1.6 The NAO and Laidlaw reviews identified shortcomings in the Department's commercial and programme management capacity and capability. In its report on the West Coast failure, the Committee of Public Accounts concluded that the Department's ".attempt to make cost savings by cutting corners on the [West Coast] competition resulted in significant additional costs...",5 and said the Department should put in place the right internal resources and external support.
1.7 The Department has taken steps to improve its capability. It has strengthened leadership and accountability by appointing a new Managing Director of Passenger Services to be the Senior Responsible Owner (SRO) for the franchising programme as a whole, and for each franchise competition. The new SRO has significant industry experience and is well respected by the market. Individual franchise competitions have a discrete project team of around nine members, headed by a senior civil servant as project director.
1.8 The Department has also made organisational changes (Figure 2 overleaf) to address problems in the InterCity West Coast competition which were due to the competition being staffed by people from various divisions of the Department. It has established a Passenger Services directorate within the Rail Executive, which is responsible for franchise letting and franchise management. The new directorate has a clear corporate structure including its own finance, procurement, and assurance teams and its own programme office. The Department is also supported by external technical, legal and financial advisers. Within Passenger Services, the franchise letting and franchise management teams have been brought together. This aims to give operators a single point of contact, improve knowledge-sharing and strengthen the link between letting franchises and managing them.
1.9 The Department has also increased its capacity to run the rail franchising programme. Passenger Services had a target headcount of 259 as at the end of September 2015. At this point, there were 32 posts (12%) vacant in total, compared to 29 vacancies (11%) in August. 34 posts (13%) were filled by interim staff, one fewer than in August. The Department has recruited a number of staff from the rail industry, including former employees of train operating companies and advisory firms.
1.10 Recruiting additional staff and retaining current staff will be a challenge as there is increasing demand for expertise from other organisations, including train operating companies and Network Rail, as well as other parts of the Rail Executive within the Department. To help manage this issue, the Department negotiated with HM Treasury to offer additional allowances above the usual civil service pay limits for specialists.
__________________________________________________________________________________________
5 HC Committee of Public Accounts, Department for Transport: Lessons from cancelling the InterCity West Coast franchise competition, Thirty-first Report of Session 2012-13, HC 813, February 2013.