Govern­ment plans risk trans­fer changes to fran­chises

Rail (UK) - - Network News - An­drew Ro­den Con­tribut­ing Writer rail@bauer­me­

A new risk trans­fer mech­a­nism will be in­tro­duced by the Govern­ment on some pas­sen­ger fran­chises, in a bid to en­sure fran­chis­ing re­mains at­trac­tive to bid­ders.

De­tails of the new Fore­cast Rev­enue Mech­a­nism (FRM) are con­tained in the Govern­ment’s re­sponse to the Trans­port Se­lect Com­mit­tee (TSC) re­port on rail fran­chis­ing, re­leased on April 24.

The FRM would of­fer pro­tec­tion against short­falls in rev­enue rel­a­tive to the win­ning bid­der’s bid rev­enue line, and en­sure that op­er­a­tors share rev­enue with the Govern­ment should the fran­chise out­per­form fore­casts. The Govern­ment says this can help en­sure ‘healthy com­pe­ti­tion’ in the fran­chis­ing process. It also says it agrees with the TSC’s rec­om­men­da­tion that bid­ding costs in fran­chises should be stream­lined where pos­si­ble.

Re­forms to track ac­cess charges are also in prospect, with the TSC rec­om­mend­ing that a pro­posal for a Public Ser­vice Obli­ga­tion on open ac­cess op­er­a­tors should be con­sulted on within the next 12 months. The TSC also rec­om­mends that timetable slots for open ac­cess ser­vices should be de­ter­mined be­fore pub­li­ca­tion of the In­vi­ta­tion to Ten­der for fran­chises. On the pos­si­bil­ity of a greater role for open ac­cess op­er­a­tors, the Govern­ment says that putting in place re­forms to track ac­cess charges must take place be­fore any other de­vel­op­ments.

On calls to make clearer the ba­sis on which fran­chises are awarded, the Govern­ment says: “This may po­ten­tially as­sist with the public and in­dus­try gain­ing a bet­ter un­der­stand­ing of the ba­sis… on which a fran­chise has been awarded. Our com­mit­ment to trans­parency must be bal­anced with the need to re­spect the com­mer­cial con­fi­den­tial­ity of bid­ders.”

The Govern­ment says it will in­ves­ti­gate ways in which the fi­nal scores could be pre­sented, and that it will con­sult with the Rail De­liv­ery Group be­fore pre­sent­ing pro­pos­als to the TSC.

An out­come-based ap­proach to spec­i­fy­ing fran­chises is agreed to by the Govern­ment, which says it is test­ing a wider use of the pol­icy, in­clud­ing ser­vice qual­ity spec­i­fi­ca­tions on the East Anglia fran­chise. It says it will de­velop its ap­proach on a case-by-case ba­sis, but “should, where pos­si­ble, strive to fo­cus spec­i­fi­ca­tions on out­comes”.

But it dis­agrees with the TSC’s rec­om­men­da­tion that what qual­i­fies as force ma­jeure should be more clearly de­fined, ar­gu­ing that ex­ist­ing def­i­ni­tions are “suf­fi­ciently clear”.

The Govern­ment ac­cepts a rec­om­men­da­tion that it should no longer con­tract for a breach level cap on per­for­mance penal­ties, although it says: “It should be borne in mind that some kind of cap will re­main ap­pro­pri­ate,

pri­mar­ily be­cause if per­for­mance were to de­te­ri­o­rate be­low the floor level for the regime the op­er­a­tor would then be reach­ing the point at which it would be­come ex­posed to con­trac­tual en­force­ment ac­tion from the Depart­ment.”

It added: “In the Depart­ment’s view, im­pos­ing un­lim­ited ad­di­tional fi­nan­cial risk on the fran­chise would not be in the public in­ter­est and could im­pact ad­versely on the num­ber, value and qual­ity of fran­chise bids.”

Should any ma­jor changes be made in the rail fran­chis­ing sched­ule, the Govern­ment says it agrees with the TSC’s rec­om­men­da­tion that Di­rect Awards should be con­sid­ered for the high­est-per­form­ing fran­chises. The Govern­ment says it will “con­tinue to con­sider” Di­rect Awards where ma­jor in­fras­truc­ture de­ci­sions “re­main un­clear”, but claims that it is “suf­fi­ciently re­sourced” to meet the re­quired fran­chise timescales.

The Depart­ment for Trans­port re­jects the TSC’s rec­om­men­da­tion that an in­de­pen­dent re­view of its fran­chis­ing func­tions should be com­mis­sioned. It says that it al­ready com­mis­sions and re­ceives reg­u­lar in­de­pen­dent re­views of the fran­chis­ing pro­gramme, adding that the Cabi­net Of­fice’s In­fras­truc­ture and Projects Author­ity con­cluded that there “is full con­fi­dence in the fran­chise team and its lead­er­ship”.


A new risk trans­fer is to be in­tro­duced by Govern­ment on some fran­chises, to en­sure they re­main at­trac­tive to bid­ders. Re­cently some com­pe­ti­tions have in­volved just two bid­ders. One of the next fran­chises to be let will be South Eastern. On April 25, a South­east­ern Class 395 races along High Speed 1 at Detling.

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