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Clear Thinking Case Study of the Month


  

The Story

Sept - Oct 2012

“West Coast Rail Bid fiasco - a Design Thinking failure, with nasty ramifications” 

The Government admitted a huge blunder in awarding the franchise for the West Coast Main Line to First Group, a decision that could have enormous ramifications for the credibility of other Government projects, such as HS2, the planned high speed rail line from London to Birmingham and beyond. First Group’s shares plunged 20% on the news.

Under pressure from the losing rival bidder, Virgin Trains, the threat of having to justify the Government’s decision in court unearthed a ‘suddenly-discovered’ flaw in the bid process. The reasons for the £40m climb-down have not been made clear but the suspicion must be that the entire bid process has become too complex for the DfT to handle.

 We examine where the thinking may have gone wrong. Our first thoughts are that this would appear to be a design fault. The design of the bid process. But the Initial Findings Report also points to DfT managers being aware of problems in March yet they let the process continue.

Key points of the Story

Virgin on the farcical?

 

Sir Richard Branson was so incensed at losing his franchise to run the West Coast Main Line that he took the Dept for Transport to court over its “insane” decision. He maintained that the winning bid, by rival First Group, was unsustainable in that it could not be financially viable.

 The day before the case was due to be heard in court the Transport Secretary, Patrick McLoughlin, announced that the bid process was halted and the franchise would not now be awarded to First Group. The DfT admitted that they had suddenly ‘discovered’ serious flaws in the bidding process, so serious that the next planned franchise offerings on other routes would also be halted until the problem was resolved.

 Who is to blame? What are the ramifications?

 

 

Ministers were quick to announce that they were not to blame, and neither were the train companies. The fault lay in the way inflation and passenger forecasts were calculated, apparently, and three DfT managers were suspended. The most senior civil servant to be suspended has denied being at fault. As did the various consultants and lawyers that assisted the DfT on the project. Two enquiries are to be held to figure out what went wrong, who to blame for the £40million cost of cancelling the bid process, and what to do about future franchises. But the real issue that now needs clear thinking on concerns the ramifications, discussed below.

 

Analysis and Lessons

Consequence  Thinking Analytical Thinking … Evaluative Thinking … Problem-Solving … Emotions Thinking … Value for Money … Concept Thinking … Imagination Thinking … Process Thinking … Design Thinking … Knowledge Management Thinking Process

Dented Credibility of the DfT and other departments?

The ramifications of the cancellation Decisionare manifold (Consequence Thinking). Many people’s instant reaction would surely be that other plans of the DfT could be suspect, possibly even right across Whitehall. The £32.7bn High Speed rail project (HS2) presumably uses the same sort of projection models and therefore could be open to similar legal objections.

  The dithering over the future of London area airports could also be further prolonged. Potentially it could open the floodgates to legal objections on many other Government projects that hang on analysing competing bids (Analytical Thinking, Evaluative Thinking).

Bury-your-head-in-the-sand Problem-Solving

The Initial Findings Report by Sam Laidlaw states that DfT managers knew as far back as March that there were problems with the process that could face legal challenge. Yet, instead of dealing with the problem they carried on, presumably hoping that it would resolve itself somehow. This is a common emotional reaction to difficulties frequently seen in ostriches. Had the team/s deliberately studied their emotions (Emotions Thinking) they would have been better able to deal with the issues before it got too late.

Value for Money: how calculated? How justified in court?

It also raises questions about putting £numbers to the hazy concept of Value for Money (Concept Thinking). This issue has already been aired by objectors to HS2. The costs of projects are relatively easy to estimate, although they seem to have a nasty habit of doubling by the time Government projects are completed. Very strange. Could be some Imagination Thinking lacking here, or simply wishful thinking (Emotions Thinking), or just poor Evaluative Thinking.

 But the real issue is putting a monetary value to the benefits of the cost-benefit calculations. And this is where the real Imagination Thinking comes in, or more likely, flights of imagination. Either way, there is plenty of ammunition here for legal eagles to assess and evaluate and argue about in court. Especially when the numbers are so nebulous, such as forecasts of passenger numbers and prices people are willing to pay at different times.

Faulty Processes?

The fact that the next planned rail franchises have also been frozen is indicative of a problem with the whole bidding process rather than just a clerical error in spreadsheets that everybody missed. Sir Richard pointed out that some previous bids for franchises have gone wrong when the incumbents went bankrupt or pulled out.

                    Clearly the line between franchisee profitability and attempts to save taxpayer money has been subject to such detailed analysis that the whole bidding and selection process has become too complex for the DfT to handle. Particularly now that the department has cut back on staff and experts. The process needs to be made simpler (Process Thinking and Design Thinking).

Learning from experience, or not. Knowledge Management.

 

Some train companies seem to manage their contracts well. Chiltern Rail, for example, have stated that they have no complaints and would seem to provide a good service generally. One would have thought that the DfT, after more than 15 years at the job, would have worked out the best model by now. Contracts are now about 13 years or longer. Yet in 2002 there were cries for making the franchises last only five to eight years. Perhaps there is a case here for improvement in the DfT’s Knowledge Management Thinking Process? Perhaps the same applies to all Whitehall departments?

 


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