THE TRANSPORT SECRETARY has confirmed that a series of errors and flaws effectively derailed the bidding process for the intercity West Coast contract. Patrick McLoughlin has also admitted to MPs that his department has not yet reached agreement with Virgin over a possible franchise extension from 9 December.

He was speaking in the Commons about the initial findings of the Laidlaw inquiry, which was set up on 15 October to investigate the collapse of the West Coast bidding process earlier in the month.

Mr McLoughlin outlined a series of problems which have been uncovered by Laidlaw, including a 'lack of transparency' in the bidding process, an internal failure to comply with guidance which the Department had devised and given to bidders, the inconsistent treatment of bidders, and also confirmation that there were 'technical flaws' in the model used to assess the degree of risk and consequently the size of the financial buffers -- or 'subordinated loans' -- required.

He told MPs that "to be blunt, these initial findings make uncomfortable reading, but they provide a necessary and welcome further step in sorting this out. The Government will need to see the full and finished report before it can comment in detail on any conclusions."

The first version of the report commissioned from Centrica chief executive Sam Laidlaw also reveals that the DfT has written to all four West Coast bidders since the competition collapsed, setting out its version of events. These letters have not been made public, but Mr Laidlaw said he would 'consider this correspondence' in the final version of his report, which is due to be published at the end of November.

Shadow transport secretary Maria Eagle responded to Mr McLoughlin's explanations and admissions by urging ministers to take responsibility for what had happened. She said: "Ministers must not be allowed to shuffle off responsibility - not my words but the words of the prime minister. This isn't just a faulty process, it's a faulty government."

The increasingly urgent problem of keeping West Coast running from 9 December has yet to be resolved. The transport secretary announced on 15 October that he wanted Virgin to continue operating the route's intercity services 'for nine to 13 months',to be followed by a short franchise to bridge the gap until a long franchise could be let in three years or so from now.

But although the negotiations have been under way for two weeks, Mr McLoughlin could report only that 'good progress' had been made. Industry insiders have suggested that Virgin is pushing for the best possible deal, while the transport secretary will be conscious that if terms are agreed they will be critically scrutinised by opposition MPs and others. He also extended the length of the proposed emergency contract to '14 months' when he made his statement in the Commons.

FirstGroup, meanwhile, has yet to reveal whether it will be seeking compensation beyond the already-announced refund of bidding costs, and a statement which followed Mr McLoughlin's appearance in the House of Commons suggested that the company is still considering its position. 

It said: '"The Secretary of State has repeatedly confirmed that FirstGroup is in no way at fault, having acted entirely in accordance with the DfT's process throughout, nevertheless we are extremely disappointed and dissatisfied that, as a result of Government's reversal of its decision, taxpayers and West Coast passengers will not benefit from the better deal that our strong bid would have delivered."

Mr McLoughlin is set to face further criticism over his Department's management of the West Coast franchise competition tomorrow, when he and DfT permanent secretary Philip Rutnam are to be questioned by the House of Commons Transport Committee.