FGW requests new franchise terms

[whole diary]

[devon_metro]

I don't really think that arguement should stand when it comes to running a public service!

[John R]

I'm reminded of the time that TV-AM lost the franchise to run breakfast television to GMTV, who bid over the odds. About a year late GMTV went back tail between their legs, said they couldn't afford to run the franchise, and (bizarrely in my view) were successful in having it renegotiated. How would you feel if you were part of the TVAM bid (or a shareholder)?

It's the same with rail franchises, except of course the public service interest is a bit more significant than keeping Roland Rat on air.

   

[The SprinterMeister]

To put it simply, the Government were naive/stupid to under-specify the franchise so badly, and First Group were stupid/naive to overbid for it to such an extent. Their bid far outnumbered those from the other preferred bidders, so there's no surprise that a greedy government accepted it without a second thought! It should be too late for FGW^▸ (First Great Western) to cry about it now.

Certainly in terms of the numbers of units that were in service in the area and their actual capability in terms of day to day operation it seems NX and the Wessex franchise were nearer the mark than the DFT^▸ (Department for Transport) / FGW agreed franchise specification.

Both DFT and FGW got the West unit provision wrong. Now perhaps is the time to revisit the subject in the light of experience gained and add capacity (in the form of class 172) rather than merely blaming whoever was ulitmately responsible. If the 172 is ordered by a lot of TOC^▸ (Train Operating Company)'s there is economy of scale to be had and it will protect jobs at the builder which is of itself no small consideration in these financially tight times.

[Btline]

I don't really think that arguement should stand when it comes to running a public service!

Well said!

[Lee]

Further related links.
http://www.thisiscornwall.co.uk/homepagenews/Threatened-train-firm-wants-better-deal/article-397649-detail/article.html

http://railwayeye.blogspot.com/2008/10/renationalisation.html

http://railwayeye.blogspot.com/2008/10/pips-squeeking.html

[Tim]

I don't really think that arguement should stand when it comes to running a public service!

Well said!

I've sympathy with that view and I understand that you take it because the passenger ought to come first which I agree with, but if you are going to allow the franchise to be renegotiated because FGW^▸ (First Great Western)/DFT^▸ (Department for Transport) made a mistake or because circumstances have changed, then I have to ask you the question, "what is a franchise for?".

If the franchise system is to transfer the risk of running a public service to the private sector then that risk ought to stay with the private sector.  If the franchise can be renegoted at will then the risk hasn't really been transfered and it stays with the public sector.  All you have done is privatise the profit when times are good but kept the loses with the taxpayer when times are bad.  As a taxpayer I object to this. 

If the risk stays with the public sector then it would be much better to have the ownership in the public sector too, or to have FGW as a mere contractor rather than a franchisee (like they are with London buses). 

It is not as if the franchise system even brings private investment into the railways.  First only hold the franchise for 7 years so they don't put any serious investment into the railways - ask yourself what does First actually own and you will find that it is very little - no infracstructure or stock, just things like staff uniforms and computers etc which have a short lifespan anyway).  the serious investment comes from NR^» (Network Rail - home page) which is in the public sector in all but name and the ROSCOs^» (Rolling Stock Owning Company - about) (who charge huge lease-fees to cover their risks).  So franchising doesn't bring huge private investment into the railway.  Compare this with the freight companies who are not franchsied and who have invested hugely buying new wagons and hundreds of class 66s which BR^▸ (British Rail(ways)) would never have been able to afford.

To my mind you either believe in capitalism and leave the railway completely (loses, profits, investments and risk - the whole lot) to the private sector - with taxpayer subsidy on routes and services where it can be justified - or you believe in state ownership and control and recreate BR (perhaps with some functions which are not core to a railway company contracted out, for example catering, cleaning, laudry, ticket machines etc).   I am happy to argue over which system is better, but the current situation is the worst of both worlds because the taxpayer takes all the risk but the private company takes all the profit and when the profit runs out it hands back the keys like GNER^▸ (Great North Eastern Railways) did.

The point of about GM-TV is a very good one.  If word gets around that franchises can be renegotiated at will what is to stop First bidding for every franchise with the promise of paying a billion-billion pound premium to the treasury and then renegotation more favourable terms after it has won the contract. 

There is also a moral argument - FGW made a promise in its bid and it is imorral for people or companies to break their promises is it not?  Just as it is imoral to enter into a contact for travel and then refuse to pay your fare.  I view FGW's attempt to renegotiate its contract with the same contempt as I view some sumbag trying to dodge their fare.  its all abot trying to argue your way out of your responsibilities.

Public service arguments should come first and I have no problem with the taxpayer subsidising the railway (as they subsidise every other mode of transport) but it is also important that the taxpayer is robbed blind to do this. 

[bemmy]

I agree with your very well argued point Tim, provided that what FGW^▸ (First Great Western) are asking for is a more favourable deal. If however there was a reasonable agreement for them to pay less for the franchise, in return for a proportional increase in the minimum service requirements -- to take account of both overcrowding and unacceptable gaps in services from certain stations -- then I would be all in favour.

[r james]

I personnaly think that they should admit defeat, and allow the FGW^▸ (First Great Western) franchise to replace almost all, if not all, of its 150s and Pacers with 172s. allowing the 150s to be cascaded to ATW^▸ (Arriva Trains Wales (former TOC^▸ (Train Operating Company))) to replace their pacers. 

[Btline]

I personnaly think that they should admit defeat, and allow the FGW^▸ (First Great Western) franchise to replace almost all, if not all, of its 150s and Pacers with 172s. allowing the 150s to be cascaded to ATW^▸ (Arriva Trains Wales (former TOC^▸ (Train Operating Company))) to replace their pacers. 

Good plan.

And NOW is the time to get cheaper rolling stock quickly due to the LM^▸ (London Midland - recent franchise) order.

Let's face it: its going to be decades before the GWML^▸ (Great Western Main Line) core is electrified, let alone any other "West" and Wales routes. DMU^▸ (Diesel Multiple Unit) are needed, and the Pacers/ Sprinters need to go!

[simonw]

The decision to turn BR^▸ (British Rail(ways)) from state monopoly to a fragmented franchise was an invitation from the government to independent franchises to take a financial bet on the cost of providing the service.

It is clear the FGW^▸ (First Great Western) won the bid by underplaying the service requirements and optimising the franchise payment to the government. Whilst it may now realise it got it wrong and want the government to change the terms. This is tough, they wouldn't be complaining if they where making huge profits, would they?

FGW should provide the extra train capacity as needed, or forfeit the franchise and it's right to hold other franchises!

[willc]

It is clear the FGW^▸ (First Great Western) won the bid by underplaying the service requirements

Er, no. FGW won by bidding an unrealistically high amount of money against exactly the same service requirements - set by the DafT - as the other groups bidding. That there were going to be problems ahead with rolling stock being cut should have been obvious to all concerned. We all know the results.

As has been said before in other threads, it really wouldn't make any difference if First were stripped of the franchise. Were National Express or Stagecoach to step in, they would face exactly the same problems Andrew Haines has been wrestling with for the past year and would probably come to the same conclusions. And to get either of them to take over, the Government would have to renegotiate the terms, probably rather more drastically than anything First has been asking for.

And would you really want Stagecoach, who got rid of the Class 442 express units and put suburban Class 450 emus on the Portsmouth-London line in place of the 444s, which were moved to replace the 442s on the Bournemouth route? Or NX, who have had a rocky ride on the East Coast since replacing GNER^▸ (Great North Eastern Railways)?

And can we please forget this Class 172 fantasy. The 150s have all got another decade of life in them, so get used to them being around until the end of the FGW franchise. As I said earlier, the lifespan of trains means no-one is going to pay for new DMUs^▸ (Diesel Multiple Unit) that no-one will want if the wires go up and the noises the Government has been making suggest that they are serious about this - not before time -  so no bank will cough up for a big DMU order until the picture becomes clearer. Especially when their whole approach to lending is going to be under close scrutiny, with every decision having to be justified to the nth degree. Not being sure whether someone will want to lease your trains in 10 years' time won't convince anyone to sign off such a loan.

[IndustryInsider]

I agree with Willc's remarks there 100%.

[Tim]

Willc is right.

Also, the government can't strip FGW^▸ (First Great Western) of its franchise because its performance is within the limits set by the franchise.  The problems caused by lack of stock are not a franchise breach because, rightly or wrongly, they are allowed by the terms of the franchise.  For the Government to end FGWs franchise without a breach by FGW would be wrong and illegal.  The outcome would probably be the government paying damages to FGW and/or other franchises being let on less favourable terms to the taxpayer as the operators try and price the risk of the government treating them as badly.

If FGW left the franchise and say National Express took over, the quality of service would, I reckon be fairly similar UNLESS the franchise agreement was amended to for example increase service and stock levels.  But if the Government want to change the terms, I am sure that FGW would let them do that within the existing franchsise providing that they were adequately paid for it.  That is the rub, any improvement to the franchise sepcification will need more government money regardless of who the operator is.  Changing the franchisee is just a red herring.

Now, a year or so ago when the current franchise started, things were possibly a bit different.  It was said by some that First were in breach of the franchise although they denied it.  If anyone on this forum knows the truth as to whether or not FGW was in breach I expect that they will be keeping it a secret.  Such matters are hiden behind "commercial confidentiality clauses" which I think is discraceful seeing as we are talking about a publc service and public money.   My guess is that it was a close run thing and depending on how you did the performance stats, and perhaps how much blame could be shifted to NR^» (Network Rail - home page), you could have found a breach or not. 

However, they were, in the view of Government,  in breach over acidentally misreporting/fiddling their preformance statistics which rather neatly avoided the issue of having to decide if there was a breach on the grounds of poor train performance. and the Government issued a "Breach Notice" to them.  The Government chose not to fire FGW, I expect because they knew that they were unlikely to get such favourable financial terms out of another operator,  but they did manage to get First to commit to an improvement plan which included First investing a bit of their own money.  I expect First would not have argeed to do this if they were not at least slightly worried about loosing the franchise. 

At the time of the "troubles", I was strongly in favour of First loosing its franchise or being punished in some other way if it had breached the agreement, if only pour encourager les autres.  I suspect (but do not know) that the Government might have been in a position to fine FGW for its performance.  What actually appears to have happened is that Kelly decided that the "fine" should be spent on improvements rather than just going into the treasury coffers, so she forced FGW to spend some of its own money on investment in an improvement plan, which appears to have been fairly sucessful.  That action was to Ruth Kelly's credit and contrasts with the fines NR paid for engineering overrun mess-ups which went into the Chancellor's back pocket and were lost from the railway.

But that is all now ancient history...

[Tim]

Willc is right.

Also, the government can't strip FGW^▸ (First Great Western) of its franchise because its performance is within the limits set by the franchise.  The problems caused by lack of stock are not a franchise breach because, rightly or wrongly, they are allowed by the terms of the franchise.  For the Government to end FGWs franchise without a breach by FGW would be wrong and illegal.  The outcome would probably be the government paying damages to FGW and/or other franchises being let on less favourable terms to the taxpayer as the operators try and price the risk of the government treating them as badly.

If FGW left the franchise and say National Express took over, the quality of service would, I reckon be fairly similar UNLESS the franchise agreement was amended to for example increase service and stock levels.  But if the Government want to change the terms, I am sure that FGW would let them do that within the existing franchsise providing that they were adequately paid for it.  That is the rub, any improvement to the franchise sepcification will need more government money regardless of who the operator is.  Changing the franchisee is just a red herring.

Now, a year or so ago when the current franchise started, things were possibly a bit different.  It was said by some that First were in breach of the franchise because of poor performance although they denied it.  If anyone on this forum knows the truth as to whether or not FGW was in breach I expect that they will be keeping it a secret.  Such matters are hiden behind "commercial confidentiality clauses" which I think is discraceful seeing as we are talking about a publc service and public money.   My guess is that it was a close run thing and depending on how you did the performance stats you could have found a breach or not.  They were, in the view of Government,  in breach over acidentally misreporting/fiddling their preformance statistics and the Government issued a "Breach Notice" to them The Governement chose not to fire FGW, I expect because they knew that they were unlikely to get such favourable finacial terms out of another operator,  but they did manage to get First to commit to an improvement plan which included First investing a bit of their own money.  I expect First would not have argeed to do this if they were not at least slightly worried about loosing the franchise. 

At the time of the "troubles", I was strongly in favour of First loosing its franchise or being punished in some other way if it had breached the agreement, if only pour encourager les autres.  I suspect (but do not know) that the Government might have been in a position to fine FGW for its performance.  What actually appears to have happened is that Kelly decided that the "fine" should be spent on improvements rather than just going into the treasury coffers, so she forced FGW to spend some of its won money on investment in an improvement plan, which appears to have been fairly sucessful.  That action was to Ruth Kelly's credit and contrasts with the fines NR^» (Network Rail - home page) paid for engineering overrun mess-ups which went into the Chancellor's back pocket and were lost from the railway.

But that is all now ancient history...

[12hoursunday]

Now, a year or so ago when the current franchise started, things were possibly a bit different. 

Aye up Tim. I think your a bit behind the times the First Greater Western franchise started on 1st April 2006 (2 1/2 years ago)
http://www.firstgreatwestern.co.uk/Content.aspx?id=94