THE NATIONAL AUDIT OFFICE has condemned the Department for Transport's handling of the West Coast franchise competition, saying that the contest collapsed because the DfT was 'confused' and 'lacked management oversight'. It adds that taxpayers are now facing a bill of least £50 million as a result.

The NAO report is the second in 24 hours to voice serious criticisms of the Department, which awarded a short operating contract to Virgin Rail Group yesterday – just three days before the present Virgin franchise expires.

The final West Coast report from Sam Laidlaw was also published yesterday, when transport secretary Patrick McLoughlin made an apologetic statement to the House of Commons in which he described its conclusions as 'extremely uncomfortable reading'.

The Laidlaw report said the West Coast competition failed because of errors made by the DfT, 'specifically around modelling flaws and the Subordinated Loan Facility sizing process'. There was also 'an accumulation of contributory causes including a lack of transparency, inadequate planning and preparation, as well as a complex and confusing organisational structure'.

Today's report from the National Audit Office says the Department delayed the issuing of the invitation to tender by eight months because it had not decided how to handle recent policy changes, such as operators being responsible for stations. There was also 'confusion among Department staff about some aspects of the process'.

National Audit Office head Amyas Morse said: "Cancelling a major rail franchise competition at such a late stage is a clear sign of serious problems. The result is likely to be a significant cost to the taxpayer.

"The failure of essential safeguards raises questions about the Department’s broader management approach, as well as this specific matter. 

"It is commendable that, once it uncovered the problems on the franchise, the Department sought to be open about what happened and to investigate further. Among the lessons to be learnt is that staff with line-management responsibilities should be clear that assurance processes are not a substitute for proper supervision and management controls.”

MP Margaret Hodge, who chairs the House of Commons Public Accounts Committee, said the collapse of the West Coast competition had been 'a first-class fiasco'. She warned that the total cost to taxpayers was not yet known, and that DfT rail franchising was now 'in disarray'.

There are more revelations to come. A further report from Eurostar chairman Richard Brown is due to be published at the start of the New Year. Mr Brown has been investigating the wider implications of the methods the DfT uses to assess bids for rail franchises.

His conclusions will be needed before the stalled franchising process can restart. At the moment four contracts are due to be replaced during 2013, but this timetable is now unlikely to be achievable.