Government to relaunch bidding for flood defence

Bidders asked to reapply for lucrative contract after rail fiasco raised procurement flaws

The Environment Agency will re-launch the bidding process for a lucrative flood defence contract after fears that the original tender suffered similar technical flaws to those that caused the West Coast Mainline fiasco.

The rail-franchise failure, which saw Sir Richard Branson nearly sue the Government for awarding the £5bn contract to FirstGroup before that decision was overturned, sparked a review of wider government procurement.

This is understood to have led to the flood defence process being halted, despite a widely held belief that Atkins is the favourite to land the work under either format. Coincidentally, the engineer was a technical adviser on the process for the London to Glasgow West Coast, a franchise that will now be run by Virgin until at least the end of next year.

Although the flood defence contract delay will not cost the tens of millions to the public purse that was one of the major features of the suspension of West Coast, it is thought that around 15 bidders have each already spent about £1m on the suspended process. The scheme will be re-launched next Tuesday, which will be a relief to households which fear a repeat of the floods that wrecked property and left the insurance industry with a £1.2bn bill last year.

An Environment Agency spokesman said: "We have slightly delayed this procurement process to give complete transparency to bidders and will be re-issuing the invitation to tender on 26 February. The new framework will be awarded in June 2013.

"We do not believe delivery of flood defence projects will be held up by the re-tendering and are confident the amount of new work which bidders are required to do will be minimal."

Both the present Coalition and last Labour government have been criticised for not investing enough into flood defences in recent years. This has led to a stand-off with the insurance industry, which has agreed with the Government that it will make its policies for homeowners living on floodplains affordable so long as defences are improved.

This deal comes to an end in June. The Association of British Insurers and the Government are trying to hammer out a replacement scheme before then, though many insurers have already based their renewal policies on models assuming that a deal might not be in place.

David Cameron has asked trusted Cabinet Office minister Oliver Letwin to lead the talks, as MPs from all parties grow increasingly aware of how not having a deal could devastate local housing markets. Typically, homes built on floodplains would be paying only £340 a year to protect them against damage that is often around £20,000-30,000.

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