Figure 7

Events and actions following the InterCity West Coast franchise competition decision

Source: National Audit Office

The Department's  response to the NAO and Laidlaw reports

Area requiring improvement

The Department's response

Greater clarity of objectives and transparency of information

The NAO report was particularly critical about the lack of clarity about the objectives and the way the Department calculated how much committed financial support it would require from bidders.

The Department has set clear objectives for the programme, and objectives for individual franchise competitions reflect these broad objectives. The Department has also improved the transparency of information. It has published, for example, a map of its procurement process, clear, detailed guides about how it will run franchise competitions, as well as procurement documents such as invitations to tender, and template financial models and franchise agreements.

Following the restart of the programme, the Department has provided bidders with greater clarity and consistency about its requirements for parent company support.

More realistic timetables for franchising projects

The NAO report identified that the Department had set itself an unrealistic timetable, in part due to the delay in issuing the invitation to tender without extending the award date.

For franchise competitions the Department typically allows around 15 months from issue of the Official Journal of the European Union notice to award of the franchise, which is a reasonable timetable, in line with past experience. Under the current programme the Department has tried to protect these time frames, even when it has had to delay issuing an invitation to tender, to avoid one of the factors which let to difficulties in the 2012 InterCity West Coast process. For example, when the Department delayed issuing the invitation to tender for the TransPennine Express and Northern franchises by two months, it also put back all of the competition milestones by two months.

Governance and assurance

The NAO report identified weaknesses in governance, assurance and oversight, which resulted in a lack of effective challenge to decisions.

With the restart of the franchising programme, the Department has established a governance structure for Passenger Services to discuss progress, risks, budgets and schedules across the programme. It has also established the Procurement Assurance Board, which reviews franchise competitions at key milestones to assure that the appropriate procurement processes have been followed. As before, the Department requires its Board Investment and Commercial Committee (BICC), HM Treasury and the Secretary of State to approve the main procurement milestones.

The Department has developed a clearer and more robust assurance process. For example, the outputs from the financial models used in bid evaluations are reviewed and independently audited by external consultants.

Source: National Audit Office