Great Western franchise extension - ongoing discussion, merged topic

[whole diary]

[JayMac]

First Group's Trading Statement, released today, did indeed make reference to the extension of the FGW^▸ (First Great Western) franchise to September 2015. So it would seem the franchise extension announcement was deliberately timed to coincide with the announcement to the London Stock Exchange.

The full Trading Statement can be read at the following link:

http://goo.gl/No8rLp

First Group's share price has climbed a couple of pence throughout today.

[LiskeardRich]

Further Information about a signal upgrade on BBC^» (British Broadcasting Corporation - home page) Cornwall, and Falmouth Packet

Long term plans include a full upgrade of the Night Riviera Sleeper Service, new maintenance facilities at Penzance and bringing forward the upgrade of the signalling on the rail line between Penzance and Plymouth.

This should support faster, more frequent trains on the mainline throughout Cornwall to enable a spinal half hour shuttle service

The latter points I note haven't been mentioned as yet here.

[paul7575]

In the normal course resignalling would be nothing to do with a franchisee, so I don't think it wouldn't normally be mentioned in the context of a franchise extension.

Paul

[LiskeardRich]

In the normal course resignalling would be nothing to do with a franchisee, so I don't think it wouldn't normally be mentioned in the context of a franchise extension.

Paul

But the extra services as a result will be to do with the franchisee

[paul7575]

The 2012 GWML^▸ (Great Western Main Line) ITT^▸ (Invitation to Tender) had the extra Cornish main line services commencing in Dec 2017, following the 'accelerated re-signalling' ahead of transfer to the ROC^▸ (Rail Operating Centre - a centralised location for railway signalling and train control operations for a specific route or region).  So if that's the timescale it will probably be off the radar in terms of today's news.

At least it is in the ITT after all, (now lapsed of course), so it was in the public domain already...

Paul

[Steve Bray]

With regard to the Cotswold Line, let's hope that they won't 'stand still' and finally improve the timetable, which since redoubling hasbeen a bit of a disappointment.

Let me start the ball rolling by suggesting that the 1434 SO service from Gt Malvern to Paddington be accelerated by the best part of 25 minutes with little or no impact to any other services (so far as I can see). How? By cutting out a 10 minute or so signal stop at Henwick, an 8 minute stop at Evesham and 10 minutes at Oxford and operating to the following schedule. Great Malvern depart 1430, ML 1433, WFS 1442, WSH 1445, Pershore 1453, Evesham 1502, Honeybourne 1509, Moreton 1520, Kingham 1528, Charlbury 1540, Hanborough 1549, and then forming the 1601 from Oxford.

[SDS]

So, the new stuff that hasn't been announced previously, I reckon is -

^The most interesting item - this contract only runs to September 2015, where the DfT^» (Department for Transport - about) schedule for re-franchising shows FGW^▸ (First Great Western) being refranchised in July16. I wonder why this contract doesn't go that far? It may simply be to get around EU^» (European Union - about) rules on large contracts being advertised in the EU journal. I guess "A further contract will be negotiated before a long-term franchise is let." covers the further extension to July16.
....
I wonder why this contract/franchise was only let until 20/09/15 and not the re-franchise date of July16? That could be really interesting!

Correct its a "direct award" and not an extension (in all but name). I do believe that the DaFT^» (Department for Transport - critical sounding abbreviation I discourage - about) can award new short term franchises without having to go through all the normal stuff.
If they did award a longer franchise they would fall foul of European Law. Stuff like it has to be advertised, fair bidding process, OJEU, etc etc.
West Coast I do believe is being run under a management contract, and that was also a "direct award".

I also note that the franchise premiums or subsidies haven't been released.

[Andrew1939 from West Oxon]

Why is there no mention (as far as I can see) in the franchise announcement about the financial arrangements with FGW^▸ (First Great Western)? Have FGW been screwed down or have FGW got themselves a good deal? Anyone out there who can throw some light on this?

[ray951]

Why is there no mention (as far as I can see) in the franchise announcement about the financial arrangements with FGW^▸ (First Great Western)? Have FGW been screwed down or have FGW got themselves a good deal? Anyone out there who can throw some light on this?

According to The Guardian http://www.theguardian.com/business/2013/oct/03/first-group-great-western-franchise-32m-pounds FGW will pay ^32.5m to Dft for the extension. No wonder this wasn't mentioned in the press release given that if FGW had kept to the original contract they would have had to paid considerably more than it, ^800m according to the article.
FGW must be laughing all the way to the bank.

[grahame]

http://www.walesonline.co.uk/news/wales-news/first-great-western-pay-department-6140469?

The DfT^» (Department for Transport - about) announced on Thursday that it had awarded the new franchise to FGW^▸ (First Great Western) but declined to disclose any financial figures.

The DfT today told WalesOnline the premium would be ^32.5m for the 23 months and FGW would incur additional costs of ^150m in both years of the new franchise, compared with the costs envisaged in the 2006 franchise contract.

The DfT said the additional costs will include:

* a significant increase in the charges FGW will pay for the use of Network Rail^s tracks, as determined by the Office of Rail Regulation;

* costs resulting from disruption to services while the Great Western line is electrified;

* heavy maintenance of rolling stock and essential maintenance work on the High Speed Train fleet;

* payments for using a new train depot at Reading, which will be higher than those for the old depot;

* preparatory work for the new Super Express Trains, which are due to arrive from Japan and begin testing in 2015.

The DfT added that the 2006 franchise contract had assumed that FGW would by now have the benefit of new trains, but FGW would have to keep the High Speed Trains ^ dating from the 1970s ^ in service for longer.

[grahame]

Also of note

The new franchise also puts an end to payments which the DfT^» (Department for Transport - about) has been making to FGW^▸ (First Great Western) to compensate for revenue from fares being lower than expected when the 2006 contract was awarded.

Ah - so that's an end of "Cap and Collar" where 80% of the risk goes back to the DfT which (as I understand it) has meant that of an extra (say) 1000 pounds collected in a day by an RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context)) team, only around 200 would stay with First to pay that team and perhaps to make a little profit.  Perhaps the change will encourage more robust fare collection, and also more of a willingness to try out other schemes which will raise more farebox income.  Could be good news for innovational things to be tried, though 2 years is scant time to build anything up and get a return.

[ChrisB]

Indeed, all risk to FGW^▸ (First Great Western), rather than losing 80% to the DfT^» (Department for Transport - about).

BUT - that is going to mean FGW become *more* risk-averse when trying new & speeded-up services. Extra trains will need a business case showing increases in patronage, and speeded-up services won't risk any added minutes for catch-up purposes. More work for those suggesting improvements in showing where increases in patronage will come from.

[Chris from Nailsea]

From the Morning Star:

Tories Hand ^247 Million Discount To First Great Western

Tories blow millions by handing rail firm massive discount to keep trains private

Tory ministers faced an angry backlash yesterday after it was revealed they have given rail privateer First Great Western (FGW^▸ (First Great Western)) nearly a quarter of a billion pounds discount on its rail franchise.

FGW will pay just ^32.5 million in premiums for the 23 months of the new extension, which lasts until 2015.

The premiums of the last two years of the previous contract amounted to ^279m, revealing an astonishing ^247m loss of payments to the taxpayer over a similar period under the current deal.

The extension was granted after a review of the government's tendering process which was put on hold following a complaint by Virgin Trains in 2012 over "significant technical flaws" when FGW operator FirstGroup won a bid on the West Coast franchise that Virgin was then operating.

The West Coast deal was annulled and the franchise process was put under review, with the government now set to pay the train companies ^50m in compensation as a result.

Since the outcome of the review this April the government has concentrated on selling off the publicly owned and profitable East Coast line, while delaying the franchising tender of FGW run services by providing the massively discounted contract extension.

Railway union RMT^▸ (National Union of Rail, Maritime & Transport Workers) said the figures backed up the union's claim that the government is ideologically opposed to a public-sector option. It said that franchise extensions are being awarded "on back-of-an-envelope calculations with the companies able to fill their boots with outrageous financial demands."

RMT general secretary Bob Crow said: "It is a scandal that the only reason for these costly contract extensions is David Cameron's decision to rig the franchising timetable so that he can carry out a totally unnecessary privatisation of East Coast rail services."

Labour's shadow transport secretary Mary Creagh also spotlighted the Tories' "obsession" with selling off East Coast while handing buckets of cash over to greedy rail companies. She said: "David Cameron should tackle his government's cost of living crisis and cap rail fare rises for struggling commuters, instead of obsessing about handing East Coast over to the private sector. East Coast is working well and will have returned ^800 million to the taxpayer by the end of this financial year. This government has learned nothing from the West Coast franchising fiasco, which saw over ^50m of taxpayers' money wasted in compensation to train companies because of ministers' incompetence."

Train drivers' union Aslef general secretary Mick Whelan pointed out that FGW had cancelled the last three years of its current contract to avoid paying the taxpayer ^800m in franchise fees. He said: "It now seems this will be exacerbated by the fact that it will not have to pay the full market value for its extended contract. The truth is that the privatised train-operating companies think that the public should pay for the investment, while they make a private profit."

FGW did not respond to the Star's request for a comment.

[ChrisB]

Blimey - that could have been printed back when the new franchisewas awarded. Did they have no current news to print?

[Chris from Nailsea]

The 'story' has also been picked up by the Plymouth Herald:

Rail union franchise claims expose Great Western train ^robbery^

A railway union has claimed the 23-month contract extension handed to First Great Western cost the Treasury ^247 million in lost income.

The RMT^▸ (National Union of Rail, Maritime & Transport Workers) says it has unearthed figures revealing the true cost of the interim deal, calling it a ^shambles^ which left taxpayers out of pocket.

FirstGroup^s First Great Western train company was last month told it could keep the franchise to run trains into Wales and the South West for another two years.

The original tender process was put on hold after the Department for Transport^s (DfT^» (Department for Transport - about)) awarding of longer-term rail franchises ran into trouble last year. Officials admitted there had been ^significant technical flaws^ in the tendering process for the West Coast Main Line, which were originally given to FirstGroup

The October announcement was broadly welcomed after promises of more seating, sleeper carriage capacity and improved wi-fi connection.

The RMT said its research showed that First will pay just ^32.5 million in premiums for the new extension. However, it said the premiums of the last two years of the previous contract had amounted to ^279 million, thereby delivering a ^247m loss to the taxpayer over a similar period under the current deal.

General secretary Bob Crow said: ^The news that the rail franchising shambles is set to cost the taxpayer another quarter of billion pounds on the Great Western route will come as a bitter blow to staff and passengers contending with attacks on pay and conditions and eye-watering fare increases to travel on notoriously overcrowded trains.

^First Group are laughing all the way to the bank, not only did they dodge ^800 million in premium payments by ducking out of the old contract early but they^ve now ended up with a rollover dropping into their laps worth a cool quarter of a billion in further lost returns to the taxpayer.^

A DfT spokesman said the Great Western franchise had been ^carefully developed to achieve the maximum benefit for taxpayers and passengers^ and an ^appropriate amount^ was being paid to FirstGroup.

First said the RMT^s figures ^only tell half the story.^

^Their deliberately misleading calculations fail to make any acknowledgment of the increased costs that First Great Western will incur over the two years of the new contract,^ a spokesman added. ^Our increased costs include higher payments to Network Rail for track access charges and the expanded Reading station and new train-care depot. We are also paying increased train maintenance costs for the existing InterCity 125 fleet, carrying out major overhaul works to prolong their lives.

"First Great Western^s part in supporting the ^8 billion investment in the route is also reflected in higher costs as we gear up to support the introduction of new trains and other service quality improvements. The deal is good news for passengers, taxpayers and our shareholders.^