BR chiefs set to win franchise fight BR chiefs set to run privatised lines

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The Independent Online

Transport Correspondent

Nearly all the private companies bidding for the first three rail franchises have been eliminated from the tender process, leaving management buy-out teams as the likely winners.

The failure of private companies to make inroads into rail privatisation is an embarrassment for the Government as it shows how difficult it is for outsiders to bid against the well-informed management teams who have run the business for years.

Among the companies eliminated was one of the favourites, Sea Containers. Its bid was thought to have been too expensive by the franchising director, Roger Salmon, who will decide the allocation of the 25 franchises. The bus company Stagecoach has also been unsuccessful but a company run by a prominent Tory in Mr Major's constituency has unexpectedly reached the final round.

Mr Salmon makes the decision on the bidders without reference to the Government and, although Department of Transport sources last night privately expressed surprise at the outcome of the bidding process, Sir George Young, the Secretary of State for Transport, is not expected to intervene.

Bids for the first three lines to be franchised - South West Trains, Great Western Railway and the London, Tilbury and Southend line - were submitted at the end of the last month and the announcement of the successful bidders is expected by the end of the year.

The Independent has learned that the management buy-out team for London, Tilbury and Southend is the sole preferred bidder which means that all other companies, have been eliminated. For South West Trains, the management buy-out team, which has formed a partnership with a subsidiary of Compagnie Generale des Eaux and National Express, the bus company, will fight it out.

The two remaining bidders for Great Western are the management buy-out team, which has formed a partnership with a bus company, and Resurgence Railways, which is headed by Mike Jones, who used to be a freight manager with BR and is a former chairman of the Conservative Association in Huntingdon, John Major's constituency, and Richard Morris, safety director of Eurotunnel.

Although the Government is keen to see all three franchises let by the end of the year, the bidding process for South West Trains may be delayed because of a problem with the performance regime. This is the scheme under which train operators will be fined if too many trains are late or cancelled.

Apparently the original version of the regime has had to be scrapped by Mr Salmon because it was inconsistent with the current system. Now Mr Salmon is negotiating with the "preferred" bidders individually over the performance regime.

Neither Mr Salmon nor the Department of Transport would comment officially on the bidding process but Brian Wilson, Labour's transport spokesman, said: "The lack of outside bidders shows that the whole privatisation process is a sham. Over pounds 1bn has been spent on privatisation and now all the trains are just going to be run by former managers."