The cancellation of the competition process to run trains on the West Coast Mainline has cost the taxpayer at least £9 million and that number could reach £40 million, according to The National Audit Office.
The franchise was initially awarded to First Group, but the bidding process was cancelled after Virgin Rail applied for a judicial review into the decision. It has since emerged that the bidding process was flawed.
The government may now have to reimburse rail companies the cost of their bids to run the franchise.
It was announced yesterday that Virgin Rail will continue to run the service, which goes though Milton Keynes and Northamptonshire, until 2015
The government has confirmed that Virgin Rail will continue to run the West Coast main line for a further 23 months.
The new franchise for the line, which passes through Milton Keynes and Northampton, was awarded to First Group in August.
This decision was later scrapped due to flaws in the bidding process.
Sir Richard Branson has called the current rail franchise bidding system "flawed" after Virgin Rail lost its West Coast service to rivals FirstGroup.