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You can't say Richard Bowker doesn't listen to the railway press – but he still won't call a franchise an SDU
One of life's little pleasures is watching the new team at the Strategic Rail Authority trying to create a neo-classical railway while desperately avoiding the ‘F' word. No, sit down Padre, I mean F**l*r*.
Here is SRA Chairman Richard Bowker announcing the rationale behind the Mk3 franchising policy announced on 6 November. ‘What we've done here is look at areas where we think the original franchises have been less successful, and set out how we're going to address and change them'.
You want to shout, ‘No, they haven't been “less successful”, they've failed, collapsed, gone broke, been fined oodles by your organisation for poor service. Half of them have had to be put on life support'.
And there's this aversion to admitting that the railway is back under state control. Rather like that earlier Richard who had to be pressed to accept the crown he wanted.
They are absolutely paranoid at the SRA about accusations that they are ‘micro-managing' the train operating companies. Perish the thought. The SRA ‘does not wish to stifle private sector flair by “micro-managing”, according to the official Franchising Policy statement.
By Jove! I thought I was the only person still talking about private sector flair and here is the SRA using it without irony. And, of course, they are micro-managing like mad.
If some EMUs go for refurbishment, commuters will find, when they come back, that the floors are still covered with easy clean plastic. Why? SRA vetoed coir matting in the vestibules and carpets in th4e saloons. Make that ‘nano managing'.
A record of success and less success
Franchising has been successful in securing *Passenger growth – it has contributed to 0ne third more passenger using the railway today compared with the last years of British Rail, with revenue growth outstripping econo,ic growth *The private sector;s commitment to huge l;evels of investment, particularly in rolling stock. New trains worth over £4billion have been orders since 1997 *Stronger marketing or passenger rail services
Franchising has been less successful in a number of areas: * After an early improvement post-franchising, service performance and overall reliability has worsened. In part this is a reflection of the fact that the network is now operating at capacity on many strategic locations and routes; *It has not proved possible through the first round of franchise agreements to incentivise a universal improvement in quality of service; *Franchisees have been unable to withstand the financial shock of a number of external factors which have combine-d to undermine revenue growth; *The costs of operating the current franchises have escalated and are substantially higher than bid levels. In combination with a levelling off of revenue, this has led to several franchises not remaining viable and the SRA providing financial support above those levels envisaged in the original franchise agreements. The extent to which risk, in relation to costs and revenue, has in reality transferred to the private sector is therefore questionable; *There is also a view within the industry that the creation of so many privatised entities has exhausted the supply of high quality managers that the industry needs to be successful.
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SRA Franchise policy statement
November 2002
What this light hearted intro is meant to show is that for all the lip service to the ideals of John MacGregor – and how remiss of me not to celebrate the 10 th anniversary of his privatisation – the SRA's new franchising policy is really about specification and control through management contracts. In fact, for the first time we are getting real franchises, where the franchisee does it Col Sanders' way with exactly 27 2inch long fries in a helping and the weight of the chicken nuggets accurate to 1%.
So the new model franchise will be based on a more precise specification in terms of the timetable to be run, the performance standards to be met and clearly identified criteria and awards for success.
Equally, there will be a ‘real possibility' of an under-performing franchise being terminated; whether with extreme prejudice is not stated. Of course we have been promised that poor performers will be ‘stripped of their franchises' ever since John Prescott got his red box. I'll believe it when I see it.
In contrast to Franchising Mk 1, under the new scheme bids will be based on the timetable being operated when the new franchise starts, including train formations. In future, instead of individual bids for each new timetable, the SRA wants to see forward planning of timetables based on ‘a collaborative industry effort'.
This is shorthand for the integrated timetable foreshadowed in the SRA's current Capacity Utilisation Policy (CUP) studies. The aim is to get the best value for money from a ‘constrained network'.
Even so, bidders will be encouraged to put forward ‘passenger focused improvements' to the existing service patterns in their proposals. So perhaps the man in Victoria Street doesn't know best?
Oh yes he does. Only if the improvements represent value for money and are consistent with the CUP will they be included in the franchise agreement.
There will be similar constraints on bidding for new rights under track access agreements once you have a franchise. Such bids also will have to be consistent with SRA strategies including the CUP.
There is even praise for Rail Regulator Tom Winsor's new Model Clauses, which have been fermenting away unnoticed in the general sturm and drang. These effectively say that you can only bid for paths that a)are there, b) you intend to use and c)don't conflict with the rights in other access agreements.
We get the massage.
Performance measurement, and bonuses/penalties will be linked to Key Performance Indicators (KPI) are still being formulated, They will include such items as train and station cleanliness, passenger information systems, availability of ticket sales facilities and security.
This is another 180 degree change of direction to the former SRA regime. I can remember Sir Alastair being quite sniffy about the SQUIRE service-quality regimes introduced by the Passenger Transport Executives for their franchises. Now it looks like SQUIRE is the way forward.
Despite ridership rising steadily since 1994 on the back of an economic boom, the passenger franchises have suffered badly from cost and revenue risk. Accordingly the new franchise agreement will give a better focus on the franchisees costs and also introduce greater transparency.
In other words, SRA will want to inspect the books regularly. There will be ‘better monitoring and recording of actual costs compared with the business case in the winning bid. This is probably more intrusive than Bob Reid's business led railway of the 1980s. But, of course, it's not m*cr* m*n*g*m*nt.
Similarly, SRA wants to get a grip on revenue risk. Perhaps toeing its paymasters' line SRA expects the market for rail services to continue to expand ‘especially as the economy strengthens'. In this optimistic scenario it wants to ‘capture private sector skills in optimising future revenue growth'.
Franchisees, believes the SRA, are in the best position to manage revenue risk, although in the medium to long term, it may get better value if it takes part of the risk through a ‘sharing mechanism'. This is worth noting.
At present ridership has plateaued under internal and external factors – for example, the London jobs market is shrinking and with it commuter TOC ridership. If the markets bounce back, a business plan agreed by the SRA in 2003 could become lucrative in five years time.
Hence SRA will ‘contain' revenue risk through shorter franchises, closely specified service patterns, agreed methods of dealing with changes, such as the CUP, and revenue sharing in the ‘later years of a franchise'.
It will also share downside risk by what it terms ‘damping excessive exposure to insolvency. If this doesn't work SRA will make up a percentage of revenue shortfall, just as it will take a percentage of excess revenue. But the need for ‘top up' will trigger a remedial plan and if that doesn't work, termination.
Franchise terms will now be five to eight years, with the possibility of extra time added for good behavious
But railway investment and management have long cycle times. This means that a shorter franchise might deter the operator from investing in long term initiatives which would not produce a return, or perhaps even come to fruition, over the remaining franchise period. Equally, something that might benefit the industry as a whole, could have an adverse effect on the franchise's performance.
In the case of such schemes, for example the provision of new assets or enhancements, the franchisee would receive a proportion of the net benefit as compensation for the risk taken. Given that the railway is skint, this seems a bit theoretical, but we shall have to see.
This approach must create and sustain a market capable of delivering the required level of service efficiently at a price which is value for money while enabling well performing franchisees to secure a reasonable level of profit on a sustainable basis
Richard Bowker |
So welcome to the new regime. All future franchise tendering will be based on this model starting with Greater Anglia in January. Retrospective application to franchises in the pipeline, particularly ScotRail and Wales & Borders are being discussed with the national Executive and Assembly respectively.
Will it be third time lucky?