1.8 The Department aims to be transparent in its approach to franchising.3 It publishes key franchise documents on its website along with descriptions of the procurement process. In the past it has not, however, publicly released the Invitation To Tender (ITT) until the procurement process is completed although a detailed Stakeholder Briefing Document is released at the same time as the ITT. Passenger and staff representatives sometimes felt that they were left in the dark about the likely direction of some bidder responses, for example on fares.
1.9 In deciding on the specifications for a franchise, the Department asks relevant local bodies to contribute their views on the Department's proposals.ii The feedback helps the Department decide whether to alter the level of service provision within the service specification. Alternatively, the Department could include service level changes as possible options to be purchased in the ITT. (See text box at Figure 4 as an example of how consultation can affect services purchased.)
4 | Example of how local consultation can influence the rail services to be purchased: the South Western franchise |
The Department's initial analysis of the cost of services between Salisbury and Bristol questioned their value for money. The business case for the franchise award in May 2006 showed that costs far outweighed the benefits on services running between Bristol and Waterloo via Salisbury. The Department had therefore publicly proposed to remove these services from the base case specification. Following the public consultation in late 2005 and early 2006, there was local opposition to this proposal. As a result, the Department decided to still exclude services running between Bristol and Waterloo via Salisbury from the base case specification but to include these services as a priced option in the ITT issued in March 2006. On receipt and analysis of bids, it was apparent that the winning bidder considered this priced option to be viable. Its bid gave a positive net present value of £3.2 million for operating the Bristol to Waterloo trains via Salisbury. Following consultation, the Department accepted the bidder's ability to operate the services between Bristol and Waterloo via Salisbury and so the service has been continued under the new franchise. Source: National Audit Office summary | |
1.10 Where these options have a direct relevance to the appropriate local PTE, then the PTE can purchase the option, if necessary by providing a subsidy, once the preferred bidder is selected. The July 2004 White Paper provided the ability for the relevant authorities to vary service specification or fares provided they bear the cost.iii However, such options do not form part of the Department's evaluation of bids which may reduce the incentive for bidders to put in competitively priced options. In our interviews with the train operating companies, we were given a range of descriptions of the approaches taken when putting together proposals for options. Most companies admitted that they do not put as much effort into working up options as they do on meeting the base level specification. Only one company explicitly said they put as much effort into scoping and pricing options as they do on the base level specification.
1.11 Since the Railways Act 2005, PTEs have not been co-signatories to a franchise containing routes that overlap with transport services that they provide locally. In these cases, the PTEs play no role in the assessment of bids. The Department therefore runs the risk that local knowledge is overlooked.
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3 The Department's approach was set out in the July 2006 publication Rail Franchise Replacement Process Manual.