Rail Franchising

Thursday 31st January 2013 Written Statements

[The Secretary of State for Transport (Mr Patrick McLoughlin)]

When I cancelled the competition for the intercity west coast franchise last October, I also put on hold the live competitions for three other rail franchises. Having carefully considered the options for these three competitions, including the recommendations of the independent review by Richard Brown, chairman of Eurostar, I have this morning informed the stock market of my decisions about these three competitions. I am also today publishing Mr Brown’s advice about these competitions, having previously redacted it from his report in view of its potential stock market sensitivity.

In summary, Mr Brown recommended that the Government should look to continue the existing competitions for Essex Thameside and for the combined Thameslink, Southern and Great Northern franchise. But in the light of his wider advice about franchising policy, he also recommended that the current proposition for the Great Western franchise was not the right one. I accept those recommendations, and accordingly:

the competition for the Essex Thameside franchise will be resumed, with a revised invitation to tender being issued to the existing short-listed bidders over the summer. This will allow the Government to address important issues raised by Mr Brown, for example about capital requirements and the bid evaluation process, while avoiding unnecessary delay. The new franchise will have a contract term of 15 years, as announced at the start of the current competition;

the competition for the Thameslink, Southern and Great Northern franchise will also be resumed, with an invitation to tender being issued to the existing short-listed bidders. This will be for a seven-year contract term, again as previously announced. Consistent with Mr Brown’s recommendation, I expect this to be more of a management-style contract. This different approach will require more time to develop and test the proposition with the market, and I will set out the timetable for this competition in the spring;

having considered the options for the Great Western franchise very carefully, and taken account of Mr Brown’s advice, I have decided to terminate this competition. This is to allow for a more fundamental review of the franchise proposition, recognising that this is a large and complex franchise which will need to manage service delivery whilst the route is electrified and new rolling stock is introduced.

In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, I do not believe it would be appropriate to reimburse the bidders.

The existing franchises for these services will expire before new long-term contracts can be put in place, so interim arrangements will be required to ensure continuity of rail services. My Department has exercised its contractual right to extend the current franchise agreement with First Great Western for a further period of 28 weeks, and I intend to do the same in respect of First Capital Connect.

I have also instructed my Department to commence negotiations with the existing train operators—First Great Western, First Capital Connect and c2c—with a view to entering into new interim franchise agreements with them. For Essex Thameside and Thameslink, the period of these interim agreements will be determined by the time needed to complete the competitions for the longer-term franchises, and will not exceed two years. For Great Western, I intend to negotiate an interim agreement for two years and will set out longer-term proposals in the spring.

The Government continue with their multi-billion pound programme of investment in the rail network regardless of the delay to the franchising programme, and my Department will seek to ensure wherever possible that the benefits for passengers previously sought in new substantive franchise agreements are not delayed.

I am mindful of my statutory duty to ensure the continuity of rail services and so, in parallel with my Department entering into negotiations with the incumbent train operators, I will also be instructing Directly Operated Railways, a Government-owned company, to undertake the minimum preparatory measures necessary to operate train services in circumstances where I am unable to agree the terms of an interim agreement with the existing train operator.

I am also today publishing for consultation a proposed new statement under section 26 of the Railways Act 1993. This statement indicates when passenger rail services are likely to be procured through an open competition, and when they might be procured by other means.

As I made clear when I published Mr Brown’s report, I will set out a full timetable for the future rail franchising programme in the spring, alongside a statement of franchising policy in light of both Mr Brown’s recommendations and the Transport Select Committee’s “Rail 2020” report.