In a report published today the Public Affairs Committee of MPs has condemned the way Whitehall awarded the East Coast rail franchise to National Express in 2007.
When the Department for Transport terminated the seven-year franchise in late 2009, it received just £120m from National Express for the contract.
The PAC's chairman, Margaret Hodge, said that before awarding the franchise the DfT had not tested any of the bids against the impact of an economic downturn.
"National Express failed to meet its profit forecasts from the very start, and when the economic downturn hit, the losses spiralled," she said. "National Express paid just £120m – less than they had offered – to walk away from a contract worth £1.4bn to the taxpayer."
She also criticised the DfT for not holding the termination of the franchise against NatEx in future bids. "The department allowed National Express to get away scot free and with its reputation intact. ...In future, the department must make clear to such companies that failure to deliver on their obligations will have serious lasting consequences," Ms Hodge said.Reuse content