Shaping the future of rail franchising

The Rail Freight Group (RFG) has welcomed new proposals from rail minister Theresa Villiers to shake up train operator franchising in the UK.

She recently announced that franchises would soon be longer, more flexible and more responsive to the needs of users – providing better value for taxpayers.

The proposals provide for franchises to run for 15 years as standard, so long as performance levels are maintained.  In return for more private investment in the railways, operators would get greater commercial freedom to innovate in the way they deliver services.  The reforms will also set tough requirements for train operators to deliver on passenger satisfaction.  Operators could face being stripped of their contracts if they fail to meet those requirements.

In a DfT release, Theresa Villiers said: “We need to reform franchising to bring in more private sector investment in order to help deliver important improvements… I am determined that franchises should provide the best possible value for taxpayers and deliver high quality services”

“The existing franchise system is too complicated, with too much micromanagement from Whitehall."

She added that there had to be a system that set the private sector operators tough requirements, but also gave scope for enterprise and innovation

Currently the majority of rail franchises are let for around eight years but, under the proposals according to the DfT, future franchises will be offered on a basis of between 10 to 15 years and bidders will be given the opportunity to present the case for a longer contract which includes additional investment.

Franchise specifications will also be designed to allow scope for operators to offer innovative solutions and bidders will be free to offer their own additional plans and options in their bid.

Other proposed changes include:

• Changes to the current financial risk-sharing provisions, known as 'cap and collar', which could include a link to GDP or employment levels.
• Making it easier for operators to invest their own money during the life of the franchise, and receiving part of the value of that investment once the franchise ends.

The outcome of the consultation will be considered alongside the emerging findings of the Rail Value for Money study, chaired by Sir Roy McNulty, and the conclusions of the Spending Review.

DfT will publish its conclusions towards the end of the year and will begin re-letting franchises under a new model soon after.

For further information, visit: www.rfg.org.uk

Published: 03/08/2010