News British franchising damaged but not broken, says Brown report
Keith Barrow Associate editor
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ONFIDENCE in the British railway franchising
process has been damaged by the Inter City West Coast (ICWC) fiasco but the system is not broken, according to Eurostar chairman Mr Richard Brown, whose independent review of rail franchising concludes there is no case for major structural change. Nonetheless, Brown says he wishes to “restate the principles” of franchising and urges the government to adopt measures designed to improve the way in which franchises are specified, procured and managed by the Department for Transport (DfT). The report says the franchise bidding process is not fundamentally flawed, but there is significant scope for improvement. “The
government needs to be clear about what it is seeking to buy in a franchise... and state its
specific objectives for each competition,” says Brown. “The bidding process should focus on these objectives and be further simplified to reduce unnecessary requirements and help reduce bidding costs.” Brown also echoes the conclusions of December’s Laidlaw inquiry and a report by the National Audit Office which called for urgent reinforcement of the DfT’s organisation and franchising capabilities. He says there should also be greater transparency in the bidding process and accountability at senior levels of management. “The key priority is for the Department to rapidly strengthen its franchising organisation, including bringing in a number of senior, commercially-experienced people,” says the report. “There is a sharp asymmetry between the experience and capability of bidders and that of the Department’s franchising teams.”
The report says franchise duration should reflect the size and characteristics of individual franchises and recommends an initial term of 7-10 years with a pre- contracted continuation for further terms of 3-5 years to give eventual terms of up to 15 years with intermediate break points. Previously government policy favoured a return to longer franchises and the abandoned 14-year ICWC contract was the first to be let under this principle. Brown says the minimum franchise term should be five years and residual value mechanisms should be more actively used to encourage investment projects with a commercial return beyond the end date of the franchise. Another focus of the report is allocation of risk. Brown argues franchisees should be responsible only for risks they can realistically manage and should not be expected to take external revenue risks such as
macroeconomic fluctuations. He suggests that the DfT adopt a clear mechanism to adjust premium and support payment to take into account variations in GDP and central London employment growth rates. By reducing the burden of these external risks, he suggests that bidders will offer better value. Brown reccommends devolving control of some franchises to Passenger Transport Executives or Integrated Transport Authorities, and that further devolution in London should be considered. Brown wants the franchising
process to resume as quickly as possible. To restore confidence he suggests that the DfT makes an early announcement on how it will bolster its resources. He also calls on the government to clarify its plans for the three suspended franchise competitions (ICWC, Great Western and Essex Thameside).
BNSF steps up capital spending
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TALIAN open-access high- speed operator NTV carried 2.052 million passengers on its Italoservices from its launch on April 28 to the end of December. NTV has operated a total of 6485 trains with punctuality of 94.4% and an
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NTV carries 2 million passengers in first eight months I
average load factor of 51%. Passenger numbers have continued to build through the year with the launch of new routes, the most recent being the extension of services to Turin on December 8. NTV operated 1295 services during
December and saw a 25% increase in monthly ridership. NTV will launch a new service between Milan and Ancona this summer in the first expansion of its network to be announced since it began commercial operations.
NSF Railway, the second largest Class I railway in the United States, says it will increase capital investment this year by 11% to $US 4.1bn. This includes $US 2.3bn for infrastructure, and $US 1bn for traction and rolling stock. The investment plan earmarks $US 250m for Positive Train Control (PTC) , and $US 550m to expand capacity and boost efficiency of its lines, terminals, and intermodal facilities including completion of the new Kansas City terminal. A key priority is to increase capacity to cope with traffic generated from Bakken Shale products. “This record capital plan continues our long-term focus on ensuring our network is prepared for the growing US demand for freight rail,” says Mr Matthew Rose, BNSF’s chairman and CEO. “We are focused on investing to meet our customers’ expectations and to expand capacity where growth is occurring.”
IRJ February 2013
Photo: Joe Calisi
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