UK: New Rail Franchising Schedule Announced

The Department for Transport (DfT) announced on 26 March 2013 a new rail franchising programme following the cancellation of the West Coast mainline procurement and the discovery of serious technical flaws in the tendering process. The announcement follows the independent review of the rail franchise programme conducted by Richard Brown which, amongst other things, suggested that the franchising programme should restart as soon as possible.

Franchising programme

One of the recommendations of the Brown Review was that the programme should reflect what the market can resource. DfT’s programme (which is printed below) sees 15 franchises being relet over 8 years.

At the time when the West Coast franchise was being let, three other franchises were also being let - Essex Thameside, Thameslink and Great Western. It had previously been announced that the first two of these would be resumed (on different terms in the case of Thameslink) and that the competition for Great Western would be terminated.

The next franchise to come to the market will be the East Coast franchise – an OJEU notice is expected in October. This franchise has been directly operated by the government since 2009. The announcement that this franchise is coming to the market has attracted criticism from opposition MPs who argue that East Coast would be useful as a public sector comparator to franchise operators. The Shadow Transport Secretary noted that “It is completely the wrong decision to focus obsessively on an unnecessary privatisation of … East Coast, instead of prioritising getting the existing stalled franchise programme back on track”.

Extensions

In order to facilitate the franchising programme it will be necessary to extend many of the franchises beyond their scheduled expiry dates. Some of the extensions are for periods which are previously unheard of – in one case 50 months. The timetable will see extensions granted to 12 of the existing 15 franchises.

Each party will want to get the best deal it can from an extension of a franchise and DfT will have its in-house operator, Directly Operated Railways Limited (DOR), on standby should negotiations falter. This approach comes with a number of difficulties. First, DOR would need to be in a position to operate the franchise so all the necessary contracts (such as access agreements and rolling stock agreements) and authorisations (such as safety authorisations) would need to be in place. Second, DOR cannot necessarily rely on the incumbent operator to transfer any rights it may need as the statutory transfer scheme, used to transfer contractual rights from an outgoing operator to an incoming operator, might not be effective in respect of contracts which expire at the end of the franchise.

The current government may be very reluctant to take steps which could be characterised as a partial re-nationalisation of the industry. A General Election is due in the middle of the franchising programme and a different government may take a different view.

Rail Franchise Advisory Panel

In an attempt to rebuild confidence within the rail industry, the DfT is to establish a Rail Franchise Advisory Panel headed by Richard Brown (author of the Brown Report and Chairman of Eurostar). One of its functions will be to help implement the reforms suggested by the Laidlaw and Brown reviews. The panel will consist of four to five members appointed by the Secretary of State and selected to ensure a mix of expertise from the rail industry, procurement and programme delivery is achieved.

Footnotes

^{1 This franchise is being subsumed into TSGN.}