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The Strategic Rail Authority's handling of the InterCity East Coast replacement franchise raises questions over its willingness to think strategically
By the time this appears in print, the storm over the Strategic Rail Authority's expected decision to award the replacement InterCity East Coast (ICEC) franchise to incumbent Sea Containers should have burst. Virgin and Stagecoach are not happy bunnies and are unlikely to take lying down the rejection of what they see as the sort of long term infrastructure investment driven vision the Government and the SRA were talking up.
Apart from rail policy considerations, there are implications for the Virgin Group as a whole. There are many in the media who would like to see the Branson empire fall; losing both the National Lottery and the East Coast franchise is already being touted as the beginning of the Virgin brand's meltdown.
At which point I should make clear that none of the figureheads of the ICEC bidders are my cup of tea.
But, and it is an over riding but, both Branson and James Sherwood of Sea Containers have made positive contributions to the present railway which outweigh my personal prejudices.
Virgin has signed up to two frighteningly ambitious franchise commitments which are supporting as much investment in traction and rolling stock as the other franchises put together. And, of course, Virgin brought Chris Green back to the railway.
Equally, Sea Containers introduced the only undisputedly successful managerial import to the railways, in the form of Christopher Garnett. Christopher, alone, took forward the InterCity brand, where Midland Main Line and Great Western stood still and Virgin regressed to pre-Prideaux standards.
In retrospect, Sea Containers bounced the, then, Shadow Strategic Rail Authority was into giving the ICEC franchise priority when the franchise replacement process it started in November 1999. But while not all the problems were obvious at that time, ICEC was not one of them.
Sea Containers' was looking for a negotiated extension using the unsubtle approach ‘We're running out of capacity, we won't buy new traction and rolling stock without an extension beyond 2003 so you'd better do something soon.' The pragmatic response would have been to have negotiated an extension of a successful franchise on the basis of some new trains, while the long term future of the route was developed.
Instead, the SSRA went into competitive replacement bidding mode, while not saying what it wanted. The fact that only Sea Containers and Virgin bothered to pre-qualify suggests that any other potential bidders were put off by the vague requirement plus the general perception that the real point of the competition was to provide the SSRA with a straw-man bid which could be used to justify a continuation of the status quo ante.
Political disaster ensued. Instead of bus company cannon fodder, the SSRA got Virgin with a characteristically high profile high speed line proposal. This raised the stakes alarmingly and embarrassed the SSRA and Government by thinking big.
Indeed after the bids were received, Virgin was given a pretty broad hint by the SSRA that a franchise plan based on a high speed line was not what it wanted. The best and final offers, to be submitted in June 2000 with the preferred bidder selected by July (snort), were to be based on Railtrack's existing plans to augment capacity on the route, if you don't mind.
As a sop to Virgin, the two bidders were also asked to formulate their, ‘probably different' thoughts on high speed capacity enhancements on the route post 2010. ‘Back off Branson so we can extend the GNER franchise painlessly' was the implied message.
But, of course, the Virgin/Stagecoach team didn't back off. They chose to ignore the broad hint, refused to be a straw man and adopted a ‘more strategic than thou' attitude to the SSRA. This high risk gamble, of giving the customer what you think he needs rather than what he says he wants, now seems to have failed.
In effect, the people's champion was appealing over the heads of the SSRA. So Virgin can't really complain if the SSRA doesn't buy an expansive continental vision of a new railway, when what was wanted all the time, and Virgin was told as much, was the next stage in the historical series of A4, Deltic, IC125 and IC225 which has extracted more speed and capacity out of the ECML's classic infrastructure.
What is disappointing is not that Virgin appears to have gambled and lost, but the message that the decision gives to bidders for future franchises. Think British Rail, optimising what we've got, rather that European rail, developing new lines to increase capacity.
And not just on the East Coast. After all the hype from bidders for the South West Trains franchise, with double deck stock revived yet again and bought by an uncritical mass media, the best and final offers from First Group/NS and Stagecoach are pure BR. Well, a note of caution here, my chum Christopher Garnett has promised to amaze me when details of the Sea Containers SWT bid are revealed, so I live in hope.
And, of course, the SRA's Strategic Plan should be published any minute now. More bad news; it will be a consultation document, soaking up yet more management time in the train operators. Oh dear, the Treasury must be delighted.