Losing bidders Arriva and Stagecoach fire up lawyers

IN MAY, both losing bidders Stagecoach and Arriva began legal action against the Department for Transport concerning the award of the new East Midlands franchise; DfT had announced on 10 April its intention to award the deal to Abellio. The voluntary standstill period before the franchise would be signed was extended by DfT at Stagecoach’s request and was due to expire at midnight on the day Stagecoach confirmed its legal challenge.

In a regulatory statement on 8 May, Stagecoach said a claim had been issued in the High Court, alleging that DfT ‘breached its statutory duties… in connection with the procurement of the new East Midlands rail franchise’.

Stagecoach says it has informed DfT it is preparing a claim for judicial review of the decision to disqualify it from bidding for the East Midlands franchise due to non-compliance regarding pensions commitments. It is also considering legal action in respect of the competitions for the West Coast Partnership and South Eastern franchises, for which DfT has confirmed Stagecoach has also been disqualified for submitting non-compliant bids.

‘Common to all is our refusal to accept the potential pension risks that the DfT requires operators to bear in relation to the three new franchises’ the statement read.

‘The full extent of these risks is unknown but we estimate them to be well in excess of £1 billion.’


Martin Griffiths, Stagecoach Group Chief Executive, said: ‘We remain deeply concerned at the Department for Transport’s procurement of the three most recent rail franchise competitions and the rationale behind its decisions.

‘Despite our continued requests for full transparency around these matters, many fundamental questions remain unanswered. As a result, regrettably we have had no option but to commence legal action against the DfT to ensure the serious issues involved and the DfT’s opaque decision-making are subject to proper public scrutiny.

‘In view of the legal action we have taken today we believe it would be untenable for the DfT to proceed to sign any contract for the East Midlands franchise without a full and proper review of the procurement of that franchise to help restore public confidence in the process.’

Responding to the legal challenge, a DfT spokesperson said: ‘Stagecoach is an experienced bidder who knowingly submitted non-compliant bids on all competitions. In doing so, they disqualified themselves.

‘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.’


Shortly afterwards, Arriva, the third bidder in the competition and also understood to have submitted a non-compliant bid in respect of pensions, confirmed it too would be mounting a legal challenge to the decision. The challenge is understood to be of the same ‘case type’ to the High Court submission made by Stagecoach. An Arriva spokesperson said: ‘We are seeking to obtain more information relating to how the bids for the East Midlands franchise were assessed’.