16 The Department's arrangements for identifying and managing risks, including handling the failure of a train operator, are well planned and followgood practice. Appendix 3 sets out the key risks we have identified and the main mitigants. The right to impose a remedial plan was invoked, for example, when First Great Western breached its franchise agreement (see Figure 16, case example on page 23). A key risk for the Department is maintaining sufficient numbers of staff with relevant industry knowledge and commercial skills to manage delivery and negotiate mid-term changes to franchise contracts. The risk of reduced revenues following an economic downturn is partly mitigated by the Department using more conservative budgeting assumptions, regular updates of budgets and train operator contingency plans to reduce costs and adjust discretionary services. In an extreme case, the Department also has contingency plans ready to step in as operator of last resort.
17 The cost of managing franchises decreased from £7.3 million in 2004-05 to £5.7 million in 2007-08. The main reason was the reduction in the number of staff involved in franchise management. The relevant Department Directorate, Rail Service Delivery, had 72 staff in post in June 2008 whereas the equivalent parts of the SRA had over 100 staff in post in early 2004. The Department can operate with fewer staff as a result of an approach that allows train operators to 'self certify' that low risk obligations have been delivered. After reviewing experience with this approach in early 2007, the Department has strengthened its compliance activity by requiring more data checks.