Review concedes vehicle agency 'wasn’t ready' for privatisation

Exclusive: Collapsed deal between BSI and VCA cost taxpayers £2.74 million

The botched part-privatisation of the agency that approves vehicles for use on Britain’s roads failed because the terms offered by the Government were “very unattractive” to bidders, according to an internal review document seen by The Independent.

Last November the British Standards Institute (BSI) walked away from negotiations to be commercial partner with the Vehicle Certification Agency (VCA), which earns £18.3m a year from testing and certifying cars, trucks, buses and motorcycles as fit for sale.

The project lasted two-and- a-half years, but collapsed within months of the BSI being selected as the preferred bidder, costing the taxpayer £2.74m. The Institution of Mechanical Engineers, the Motor Industry Research Association and the certification specialist SGS UK were also invited to bid last summer.

Ministers hoped the private sector could turn the VCA’s £511,000 loss in 2013-14 into a profit during a contract lasting several years, as part of wider reforms of motoring agencies. But the VCA has already improved its finances without outside help: its latest accounts show a £535,000 profit, despite a squeeze from vehicle manufacturers on its margins.

A Department for Transport presentation concedes that the organisation “wasn’t ready enough” for the joint-venture model and “the extent to which Government wanted to exert control [over the new company] through both the contract and shareholders agreement was very unattractive to bidders”.

It is understood that bidders had been asked to hand any excessive profit to the Treasury; they found the contract to be overly complicated, and were concerned about restrictions on how the partnership would work.

The review document states: “The process followed and the procurement route didn’t give the flexibility to respond to different solutions suggested by the market… The commercial proposition offered to the market wasn’t attractive enough.”

It is thought the Government could revive the process in the future, or at least develop ways of making more money out of its overseas operations, where the VCA advises foreign manufacturers. It has offices in Malaysia, China, Italy, India and Australia.

Sources close to the VCA said the process was “doomed to failure from the start” and that the agency’s 200 staff, mainly in Bristol and Nuneaton, were “completely unhappy because it was nonsense”.

The shadow roads minister, Richard Burden, said: “The message I take from this is that Government decided on the answer before they worked out the question. This fits with the chaos that’s been going on with the motoring agencies generally. The VCA is the starkest example: why was Government doing it in the first place. The VCA is successful already.”