1.12 The Department has generated keen competition in bidding for passenger rail franchises, though the competitions have been dominated by established UK rail companies.
1.13 The Department regards three to five bidders as the optimum number to provide adequate competition and has generally been successful in achieving this level of interest. Seven out of eight competitions attracted three or more bidders (see Figure 5). Only the West Midlands franchise did not. Although the Department pre-qualified three bidders, it attracted only two final bids. MTR Corporation of Hong Kong dropped out after deciding to concentrate on bidding for a rail concession from Transport for London which they won.
5 | Details of Franchise competitions | |||
Franchise | Franchise Winner | Previous train operator(s) | Number of bids submitted | |
Integrated Kent Franchise (April 2006) | Govia Ltd | South Eastern Trains, a subsidiary of the SRA. (Prior to this it had been run by connex) | 4 | |
Thameslink/Great Northern (April 2006) | FirstGroup plc | Govia (Thameslink) | 5 | |
Greater Western (April 2006) | FirstGroup plc | FirstGroup (Great Western and Great Western Link) National Express Group plc (Wessex) | 3 | |
South Western (February 2007) | Stagecoach Group plc | Stagecoach (South West Trains) Stagecoach (Island Lines) | 4 | |
East Midlands (November 2007) | Stagecoach Midland Rail Ltd | National Express Group (central) National Express (Midland Mainline) | 4 | |
West Midlands (November 2007) | Govia Ltd (London and Birmingham Railway Ltd) | National Express Group (Silverlink) National Express Group (central) | 2 (a third company was prequalified but declined to bid) | |
New cross country (November 2007) | Arriva plc | Virgin cross country National Express Group (central) | 4 | |
Inter city East coast (December 2007) | NXEc Trains Ltd (National Express Group plc) | GNER | 4 | |
Source: Department for Transport | ||||
1.14 All the successful bidders in the franchise competitions let by the Department were established UK rail companies. There was limited interest from some overseas based companies, including MTR Corporation of Hong Kong and Danish State Railways, but none were successful in winning a franchise let by the Department. NedRailways (with Serco) has previously been successful in winning the Northern and Keolis4 (with FirstGroup) the TransPennine franchises. In 2008, Deutsche Bahn acquired Laing Rail, operator of Chiltern Railways and 50 per cent owner of the operator of the London Overground concession. The Department has told us that it intends to solicit more interest from overseas based transport companies in its marketing of future franchise competitions.
1.15 Only two franchises were awarded to incumbents (see Figure 5).5 This suggests that the procurement process did not advantage past incumbents.
6 | Total specifcation and procurement costs since 2003-04 (£'000) | ||||||||||||||||
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| 2003-04 sra | 2004-05 sra | 2005-06 (part) sra | 2005-06 (part) DfT | Total 2005-06 sra DfT | 2006-07 DfT | 2007-08 DfT | ||||||||||
Specification |
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Internal (Staff Admin) | N/A | 505 | 247 | 898 | 1,145 | 1,493 | 1,632 | ||||||||||
External | N/A | 3,229 | -6 | 3,390 | 3,384 | 1,641 | 584 | ||||||||||
Total specification | N/A | 3,734 | 241 | 4,288 | 4,529 | 3,133 | 2,216 | ||||||||||
Procurement |
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Internal (Staff Admin) | 1,632 | 1,004 | 986 | 490 | 1,476 | 928 | 1,325 | ||||||||||
External | 21,011 | 10,587 | 3,233 | 5,080 | 8,313 | 6,227 | 3,512 | ||||||||||
Total procurement | 22,015 | 12,219 | 4,219 | 5,570 | 9,789 | 7,155 | 4,837 | ||||||||||
Total specification procurement | 22,015 | 15,953 | 4,460 | 9,858 | 14,318 | 10,289 | 7,054 | ||||||||||
Source: Department for Transport | |||||||||||||||||
NOTE Internal costs consist of the Department's (and previously the SRA's) staffng and associated administrative costs. External costs are invoiced costs, including advisers' costs. N/A: costs for specifying franchises were included in procurement costs in 2003-04. | |||||||||||||||||
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4 Keolis also holds a 35 per cent stake in Govia Ltd.
5 Included amongst these two is the Greater Western Franchise, an amalgamation of three previous franchises. The winner, FirstGroup, was the previous incumbent on two of these franchises.