The House of Commons Public Accounts chairman has called the government's handling of the West Coast franchise a "fiasco."
Margaret Hodge, Labour MP for Barking, said: "The DfT's handling of the West Coast franchise was a first-class fiasco."
"It has left the Government's entire policy on rail franchising in disarray, as a further three competitions have had to be put on hold.
"The total cost to the taxpayer of putting it right is currently unknown but is likely to be significant."
Ms Hodge said the Dft had "blundered into this major and complex competition for one of the biggest franchises in the country without even knowing how key parts of its policy were to be implemented".
The head of a report that stated that taxpayers were likely to incur a significant bill over the West Coast rail franchise has said that there are "serious problems."
National Audit Office (NAO) 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."
Taxpayers will face a "significant" bill over the West Coast rail franchise process, a report from a Government spending watchdog has said.
The Department for Transport's (DfT) running of the West Coast bidding process lacked management oversight, with some staff "confused" by the system, the National Audit Office (NAO) report said.
The Government has already indicated that repaying bidding costs to the companies competing for the franchise is likely to land taxpayers with a bill of around £40 million.
In its report, the NAO said staff and adviser costs, legal costs and money for the two reviews set up by the Government following abandonment of the West Coast bidding amounted to £8.9 million.
The Transport Secretary Patrick McLoughlin has announced Virgin are to operate the West Coast Mainline until November 2014.
Virgin had been set to lose the West Coast contract which it has been operating since 1997 but the Government scrapped the bidding after faults by the Department for Transport were found with the bidding process.
As the report from Sam Laidlaw into the cancellation of the InterCity West Coast franchise competition confirms, we bid entirely in accordance with the Department for Transport's process throughout and the Secretary of State has repeatedly confirmed that FirstGroup is in no way at fault.
It is especially disappointing that passengers and taxpayers will not see the benefits that our successful bid would have delivered.
We maintain that the private sector provides the most effective and efficient way to deliver passenger rail services in the UK.
We now await the outcome of the independent review being carried out by Richard Brown and hope this will provide certainty and confidence in the future of rail franchising.
The suspensions of three Department for Transport officials following the scrapping of the West Coast franchise bidding have been lifted, the department said.
Transport Secretary Patrick McLoughlin today announced the appointment of a Director-General with "responsibility for all rail policy and franchising."
"We will ensure that we have the right mix of professional skills inside the department and, where necessary, from professional external advisers," he added.
Mr McLoughlin made the announcement after confirming that Virgin Trains would continue to run the West Coast mainline until at least 2014.
Sir Richard Branson wrote in his blog that it was a "perfect early Christmas present" to learn that Virgin Trains will run the West Coast Main Line for a further 23-months.
He said: "It has been a long journey to get to this point, but we won’t be resting on our laurels and intend to keep improving services for our loyal customers."
On Twitter he said the deal was "reward for hard work and bravery of the team".
You have been telling us what you think of the decision to allow Virgin Trains to carry on running services on the West Coast Main Line for a further 23 months:
- Steve Smith: "Well done Virgin. I'm glad, it's the best company for the job. Keep going for long I say. Well done Richard."
- Alan Lowndes: "Doesn't matter who is running it. As soon as we get a light dusting of snow, all services will be cancelled."
- Marple Mills: "Welcomed and they should never have taken it away."
- Dave Carty: "I don't think it matters who runs it to be honest."