West Coast Main Line franchise shambles - possible impact on Great Western franchise?

[whole diary]

[paul7575]

There's a subtle difference AFAICS^▸ (As Far As I Can See) between a new 'management contract' to commence on a certain date,  that is competitively tendered for following an ITT^▸ (Invitation to Tender), and a management contract like the one Virgin trains were on for a few years, when the incumbent franchisee was transferred onto it to overcome a problem that had arisen during the franchise, i.e. the WCML^▸ (West Coast Main Line) modernisation...

London Overground is held up as a counter example to normal franchising, but LOROL^▸ (London Overground Railway Operations Ltd) still got the job by competitively tendering following an ITT.

Paul

[ChrisB]

Indeed - but why not use the word 'franchise' unless what is going to be up for tender is materially different?

[CLPGMS]

Contract Start - March 2016

Chris - I think that you mean "July 2016".

[ChrisB]

Thank you - I did. Now corrected.

[Southern Stag]

Indeed - but why not use the word 'franchise' unless what is going to be up for tender is materially different?

It appears Great Western and Thameslink will be competitively tendered management contracts in the LOROL^▸ (London Overground Railway Operations Ltd) mould rather than franchises with the DfT^» (Department for Transport - about) bearing more revenue risk. This is because of the significant disruption facing both in the next franchise period.

[Plymboi]

Right blonde Moment coming but....

What's the difference between management contract and franchise?

[JayMac]

What's the difference between management contract and franchise?

Politics. 

I've got a fair idea of the real answer, but it's late and I'm a wee bit tired. If no one steps up I'll have a go at answering, less facetiously, tomorrow.

[ellendune]

What's the difference between management contract and franchise?

A management contract transfers little risk. It is typically a cost plus type of contract, though perhaps with some incentives in it. It is unlikely to include much investment. Having said that the WCML^▸ (West Coast Main Line) was a management contract for many years.

[Southern Stag]

AFAIAA it's basically down to how a TOC^▸ (Train Operating Company) gets paid for running the service. With the franchise which we're familiar with on the national network TOC's bid based on premium or subsidy profiles, payments that they make or receive from the DfT^» (Department for Transport - about) for providing the service. They take all revenue and pay the costs for the franchise (it isn't quite a simple as that because of the rather complex way Network Rail is funded) and have to make the agreed premium payments and take only the agreed subsidies. TOCs are protected from the effect of external economic factors, originally by the cap and collar arrangements whereby the DfT would make up for most the shortfall in predicted revenue and would also take most the surplus from greater than predicted revenue. In the aborted round of franchises this was replaced by a new measure, which was rather poorly understood and was one of the reasons for the collapse of the franchising system. In a management contract the DfT will take much more of the revenue risk, the TOC is paid a fee for running the service, they don't have to forecast the revenue or make premium payments to the DfT, the fee paid by the DfT is simply a profit for the TOC. Again it can't be quite that simple as the TOC still has to be incentivised to increase revenue in some way, otherwise they could just run the franchise to pot and still pick up there fee. When a line is going to be subject to major disruption it is much harder to predict revenue, so a traditional franchise may be more likely to collapse because it is unable to make the premium payments or get by with the agreed subsidy. With a management contract the service will keep ticking over with the DfT picking up the cost. I doubt I've got everything correct there so I welcome some more posters knowledge.

[thetrout]

I've said it before on this forum. I think that the London Buses Model should be used on the railway. In line with completely tearing up the routing / fares guide and starting again.

I was having a discussion with a guard about all this when I asked her for a split tickets combination. She couldn't help but agree with my line of "If the A to B ticket was the same price as the A to J to B" ticket when every train stops at J anyway. Is the system fit for purpose?

I also have a conspiracy theory on the ICEC Franchise which is due to be re-tendered at some point. If the Government was that bothered about Eastcoast, they would've re-tendered years ago. However they've had a nice 600 odd million(*) into the treasury out of the DOR arrangement. Perhaps that's not so bad for them then??

The railways should be bought back into Government ownership IMHO^▸ (in my humble opinion) after this major blunder. I think it is both in the interests of the Public and also removes a huge element of risk i.e. another NXEC^▸ (National Express East Coast) or GNER^▸ (Great North Eastern Railways) disaster.

My final view on FirstGroup is that they are morally corrupt in that they were willing to risk handing in the keys for the final 3 years of the franchise in the hope of bidding and renewing ICGW for a longer period. Probably in an attempt to avoid hefty premiums back to the DfT^» (Department for Transport - about)/Governement for the optional 3 years.

So I really honestly think that the Government allowing them to continue till 2016 is very controversial and shocking decision. Considering the franchise was due to expire in 5 days (31st March 2013). I rather suspect that the DfT's decision was either rushed and/or one of panic!

My feeling is that maybe there should be a public inquiry here...?!?! The system clearly cannot and does not work!

[Southern Stag]

My feeling is that maybe there should be a public inquiry here...?!?! The system clearly cannot and does not work!

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/49453/cm-8526.pdf

That's your review on the system, the conclusions; the system is good but has gone wrong. I'm not saying the report is infallible btw, or that I agree with its findings.

[eightf48544]

Not sure where to put this or if there is already a thread.

I thought I heard yesterday that DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) are putting East Coast out to tender to re-privatise it!

No time scale mentioned or how it affects WCML^▸ (West Coast Main Line) and GW^▸ (Great Western) re-tendering.

[paul7575]

DfT^» (Department for Transport - about) have restarted the whole franchising timetable, not just the ECML^▸ (East Coast Main Line), including resuming a couple of current competitions that are 'on hold' (ie Essex Thameside and the merger of Thameslink/Great Northern/Southern) with the current shortlisted bidders.

There is a full timetable on DfT's website, the implications for GW^▸ (Great Western) are being discussed in this thread: http://www.firstgreatwestern.info/coffeeshop/index.php?topic=11347.60

Paul



 

[TonyK]

Now, we learn that FGW^▸ (First Great Western) are to continue with the Great Western franchise until 2016, and the bearded one will keep WCML^▸ (West Coast Main Line) until at least 2017. The Bristol Post has details:

First rail franchise for London-Bristol service extended for three years

Wednesday, March 27, 2013

The Bristol Post

By Michael Ribbeck

RAIL firm First Great Western is to operate services between London and Bristol for the next three years, the government has announced.

The process for bidding for the tender for the rail franchise was thrown into chaos last year at a crucial time.

A mistake in the bidding process for another franchise, for the West Coast Mainline, meant that the whole process across the country had to be abandoned while an inquiry into the multi-million-pound mistake at the Department for Transport was carried out.

The decision could not have come at a worse time, with Great Western network gearing itself up for the ^5 billion plan to electrify the line between Bristol and the capital.

New services planned after electrification are expected to be faster and more frequent ^ but in the short term the work to upgrade the line is expected to lead to delays and cancellations for several years.

Although the bidding process has been halted First Great Western has been told it will continue running services in the region for another three years, until 2016.

The company took over the tender a decade ago and was originally criticised for the number of delays and cancellations. However First has dramatically improved performance on the route in recent years.

The existing franchise had been due to end this October but last month The Post reported that the government had indicated it would continue until 2015.

Yesterday the government announced that the new franchise was now due to start in July 2016.

Transport Secretary Patrick McLoughlin has published a timetable for all rail franchise arrangements over the next eight years.

He said: "This programme is a major step in delivering tangible improvements to services, providing long-term certainty to the market and supporting our huge programme of rail investment. Above all, in future franchise competitions we are placing passengers in the driving seat by ensuring that their views and satisfaction levels are taken into account when deciding which companies run our railway services.

"Franchising has been a force for good in the story of Britain's railways, transforming an industry that was in decline into one that today carries record numbers of passengers."

First said it was giving up the previous Great Western franchise in 2011, three years before it was due to end, saving the company from paying ^800 million to the taxpayer.

But the latest deal takes it far beyond the original end date for the franchise, which started in 2006.

A DfT^» (Department for Transport - about) spokesman said talks to finalise details of the deal on services up until 2016 were still ongoing.

First chief executive Tim O'Toole said: "This provides continuity and consistency for our passengers and enables us to continue to deliver considerable improvements to services.

"We look forward to reviewing the details of the upcoming franchise competitions as they are announced, and submitting further high-quality bids that deliver for passengers, taxpayers and shareholders."

So FGW didn't take up the extension they could have had, but got it anyway. By the time the next franchise review comes around, the electrification will be well under way, and contenders for the new franchise will be able to say how they will use IEP^▸ (Intercity Express Program / Project.) and otherwise use the massive investment to the fullest. FGW will have been subjected to delays and workarounds during electrification, as they have been during the work at Reading.

There is fuller information about the timetable nationally in the Written statement by the Minister, DfT website

[JayMac]

Now, we learn that FGW^▸ (First Great Western) are to continue with the Great Western franchise until 2016

Despite it being widely reported, the management contract has yet to be signed off, although I suspect it is somewhat a fait accompli.

Meanwhile in other (related) news:

From The Telegraph:

Train firms drop ^40m lawsuit over Great Western costs

Four of Britain^s major train operators have dropped a lawsuit against the Government to recover up to ^40m of costs lost when the bidding competition for the Great Western rail franchise was scrapped earlier this year.

Arriva, FirstGroup, National Express and Stagecoach lodged a claim with the specialist Technology and Construction Court earlier this month, but later agreed to ^stay^ the proceedings to allow for further negotiations with the Department for Transport.

However, the companies have now decided not to press ahead and sue the Government, despite claims by one rail executive that they were still ^morally in the right^.

The move comes after Transport Secretary Patrick McLoughlin on Tuesday announced that the Government would award extensions for 12 rail franchises.

Dean Finch, the chief executive of National Express, told The Daily Telegraph that he believed the train operators were still ^morally in the right^, but the company had decided not to pursue the matter any further based on the available evidence.

A Stagecoach Group spokesman said: ^We are not pursuing the issue further and we consider the matter closed. Our focus is firmly on looking forward to support moves to get franchising back on track and deliver the planned extensions to our franchises.^

A spokesman for Arriva said: ^Following the stay in proceedings we have considered the DfT^» (Department for Transport - about)^s response and have decided not to pursue the matter further.^

National Express is currently negotiating with the Government over an extension to its c2c contract, which allows it to run trains between London Fenchurch Street and south Essex.

Stagecoach is in talks over extensions to its South West and East Midlands franchises, while its joint venture with Virgin Trains will continue to run the West Coast Main Line until 2017.

FirstGroup will continue to operate the Great Western franchise until July 2016.Mr McLoughlin sparked outrage in January when he cancelled the competition for Great Western services between London, Bristol and Cardiff and said that he would not reimburse the train companies, which spent up to ^10m each preparing bids. The franchise had originally been due to come to an end next month.

The auction was cancelled in the wake of the West Coast main line fiasco, which sparked a review of the franchising system in Britain.

The DfT declined to comment, but had previously argued that the document inviting train operators to tender for the franchise made clear that the Government would ^not be responsible for the costs or expenses^ of any bidder.

National Express on Wednesday announced it has won several new contracts, including one to run coach services between Luton airport and Victoria in central London for seven years. The services are expected to generate a minimum of ^6m of revenue a year.