East Midlands, South Eastern & West Coast Franchise Updates April 2019

[whole diary]

[Lee]

https://www.gov.uk/government/speeches/east-midlands-south-eastern-and-west-coast-partnership-franchise-updates

https://www.gov.uk/government/news/more-seats-services-and-state-of-the-art-trains-for-passengers-on-new-east-midlands-railway

- East Midlands Franchise goes to Abellio East Midlands for 8 years from August 2019 - August 2027, with possible 2 year extension.

- DfT^» (Department for Transport - about) negotiating short-term extension to the current South Eastern franchise agreement with Govia until 10 November 2019, with an option to extend the agreement further to April 2020.

- DfT due to award the West Coast Partnership in June 2019.

Apparent ban on Stagecoach bidding - https://www.yorkshirepost.co.uk/news/transport/stagecoach-banned-by-government-from-competing-for-rail-franchises-1-9702477

https://dailybusinessgroup.co.uk/2019/04/stagecoach-disqualified-from-uk-rail-franchise-bids/

EDIT to add additional content/links

[ChrisB]

I have some sympathy for Stagecoach - but it seems that they've only been banned from these franchises, according to the write-ups?

[stuving]

I have some sympathy for Stagecoach - but it seems that they've only been banned from these franchises, according to the write-ups?

More to the point, the reports say that these three bids (presumably all that are under evaluation at the moment) were rejected as non-compliant. That's part of a bigger argument about the historic pension scheme, but even so it's hard to see it as a "ban".

The other implication of the reports is that Stagecoach bid in each case following the DRG agreed position - so did all the other bidders do the same, or did some break ranks? Plus, of course, is that collusion itself lawful ... ?

[grahame]

https://www.gov.uk/government/speeches/east-midlands-south-eastern-and-west-coast-partnership-franchise-updates

The franchise is due to start on 18 August 2019 and will run for 8 years, until 21 August 2027, with an extension of 2 years callable at my discretion.

Is Chris Grayling signalling an intention of still being Minister for Transport about 8 years from now?  . ... yes, I do understand that "my discretion" really mean "my role's discretion"

[Lee]

#You like potato and I like potahto
You like tomato and I like tomahto
Ban, disqualification, non-compliance, discretion!
Let's call the whole thing off!#

[grahame]

From the RMT^▸ (National Union of Rail, Maritime & Transport Workers)

RMT ON NEWS STAGECOACH IS BANNED FROM BIDDING FOR FRANCHISES

RMT demands that Stagecoach contracts be taken into public ownership‎ as company is banned from bidding for rail franchises.

RAIL UNION RMT has demanded that immediate steps be taken to bring franchises involving Stagecoach into public ownership as it emerged that the company have been barred from bidding in the current round of franchise awards.

RMT has warned that services, and the jobs of thousands of rail workers, are now left hanging by a thread as the chaotic mis-management of Britain’s railways takes another turn for the worst. With 70% of the British public supporting public ownership RMT is stepping up campaigning in light of the latest news.

continues

So ... I think they're saying that the Government has made a mess of overseeing the running of the railways, so will they please take over and run the railways.  If they can't even run the contracts, what would be different if they tried to run the whole thing?  Genuine answers worringly sought.

Whoever / however this pans out, I suspect that trains will continue to run, lines be maintained, and skilled staff who perform those tasks will still be needed. Who gives them their pay 'cheque' may change, and there might be worrisome times as they're moved over from one employer to another, but are their thousands of jobs really at risk, or is there an element of scaremongering in there?

Isn't Williams supposed to be sorting this out?

[Richard Fairhurst]

A few interesting things in the East Midlands franchise over and above the intercity fleet replacement (...what's the betting the 222s end up at CrossCountry?). Pleased to see the direct Melton/Oakham-London service over Harringworth Viaduct is continuing. Really not sure Corby merits a half-hourly service, but full marks for trying I guess. Confirmed that Liverpool-Nottingham is transferring to "another operator". Mostly incremental on the local services, but the hourly Peterborough-Doncaster via Lincoln looks good.

[rogerw]

My first thoughts on East Midlands are
Where are they going to get these modern diesel trains from to replace the HSTs^▸ (High Speed Train) next year?
There seem to be a lot of local trains promised air conditioning. New trains?
I like the promise of faster and more comfortable trains. Clearly not IETs^▸ (Intercity Express Train) then

[SandTEngineer]

Stagecoach response to ban: https://otp.investis.com/generic/regulatory-story.aspx?cid=273&newsid=1246762  (Mods: Might be better to create a new topic for this?)

10 April 2019

Department for Transport rail franchising programme

Stagecoach Group plc ("Stagecoach") has been informed by the Department for Transport ("DfT^» (Department for Transport - about)") that it has been disqualified from the current three UK^▸ (United Kingdom) rail franchise competitions.

Stagecoach was shortlisted in the following franchise competitions:

• East Midlands where it was bidding independently

• South Eastern where it was bidding with support from its intended partner Alstom

• West Coast Partnership where it was part of a joint bid with Virgin Group and SNCF^▸ (Societe Nationale des Chemins de fer Francais - French National Railways)

A senior DfT official has verbally informed Stagecoach that it has been excluded from all three competitions for submitting non-compliant bids principally in respect of pensions risk.

Bidders for these franchises were asked to bear full long-term funding risk on relevant sections of the Railways Pension Scheme. This is at a time when The Pensions Regulator is seeking additional funding because of serious doubts over the Government's ongoing support for the industry-wide scheme.

Stagecoach Group Chief Executive Martin Griffiths said: "We are extremely concerned at both the DfT's decision and its timing. The Department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.

"We have drawn on more than two decades of rail experience and worked in partnership with local stakeholders to develop high quality proposals to improve each of these rail networks.

"We bid consistent with industry guidance issued by the Rail Delivery Group and shared with the DfT. Without ongoing Government support for the long-term funding of railway pensions, The Pensions Regulator has indicated that an additional £5billion to £6billion would be needed to plug the gap in train company pensions.

"In contrast, the rail industry proposed solution would have delivered an additional £500million to £600million into the scheme. This would have provided better stability and security for members and much better value for taxpayers.  We are shocked that the Government has rejected this for a higher risk approach. We would urge that a full independent value for money review is undertaken into this issue without delay.

"Along with many other train companies, we believe strongly that the private sector should not be expected to accept material risks it cannot control and manage. In fact, this was a key finding of the Brown review into rail franchising more than six years ago. We are therefore extremely surprised that the Government still expects private operators to take risks they are not best placed to manage, despite the recent difficulties experienced by a number of operators of outsourced public sector contracts.

"Forcing rail companies to take these risks could lead to the failure of more rail franchises and cannot be in the best long-term interests of either customers, employees, taxpayers or the investors the railway needs for it to prosper.

"This is more evidence that the current franchising model is not fit for purpose, a view which has already been expressed by Keith Williams, who is leading the independent review of the rail system.

"It also further damages the already fragile investor confidence in the UK rail market and it undermines the involvement of two of the last British transport groups who are part of running Britain's railway.

"Over more than 20 years, we have delivered industry-leading performance, record passenger growth, excellent industrial relations, and the highest levels of customer satisfaction in the sector. We will continue to focus on delivering high quality services for our customers at our existing rail businesses."

ENDS

And from the BBC^» (British Broadcasting Corporation - home page): https://www.bbc.co.uk/news/business-47877858

Stagecoach says it is "extremely concerned" after the Department for Transport (DfT) barred it from three UK rail franchise bids.

The DfT says the bids for the East Midlands, South Eastern and West Coast franchises were "non-compliant" because they did not meet pensions rules.

Martin Griffiths, chief executive of Stagecoach, has called for an "urgent meeting" with the DfT.

Stagecoach had "repeatedly ignored established rules", the DfT said.

Mr Griffiths said in a statement: "We are extremely concerned at both the DfT's decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns."

Bidders for the franchises have been asked to bear full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said. The Pensions Regulator has estimated the UK rail industry needs an additional £5-6bn to plug the pensions shortfall, and the company said it was being asked to take on risks it "cannot control and manage".

Mr Griffiths said: "Forcing rail companies to take these risks could lead to the failure of more rail franchises and cannot be in the best long-term interests of either customers, employees, taxpayers or the investors the railway needs for it to prosper."

It was, he said, "more evidence that the current franchising model is not fit for purpose" and "further damages the already fragile investor confidence in the UK rail market".

Stagecoach had bid independently for the East Midlands franchise, had intended to partner with Alstom for the South Eastern operations, and was jointly bidding for the West Coast Partnership with Virgin and SNCF.

Stagecoach shares fell almost 10% in early trading.

'Ignored rules'

A DfT spokesman said that other bidders had met its requirements, and also announced that the East Midlands franchise had now been awarded to Abellio "after they presented a strong, compliant bid".

He said: "Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.

"Stagecoach chose to propose significant changes to the commercial terms for the East Midlands, West Coast Partnership and South Eastern contracts, leading to bids which proposed a significantly different deal to the ones on offer.

While Stagecoach has played an important role in the UK railways industry, "it is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer".

Stagecoach, which also has a huge bus division, currently operates the East Midlands rail franchise between London St Pancras International and destinations including Leicester, Derby, Sheffield, Nottingham, Manchester and Liverpool.

The company has a 49% share in Virgin Rail and also runs the Sheffield Supertram.

Stagecoach's East Coast franchise was renationalised last year following poor performance and mounting losses.

[ChrisB]

If they are shown to have disregarded the rules in their submissions, I'm guessing they'll owe their partners some compensation for self-disqualifying them too?

[Celestial]

I can't imagine they would (or even could) put a bid in without it being agreed by all the partners to the bid.

[JayMac]

So, what will Abellio order for the "bi-mode" inter-city fleet that will be replacing the current high speed fleet at East Midlands?

My prediction is the order book at Newton Aycliffe will soon be swelled.

I suspect the East Midlands regional fleet of Class 15x will be replaced by Class 170s cascaded from one of Abellio's other franchises, Greater Anglia.

[bradshaw]

https://www.railwaygazette.com/news/single-view/view/stagecoach-disqualified-from-three-franchises-in-pension-dispute.html

This article makes interesting reading. I would think and experienced operator like Stagecoach would have discussed this with its partners. There seems to be a significant financial risk which the DfT^» (Department for Transport - about) is placing on the operators.

Stagecoach Chief Executive Martin Griffiths said 'Along with many other train companies, we believe strongly that the private sector should not be expected to accept material risks it cannot control and manage’,

I would expect this to be contested at the Courts to get a definitive judgement

[JayMac]

It wouldn't be the first time Stagecoach have started legal action after a DfT^» (Department for Transport - about) decision pertaining to franchise letting.

[bradshaw]

Richard Branson has written the following at
https://www.virgin.com/richard-branson/virgin-trains-could-be-gone-uk-november

We’re baffled why the DfT^» (Department for Transport - about) did not tell us that we would be disqualified or even discuss the issue – they have known about this qualification in our bid on pensions for months.

Our first priority is always to look after our teams. The pensions regulator has warned that more cash will be needed in the future, but no one knows how big that bill might eventually be and no responsible company could take that risk with pensions. We can’t accept a risk we can’t manage - this would have been reckless. This is an industry-wide issue and forcing rail companies to take these risks could lead to the failure of more rail franchises.
We have significant concerns over the latest developments and their implications for the future of the UK^▸ (United Kingdom) rail market. We are still looking closely at the decision and we are now considering our options.