UK: Parliament Meets to Discuss Rail Franchise Reform

Image courtesy of Network Rail

The UK Parliament Select Committee has met to discuss reform of the current rail franchise system. The conclusions and recommendations included the requirement that the Department for Transport increase transparency regarding benefits passengers should expect to enjoy, that shortfalls in staffing be made up with qualified individuals and that the Department should deliver a strategic plan in terms of its long-term budgeting and planning.

The Select Committee heard that the Department for Transport has moved away from awarding rail franchises based solely on cost, but rather now attaches significance to benefits customers will see in terms of service, cleanliness, safety and, increasingly, wifi access. However, this new approach has not yet reached customers, and the Department was unable to say when it would. As a result, it was recommended that the Department should set out what benefits would reach customers and when .

The Department was criticised for its poor progress in increasing its franchise management capability. It was noted that the Department has made steps towards this but since the collapse of the 2012 Intercity West Coast Competition, capability has not noticeably improved. This situation is dire enough that the nine operating companies currently running services in the UK may well drop out of the industry.

The Department has taken steps to encourage more operating companies to compete for franchises , but these efforts have been met with limited success. Further, while the Department is unwilling to amend its current approach to make entry into the market easier. Furthermore, 7% of positions within franchise management teams are vacant. It was recommended that the Department should develop alternatives to current practices by looking at best practice in other industries. Additionally, it should continue efforts to fill personnel vacancies.

A further criticism of the committee was that the Department was not taking steps to develop partnerships with operates to encourage innovation and improve services. The current approach is too rigid, which “stifles innovations and reduces efficiency”, by requiring over-specific details there is limited flexibility for operating companies to flex their innovative muscles.

Planned infrastructure improvements have created an uncertain market place, which in turn has resulted in the delay of new franchise agreements . Although the Hendy Review’s timetable of upgrades has increased certainty, some “direct award” franchises will not end for another six years, which means delays to improvements to services for customers, as well as an unfavourable negotiating position for the Department.

Overall, the Department was considered to lack a coherent strategic vision which may result in unnecessary costs in the future. As the Department is responsible for the whole industry (directly or indirectly) in the UK, its vagaries and faltering progress are hindering the development of infrastructure, rolling stock and franchising .

The Committee’s findings are damning of the Department for Transport, identifying failures at almost every level. The recommendations must be implemented within the year as far as possible. The most fundamental of the recommendations are that the Department’s leadership be strengthened and its long-term strategic vision be consolidated and presented in transparent, coherent form to encourage competition from train operating companies.