In 2012, the U.K. saw one of its most infamous spreadsheet-related scandals with the West Coast Main Line bidding fiasco. As one of the most lucrative British railway corridors, the West Coast Main Line connects London to the north along a western route that passes through the pastoral English countryside with stops in major cities such as Birmingham, Liverpool, and Manchester before finally reaching the Scottish destinations of Glasgow and Edinburgh. It is a transit lifeline for the country, and one that was run by Sir Richard Branson’s Virgin Trains 15 years prior to the franchise re-bidding.
The procurement and evaluation process initially began in 2011, as the Department of Transport (DfT) began to court its potential suitors for the rights to operate the West Coast Main Line. In the U.K., the government sells the rights to operate train services on its transit routes at auction. However, these rights are not necessarily awarded to the highest bidder – it’s more complex than that. The bidders must demonstrate that their trains will be able to operate sufficiently, and the DfT must also weigh the payment scheduling proposed by competitors. Amongst the competition, two contestants clearly stood out: former incumbent Virgin Trains and lead challenger FirstGroup. After a rigorous evaluation cycle and a leading bid of £5.5bn, the DfT awarded a 13-year contract to FirstGroup in August 2012. However, something didn’t seem right…
Shortly after the DfT’s decision was announced, 150,000 people signed a petition for a reconsideration, and Sir Richard Branson also questioned the specifics of the DfT’s procurement process by starting high court proceedings with the aim of launching a judicial review. The procurement process was examined by a committee, and what they found was baffling. Civil servants at the DfT overcalculated the amount of risk capital that was necessary for each franchise bid to guarantee against default. As a result, the bid requirements were much higher than necessary. The origin of this miscalculation was traced back to a series of financial models used in spreadsheets for the evaluation. The Guardian reported that these poorly managed spreadsheets “mixed up real and inflated figures and included double accounting,” and that the department decided to scrap a £1m audit that would have caught this £40m mistake. Unfortunately, the economic burden due to this negligence was passed down to taxpayers. In October 2012, the DfT scrapped their initial agreement with FirstGroup and were forced to redo the entire procurement process.
Tim Harford, a reporter at the Financial Times notes, “We need to accept [that] modern life is full of mathematical, spreadsheet and programing errors.” These words resonate in a world where the ramifications of spreadsheet negligence bear hefty economic and reputational costs. Although error can never be completely eliminated, it can be greatly reduced and held in check by proper audit protocol.