“We were notified late last night that the Department for Transport (DfT) has apparently discovered significant technical flaws in the way its franchise process for the InterCity West Coast was conducted and has consequently cancelled the competition for this franchise.
“We understand the DfT has ordered two urgent independent inquiries into the West Coast competition and the wider DfT rail franchise programme.
“Until this point we had absolutely no indication that there were any issues with the franchise letting process and had received assurances from the DfT that its processes were robust and that it expected to sign the contract with FirstGroup soon.
“We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries.
“The DfT has made it clear to us that we are in no way at fault, having followed the due process correctly.
“We submitted a strong bid, in good faith and in strict accordance with the DfT's terms.
“Our bid would have delivered a better deal for West Coast passengers, the taxpayer and an appropriate return for shareholders.”
PE examines what the government's decision to scrap its West Coast franchise plans means for rail passengers and future rail policy.
Q. Just how embarrassing is all this for the government?
A. Well, it's left ministers and Department for Transport (DfT) officials with a great deal of egg on their faces. Former transport secretary Justine Greening and the incumbent Patrick McLoughlin had been at pains to say that the West Coast bidding process had been robust. Now it transpires it was anything but.
Q. So what exactly has gone wrong?
A. It seems it was not just a matter of the difference between Virgin's bid and that of FirstGroup but that all the bids from all four competing companies were not properly evaluated by officials. Heads could roll at the DfT while the government's general competence, at a time it is trailing in the polls, has been called into question.
Q. So what happens now?
A. There are two reviews to look into what happened and, until they report, the bidding process for three other rail franchises has been put on hold. A number of other franchises are due for renewal over the next few years and this lengthy process could be spun out even further now, leading to uncertainty at a time of ever-increasing passenger numbers on the network.
Q. What about the West Coast and its passengers?
A. Passengers should have nothing to worry about. Possibly, Virgin will be asked to carry on running the trains after the December 9 date on which FirstGroup had been supposed to take over the line.
In any case there is a legal provision for the DfT, if necessary, to take over franchises and run them in the public sector. The department has been doing this since 2009 on the East Coast main line after National Express pulled out of the franchise.
Q. What other implications are there?
A. At least McLoughlin comes out of the debacle relatively unscathed, even if he initially embraced the original DfT West Coast decision made under Ms Greening.
McLoughlin can say that the errors occurred before his arrival at the DfT, while Greening, now International Development Secretary, must bear the brunt of the criticism.
Q. What about government rail policy generally?
A. This fiasco will support the views of some who question what franchises are for. It also plays into the hands of those who say that the government has too much control of what is supposed to be a privatised railway.
Then there is the question of rail running costs, which the government is determined to reduce. Some might argue that in deciding on bids from companies to run franchises, the DfT is more concerned about how much money is being promised than the standard of service likely to be provided.
Q. What about FirstGroup, Virgin and the two other unlucky bidders?
A. They are getting their bid costs back from the DfT at a time when the rail industry can ill-afford to dish out any money. As usual the real losers here will be taxpayers.
Q. So something of an shambles, then?
A. Looks like it.