3.15 The Department's procurement approach - to buy what is bid - has provided clarity and consistency. It is also understandable that the Department takes steps to reduce the risk of legal challenge, given the inconsistencies in the procurement approach discovered after the collapse of the InterCity West Coast competition in 2012.
3.16 The Brown Review recommended that the Department and the franchisee develop a partnership relationship to bring about ongoing improvements in operators' financial and operational performance. The operators we spoke to felt the Department was not performing as strongly in this area as they would expect. Operators told us that there are high numbers of committed obligations that are written into contracts, that they must meet if they are to avoid breaching the contract. This approach can bring about rigidity in the contract management approach and reduce innovation and efficiency.
3.17 The Department is aware of operators' views and is taking steps to develop its approach to contract management and its commercial capability. For example, it has begun reviews of the franchise agreement and the contractualisation process, in consultation with operators. This is looking at, for example, developing contractual obligations based on the results of an operator's activities (outputs or outcomes) rather than what the operator does (inputs). If managed properly, this has the potential to promote more innovation and reduce inefficiency.
3.18 The Brown Review emphasised the importance of franchise management, requiring commercially experienced individuals. Operators told us, however, that the Department's approach to contract management varies and has not noticeably improved since 2013. The Department is aware of this. In April 2015, it appointed an industry professional to a new role of Head of Franchise Contract Management. It is currently taking steps to strengthen its commercial capability.