its previously-announced plan to award an initial contract of up to 14 months. Instead, Virgin Rail Group, 49 per cent of which is owned by Stagecoach, has agreed to a management contract which could last up to two years.
However, the terms are flexible and there could be further changes to come.
The DfT said the new contract will run for up to 23 months -- from this Sunday (9 December) until 9 November 2014 -- after which the West Coast Main Line intercity services will be let under a long-term franchise.
Considerable uncertainty remains. The DfT has reserved the right to shorten this period by up to six months if a replacement franchise can be let 'on a shorter timescale' -- presumably meaning that the DfT will try to replace this contract during its second year.
The franchise does not follow the established model, in which the operator takes commercial risk. Instead, Virgin has a management contract with both revenue and cost risk being borne by the DfT. In return Virgin will receive a flat 1 per cent of revenue. The franchise also includes a provision for the DfT and VRG to agree 'revised commercial terms that would see VRG take greater revenue and cost risk' later on.
The deal as it is at the moment has taken more than seven weeks to hammer out, because the transport secretary Patrick Mcloughlin had announced the start of negotiations with Virgin on 15 October -- 12 days after the previous West Coast competition had collapsed and the award to FirstGroup had been withdrawn.
With intercity West Coast services now secured, at least for the time being, attention will turn to the delayed Laidlaw report, which follows an inquiry into the collapse of the earlier competition. It should have been published at the end of last week, but has been delayed while ministers consider its findings.
Meanwhile one of the three civil servants suspended after the competition collapsed is due to resume her case against the DfT in the High Court tomorrow. Kate Mingay is claiming that she was not to blame for the West Coast errors, and that the suspension has damaged her career.