Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence


Memorandum by the Greater Manchester Passenger Transport Authority (PRF 27)

PASSENGER RAIL FRANCHISING

1.  INTRODUCTION

  1.1  Greater Manchester Passenger Transport Authority (GMPTA) is responsible for specifying and developing the local rail network in the Greater Manchester area through the Greater Manchester Passenger Transport Executive (GMPTE).

  1.2  GMPTA strategy and priorities for public transport over the next 10 years are set out in the Greater Manchester Local Transport Plan. In view of the significant developing role envisaged for rail over the next ten years, GMPTA has been developing a rail strategy through a process of public consultation. As part of this strategy it has been working with the SRA and Railtrack to also identify what improvements need to be made to the local rail network to enable the anticipated growth in usage to be accommodated.

  1.3  This work has been undertaken in the context of the Government's 10-year Transport Plan and the anticipated delivery mechanism for investment, as previously envisioned by the SRA—the reorganisation and reletting of franchises for periods of up to 20 years.

  1.4  Recent consultation documents issued by DTLR throw these assumptions into some doubt and we welcome the opportunity to give our views to your sub-committee. Our comments are arranged under the headings shown in your press release dated 23 July 2001.

2.  ENSURE THAT RAPID IMPROVEMENTS IN THE SAFETY, PUNCTUALITY, RELIABILITY, COMFORT AND FREQUENCY OF SERVICES ARE ACHIEVED

  2.1  You will note from our earlier response to the concerns we have about the practicability of awarding two-year franchise extensions in this area. In effect, all franchises for the operation of local and inter-urban services in this area are operated by train operating companies as management contracts on behalf of the SRA. This situation has been brought about by the need for the SRA to dissolve the existing franchises to facilitate redrawing of the franchise map and the creation of new franchises (Appendix B shows the existing and proposed new franchises).

  2.2  In summary, the arrangement under which the SRA bought out these heavily loss-making franchises was on the basis of the SRA receiving a one-off financial payment absolving the franchisee from future financial liabilities. In exchange, the operator receives an agreed profit based on the cost of operating the specified level and quality of service. There is no incentive for the operator to invest money to improve or develop the franchise. The arrangement was intended to cover what was presumably hoped to be a relatively short period until the new long-term franchises could be awarded.

  2.3  The DTLR's draft objectives and guidance do not mention this arrangement which differs from franchises such as Midland Main Line where two-year franchise extensions may be practicable. In effect, it would appear that improvements in a franchise operated on the basis of a management contract would have to be funded by the SRA. However, we would be interested to learn if the SRA or DTLR considered that an imaginative arrangement could be made to overcome this issue.

  2.4  In short, the Authority does not at present consider that achieving improvements in Greater Manchester could be facilitated by short extensions to franchises. If a longer-term franchise was let it should be in the interests of the new franchisee to introduce improvements as early as possible to achieve maximum additional revenue. It is also open to the SRA to specify delivery of achievable improvements in the early years of a long franchise whilst accepting that some infrastructure based benefits might take longer to achieve. But we do welcome the fact that the SRA will in future require bids on a like basis and that the Secretary of State has power to determine what goes into franchises.

3.  SECURE INVESTMENT IN ADDITIONAL NETWORK CAPACITY AND OTHER IMPROVEMENTS TO MEET BOTH THE LONG AND SHORT TERM NEEDS OF THE RAILWAYS AND WHETHER THE SUMS ALLOCATED TO RAIL INVESTMENT REMAIN ADEQUATE IN THE LIGHT OF EVENTS SINCE THE PUBLICATION OF THE GOVERNMENT'S TEN-YEAR PLAN FOR TRANSPORT

  3.1  It is difficult to envisage how the substantial sums of private sector funding assumed in the Government's 10-year public transport plan could be attracted from extending franchises for short periods. Not only is there concern that money from the private sector will be reduced but there is also a risk that agreement to invest in schemes which have a long gestation period will be significantly delayed.

  3.2  It is difficult to make a conclusive statement in response to the second part of your question as we do not have access to the SRA's outline budget or the estimate of what money was assumed to come from Railtrack. It can only be assumed that Railtrack's financial difficulties, on the basis of recent statements made by that company, will severely reduce or eliminate their ability to contribute the required level of funds to the ten-year plan. In these circumstances, either the scope of the plan will have to be reduced or the contributions from the other private and public sector parties increased.

4.  PROVIDE THE FRAMEWORK FOR MAJOR INFRASTRUCTURE ENHANCEMENT PROJECTS TO BE TAKEN FORWARD NOW THAT RAILTRACK IS TO FOCUS ON THE MAINTENANCE AND RENEWAL OF THE EXISTING NETWORK

  4.1  Major enhancement projects require long-term commitments from parties which have a defined role relating to the whole or a substantial part of the life of that project. It is difficult to envisage that franchisees involved in short-term extensions will have either the required intellectual or financial interest or resources needed to have a meaningful role in such projects. It has been our experience that even with a seven-year franchise, there is reluctance on the part of train operators to become involved in projects which only come on stream towards the end of their franchise. Quite rightly, their priority is to manage day-to-day issues and focus on achieving their commercial objectives within challenging timescales.

  4.2  In such situations, the train operators will inevitably focus more on how these long-term projects affect their short-term performance capability and seek the maximum compensation for any disruption which may be caused.

5.  TRANSFORM THE SRA'S LEADERSHIP OF THE INDUSTRY, ITS DAY-TO-DAY MANAGEMENT OF FRANCHISES AND THE WAY IN WHICH IT ASSESSES AND AWARDS NEW AND EXTENDED CONTRACTS FOR PASSENGER SERVICES

  5.1  It was encouraging to read in the DTLR consultation document that it was recognised that day-to-day management of the franchises should be given greater emphasis. It has always been our view that monitoring and enforcement locally are very important especially with a heavily loss-making franchise where there is little commercial incentive for operators to improve their performance. This is one reason why GMPTA/E places a strong importance on maintaining the Service Quality Incentive Regime ([13]*SQUIRE) in its area whilst the SRA has taken the view that enhanced customer satisfaction surveys are adequate albeit they take retrospective action on perceived rather than actual performance.

  5.2  Past performance of train operators should have a strong bearing on SRA's consideration of their appropriateness for award of new or extended franchises. It is obviously appropriate to put this performance in the context of any extenuating circumstances not of the operators' making. However, it is debatable whether an operator who had made mistakes, corrected them and made appropriate recompense might not in future provide consistently better performance than an operator who had not experienced the consequences of poor performance. If there is evidence to suggest that an operator has displayed a disregard for the relevant franchise agreement and the interests of passengers then this should certainly be borne in mind for the future.

6.  IMPROVE THE POOR STATE OF INDUSTRIAL RELATIONS IN THE RAILWAYS

  6.1  GMPTA/E do not become directly involved in the industrial relations of any companies from whom it procures public transport services. However, it must be assumed locally that the industrial relations situation is not improved by tensions imposed on management and staff in a short-term franchise. Uncertainty in the work force regarding future employment prospects in the context of the current franchise restructuring process is apparent. This will be exacerbated if the uncertainty is prolonged as a result of short-term franchise extensions.

September 2001




13   * SQUIRE is a monitoring and incentive regime operated by PTE's. The quality of station and on train passenger facilities is monitored on a continuous basis against agreed benchmarks. Points are awarded or deducted in accordance with performance and these are converted into financial penalties or rewards and franchise payments adjusted accordingly. Back


 
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