Memorandum submitted by Lord Bradshaw
PASSENGER RAIL
FRANCHISING
What should be the purpose of passenger rail franchising?
To give operators incentives to carry more passengers
by investing more.
It is very ineffective in that it tends to force
fares upwards. Franchices are too short to encourage significant
investment.
How well does the process for awarding franchises
work?
Operators and prospective bidders for franchises
are fixated on offering terms which will win the franchise. This
means making the highest bid which involves maximising fares and
providing the least costly service and lowest investment that
will meet that aim. Past performance and objectives such as expanding
carrying are not taken into account. The objectives of the Treasury
to minimise expenditure are given paramount importance and the
process is now increasingly focussed to this end with less room
for initiative on the part of bidders.
Are franchise contracts the right size, type and
length?
NO. The best franchises are long (eg Chiltern)
and lead to long term investment. They give too little weight
to past performance. They deliver the short term financial results
desired by government. Passengers have only a very marginal input
despite a lot of "consultation" which is largely ignored
by governments.
The franchise holder bears most of the risk.
There is little scope for improving services through franchise
agreements unless franchises are made longer with measurable sucess
criteria which are taken into account on re-bedding. If the railway
is to carry more people at peak times then franchises should state
this.
Do we need more competition and vertical integration?
Neither is necessary unless genuine new markets
are opened up (like Shrewsbury). It would be valuable to benchmark
both Network Rail (through allowing vertical integration in a
long franchise eg Merseyrail) and the ROSCO's by means of either
government or The Mayor of London entering a long lease of some
rolling stock directly with a manufacturer.
The franchising process is far too bureaucratic
(ask how large the bid documents are?) and expensive. The process
is designed to protect officials from the possibility of judicial
review. Any value judgements are replaced with expensive success
criteria devised expensively by management consultants.
I would be glad to expand on this brief statement
having long experience of the franchising process.
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