Lack of rail franchise competition 'reaching crisis point'

 

Ministers have announced that the latest rail franchise to be ‘shortlisted’ has only three bidders, causing one rail expert to claim that the process is reaching ‘crisis point’.

It follows the announcement in February that only two bidders were shortlisted to run the South Western rail franchise from June 2017 and is the seventh consecutive franchise for which the Department for Transport (DfT) has shortlisted three bidders or fewer.

The Department has previously said that it ‘requires at least three bids per competition to create competitive tension and increase the likelihood of receiving high quality bids’.

Rail expert Christian Wolmar told Transport Network: ‘I think it’s reaching crisis point where there is very limited interest’.

He said this was partly because the cost of bidding had gone up significantly and partly that the Government was requiring tighter deals, both in terms of arrangements for passengers and financial arrangements.

The DfT has given details of the bidders for the West Midlands franchise from October 2017.

”Local
The current West Midland deal includes services to Liverpool Lime Street

The three companies in the running are London and West Midlands Railway Ltd a subsidiary of Govia Ltd; West Midlands Trains Ltd, a subsidiary of Abellio Transport Group Ltd with East Japan Railway Company and Mitsui & Co Ltd as minority partners; and MTR Corporation (West Midlands) Ltd.

In a report in February, the Commons Public Accounts Committee highlighted concerns about a low level of competition for rail franchising, noting that the previous five franchises had each attracted only three bidders.

The committee said: ‘There is a real risk to value for money if market interest in operating rail franchises declines any further.’

The current West Midlands franchise covers a combination of commuting and long-distance services spanning the Midlands, South East and North West as well services to London Euston and Liverpool Lime Street. The DfT said it expects to award the franchise in June 2017.

It also announced that the joint consortium of East Japan Railway Company and Mitsui & Co Ltd, which is part of the Abellio bid for the West Midlands franchise has been awarded a new Pre-Qualification Questionnaire (PQQ) Passport, making it eligible to express an interest in all upcoming rail franchise competitions for the next four years.

The PQQ Passport was introduced by the DfT to reduce the cost of pre-qualification for franchise competitions and attract new entrants to the market.

Transport Network has approached the DfT for comment on the continuing low level of bids for rail franchises.

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