Great Western Franchise Consultation

[whole diary]

[JayMac]

A peppercorn rate would never be acceptable to the hareholders.

[TerminalJunkie]

hareholders

Got 'em by the long and fluffies?

[Network SouthEast]

A peppercorn rate would never be acceptable to the hareholders.

It would be more acceptable than DOR running the show.

They'll also gain another two years experience running the franchise, which should bode well for any future re-bid too.

[JayMac]

A peppercorn rate would never be acceptable to the shareholders.

It would be more acceptable than DOR running the show.

More acceptable to who? Certainly not the board of directors who would be breaking the law if they didn't maximise the return to shareholders (Section 172 Companies Act 2006).

[ellendune]

Yes but the law does allow them to take a slightly longer term view.  I would suppose we are talking about a cost plus management contract. In which case they would not actually be making a loss!

[Trowres]

I thought it might be worthwhile quoting s172 of the Companies Act 2006:

172 Duty to promote the success of the company
(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to^
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.

I have omitted parts 2 and 3 as they are less relevant.

[swrural]

'Ask the experts' time please.  Now I know what TUPE^▸ (The Transfer of Undertakings (Protection of Employment) Regulations 2006.) means, could they not just make a deal with the most senior TUPE people in FGW^▸ (First Great Western) and ask them to form a company called "Now a New GW^▸ (Great Western)" or something, and give them a management contract?  I imagine such senior people all meet this 'safety case' thing, a term which does not sound logical English to me, so it must be American, I expect.

Just on another tack, I cannot believe that FGW will not apply for compensation for having been mucked about.

[Chris from Nailsea]

... could they not just make a deal with the most senior TUPE^▸ (The Transfer of Undertakings (Protection of Employment) Regulations 2006.) people in FGW^▸ (First Great Western) and ask them to form a company called "Now a New GW^▸ (Great Western)" or something, and give them a management contract?

Wouldn't that be merely offering an extension of the existing franchise to the existing management of First Great Western, in all but a new name?

[JayMac]

With First Group's share price having taking a hefty hit over the past few days following the release of the report into the franchising fiasco, I don't think the board are going to be suggesting to shareholders that they show some altruism and offer to run the franchise for two years for nothing. Shareholders and altruism are unlikely bedfellows.

First Group will be looking to get the maximum return from the management contract.

My real fear for the future is that the fiasco will have put off all the other original bidders for the various paused franchises and they won't bother re-bidding (in the cases of Greater Western and InterCity West Coast), or will withdraw their bids following the amended Invitations to Tender for the Thameslink, Southern & Great Northern (TSGN) and Essex Thameside franchises. Leaving the incumbents as the only show in town.

[SandTEngineer]

Well unless I am reading the DfT^» (Department for Transport - about) press release incorrectly they haven't completely ruled out DOR yet:

I am mindful of my statutory duty to ensure the continuity of rail services and so, in parallel with my department entering into negotiations with the incumbent train operators, I will also be instructing Directly Operated Railways, a government owned company, to undertake the minimum preparatory measures necessary to operate train services in circumstances where I am unable to agree the terms of an interim agreement with the existing train operator

[John R]

I think that's to try and make sure that the incumbent operator doesn't have DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) completely over a barrel in terms of negotiations of the management contract. Though whether it succeeds will depend on how the current operator judges the actual ability of the department to implement DOR control and at what cost.

[ellendune]

Unless they were thinking of pulling out of rail franchising all together, I do not think First Group would willingly part with their senior management team at FGW^▸ (First Great Western).  

If they cannot agree a management contract with DfT^» (Department for Transport - about) then they will have to pay them to do very little until the next franchise bid comes up for preparation.

The longer they are not running a railway he less useful they will be.

So if they want to remain in the rail franchising business they will "need to foster the company's business relationships with suppliers, customers and others" namely DfT  and, given the extraordinary publicity campaign that Virgin ran over the WCML^▸ (West Coast Main Line) franchise, also FGW's customers and the public.

Don't forget DfT asked Directly Operated Railways to do the MINIMUM NECESSARY. 

[Chris from Nailsea]

From the Telegraph:

Government faces 'challenge' to recruit vital rail experts

Attracting private sector rail experts to run government franchise teams in the wake of the West Coast Main Line fiasco will be a ^challenge^, the chairman of Eurostar told MPs^▸ (Member of Parliament).

Richard Brown, who last week published a report into the future of rail franchising, warned lower pay and the limitations of working in the civil service will make it difficult for the Government to recruit skilled staff from the private sector. Mr Brown told the Commons Transport Select Committee there were plenty of experts within the rail industry with experience of dealing with complex rail franchises. However, persuading those individuals to enter the civil service wouldn^t be easy, he suggested.

^I think there is a particular challenge for the department [of Transport], as there would be for any other government department, in getting those sorts of people to come and work within a civil service structure,^ Mr Brown said. ^They [the DfT^» (Department for Transport - about)] will have to take some difficult decisions about terms and conditions and pay, and give reassurances they will be given the headroom to actually deliver what the government want.^

[swrural]

... could they not just make a deal with the most senior TUPE^▸ (The Transfer of Undertakings (Protection of Employment) Regulations 2006.) people in FGW^▸ (First Great Western) and ask them to form a company called "Now a New GW^▸ (Great Western)" or something, and give them a management contract?

Wouldn't that be merely offering an extension of the existing franchise to the existing management of First Great Western, in all but a new name?

I thought the difference between the TUPEs and the top brass (should emphasise I only have had helpful contact with the top brass of FGW and have great respect for them) is that the people who 'lose' their jobs when a franchise changes are the 'top brass' and the tupes go on running the show. 

It just occurred to me that a DOR operation is just the top brass (only without bonuses )so what really is the problem during the interregnum caused by the franchising fiasco?  One could even hire in those top brass to DOR if they feel like it?

[ellendune]

I thought the difference between the TUPEs^▸ (The Transfer of Undertakings (Protection of Employment) Regulations 2006.) and the top brass (should emphasise I only have had helpful contact with the top brass of FGW^▸ (First Great Western) and have great respect for them) is that the people who 'lose' their jobs when a franchise changes are the 'top brass' and the tupes go on running the show. 

It just occurred to me that a DOR operation is just the top brass (only without bonuses )so what really is the problem during the interregnum caused by the franchising fiasco?  One could even hire in those top brass to DOR if they feel like it?

They don't loose their jobs if the main company (First Group in this instance) decide that they need them in order to put in a franchise bid for another line. If First Group wanted to keep them for a later franchise bid I am sure they could find them something to do and continue to pay them.  Directly Operated Railways could try and employ them, but the people concerned are entitled to make their own choice as to who they work for. 

Without such people First Group would not be in a position to make further franchise bids.