Unlike previous franchise awards that have involved a change of control, the winning bidder will buy the East Coast Main Line operating company under the terms of a share sale agreement.
A closer working relationship with the Government is sought, with a partnership committed to deliver vision, a long-term plan and a delivery team that is wholly committed to putting passengers at the heart of the business. The objective is to realise the full potential of both the franchise and the investment being made in infrastructure and IEP rolling stock.
This was mirrored in the prospectus, with a call for genuinely creative bids offering improved timetables that build on the core train service requirement, alongside a transformation of the customer experience.
Bidders have been urged by the Franchising Director to engage with the DfT in discussing innovative solutions that include new funding proposals. It reflects a Government desire to ensure that the passenger gains, the industry thrives, and the taxpayer benefits.
The cap and collar provisions of previous contracts will not be repeated, as although the Government will share in profits beyond an agreed threshold, protection against revenue risk is confined to an adjustment in contract payments if economic growth is lower than forecast.
The three rail trade unions - RMT, ASLEF and TSSA - subsequently challenged the legal validity of the East Coast franchising proposal on the basis of process failures, but the challenge was rejected by legal authorities.
The argument has also been advanced that Directly Operated Railways should continue to run the business. This is because since taking over operations from National Express in November 2009, the East Coast business has performed better than comparable West Coast operations.
This is only in terms of the premium paid to the Government, however. Last year earnings from services operating from King’s Cross enabled £208m to be paid to the DfT, compared with a payment of £108m by Virgin in respect of its West Coast services.
Much has been made of this, but the statistic is not a reliable basis on which to assess the relative efficiency of the two businesses. There is a large variation in rolling stock costs, whereby Virgin pays £250m more than East Coast in annual charges, given the age difference of the two fleets.
Scotrail must upgrade services for inter-urban and scenic routes
The Invitation To Tender for the ScotRail franchise that commences on April 1 2015 required a significant upgrade in the provision of services.
Infrastructure improvements are being made to the core inter-urban routes that serve Scotland’s seven cities, covering services that operate from Edinburgh/Glasgow to Aberdeen and Inverness with stopping patterns at Perth, Stirling and Dundee, and on the East-West link between Aberdeen and Inverness.
This will allow faster journey times. And to exploit this, the future operator is required to improve the quality of rolling stock so that vehicles are comparable with Mk 3 coaches currently operated by East Coast on the Anglo-Scottish services beyond Edinburgh.
There is also recognition that services operating on scenic routes can be improved as a tourist attraction. This covers the West Highland (Oban/Fort William) and Kyle routes, where there is a specification for suitable rolling stock to be provided that gives passengers a better opportunity to see the views. The train operator will also be tasked with working with Network Rail to clear vegetation that obstructs the scenery. Catering must also be available on these services.
The £650m Edinburgh-Glasgow Improvement Programme (EGIP), which as well as Central Belt electrification via Falkirk High includes the provision of overhead wires to Stirling, Alloa and Dunblane, will be commissioned between December 2016 and December 2018. The franchisee is required to introduce new rolling comprising 23-metre vehicles formed into eight-car sets.
Transport Scotland is also providing a £30m stations improvement fund, but expects proposals to be brought forward that attract additional third party funding. Areas for priority are the improvement in station facilities at locations served by the Caledonian Sleeper trains, and more places with step-free access. The franchisee will also be expected to contribute £500,000 per annum towards the cost of Community Rail Partnerships.
There will also be responsibility for the operation of the re-opened Borders Railway between Edinburgh and Tweedbank, where construction will be completed by June 2015.
The new contract will be for seven years, with the option of a three-year extension related to performance. In terms of train operations, the target Public Performance Measure is set at 92% for the initial four years, increasing to 92.5% thereafter with a cancellation rate not exceeding 1.6%.
The National Passenger Survey conducted by Passenger Focus will be used as a key performance indicator. The minimum level of overall satisfaction that must be achieved is 88.3%. Any shortfall will be the subject of a substantial penalty of 10% of profit in the year concerned.
Northern England franchises must be affordable
The Department for Transport has decided not to merge the Northern and TransPennine Express franchises, because they meet different market needs that require separate product solutions. They are due to commence in February 2016, following the contract awards in October 2015.
Some remapping of routes is proposed, to reflect the electrification of the TransPennine route between Liverpool and York/Selby.
This involves removing lines that are not to be electrified from the TPE network, as they will no longer offer through services of the type currently provided. This will affect locations such as Scarborough, Middlesbrough and Barrow-in-Furness, as well as Hull, if a proposal for privately financed route electrification is not authorised.
The future TPE franchise holder will be required to focus on offering competitive inter-regional rail services between urban centres, building on the success of the existing operation, which has attracted significant growth as a result of an improved journey experience.
For Northern operations, there is a requirement to improve affordability. The current level of subsidy is the highest in England and Wales, and revenue of £268m per annum covers just 36% of turnover. There is a subsidy of 53p for each passenger mile, which results in support payments of £324m. (TPE routes required a subsidy of £41m - 16p per passenger mile.)
Bidders will be expected to demonstrate proposals to increase capacity, while containing the level of subsidy by the introduction of Driver Only Operation and improvement in the fares yield.
