04.03.16
DfT willing to accept only two ‘genuine’ bids for franchises
Lord Berkeley, who sits on RTM’s editorial board, had asked the department what the minimum number of bids for rail franchises should be to create the “necessary competitive tension to ensure value for money for the travelling public, and in particular whether they consider that three bids is sufficient for that purpose”.
In response, transport minister Lord Ahmad of Wimbledon, said: “Whilst the Department for Transport prefer to have three bids for each franchise competition, as was the established practice under the previous government, we are prepared to accept that on occasion, we may only have two genuine bidders.”
The reference to the two “genuine” bidders comes after First Group and Stagecoach were the only companies shortlisted last month to run the next South Western franchise.
This news came shortly before the Public Accounts Committee (PAC) released its ‘Reform of the rail franchising programme’ report, which claimed the DfT had made relatively “poor progress” in building up its franchise management capability since the collapse of the Intercity West Coast competition in 2012.
The influential group of MPs also noted that the number of bids the DfT receives for franchise competitions has reduced, on average from four to three since the restart of the franchising programme in 2013. And while the department acknowledges the risk that some of the nine transport companies that currently run rail franchises may drop out of the market, it was unclear about how it plans to retain their interest.
PAC has recommended the DfT should develop alternatives to its current commercial approach so it is well placed to deliver value for money if market interest falls to a level where intense competition cannot be guaranteed.
At the time, Meg Hillier MP, chair of the PAC, said: “We are particularly concerned about the effects of declining competition within the programme.
“Our report states that by its own measure, the department requires at least three bids per competition to increase the likelihood of receiving high-quality bids. Yet it was announced that only two companies will compete to run the South Western franchise from June next year.”
(Image: c. Philip Toscano/PA Wire)