Longer franchises of 15 years

Future franchises might last up to 15 years and include different ways of sharing risks between government and train operators, the Department for Transport said on November 29.

It explained that there would continue to be situations where operators took the majority of revenue risk over the medium term, adding that it would continue to use management contracts (where DfT takes revenue risk and pays the operator a fee) for major infrastructure upgrades.

DfT’s strategic vision document said that the vast majority of infrastructure risk should stay with Network Rail. However, it added: “There may be small-scale opportunities to share risk to improve the efficient delivery of infrastructure, but these will need to be designed on a case-by-case basis.”

It said it would develop a commercial model that supported long-term and integrated partnerships between track and train. This could bring 15-year deals with the prospect of extensions if they delivered new benefits for passengers.

Since privatisation in the mid1990s, governments have wavered between long and short deals, with short usually winning. Chiltern is the only operator with a 20-year deal, but that included a series of infrastructure upgrades - most recently the rebuilding of BicesterOxford that included a new chord to the main line into Marylebone.

Elsewhere, seven-year deals have become the norm, although many are later extended under Direct Awards as the DfT has struggled to let new competitions following the collapse of its West Coast competition in 2012.