Reuters /London


Richard Branson’s Virgin Trains group yesterday launched legal proceedings against the government in a last-ditch bid to prevent a rival bidder from signing the contract for the west coast railway train operating franchise. 
The government had earlier rejected a plea by the billionaire businessman to rethink the bidding process which awarded the rail contract to FirstGroup for around £6bn, sparking a bitter row. 
“We have tried for three weeks to get clarity over the department for transport’s decision and to have a number of key questions answered,” Virgin said in a statement. “On each occasion we have been refused information.
“We are left with no choice but to commence court proceedings as we believe the procurement process has ignored the substantial risks to taxpayers and customers of delivering FirstGroup’s bid over the course of the franchise.”
Branson’s Virgin Trains, a joint venture between Virgin Group and Stagecoach, had run the services between London and north west England and Scotland for 15 years but lost out in the contract extension bid earlier this month. 
The tycoon attacked the decision as “insanity” and said the department for transport’s (DfT) decision needed to be reviewed because FirstGroup’s numbers did not stack up.
He even offered to run the service on a not-for-profit basis for a few months beyond the handover date on December 9 to allow time for a review.
Virgin and even some customers have suggested that the cash-strapped government accepted the highest offer without questioning whether the financial terms made sense.  
“The current process is geared to selecting the highest risk bid and needs to be independently audited to prevent a repeat of former franchise failures,” Virgin said.
FirstGroup has said the department’s process was rigorous, detailed and fair, with bids thoroughly tested. 
“There has been no complaint about the process, which was carefully described in advance, until Virgin Rail Group had lost commercially,” it said.
The DfT said earlier yesterday that there would be no delay in handing the west coast rail franchise over to FirstGroup, although Virgin believes a legal challenge will prevent the contract from being signed. A spokesman for the department declined to comment on the legal challenge.
Branson is backed by more than 150,000 people, who have signed an e-petition urging the government to reconsider the franchise award.
FirstGroup expects the route, which has annual revenue of around £900mn, to generate sales growth of 10.4% and margins of roughly 5% over the life of the contract.
Meanwhile FirstGroup’s chief executive, Tim O’Toole, warned that any delay in awarding the contract would wreak havoc as the industry prepares to bid for a slew of high-profile routes, including the Great Western and east coast franchises.
“This is a huge piece of work that is in front of the industry and we have to get on with it,” O’Toole said. Delaying the west coast decision would “invite this kind of behaviour in other deals”.
He defended FirstGroup’s record as the operator of multiple franchises, including Scotrail and First Capital Connect. Responding to repeated warnings from Branson that FirstGroup had overbid, O’Toole said: “This company is going up against an organisation whose core competency is publicity and PR. And they would be a formidable opponent if that was the only criteria.”