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INFORMED SOURCES May 2003

Greater Anglia – franchise replacement gets nasty

Just how did the Strategic Rail Authority come to place First Group a poor fourth in a weak line up for the Greater Anglia franchise?

Mr ‘Track' Miles phoned early one morning in high excitement. ‘I have the Greater Anglia qualification list' he said, ‘are you sitting down?'

‘No', I said. ‘Well do', he said.

So I sat and after we had played ‘who do you think has qualified' he told me. Arriva, GB Railways and National Express. No FirstGroup.

And then, of course, the spinning began.

But let's start at the very beginning which, as Dame Julie Andrews assures us, is a very good place to start.

Greater Anglia is the template for the SRA's one operator per London commuter terminus franchise replacement policy. Back in May last year the SRA announced that nine would-be bidders – an ‘impressive field' according to SRA Chairman Richard Bowker - had pre-qualified for Greater Anglia (Table 1)

This came a shock to Virgin who had simply asked for the documentation and suddenly found themselves pre-qualified. Only goes to show, you shouldn't talk to strange Authorities.

Table 1

According to its own programme (Modern Railways January 2003 page 8) the SRA was to seek tenders from this list on 15 January. Instead it issued a 44 page booklet entitled ‘Qualification to receive an ITT Document: Greater Anglia Franchise' with a colourful photomontage of East Anglian railway scenes on the cover.

Interestingly, when tweaked on this change of plan by a journalistic chum, Richard Bowker got quite stroppy, claimed that the programme had said the Greater Anglia refranchising would start on 15 January and it had, but added that issues raised by ATOC among others meant that the ITT would not be ready until April. Even more interestingly, the programme appeared to have disappeared from the SRA web-site when I came to check – so it's lucky Modern Railways put these hostages to fortune in print.

Given that all you had to do to pre-qualify was walk past the SRA offices looking hopeful, it made a lot of sense to cut down such an ‘impressive field' to more manageable proportions. And the delay in preparing the ITT provided the opportunity to do just this, while being seen to do something on the promised date.

Anyway back to the Qualification document. Remarkably, it is so confidential that recipients have to hand it back ‘promptly' to SRA on request, ‘without retaining copies thereof'.

This has to be the most paranoid confidentiality clause ever. There is nothing in the document that is not in the public domain. And, if I may have a pompous old fart moment (POFM), the SRA is spending my taxes and franchise replacement should be transparent and accountable, with confidentiality applied only where necessary.

Janet and John

Sorry about that. Anyway the meat of the document is the 24 page questionnaire, the first half of which is tick the box stuff which applies to any replacement franchise. You know the sort of thing, name and address, have you ever been made bankrupt, who are your tame bean counters and legal eagles?

Part D, however, gets down to the nittier gritty, starting with how the applicant handles safety, quality and environmental issues. All very Janet and John, such as describing the approach and procedures for managing incidents. This, of course, gives existing franchisees an edge, since they simply cut and paste from their safety cases in reams, with all the right buzz-phrases.

Next, you have to detail relevant experience of passenger transport operations. This has various prompts.

For example, under Service Delivery, you are asked to ‘indicate your understanding of performance standards, giving an indication of the parameters you measure, the targets you expect to achieve, and the achievement of those targets'.

Similarly with issues such as revenue protection, commitments to customers and adverse weather conditions. My favourite ‘Ambience', defined as a measure of quality of service including cleanliness, lighting and being pleasant to use. Applicants are asked describe their approach to maintaining the ambience in terms of keeping stations and vehicles well lit, free of dust, dirt and litter, free of graffiti and generally in good condition.

There are eight of these ‘philosophical' questions and they have to be answered on not more than 12 sheets of A4 sized paper. That equates to 3000-4000 words – less than the length of this column

There are further sections on rolling stock maintenance, procurement and performance. My traction and rolling stock chums in several of the long listed organisations have impressive credentials to put forward with lots of numbers and charts showing real improvements.

Finally, there are the franchise specific questions. Applicants were given 800 words, about the length of one of our Railtalks, to describe their approach to the bidding phase for Greater Anglia with lists of management, advisors and consultants and so on, plus one-page CVs.

And, for the tiebreaker you were allowed 3,000 words (half an Informed Sources) plus charts, in which to expound your approach to operating and managing the Great Anglia Franchise including describing how this provides a ‘fit' with the SRA's objectives for the franchise.

Muddy waters

So, in terms of old-time BR procurement say, a one or two box submission. Obviously, the SRA has to have some form of ‘marking' or ‘scoring' system on the philosophical questions so that applicants can be ranked to produce a shortlist. And here the waters start to muddy.

In the case of Greater Anglia, the scoring system includes ‘non-equal weightings'. In other words, some questions are more important than others.

For example, you could imagine the mini-essay ‘How I would manage and operate the Greater Anglia Franchise' might represent 25% of the total marks whereas Service delivery and Ambience might be 5% each and handling Adverse weather 1%.

But, we don't know, because the SRA says that the scoring system is confidential. Applicants are therefore bidding blind.

This contrasts with the first round of franchise bidding where everyone knew that it was the subsidy profile with the lowest Net Present Value that would win.

Now I can see some point in not revealing the marking system or its weighting if you want to find out whether a would-be bidder's corporate ethos really matches the SRA's aspirations. Or, indeed, whether the applicant understands what SRA is looking for and the relative values it applies to the factors under consideration.

But, if you read this column you will know that the SRA's concept of franchising has been changing over the months, from let-it-all-hang-out 20 year deals to tightly controlled specifications. So the fact that Connex and First are now head-to-head on Trans-Pennine Express, where franchise replacement started in September 2001, doesn't mean anything in terms of Greater Anglia or Northern today.

Wash-up vital

But, if you keep the criteria secret, detailed post selection wash-up meetings with unsuccessful applicants are vital. And pronto.

You need to take people through their questionnaires and show them where they got it wrong. For example, did they misunderstand SRA general policy or just local issues. Was their ‘weighting' of issues awry and if so, why?

There is considerable self interest in this for the SRA. They are short of credible bidders. They are running out of time. So it is vital that they get well informed bids and keep serious bidders on-side, let alone in play.

So, that was the application process. And when it was completed only Arriva, GB Railways and NEG had come up to scratch, even though the SRA could qualify up to five.

Puzzled

Initially, First expressed puzzlement at the news. Mike Mitchell, the Corporate Communications Director was perplexed. ‘The fact that we pre-qualified for the others (Northern and ScotRail) with the same team makes it seem strange that there was something wrong with Anglia', he mused.

But the SRA told the Daily Telegraph that First had failed to meet any qualification criteria bar the financial requirements. ‘You have to prove and convince us that you have the appetite for the job going forward' a spokesman said.

There were strong hints that First had relied too heavily on Great Eastern's record. Richard Bowker was quoted as saying, ‘We were very clear that pre-qualification is not a shoo-in. It's a proper process with a tough set of hurdles. We run each one as a separate competition'.

At which point, before voices get raised, I should draw a distinction between Great Eastern and FirstGroup.

First makes much of the superior operational performance of Great Eastern compared with the East Anglian franchises of GB Railways and NEG. And also the strong financial performance compared with franchises operated by the three successful applicants.

But, as with Chiltern, Great Eastern's performance to date has been all about Old Railway management teams running the railway. Franchise ownership has had very little effect although, to First's credit', they got the subsidy profile right. So right that it survived the post Hatfield turmoil.

Thus, it is entirely feasible that as First was not so good at filling in questionnaires and describing its commitments to customers as the three who prequalified. But leading the First bid team was Bob Breakwell who ran Great Eastern from before privatization.

Pragmatic?

This should have been a strength. However such questionnaires are bull shitters' playgrounds and Bob has never has done BS. First, with the Great Eastern team leading the bidding could have come across as a bit pragmatic and cautious.

Indeed ‘Not aspirational enough' is a phrase I have heard. So Bob may have omitted the nuclear powered double deck hovertrains into Liverpool Street.

Then there is the ‘incumbent shoo-in' theory. Mr Mitchell denies that First did not take the application seriously and was relying on its record. But he adds ‘To say you can't rest on tour laurels – what does that mean? Can someone who's messed up a railway qualify if he promises to do better in future'.

Who could he be referring to? Well he didn't use the ‘A' word, but Arriva does not have a good reputation and despite having learned the hard way on UK tax payers, then proceeded to screw up royally in Denmark (see John Gough this month). On the other hand they do Aspiration extremely well.

Nasty

But by now things were getting nasty. First had done the unforgivable – challenge an SRA decision publicly. And suddenly it all came out – and it was not pretty. SRA cluster-bombed First all over the media.

Here is Richard Bowker's spokesman Ceri Evans quoted in the Independent . ‘This is a company looking for someone to blame and the finger is conveniently pointing at us.

“They basically underestimated the quality and the depth of the information we expected from them. They flunked it big time and if the only way they think they can be part of a professional railway is by taking us to a judicial review or whatever that is pathetic.

“Not only have FirstGroup thrown their toys out of the pram, but they have now got out of the pram and they are scrabbling around on the floor. The fact is they took their eye off the ball and came in with a second rate submission and they are not going to be allowed to re-enter the bidding. They shot themselves in the foot and are looking for someone to blame'.

Now there is a tendency in the railways to smile at this sort of thing and say ‘It is just Ceri being colourful'. On the basis of hard experience I disagree.

In my decade away from railways I became Group Publicity Manager of one of the great names in the aircraft industry, but by my time an industrial conglomerate. We were involved in a nuclear power station contract which was doing a West Coast Route Modernisation - only we also had a joint and several guarantee on the project.

Quizzed one day by a chum (huh) on the Telegraph city page I was asked how dire the situation was . ‘We're not shouting “help, help” if that's what you mean', I briefed.

Next morning I was up before the Board. My, as I thought, off the record remark was there in print. No one said, ‘That's just Roger being colourful', and I was torn off a slight strip by the new MD who had just promoted me. Fortunately no harm was done.

So comments by his Director of Communications must be taken as reflecting the SRA Chairman's own views. And they are deeply worrying.

Unfortunately, the bus bandits didn't get where they were by being nice to people and turning the other cheek. First Group Chief Executive retorted ‘I find what the SRA has done incredible. What do you have to do to get the SRA to take the railways seriously when they discriminate against an existing operator in this way?'

Errors?

I was told that First had put in an ‘appalling' submission and had already admitted to the SRA ‘several times' that they had been guilty of not putting in enough information'.

Now I find it hard to believe that a team under Bustlin' Bob would not put in a valid questionnaire on such an important franchise. Prosaic, possibly, sensible, certainly, BS free, undoubtedly. But, according to Informed Sources, Nick Newton SRA Managing Director Operations and in charge of franchising, has been claiming that First were disqualified because they didn't fill in the questionnaire properly.

Possibly so. But surely, in such an event the SRA would call in an applicant to clarify any errors. At least they would if they wanted to keep a strong potential bidder in play – but they clearly didn't.

And I would have thought that having First in the process would be prudent. As incumbent they would provide a reality check. And when there are reservations about all three qualifiers, whether commitment, financial strength or competence, the last thing you want is a small field.

But above all, if First are excluded, only railwaymen's residual pride will keep a lame duck franchise ticking over. Why should First pour blood and gold into lost cause for a year, when its management talent and train procurement teams might be better employed in another franchise.

And already letters have gone out from Great Eastern canceling invitations to tender for a series of projects such as new ticket gates.

Keeping First in the Great Eastern bidding tent is so obvious that SRA must have wanted to make an example of them very badly indeed. Dammit, the SRA even put it in writing that while responses which were not duly completed and signed may be disregarded, nevertheless, it expressly reserved the right, in its absolute discretion, to treat any response to the Questionnaire as valid and to proceed with the inclusion of any applicant notwithstanding any procedural defect in relation to a response to a Questionnaire.

Then there is conspiracy theory, namely that SRA was trying to ensure that no one franchisee runs more than one London terminal under the new regime. Thus since First is going to get Paddington, they can't have Liverpool Street.

This cannot be so, logically or legally. Logically, who can tell that the Effingham & WGC Railway Company will not put in a killer bid for the Greater Western franchise leaving First in the cold. Legally, you can't fix things that way – can you?

So now we have more industry linen washed in public. But above all we now know that the SRA not only brooks no dissent but that it holds its suppliers in deep contempt and is not afraid to say so in public.

As I jet off for a family wedding in Tenerife, it looks as though this one will run and run. See the news papers for the latest report from the front.

Continues.........

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