Stagecoach disqualified from three franchise competitions

[LNW-GW Joint]

There's no reason why a direct award shouldn't include improvements

Except the DfT doesn't want to spend the money without a competitive bid.
The WC and XC direct awards have been straightjackets, to maximise premiums.

 

[Wolfie]

The NHS doesn't act fairly.
Different areas of the country have access to different treatments.

Award the franchises that are currently "to let" on the old system and start afresh with the new ones.

The NHS in England has been split into multiple commissioning areas so that Ministers can say "local decision, nothing to do with us" and abdicate responsibility while offering inadequate resources.

 

[StaffsWCML]

Yes, lengthly direct awards that will do nothing to improve things for passengers.
Good approach

With the 2 companies left bidding for the franchise I am struggling to see where these 'Improvements' will come anyway.

I would much rather them fix a broken franchising system that is not fit for purpose and continually delivers mediocracy or worse for the customers.

 

[infobleep]

Yes, lengthly direct awards that will do nothing to improve things for passengers.
Good approach

Why is nothing allow to improve for passengers with lengthy direct awards?

 

[The Ham]

Why is nothing allow to improve for passengers with lengthy direct awards?

The concern I have with long franchises is that there'll be new trains in the first 2-3 years and then nothing until the next franchise is let.

There could be ways to overcome this concern, but it needs to be something which is dealt with before any change is made.

 

[hwl]

The concern I have with long franchises is that there'll be new trains in the first 2-3 years and then nothing until the next franchise is let.

There could be ways to overcome this concern, but it needs to be something which is dealt with before any change is made.

Agree completely. There need to be regular reviews liked happened(s) with Chiltern but I doubt the Chiltern format would work in more than half of Franchises, many would need a more comprehensive review process (which could end up as problematic as direct awards!)

 

[StaffsWCML]

I'm not sure how franchising really works at all for service users. You can end up with a good provider being replaced with a bad provider because the government decide bring in new 'compliances'. You can end up with a terrible company running a franchise for 8 years with no real recourse, they can bid again and as long as they are 'compliant' they can win again with lots of empty promises.

 

[JonathanH]

The concern I have with long franchises is that there'll be new trains in the first 2-3 years and then nothing until the next franchise is let.

There could be ways to overcome this concern, but it needs to be something which is dealt with before any change is made.

When trains are designed to last 30 years, having new trains in the first 2-3 years and then nothing until the next franchise seems reasonable. The point which is more pertinant is that there should be an ongoing review of the service offered (timetable, capacity etc). New trains isn't everything but a review which identifies how the service can be reviewed and improved after the first five years might work.

If you go back to the original round of franchises, some were let on 15 year terms precisely because they included new train fleets - the others were let on the basis of seven years. More recently, this became shorter franchises for all, but not before Chiltern got 20 years on the basis of rolling improvements and review (although you could argue that they are now in the lean period of improvements you are concerned about).

 

[The Ham]

When trains are designed to last 30 years, having new trains in the first 2-3 years and then nothing until the next franchise seems reasonable. The point which is more pertinant is that there should be an ongoing review of the service offered (timetable, capacity etc). New trains isn't everything but a review which identifies how the service can be reviewed and improved after the first five years might work.

If you go back to the original round of franchises, some were let on 15 year terms precisely because they included new train fleets - the others were let on the basis of seven years. More recently, this became shorter franchises for all, but not before Chiltern got 20 years on the basis of rolling improvements and review (although you could argue that they are now in the lean period of improvements you are concerned about).

When I was taking about new trains, I was more thinking of extra trains (which may or may not include new trains) otherwise you could see an increase in rail capacity and then overcrowding for years and years on end whilst we wait for the next franchise to start.

However if you have a long franchise you could also see mid life trains being replaced to ensure that they'll last the franchise. As an example you let a franchise for 20 years with rolling stock which is 25 years old, that stock is likely to be replaced early in the franchise (especially if doing so increases capacity). As by doing so it gives the longest period of payback on the investment by the company making the change. As there's no short franchises those trains could struggle to find a new home any time soon, especially if they are third rail units.

As such you could have trains which need more capacity but getting it as the TOC is waiting out their franchise whilst at the same time there being trains sat idle as they are too new to scrap but to old to last out the full period of the franchise they've left.

There are ways you could make it so that there was ongoing investment in rolling stock capacity to ensure that this doesn't happen. However it's something which needs to be considered before long franchises are let.

 

[700007]

Would it be worthwhile in new franchises perhaps to include 'adjustment periods' either a third into the franchise or halfway into the franchise where the demand, infrastructure and operations is scrutinised by DfT and other relevant bodies to see if the franchise firstly is performing well, but also if the franchise is making the best use of its resources?

By the latter point I mean things like:

• Is there sufficient capacity on all trains
• Is there too much capacity on certain trains without good reason (i.e. Stock move in passenger service)
• Is customer satisfaction doing good on the franchise?
• Are there new routes or stations that could begin or open up in the short term that could open up and generate a healthy demand or revenue / profit?
• Improving punctuality and reliability

Sometimes it is poor when a passenger franchise hasn't ordered enough stock or perhaps saw a station or route become a victim of its success but the passenger has to suffer years of overcrowding and poor use of resources to the next franchise to see any work done to fix this.

 

[cactustwirly]

I'm not sure how franchising really works at all for service users. You can end up with a good provider being replaced with a bad provider because the government decide bring in new 'compliances'. You can end up with a terrible company running a franchise for 8 years with no real recourse, they can bid again and as long as they are 'compliant' they can win again with lots of empty promises.

It ensures value to the taxpayer, as the winner is the company with the best bid, ie the best value for money

 

[Bertie the bus]

It ensures value to the taxpayer, as the winner is the company with the best bid, ie the best value for money

No it doesn't. That just means the company who makes the best promises. Premiums stated at the time of the bid don't equal premiums received as VTEC showed.

 

[LNW-GW Joint]

No it doesn't. That just means the company who makes the best promises. Premiums stated at the time of the bid don't equal premiums received as VTEC showed.

"Deliverability" also comes into it.
DfT doesn't always go for the highest bid.
There are also penalties for under-delivery (like losing the franchise), and profit-sharing for over-delivery.

 

[HH]

Theoretically DfT goes for the MEAT, which is based on the formula P+nQ, based on their evaluation (which includes deliverability) and after risk adjustment (which can also be affected by deliverability). Whether this works out to be the best deal in the long run, no-one can say. What is certain is that there will be change and some owning groups are rapacious in the consequent negotiations. It may be why they are less popular.

 

[WatcherZero]

VTEC did honour their premium commitments paying up in full until the franchise was terminated.
The government also shares a responsibility to provide the infrastructure and other commitments that it asks bidders to assume as a baseline in their bid. The government is also responsible for checking the bidders math and evaluating whether its financially deliverable and assigning a risk value which is knocked off the bid evaluation score.

 

[ComUtoR]

Theoretically DfT goes for the MEAT,

Assuming you have capitalised MEAT for a reason; what does it abbreviate ?

which is based on the formula P+nQ

What does PnQ represent ?

Please and Cheers in advance

 

[HH]

MEAT = Most Economically Advantageous Tender

P = Price, Q = Quality, and n is a figure set by DfT, which is supposed to balance the two to best effect. I'm not convinced that they get it right - probably the value they get depends on what they decide they want and the assumptions they make about what it will cost and what it's worth.

 

[Goldfish62]

MEAT = Most Economically Advantageous Tender

P = Price, Q = Quality, and n is a figure set by DfT, which is supposed to balance the two to best effect. I'm not convinced that they get it right - probably the value they get depends on what they decide they want and the assumptions they make about what it will cost and what it's worth.

You beat me to it posting that information.

 

[Antman]

I don't see how it in itself is unfair. It just means they will need to bid for a higher subsidy /lower franchise premiums to cover the possible risk that this could possibly cause

It is unfair because Croesus Railways Limited doesn’t exist. How can you run a fair procurement if the only bidders are those who are backed by their State or are able to make decisions to invest where they don’t have to comply with the law. Or worry about financial consequences. Stagecoach has to comply with all the various bits of legislation and also the sentiment of the market (because it’s listed). t. A state bidder or a quasi state bidder through a corporate vehicle doesn’t have the same. So it’s not a fair procurement because the result is a foregone conclusion - no prudent private operator can win as their financial model will almost by definition be non-compliant. So only a state operator can win.

 

[StaffsWCML]

It is unfair because Croesus Railways Limited doesn’t exist. How can you run a fair procurement if the only bidders are those who are backed by their State or are able to make decisions to invest where they don’t have to comply with the law. Or worry about financial consequences. Stagecoach has to comply with all the various bits of legislation and also the sentiment of the market (because it’s listed). t. A state bidder or a quasi state bidder through a corporate vehicle doesn’t have the same. So it’s not a fair procurement because the result is a foregone conclusion - no prudent private operator can win as their financial model will almost by definition be non-compliant. So only a state operator can win.

Spot on! This is the crazy situation we are in.

The system is broken, it is not delivering for the passenger.

 

[John R]

VTEC did honour their premium commitments paying up in full until the franchise was terminated.
The government also shares a responsibility to provide the infrastructure and other commitments that it asks bidders to assume as a baseline in their bid. The government is also responsible for checking the bidders math and evaluating whether its financially deliverable and assigning a risk value which is knocked off the bid evaluation score.

However their bid was aggressively back end loaded in terms of premium payments, and I’m guessing that is why they won. So they won but got out before the going got tough and thus didn’t deliver on their overall promise. A point that the Govt conveniently ignored when saying that Virgin had paid everything they had promised to.

 

[StaffsWCML]

However their bid was aggressively back end loaded in terms of premium payments, and I’m guessing that is why they won. So they won but got out before the going got tough and thus didn’t deliver on their overall promise. A point that the Govt conveniently ignored when saying that Virgin had paid everything they had promised to.

To be fair the Government didn't honour their upgrade commitments on the line which VTEC based their models on, so they are also responsible.

 

[John R]

To be fair the Government didn't honour their upgrade commitments on the line which VTEC based their models on, so they are also responsible.

That’s very true, and I had forgotten that point. Although as I understand it, up to the point of default NR had delivered everything expected of it, and still the franchise was haemorrhaging money due to growth expectations not being achieved. So even if an appropriate adjustment could have been negotiated for the non-delivery of NR improvements (which I suspect it could have been), Virgin wasn’t interested as they were already holed below the waterline.

 

[hwl]

That’s very true, and I had forgotten that point. Although as I understand it, up to the point of default NR had delivered everything expected of it, and still the franchise was haemorrhaging money due to growth expectations not being achieved. So even if an appropriate adjustment could have been negotiated for the non-delivery of NR improvements (which I suspect it could have been), Virgin wasn’t interested as they were already holed below the waterline.

The final growth (and other numbers) numbers were based on a date just before the bid submission but growth (under EC) between that point and the start of the VTEC era was substantially lower so on Day 1 annual revenues were an 8 digits sum lower than they were told to assume in the bid. No realistic way to recover from that either.

 

[StaffsWCML]

That’s very true, and I had forgotten that point. Although as I understand it, up to the point of default NR had delivered everything expected of it, and still the franchise was haemorrhaging money due to growth expectations not being achieved. So even if an appropriate adjustment could have been negotiated for the non-delivery of NR improvements (which I suspect it could have been), Virgin wasn’t interested as they were already holed below the waterline.

We don't know the full workings but I think a mutual termination was probably the best course of action given the circumstances. The DfT was probably not happy with any expected renegotiated amounts.