Thursday 09 May 2019 2:45 pm | Updated: Wednesday 05 June 2019 9:04 am

Government signs controversial East Midlands franchise contract with Abellio

The government has gone ahead and signed a controversial contract for the East Midlands franchise with Abellio as the war with Stagecoach over the decision intensifies.

The signing has gone ahead after the standstill period – the days following the award decision and its official signing expired at midnight last night.

Yesterday Stagecoach's sour relations with the Department for Transport (DfT) reached new heights after it formally launched legal action against the decision to disqualify it from the East Midlands, West Coast and South Eastern franchises over its refusal to share open-ended pension liabilities with the government.

The government has repeatedly defended the decision to block Stagecoach, which owns 49 per cent of Richard Branson's Virgin Trains, saying it was responsible for its own disqualification.

The legal action could mean that beleaguered transport secretary Chris Grayling could be called to the stand to defend the government.

It is just the latest in a string actions launched against Grayling over his handling of procurement contracts.

The government has already paid out £33m to Eurotunnel over its decision to award a contract for running ferries in the event of a no-deal Brexit to Seaborne Freight – a company that owned no ships.

Rival P&O Ferries has since said it will sue the government on the grounds that the money will go towards improvements at Eurotunnel that will put its services as a "competitive disadvantage".

The Stagecoach claim alleges that the DfT breached its statutory duties under the procurement of the new East Midlands rail franchise.

The company maintains that the DfT is wrong to ask it and other rail firms to accept the potential pensions risks attached to each of the franchises, which it estimates could be "well in excess" of £1bn.

A spokesperson for Stagecoach said: "There is no change in our position and our litigation against the DfT is proceeding. We are also preparing a claim for judicial review of the DfT's decisions to disqualify us from bidding for the East Midlands rail franchise and to award the franchise to Abellio. In addition, we are considering legal action against the Department in respect of the West Coast partnership and South Eastern franchise competitions.

"Our significant concerns around the DfT's management of the procurement process have been amplified by its decision to press ahead with the signing of the East Midlands franchise and its choice to leave so many fundamental questions unanswered."

The DfT spokesperson said: "We have now signed the contract confirming Abellio as the new operator of East Midlands Railway from August 2019.

“By delivering state-of-the-art trains with more seats, improved stations and trialling hydrogen fuel cell technology, this new franchise will ensure better journeys for passengers and play a major role in building a railway fit for the future.”