Virgin have lost the West Cost rail franchise to FirstGroup. This raises some interesting procurement questions which are worth further discussion.
I have been using both the West Coast and the Great Western for 12 years. If I was completely ignorant of who runs each of the current franchises and they were both using the same livery, I would have no problem comparing and rating service. In fact I would say there was no comparison. Then we have the facts:
Virgin is clearly ahead on past customer service. Yet it seems only a few weeks since we heard that the Government will have a blacklist of poor performing suppliers. How much emphasis should be given to the evidence of past supplier performance or as the Minister ironically called it 'track record'? How much emphasis was given to it on this occasion? If you were leading the evaluation, how much emphasis would you have given? In your domestic shopping how much emphasis do you give? In your professional position how much emphasis do you give?
FirstGroup have allegedly provided assurances as to the improvements they will introduce. If we are to avoid always staying with the same supplier and closing the door to future competition of course we need to consider proposals from new bidders. Otherwise we are really saying there will be a first mover advantage and at the same time we become a hostage to the incumbent. But how do you separate rhetoric and how much credence was given to it on this occasion? If you were leading the evaluation, how much credence would you have given? In your domestic shopping how much credence do you give to rhetoric? In your professional position how much credence do you give to rhetoric?
You can protect against rhetoric through good contact management and, if the worst comes to the worst, hopefully, terminate the contract and go elsewhere. We have heard that bonds will be entered into. Bonds are costly for both the provider and the buyer, they are an overhead cost to both. However, let's remember how difficult it is to call on the bond. I really doubt if they are a successful tool. I also would quite like to see some empirical evidence of their effectiveness as an incentive against poor performance and how often they are drawn on? If you were leading the evaluation, how much reassurance would you have had knowing there was going to be a bond? In your domestic shopping does the equivalent even enter your psyche? In your professional position how much comfort do they provide in terms of risk mitigation?
Of course terminating a service is only feasible if you have you can either do without that service, or have some alternative provider. If the losers in the competition exit the market the power has shifted from the buyer to the incumbent provider. Virgin have said they will exit the market. So if performance collapses, how much choice will the government have to move elsewhere? If there is no alternative provider why would FirstGroup worry about performance? How much consideration was given to that on this occasion? If you were leading the evaluation, how much consideration would you have given? In your domestic shopping how much consideration do you give? In your professional position how much consideration do you give?
Finally, bids have to be affordable. Not just for the buyer but also the supplier. If the bidder has priced too low, including the costs of improvements, then the bid may not be economically viable and we risk service improvements being no more than rhetoric, poor performance, supplier failure, market failure, ...
These are rail problems!