Arriva sues government for £200m over rejected East Midlands bid

THE disqualification of Arriva from the East Midlands franchise competition could cost taxpayers £200 million, if a legal claim succeeds.

The Department for Transport said Arriva’s bid for the franchise was ‘non-compliant’, because it had attempted to reduce possible risks from having to help fund railway pension shortfalls which could run into several billion pounds.

Stagecoach, Virgin and SNCF were all turned down for the West Coast Partnership and Stagecoach for East Midlands and South Eastern, for the same reason.

Court documents seen by City A.M. seek to recover compensation of £200 million after Arriva was barred from going any further with its bid for East Midlands.

Stagecoach has also started legal action, claiming compensation for losing its chances to run East Midlands, West Coast Partnership and South Eastern.

When the bids for East Midlands from Arriva and Stagecoach were both rejected, the only remaining bidder, Abellio, was awarded the contract.

Arriva said: ‘This effectively meant that the procurement was won or lost on the basis of the tenderers’ appetite to assume the risks which the pensions requirements sought to allocate to tenderers, as opposed to the content of the tenderers’ proposals in respect of price and/or quality.’ The claim also accuses the DfT of ‘manifest errors of assessment’ as well as ‘irrationality’ and ‘disproportionality’, and demands that the award to Abellio be cancelled. At the moment, the Dutch firm is due to take over East Midlands on 18 August.

After the news broke on 10 April, Stagecoach chief executive Martin Griffiths had said: ‘We bid consistent with industry guidance issued by the Rail Delivery Group and shared with the DfT. Without ongoing Government support for the long-term funding of railway pensions, the Pensions Regulator has indicated that an additional £5 billion to £6 billion would be needed to plug the gap in train company pensions.

‘In contrast, the rail industry proposed solution would have delivered an additional £500 million to £600 million into the scheme. This would have provided better stability and security for members and much better value for taxpayers. We are shocked that the Government has rejected this for a higher risk approach.’

The DfT said: ‘We do not comment on legal proceedings. However, we have total confidence in our franchise competition process and will robustly defend decisions that were taken fairly following a thorough and impartial evaluation process.’

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