It was due to be re-let in December 2012, with FirstGroup announced as the winning bidder; this decision was later reversed after the discovery of irregularities in the franchise letting process.

In the wake of the collapse of Railtrack and the inability of its successor Network Rail to deliver the upgrade, the franchise was suspended in favour of a management contract in July 2002.

[8][9][10] Because of the increased future risks carried by operators under the new scheme, the government required a large financial surety to discourage early contract default.

[13] In October 2011, the DfT announced that Virgin had been granted a franchise extension until 8 December 2012,[14] and in January 2012 issued the Final Invitation to Tender to the shortlisted bidders.

[15] On 15 August 2012, the DfT announced FirstGroup as the successful bidder for the franchise,[16] promising 11 new six-carriage electric trains, direct services to Blackpool in 2013, and to Telford, Shrewsbury and Bolton in 2016.

[23] Despite public and political pressure for an independent review of the deal, the DfT declared it would not delay the signing of the contract once the ten-day standstill period had expired.

On 28 August, Virgin Trains announced it would seek a judicial review of the franchise decision, preventing the contract being signed, claiming civil servants had "got their maths wrong with FirstGroup".

[24][25] In September 2012, the DfT began making arrangements for the franchise to pass temporarily to West Coast Main Line Limited, a subsidiary of Directly Operated Railways, in the event that a judicial review was granted.

It was stated that civil servants had made significant mistakes in the way in which the risks for each bid had been calculated,[10] leading to too little default surety being required of bidders.

[34] The Laidlaw report was published in December 2012, and found the DfT to be primarily responsible for the failure of the West Coast competition, having made several errors in its financial modelling.