Rail franchising Contents

7Departmental capabilities

91.There are clearly a number of structural and governance issues that inhibit the franchising model from achieving all the benefits that it could potentially achieve for passengers. The Department also has a role is managing the franchising programme which can influence the extent to which franchising can deliver for the passenger.

92.The Department’s franchising capability has, according to the RDG, strengthened since the Brown Review.185 The NAO considers that “significant risks”186 still remain in delivering the franchising programme. This section of the report assesses and draws conclusions about the Department’s capabilities across the key phases of franchising, as set out in the diagram below. The broader planning and scheduling capabilities of the Department are also assessed.

Public consultation

93.The Department conducts formal public consultation prior to the Invitation to Tender (ITT) for a new franchise being issued to bidders. The consultation usually runs for 12 weeks. As part of this, a consultation document is published outlining proposals for the new franchise. A stakeholder briefing document is then published, which includes: analysis of public responses; and a review of the final franchise specification, explaining how the Department has taken account of stakeholder and public views in developing the franchise specification.187

94.Consultation response rates from individual passengers and members of the public vary drastically for different franchises—from more than 3,000 for TSGN to fewer than 100 for Essex Thameside and East Coast.188 The Campaign for Better Transport told us that the wider public and rail users are not well engaged in franchising.189 In particular, the size of the franchising consultation documents and the methods for engagement can be “very difficult” for the general reader to understand.190

95.In practice, rail user groups are the main way through which the passenger voice is represented during the consultation phase of franchising. It is clear that the Department has a well-established191 relationship with Transport Focus which has increased the attention on passenger experience.192 However, London TravelWatch was critical of the Department for not engaging with them “in any way” in the preparation of the Essex Thameside and TSGN franchises. The East Anglia franchise also had the consultation and ITT preparation phases completed without any input from London TravelWatch.193

96.The Department needs to find more innovative and streamlined ways of engaging with passengers and wider stakeholders when consulting on rail franchises. It is clear that consultation documents in the order of 60 to 70 pages and formal written responses are not the most effective in engaging with the wider public. We recommend that the Department publish a rail franchising public engagement strategy. This does not have to be exhaustive. A short document and associated webpage would provide the public with a clearer view on how to engage with franchising. We also recommend that the Department engage with relevant rail user groups on a more substantive basis at the beginning of the consultation process.

Franchise competition outcomes

97.Franchise competitions, pre-2013, were evaluated almost exclusively on price.194 The Department now sets out in the franchise Invitation to Tender (ITT) the criteria for which franchise bids are evaluated, including: cost to Government; service quality; and deliverability.195 As recommended by the Brown review, and given the requirements for different markets, scoring criteria reflects different franchise priorities and there is no “one size fits all” evaluation framework.196

98.Paul Maynard emphasised that “it is quality that drives the Department’s aims in terms of franchising.”197 There is undoubtedly an increased emphasis on passenger experience198 and on service quality199 in recent franchise specifications. Yet across the industry it is assumed that cost remains the overarching factor determining the outcome of franchise competitions.200 The RDG concluded that “other factors are only assessed when the cost gap between the top two bidders is small [and] … since the Brown review all franchises have been awarded on the basis of cost.”201

99.Only DfT evaluation teams see full details of all bids. The relative scoring of the elements (e.g. price and service quality), within and between bids, is not seen externally.202 Stephen Locke, from London TravelWatch, described the lack of transparency as a “black box”203 and said that the “lack of transparency on these awards is a barrier to trust in the system.”204

100.We believe that the Department’s commitment to transparency is undermined by the lack of information following a franchise award. Commercial sensitivities limit the amount and type of information that can be published. Acknowledging this however, we recommend that the Department publish a scoring system, possibly in the form of a weighted index, following a franchise competition. This would omit commercially sensitive details but give the public and industry a better understanding of the basis, in terms of quality and price, on which a franchise has been awarded.

East Anglia competition and the Stansted Express

101.The Stansted Express is part of the East Anglia franchise and runs four times an hour with a typical journey from London Liverpool Street to Stansted Airport taking between 45 and 49 minutes, depending on the stopping pattern.205 However, underinvestment on the West Anglia Main Line has seen journey times to the airport from central London decline by 10 minutes over the past decade. This has led to the share of Stansted’s passengers using rail falling from around 30% in 2005 to around 22% currently.206

102.The franchise competition for East Anglia, which concluded in August 2016, presented an opportunity for the Department to ensure upgrades to the Stansted Express were prioritised. However, the winning franchise bid made no commitments to improving journey times to Stansted Airport from central London and included a requirement to add further stops on the Stansted Express.207 Although it should be noted that the provision of a direct service from Norwich was specified in the franchise.208

103.It is clear that this outcome was, in a large part, reached because there was no reference or acknowledgment in the ITT of improving journey times to Stansted;209 and there was no particular advantage to be gained for bidders from going beyond the ITT requirements.210 This is in contrast with the Ministerial Foreword, as part of the February 2015 prospectus which stated that “a key aspiration is improved journey times [from Stansted Airport] into London and we expect that the new franchise can deliver on it.”211 This franchise outcome is also counter to recent Statements by the Secretary of State in October 2016 and the Rail Minister in November 2016 emphasising their commitment to greater rail access to Stansted Airport.212

104.We followed up on the issue of surface access to airports, with our report published in February 2016. This outcome demonstrates to us another failure from the Government in taking to take a clear lead on integrated transport planning which is, as we concluded, the major obstacle to better surface access to the UK’s airports.213

105.The experience from the East Anglia franchise competition shows that there is an obvious disconnect between franchising and the Government’s wider transport policy objectives. As concluded in our previous report, integrated transport planning is crucial to improving surface access to airports. It is simply unacceptable that a service that provides significant economic and social benefits, within the context of constrained airport capacity in the South East, be entirely ignored in the bidding process. We recommend that the Department, Network Rail, Greater Anglia and Manchester Airport Group work together to develop plans for journey times improvements on the Stansted Express. Improvements would heavily and directly benefit MAG and as such it should consider making a funding contribution to the associated cost. The wider role of third-party investment in rail will be examined in our Rail Governance and Finance inquiry.

The franchise agreement and specification

106.TOCs contract with the Department to provide services, based on a set of specified terms, for a fixed number of years. These specifications are documented in the franchise agreement and relate to aspects including, but not limited to: level of train service; station upgrades; train upgrades; performance targets; passenger satisfaction; and fares and ticketing improvements.

107.A franchise agreement is typically a very large and complicated contract. They have grown in recent years because of the “pressure on the Department to try to control franchise outcomes.”214 Many aspects of the services in the franchise agreement are prescribed with very detailed granular outcomes, “often by someone sitting in Whitehall who is predicting what passengers will want in five or 10 years.”215 Paul Maynard asserted that the high degree of specification is needed to “make sure that we continue to drive quality”, particularly on commuter networks.216

108.There was consensus in the evidence that the degree of specification within a franchise agreement is bespoke to an individual franchise.217 For example, there is merit in tightly specifying commuter services or where the franchisee does not have a natural commercial incentive to improve its service offering.218

109.However, the Department itself commented that “detailed specification can sometimes be counter-productive”,219 particularly if the specification cannot change fast enough when circumstances change; or where the franchising authority is not best placed to determine what is best for passengers at a local level. The CMA also concluded that “detailed franchise specifications limit the ability and incentives of franchised TOCs to respond to changing customer preferences or to drive efficiencies during the life of a franchise.”220 With reference to Chiltern Railways, the CMA highlighted that “where franchise specification is less tight, franchisees delivered improvements to rolling stock, line speed and service in order to compete with other franchisees.”221 The RDG also concluded that “the more tightly specified the contract and the more regulation imposed, the more constraint there will be on innovation to improve services for passengers and to lower costs.”222

110.Alstom recommended that franchise agreements should be focussed on franchise outcomes.223 The Social Market Foundation (SMF) proposed that “new contracts should be centred on a single measure of overall satisfaction against which operators would be scored.”224 Such a measure might be a variation of the National Rail Passenger Survey which provides a network-wide picture of passengers’ satisfaction with rail travel. However, Mike Hewitson of Transport Focus, felt that it was “a bit too blunt just to have a single overall satisfaction measure.”225

111.We do not recommend moving to a single measure upon which to measure operator performance but we do recommend the Department streamline franchise specifications, taking an outcome-based approach. This would provide operators with more flexibility in delivering tailored services to passengers based on individual market requirements, which change over time. It would also reduce the burden on prospective operators in the bidding process and on the Department in developing the ITT and in the monitoring and enforcement of a franchise. However, it is also important, where an individual franchise warrants it (e.g. on largely urban, commuter-heavy franchises), that detailed commitments can be set out, related particularly to service quality provisions, in franchise agreements with the expectation that the TOC will be held to them.

Franchise performance monitoring

112.Once a franchise is let, the Department has a role in monitoring the performance of an operator against its contractual performance obligations (such as cancellations, lateness and passenger satisfaction). Paul Maynard outlined his expectation that “from the day that they are let, [the DfT should] actively intervene, in a way which is proportionate, should there be a problem on the network.”226 For the Committee, the key point of scrutiny with respect to the Department’s monitoring capabilities was transparency.

113.As established in our report on the Rail Passenger Experience,227 GTR have had their Schedule 7.1 performance benchmarks228 changed twice in November 2015 and February 2016; in the former case without any public notification. For example, the original cancellation benchmark in the contract was increased from 1.97% to 2.75% because of the remedial plan in February 2016.229 Stephen Joseph OBE of the Campaign for Better Transport commented that “just letting GTR off the hook by amending their franchise requirements sends entirely the wrong signal about whose side the Department is really on.”230

114.GTR also independently introduced revised timetables that resulted in the cancellations of 341 daily services between 11 July and 5 September 2016 implemented to improve reliability as a result of high levels of train crew sickness and a reduction in the uptake of overtime.231 This was to the severe detriment of many thousands of passengers. We tried to establish how the Department was holding GTR to account for these cancelled services. While we will not be able to establish this, with certainty, until the final force majeure claims are settled; it was clear that the revised timetable was not included in the measure of performance available to the public, the PPM.232

115.Despite the Department’s consistent claims of a commitment to transparency, our experience would suggest that transparency in franchising monitoring appears to be very poor. It has taken significant effort from this Committee to obtain basic information around GTR’s performance benchmarks and timetabling which are not available publicly. Further, in allowing GTR to change their performance benchmarks and timetable, which effectively enabled them to avoid breach of contract, the Department has not actively intervened in a manner proportionate to the problems on the TSGN franchise. GTR have effectively been given a penalty holiday because of this industrial dispute.

116.The way the force majeure provisions are currently drafted in franchise agreements provides operators with far too much leeway when dealing with industrial disputes. We accept that part of the industrial action is outside the control of the operator. Yet the ability to respond to it, particularly in terms of managing longer term staffing levels, is very much within the control of the operator. We recommend that in future contracts, terms are drafted in a way that has a clearer definition of what qualifies as force majeure and is commensurate to the degree of control of an operator has in dealing with an industrial dispute.

Changes to performance reporting

117.After extensive investigations and pressure from the Committee, Rail Minister Paul Maynard, outlined the Department’s intent to publish actual performance benchmarks for each rail franchise every four weeks.233 This accepts one of the key recommendations from our Rail Passenger Experience report and will help in ensuring that “passengers can see what is going on in the franchises.”234 This commitment by the Minister is very much welcome and is an important step to more transparency in franchising.

118.It is important to note that this announcement is only the first step in the transparent publication of performance benchmarks. The Department can choose either to wait for a franchise to be renewed or introduce these new reporting measures through in-franchise contract changes.235 Minister Paul Maynard indicated recently that Delay/Repay 15 changes would only be introduced where “a franchise competition is underway or is planned.”236 In other words, it would not be introducing changes through changes to existing contracts. It is therefore likely that we will not see the full publication of performance benchmarks until the Essex Thameside franchise expires in 2029.

119.Additionally, even if performance benchmarks are published, they may not provide the full picture of performance. This would particularly be the case in instances where benchmarks are changed behind closed doors, or where operators are able to independently revise timetables to adjust performance results because of force majeure clauses. Thus, what is being published may not be fully reflective of an operator’s actual performance.

120.We welcome the Minister’s commitment to make franchise performance reporting more transparent following our extensive investigations and ongoing pressure. It is a significant step forward and goes some way to increasing the accountability of operators to the public for poor performance. We recommend that the Department outline, in detail and with a timeline, its plans to incorporate these reporting provisions into existing contracts. We also recommend that when the Government publishes the promised performance benchmarks, it does so in an easy to access format which is not hidden away separately on individual operator websites. The data must be centrally located on a dedicated and visible webpage that shows the performance of all operators and makes clear whether operators are failing to or are at risk of failing to deliver the services the Department has contracted them to provide. It must also be possible to track any agreed changes to the levels and quality of services and a clear rational for each such agreed change should be easy to find. This has implications for the transparency of the entire franchising process.

Franchise enforcement

Performance penalties

121.Franchises contain performance and service quality targets. These are enforced by the Department using financial penalties when targets are missed. The financial penalties may not be sufficient to incentivise performance improvements from operators. For example, despite the severe operational failings of GTR, it paid only £2 million in penalties in its first year of operation (0.2% of its management fee of around £1 billion). In fact, we established that GTR earned a net payment (i.e. performance rewards were greater than the penalties) in its first year of operating the TSGN franchise. We also established that performance penalties, at least for the TSGN franchise, are capped with the breach level of performance. This means that once performance has exceeded the breach level, there is no incentive for the operator to improve or even maintain performance as the penalty will remain the same. The performance penalties for GTR are likely to be higher for this financial year but the extent of this is highly dependent on GTR’s force majeure claims. If all such claims are approved, the financial penalties are likely to be negligible compared to the management fee.

122.Jamie Burles, Managing Director of Greater Anglia, asserted that, more broadly, penalties for poor performance had previously been more “reputational”237 than financial in previous contracts. However, he noted that there is “a very significant financial penalty in the [new Greater Anglia] contract.”238 We are yet to see the new contract but will follow this up with the Department.

123.We were concerned to see that GTR earned a net payment in the first year of operation on the TSGN franchise, with performance rewards greater than penalties. We are also disappointed that performance penalties on that franchise have been capped which disincentivises performance once it has deteriorated beyond the breach level. We conclude that by capping performance penalties the Department has not drawn up a contract in the public interest. We recommend that the Department learn lessons from this episode and that it overhaul its contracting approach to performance penalties to ensure that penalties are more proportionate to the revenue obtained from a franchise. As a starting point, it must no longer contract for a breach level cap on penalties in the way it did so on the TSGN franchise. There may be wider issues affecting other franchises but it is difficult for us to make any other specific recommendations as we have only seen performance penalties for the TSGN franchise.

Revocation of a franchise

124.The Department enforces a franchise agreement principally through performance penalties. However, in the event of an operator repeatedly exceeding default performance benchmarks, the Department, contractually, has the ability to revoke a franchise from an operator—though it is not compelled to do so.

125.No franchise has ever been taken back by the Department because of poor performance.239 However, Peter Wilkinson told us that “the Department is absolute in its commitment to remove a franchise if the conditions are such that that decision is merited.”240 The Government’s enforcement policy has not been updated since 2008.241 In the event of a franchise being taken back by the Government the operator of last resort is currently the Canadian engineering and construction firm SNC-Lavalin.242

126.We are of the view that the Department does not have sufficient capacity to revoke a franchise from an operator, particularly of the size and complexity of TSGN. With a rather weak penalty regime, the Department appears to have very few levers with which to manage performance and enforce a contract. An out-of-date enforcement policy shows a complacency on part of the Department in terms of prioritising franchise enforcement.

127.As an immediate priority, we recommend the Department update its enforcement policy by May 2017. In doing so and given the potentially high costs of running an operator of last resort, we recommend the Department consider new ways of enforcing the contractual terms of a franchise. For example, the Department should consider contracting for the reallocation of capacity to an alternative operator in the event of sustained poor performance or default. This could potentially mitigate the cost of running an operator of last resort and also provide a very genuine enforcement threat against poor performance.

The commercial and enforcement functions of franchising

128.The Department is a commercial partner in a franchise agreement and has significant vested interests through premiums and subsidies. It also has an enforcement role in managing the contract.

129.As established, the Department’s enforcement capabilities are insufficient to provide a genuine threat to operators. Some witnesses also felt that there was a conflict between the commercial and enforcement roles of the Department, particularly as franchising is a “closed shop”243 in terms of transparency. This is because the Department may, through different measures of enforcement, undermine the income it obtains through premiums.

130.At present the ORR has an important role to play in licensing the train operating company as a safe train operating company. It has no franchise enforcement powers.

131.We question whether it is effective for one of the commercial partners to a franchise (i.e. the Department) to also be the enforcement authority. In light of this, we recommend that the Government transfer enforcement and monitoring capabilities of franchising to the Office of Rail and Road or another independent body. It should bring forward a consultation setting out the options for independent enforcement—including the ORR option or the creation of a new body. This consultation should also consider the costs of doing this and examine the implementation issues for the ORR in terms of the impact on its other functions and resources.

Planning and scheduling franchise competitions

132.The Department has a key planning function by scheduling competitions in a way that is manageable and sustainable for it and industry. It also has a broader strategic function in terms of determining the structure and duration of franchises. These issues were discussed in Chapter 5.

133.In 2013, following the relaunch of the franchising programme, the Department introduced a franchising schedule to provide a “clear pipeline of all upcoming competitions.”244 Of the 15 franchises included on the DfT schedule, no fewer than seven are expected to be re-let between 2017 and 2019, “significantly stretching the capacity of bidding teams.”245 FirstGroup felt that the Department was “running to keep up”246 and London TravelWatch had “grave doubts as to the DfT’s ability to handle the large number of franchises to be let over the next two years.”247 ASLEF, with reference to the cuts in the DfT resource budget, added that “if the department was ill equipped to deal with the West Coast refranchise debacle in 2012, it’s hard to see how it will be able to cope with the huge amount of competitions on a far reduced budget.”248 The RDG was also “less confident”249 that the Department would be able to secure sufficient temporary resource, with the appropriate skills, to cope with the increased level of contract letting in the next two years.

134.Separately, Paul Maynard emphasised that “what is most needed on the part of the Department is as clear and predictable a schedule as possible, because the industry likes nothing less than uncertainty.”250 However, in 2016 alone there have been three revisions to the franchise schedule, which was most recently revised when the Intercity West Coast Partnership was announced on 4 November 2016. This announcement took place the same month the ITT was due to be issued for the franchise. Even though the changes between schedules tend to be minor, constant changes create a “moving target” for the industry, which comes at a significant cost, particularly if prospective bidders are required to employ bidding teams on a full-time basis.

135.The Department has only procured six competitive franchises since 2012. We do not believe the Department has sufficient capacity to procure the seven franchises that are scheduled between 2017 and 2019. One of those will be the complex Intercity West Coast Partnership. Recent experience with TSGN does not fill us with confidence that the Department can deliver this sort of complex franchise. Further, the West Coast Partnership will inevitably be a significant resource burden on the Department and has the potential to jeopardise other franchise competitions in that period. Unless, within the timescale required, major changes advocated in this report are implemented and the Department is resourced to manage the procurements, we recommend the Department should consider direct awards for its highest performing franchises due for renewal between 2017 and 2019. While not desirable, particularly in terms of limiting competition and creating further change in the franchising timetable, this proposal may mitigate the costs from mismanaged franchise procurement likely to result from a congested franchising schedule.

Franchise competitions and infrastructure changes

136.The enhancements at London Bridge as part of the Thameslink programme are the main reason for the disruption on the TSGN franchise.251 Paul Harwood, Strategy and Planning Director at Network Rail, added that having the franchising competition span when the major works were taking place made it “quite complicated to engage with the train operating company” and that “we would have wanted better and longer-term engagement with the train operating company around developing the plan when you have that much of an infrastructure challenge. We were not able to do that.”252

137.The £800 million investment programme for Waterloo is due to reach its peak in terms of disruption in mid-2017.253 However, the South Western franchise is, according to the Department’s franchise schedule, due for changeover in August 2017. This presents a significant risk for the new franchisee in terms of sustaining performance in the initial franchise period. In the case of South Western, owner groups have confidence in the ability of industry to transfer a franchise from one company to another;254 and told us that it is in the interests of all operators to make sure that the transition happens smoothly.255 However, this transition is heavily dependent on the Department coordinating with Network Rail and the operator to ensure that the assumptions fed into the franchise are accurate and reliable. Paul Maynard and Peter Wilkinson, Managing Director of Passenger Services at the Department for Transport, both acknowledged that there were lessons to be learned from the misinformation during the TSGN franchise changeover and that “we do not repeat the same mistakes when we have to deal with Waterloo.”256

138.We welcome the commitment by all parties to a coordinated changeover of the South Western franchise in 2017. Yet the success of a franchise changeover depends on the assumptions and information provided by the Department. Given the gross inaccuracy of assumptions and planning for the TSGN franchise and the void in capability this represented, we believe that there is a performance risk to a new operator, and therefore passengers, from the South Western franchise changeover being scheduled in the middle of major infrastructure works at Waterloo. The practicalities and costs of delaying this franchise are likely to be significant and may outweigh the benefits of improved coordination in planning with the incumbent. The current schedule for the South Western franchise competition should remain as planned. More broadly, we recommend that consistent operational management be maintained during any future major infrastructure works scheduled for major London terminals.

Intercity West Coast Partnership

139.On 4 November 2016, the Government announced the Intercity West Coast Partnership, a new franchise that will be responsible for services on both the West Coast Main Line from 2019 and designing and running the initial HS2 services from 2026. The franchise will run for the first three to five years of operation of HS2 and is anticipated to be run on a partial revenue risk basis.257

140.The West Coast franchise, for which the ITT was due in November 2016, will now be extended by 12 months using a direct award until the commencement of the new franchise in 2019. This now means that the West Coast franchise would have been under direct award from December 2012 to April 2019 and with the same operator since the line was first privatised in 1997.

141.Paul Maynard in his announcement, outlined the potential benefits of this proposal, noting that partnership with HS2 Ltd was crucial “to design, launch and operate the passenger services on HS2 and manage the timetable recast of the West Coast Main Line.”258

142.Many stakeholders have been concerned that HS2 was being developed as a wholly independent railway, unintegrated with the rest of the network. Roger Cobbe from Arriva UK Trains concluded that “this is a useful step towards better integration.”259 Paul Maynard also emphasised that “it would not have made sense to launch a franchise solely for the West Coast Main Line while taking no account of the needs of HS2.”260 Peter Wilkinson told us “the view we came to is that the right way to procure the franchise is to ensure that the franchise operator for the West Coast has a vested interest in the success of HS2.”261

143.The TSGN franchise was also let on the basis of enhancing coordination and planning during the final stage of the Thameslink Programme. The eventual implementation of that franchise was shambolic and fraught with problems. Peter Wilkinson acknowledged that “[the DfT] would not embark on a franchise of that design, that construct and that nature again.”262 Yet there appears a serious risk that, because of the complexity and scale of services offered on the proposed Intercity West Coast Partnership, and the long term disruption to services form London Euston, there may be similar planning and coordination issues as those realised on the TSGN franchise.

144.The other major risk associated with this partnership is competition. What is being created is a very large single monopoly franchise, with very little or no on-rail competition on a key network route. Roger Cobbe, Policy Director at Arriva, questioned whether “we ought to ask whether there is scope to introduce more competition in the structure in the future.”263

145.While we acknowledge the potential benefits of having a single operator coordinating services on the West Coast Main Line and the new HS2 line, there are competition and planning risks associated with operating a franchise of this magnitude and complexity. And while this decision was informed by consultation from the now delayed West Coast franchise re-let, we are concerned that this specific decision has been made without any formal consultation; and that it was announced without any accompanying business case or evaluation for the public and stakeholders to consider. We recommend that the Department publish the business case for this decision, clearly outlining the balance of benefits and risks from this decision. We are pleased that the Government published further detail in the recent prospectus on how it intends to structure and operate this franchise in the future.

Reviewing the franchising functions of the DfT

146.The franchising system was reformed following the Brown review in 2013.264 It is clear that significant changes occurred within the Department in establishing the Passenger Services Directorate. The Department, in its submission, noted the work it has done, and is still doing, to streamline franchise procurement processes and to rearrange teams to have a better market focus.265 A number of other witnesses commented that there had been progress by the Department in terms of its franchising capabilities, which is encouraging.266 However, a number of serious deficiencies in capability have been identified in this inquiry, including:

147.The Brown review recommended that, in the medium term, the Department review the best organisational location for rail franchising and franchise management, whether in the Department, in an agency or an arm’s length body.267 The previous Secretary of State concluded that the Department should retain its franchising functions.268 Minister Paul Maynard told us that the Department is now “competent”269 to the point where he has not considered implementing the recommendations of the Brown review. He also told us that the Department’s track record since 2012 demonstrated that these capabilities were best retained in-house at present.270

148.Despite the recent efforts of the Department to improve its franchising operations, there is extensive evidence pointing to serious deficiencies in its franchising capability and capacity. We are of the view that the Department’s progress since 2012 is insufficient to warrant proceeding with the current structures and personnel in place. While we still believe the Department has an important role to play in franchising, we do believe certain functions of the franchising process may be better placed elsewhere.

149.Because of this, we recommend that an independent and publicly available review of the Department’s franchising functions be commissioned. In addition to reviewing the Department’s capabilities and capacity, this can include consultation regarding the transfer of the monitoring and enforcement functions to the ORR. This should also outline the Department’s strategic direction for franchising, including but not limited to the way it wishes to structure and plan for future franchises, and how it plans to manage the issue of open access.


185 Rail Delivery Group (RFG0019)

187 Campaign for Better Transport, Passenger’s guide to franchising, 2015

188 Campaign for Better Transport (RFG0013)

189 Campaign for Better Transport (RFG0013)

191 Transport Focus (RFG0009)

192 Transport Focus (RFG0009)

193 London TravelWatch (RFG0012)

194 Department for Transport (RFG0003)

195 Rail Delivery Group (RFG0019)

196 Transport for London (RFG0025)

198 Transport Focus (RFG0009)

199 Q280, 281; Q367; Alstom UK&I (RFG0021)

200 Q.71; Rail Delivery Group (RFG0019); FirstGroup (RFG0018); London TravelWatch (RFG0012)

201 Rail Delivery Group (RFG0019);

202 London TravelWatch (RFG0012)

204 London TravelWatch (RFG0012)

205 Department for Transport, East Anglia Prospectus, February 2015

206 Manchester Airports Group (RFG0023)

207 Committee correspondence with Manchester Airport Group.

208 Department for Transport, East Anglia – Stakeholder Briefing Document, September 2015

209 Department for Transport, Invitation to Tender – East Anglia, September 2015

210 Committee correspondence with Manchester Airport Group.

211 Department for Transport, East Anglia Prospectus, February 2015

212 House of Commons, Debate – Airport Capacity, 25 October 2016; House of Commons, Debate – West Anglia Taskforce Report, 8 November 2016

213 Transport Select Committee, Surface transport to airports, First Report of Session 2015–16, February 2016

217 Competition and Markets Authority (RFG0005); Department for Transport (RFG0003)

218 Department for Transport (RFG0003)

219 Department for Transport (RFG0003)

220 Competition and Markets Authority (RFG0005)

221 Competition and Markets Authority (RFG0005)

222 Rail Delivery Group (RFG0019)

223 Alstom UK&I (RFG0021)

224 Social Market Foundation (RFG0008)

227 Transport Select Committee, The future of rail: Improving the rail passenger experience, Sixth Report of Session 2016–17, October 2016

228 See Schedule 7.1 of the TSGN franchise agreement.

229 Govia Thameslink Railway, Remedial Plan, 12 February 2016

231 Transport Select Committee, The future of rail: Improving the rail passenger experience, Sixth Report of Session 2016–17, October 2016

232 For the latest details of the force majeure claims, see Committee correspondence between Committee Chair Louise Ellman and Rail Minister Paul Maynard; Q258

233 Paul Maynard MP, Correspondence with the Transport Select Committee, 21 October 2016

236 Railways: Compensation: Written question – 52881

244 Department for Transport (RFG0003)

245 Campaign for Better Transport (RFG0013)

246 FirstGroup (RFG0018)

247 LondonTravelWatch (RFG0012); Q85,86

248 ASLEF (RFG0014)

249 Rail Delivery Group (RFG0019)

253 Network Rail, Wessex Capacity Improvement Programme, accessed 22 December 2016

257 Department for Transport, West Coast Partnership franchise prospectus, 19 January 2017

258 Department for Transport, Rail franchising: InterCity West Coast and HS2, Written Statement to Parliament, 4 November 2016

264 RMT (RFG0006)

265 Department for Transport (RFG0003)

266 Transport Focus (RFG0009); FirstGroup (RFG0018); Alstom UK&I (RFG0021)

267 Department for Transport, The Brown Review of the Rail Franchising Programme, January 2016




2 February 2017