Conclusions and recommendations
1. The
Department is sponsoring the programme to increase passenger capacity
on the Thameslink route through central London. The programme
comprises three interrelated projects— to improve rail infrastructure,
to buy new trains, and to let the new franchise to operate the
new services. The infrastructure project to improve tracks and
stations at a cost of £3.55 billion (2006 prices), is being
delivered through Network Rail. The Department is buying the
new trains, with an estimated capital cost of £1.6bn, through
a private finance initiative. It is also responsible for letting
the new franchise and overall management of the programme.
2. The excessive time
taken to get the Thameslink project off the ground means passengers
have to wait far too long—over 30 years—for this upgrade.
There was clear evidence of the need to upgrade the Thameslink
route in 1989 but passengers will only start to see the benefits
in the 2020s. Proposals for the route were developed throughout
the 1990s and early 2000s by a succession of rail industry sponsors,
until the Department became sponsor of the programme in July 2005
and put in place delivery arrangements in 2006. The Department
told us that the lessons learned from the slow start on Thameslink
show that clear objectives, political consensus and a stable,
predictable funding base are important factors in getting big
projects up and running quickly.
Recommendation: The Department should develop
a long term investment strategy for transport projects built on
a strong evidence base, including better passenger travel data
and more reliable forecasts. This should help to secure political
consensus and greater certainty of funding, which will in turn
help to get projects up and running much more quickly.
3. The Department suffers from a shortage
of strong project management skills. There
is a core Thameslink team of just five which seems too small for
a programme of this scale, compared with teams for other complex
government projects. The programme management skills and the continuity
of the current senior responsible owner (SRO) have been crucial
to the project so far, but he will now be moving to support delivery
of High Speed 2. We are worried about the impact this will have
on the Thameslink programme given the scale of what remains to
be done to complete it by 2018. The apparent need to move the
Thameslink SRO onto High Speed 2 illustrates the scarcity of the
project management and commercial skills that the Department has
available.
Recommendation: The Department must put
in place a clear plan to build sufficient, appropriate skills
in the organisation to match the scale and ambition of its portfolio
of projects. Clear succession plans should be built into project
plans taking into account the key points in the project lifecycle
when staff moves can be made with minimal impact.
4. We are sceptical that the programme will
be delivered by 2018 given the delays in awarding the contract
for new trains, and have concerns about the Department's choice
of PFI for this project. The delay of
more than three years in awarding the contract to buy new trains
means that there will be less time for the trains to be delivered
than was originally planned. The Department said that it is confident
that the trains can still be delivered on time but was unable
to cite any examples of a manufacturer delivering trains early
and we are not confident that the trains will be delivered on
schedule. The Department told us that the delays are partly down
to underestimating the complexity of the procurement and to difficulties
in raising finance in the current market. Both of these issues
highlight the importance of understanding properly the risks of
the chosen delivery model from the start. In this context, it
is alarming that the Department only compared the PFI option against
another private sector option and did not construct a public sector
comparator to understand better the relative costs of choosing
the PFI route. Since our hearing the Department has awarded the
contract for supplying new trains to a consortium of Siemens and
Cross London Trains and we intend to examine this deal further.
Recommendation: For all future procurements
the Department should evaluate all the delivery and funding options
and ensure that it fully understands and compares the costs, risks
and rewards of each option.
5. The Department was too slow to recognise
the impact of planned infrastructure works and new trains on its
plans for letting the new franchise.
In July 2012 the Department considered and rejected using a 'management-style
contract' under which the franchisee is paid a management fee
for operating the route instead of being dependent on revenue
from ticket sales. This would transfer a lower level of risk to
the franchisee than conventional franchise arrangements as the
Department receives the revenue from tickets but bears the risk
that sales are lower than expected. However, in January 2013 the
Department changed its view and decided to adopt this approach
as the franchisee will have to deal with disruption from planned
infrastructure works and focus efforts on bringing new trains
into service, rather than on growing passenger revenue on the
route. The Department knew about these factors well before 2013
and should have made the decision to use a management-style contract
earlier. We are concerned that the change in approach to the
franchise indicates a worrying lack of forward planning or integrated
thinking across the programme.
Recommendation: The Department should focus
on integrated planning and aligning decision making across the
different elements of complex programmes from the very start.
6. We are not convinced that the Department
has thought through all the risks associated with letting a new
style of franchise for the first time.
The Thameslink franchise will be expanded to bring Great Northern,
Southern and parts of the South Eastern franchises together under
one operator. It will be the first time the Department has let
a management-style contract and it will be a seven-year agreement.
The Department acknowledges the challenges of letting a new style
contract, and outlined measures it has taken to strengthen its
franchising programme as a whole. However, the Department did
not explain how it would address the specific risks of letting
a management-style contract for the first time. Our report on
the cancellation of the InterCity West Coast Mainline franchise
shows the mistakes that can be made if insufficient time and resources
are invested in adopting a complex new approach.
Recommendation: The Department needs to
invest sufficient time and resources in considering the details
of the management-style contract and develop a clear approach
to running the Thameslink competition which identifies the risks
and shows how these have been managed.
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