The Department for Transport is "no longer contesting the judicial review sought by Virgin Trains Ltd in the High Court".
All other outstanding franchise competitions - Great Western, Essex Thameside and Thameslink - will be paused pending the independent reviews.
The DfT said mistakes were made in the way inflation and passenger numbers were taken into account and how much bidders asked to pay.
The DfT also admitted if it had not been forced to examine its own process in its attempt to fight Virgin Trains' legal bid it would not have found these errors.
The mess that is emerging over the bidding process for the West Coast Main Line will be costly and raise the question of re-nationalisation.
The decision to award FirstGroup the West Coast Main Line rail franchise has been cancelled, the Department for Transport said.