Rail franchise review rules out major change

10 Jan 13
A review of the government’s rail franchise policy has ruled out major reforms following the botched award of the West Coast main line contract last year.

By Richard Johnstone | 11 January 2013


A review of the government’s rail franchise policy has ruled out major reforms following the botched award of the West Coast main line contract last year.

The examination of the franchising programme by Eurostar chair Richard Brown, published yesterday, found there was a need to strengthen Whitehall’s capability to decide on contracts. However, he said that there was ‘no credible case for major structural change’ in the rail industry.

Brown was asked by Transport Secretary Patrick McLoughlin to conduct one of two reviews after the 14-year West Coast deal awarded to First Group in August was cancelled in October. McLoughlin had found ‘unacceptable mistakes' made by his department in the contract, including incorrect calculations for the security bonds bidders had to provide.

The first review, by Centrica chief Sam Laidlaw, reported in December.

Brown concluded that the rail industry worked well, with 92% increase in passenger numbers since privatisation and much-improved punctuality and passenger satisfaction. He said it was ‘highly unlikely’ this could have been achieved if the franchising system was ‘fundamentally flawed’.

However, there was a need to increase the government’s capability and experience in franchise negotiations to ‘match that of the bidders’ teams in line with good procurement practice’. Strengthened capability could come from recruiting senior managers with experience in procurement and commercial negotiation, as well as in finance and programme management.

Brown also set out three potential ways to structure the civil service team that examines franchise bids.

It could be kept within the main body of the DfT, as it is now, or established as an executive agency within the department, similar to the Highways Agency. It could also be established as a standalone organisation, similar to the Office for Passenger Rail Franchising that decided on rail franchise bids for the first eight years of privatisation, or the Strategic Rail Authority that replaced it until 2006.

Although Brown did not recommend one in particular, he said the standalone model had ‘been suggested by several of the organisations I have spoken to’ and could depoliticise the franchising process. The House of Commons transport select committee backed this idea last week.

Brown also called for the bidding and evaluation process for franchises to be strengthened to ‘concentrate on the essentials of price and quality in evaluation’. As well as taking account of the price offered by bidders – either in premium payments to the government or subsidy support – the system should give ‘overt and direct weighting’ to the quality and achievability of bids.

Brown said it was also ‘essential’ that five franchise competitions halted in October – Essex Thameside, Great Western, Thameslink, Southern and Great Northern – were now restarted.

McLoughlin said the review ‘confirmed that [the] government’s approach to the rail franchising system is still the best way to secure the rail services for taxpayers and farepayers alike’.

He added: ‘It has identified a number of detailed improvements, which I will carefully consider before publishing a further statement regarding the government’s franchising policy in the spring.’


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