Memorandum by the Greater Manchester Passenger
Transport Authority (PRF 27)
PASSENGER RAIL FRANCHISING
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 SRAthe 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
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
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
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.
5.1 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
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
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.
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