Labour slams FGW

[whole diary]

[paul7575]

FGW^▸ (First Great Western) have not ended the franchise early, they have simply declined their right to a 3 year EXTENSION of the 7 year franchise! Thats how it is!

I commented this on another forum, and had responses flying back that I was incorrect, and it was a 10 year franchise all along and they have just cut the contract short

You were quite right about it being a 7+3 contract, and here's your ammunition: 

The key factor is the existence of an 'initial expiry date' (defined as 31 Mar 2013 in the overall franchise agreement) which is used in the 'franchise continuation criteria' shown in Schedule 18 of the franchise terms here:

http://assets.dft.gov.uk/publications/rail-passenger-franchise-agreement-first-great-western/fgw-terms-2012.pdf

The 'initial expiry date' is not only the date by which the DfT^» (Department for Transport - about) could end the contract, if the continuation criteria were not met, but it was also quite clearly the date at which FGW could end the franchise:
 

1.4 If, within 14 days of receipt of notice from the Secretary of State under paragraph 1.2 or 1.3, the Franchisee notifies the Secretary of State that it does not wish to continue the Franchise Agreement beyond the Initial Expiry Date on the terms set out in the Franchise Agreement, the Franchise Agreement shall terminate on the Initial Expiry Date.

If people actually bothered to read both the franchise agreement and the franchise terms together there ought to have been a lot less talk of FGW 'handing in the keys'...

Paul

[Btline]

I agree with Andy W. If First were passionate about running FGW^▸ (First Great Western) they wouldn't have handed the keys back.

They should be barred from bidding.

At least Virgin showed some passion for the route, and passion for improving the service by cutting journey times.

[TonyK]

I stand corrected - I have fallen under the spell of the malign spin doctors! First said their motive was to win the full 15-year deal on Great Western. I also see no reason why they shouldn't do so, except that they have pledged to cut fares on WCML^▸ (West Coast Main Line).  Another operator may offer to do that on Great Western. So FGW^▸ (First Great Western) decided against paying best part of a billion for an extension to the year before the line is electrified, and have been proven right so far. It looks like astute business practice, if not dedication to transporting the masses cheaply.

[Milky Bar Kid]

Why would they commit to a further 3 years when they were short sold ideas from the dft like IEP^▸ (Intercity Express Program / Project.) etc.

[Andy W]

You were quite right about it being a 7+3 contract, and here's your ammunition: 

The key factor is the existence of an 'initial expiry date' (defined as 31 Mar 2013 in the overall franchise agreement) which is used in the 'franchise continuation criteria' shown in Schedule 18 of the franchise terms here:

http://assets.dft.gov.uk/publications/rail-passenger-franchise-agreement-first-great-western/fgw-terms-2012.pdf

The 'initial expiry date' is not only the date by which the DfT^» (Department for Transport - about) could end the contract, if the continuation criteria were not met, but it was also quite clearly the date at which FGW^▸ (First Great Western) could end the franchise:
 

1.4 If, within 14 days of receipt of notice from the Secretary of State under paragraph 1.2 or 1.3, the Franchisee notifies the Secretary of State that it does not wish to continue the Franchise Agreement beyond the Initial Expiry Date on the terms set out in the Franchise Agreement, the Franchise Agreement shall terminate on the Initial Expiry Date.

If people actually bothered to read both the franchise agreement and the franchise terms together there ought to have been a lot less talk of FGW 'handing in the keys'...

Paul

Hi Paul,

Thanks for the link to the document.

The way the contract reads then it is, as you say 7+3. However it is my understanding that the way the franchise payments are structured it is largely in the last 3 years that First pays for the franchise. This amounts to some ^850 million.

I looked through the document for Figures for Appendix 8 Calculation of Annual Franchise Payments to try to verify this but cannot find it.

So while the franchise is 7+3 it is financially structured as a 10 years contract.

First have exercised the option, quite legally, to terminate after 7 years saving this payment of ^850 million to the taxpayer.

That is all fine but given that First have exercised that right I see no reason whatsoever why they should be allowed to re-tender. They had the option to run the franchise past 2013 and chose not to, to me that is the end of the discussion.

It is a question of morality not legality.

Every taxpayer is collectively out of pocket to the tune of ^850 million. Yes you can point to frankly useless politicians & civil servants at the DfT in allowing this to happen and First are probably wise to exploit this and then course First can then use this money to outbid others for other franchises, good business but dubious morals.

So thanks and goodbye should be the response to the early termination.

[Btline]

I agree.

Love or loath them, VT^▸ (Virgin Trains - former franchises) would never walk away.
Chiltern would also never hand back the keys.

[vacman]

FGW^▸ (First Great Western) have not ended the franchise early, they have simply declined their right to a 3 year EXTENSION of the 7 year franchise! Thats how it is!

I commented this on another forum, and had responses flying back that I was incorrect, and it was a 10 year franchise all along and they have just cut the contract short

Yes they exercised their right to early contract termination - nothing illegal and to be honest it would have been commercially silly not to do so. That being said I see no reason whatsoever to allow them to re-bid. If they do not want the franchise so be it, let it go to a company that wants it. The taxpayer is almost a billion pounds out of pocket because of this tactic.

I disagree, the 10 years was based on electrification by 2013 and IEP^▸ (Intercity Express Program / Project.) being up and running so if they had have took up the extension they would be paying a hefty premium for something that they didn't have! That is why the DfT^» (Department for Transport - about) haven't spat their dummy and why the DfT were full expecting this.

[mjones]

But you appear to be proposing an additional penalty going beyond the contract. The lawyers would love it! Government procurement can't be run like that.

[Andy W]

I disagree, the 10 years was based on electrification by 2013 and IEP^▸ (Intercity Express Program / Project.) being up and running so if they had have took up the extension they would be paying a hefty premium for something that they didn't have! That is why the DfT^» (Department for Transport - about) haven't spat their dummy and why the DfT were full expecting this.

Hi Vacman,

I can't see any obligation for either electrification or IEP in the Franchise agreement - can either you or Paul, who appears to be the expert in these matters, point that out to me. DfT cannot 'spit out their dummies' as you put it because as Paul demonstrated they First are well within their rights to terminate after 7 years. I'm not saying you are wrong, I'd just like to see this commitment.

[Andy W]

But you appear to be proposing an additional penalty going beyond the contract. The lawyers would love it! Government procurement can't be run like that.

I'm not proposing any additional penalty, what I am saying is First had a contract beyond 2013. They have, perfectly legally, chosen not to take up that contract. It should therefore be open to others to provide the service that First demonstrably aren't interested in.

[ellendune]

They are. Its called the franchise bidding process.

There really is not alot of difference between this and when Chiltern took up the offer of an early termination in order to bid for a 20 franchise which they won.

[Andy W]

They are. Its called the franchise bidding process.

There really is not alot of difference between this and when Chiltern took up the offer of an early termination in order to bid for a 20 franchise which they won.

My point is they should forfeit the opportunity to bid. This is a cynical tactic to avoid paying the franchise monies. If the contract wasn't back end loaded to the last 3 years I might agree.

For the record how much money did First pay for the initial 7 years of the franchise?

In terms of Chiltern exactly how much money did they avoid paying? IIRC^▸ (if I recall/remember/read correctly) the Chiltern scenario was to extend the contract not to dodge paying up - but please correct me if I'm wrong.

[Btline]

Comparing Chiltern, who negotiated a long franchise and invested huge amounts of money to transform the service to FGW^▸ (First Great Western) who handed back the keys to avoid paying the gov after a botched and scaled down refurb that was only the scale it was because of a slap on the wirst from the gov is ridiculous.

And even now the air con doesn't work!

[Andy W]

FYI^▸ (for your information) http://www.railnews.co.uk/news/2011/03/14-speculation-that-first-gw-may.html# Some outline figures are presented in this article.

[ellendune]

My point is they should forfeit the opportunity to bid. This is a cynical tactic to avoid paying the franchise monies. If the contract wasn't back end loaded to the last 3 years I might agree.

I disagree entirely.

They did not bid for 10 years they bid for 7 extandable by a further 3 years by mutual agreement.  I assume therefore DfT^» (Department for Transport - about) assessed the bids on the basis of 7 years not 10. If the original franchise had been 10 years that would have been different, but it was not.