06.09.16
Welsh government needs greater oversight to manage new franchise
The Welsh government needs to improve the oversight of its spending on rail as it takes responsibility for procuring the next Wales and Borders franchise, according to a new audit report.
The report from Huw Vaughan-Thomas, the auditor general for Wales, said that so far the Welsh government has successfully gained significant investment in rail services despite its limited powers.
However, it said that it must improve its strategy for evaluating the outcome of its investments as it plans to gain powers to procure the next Wales and Borders franchise in 2017.
Vaughan-Thomas said: “The Welsh government has made a significant investment in Welsh railways over recent years and is taking appropriate action to influence decision-making given its still limited powers to determine rail infrastructure projects.
“However, the procurement of the new Wales and Borders franchise services alongside the further development of the South Wales Metro takes the Welsh government into new territory. The Welsh government must manage effectively the risks in procuring what is a significant investment for Wales and ensure that there is strong scrutiny of progress and decision-making if it is to realise the benefits that it expects to deliver.”
Between April 2011 and March 2016, the Welsh government invested around £362m in the Welsh railways and £226m in rail infrastructure.
However, the auditor general’s report said that it had “not adopted a systematic approach to evaluate the value for money of its investment in rail services”.
The Welsh government believes it will gain the power to procure the next Wales and Borders franchise next year, although it does not have the same rail franchising powers as the UK or Scottish governments.
It intends to let an integrated Wales and Borders and Metro contract, the first contract of its kind in the UK.
The Welsh government also intends to bid for £125m from the European Regional Development Fund to support investment in the South Wales Metro Phase 2 project. But since the UK voted to leave the European Union, it has been seeking confirmation that it will still be able to access this funding or equivalent funding from the UK government.
Vaughan-Thomas said that given the size of the planned franchise, which will be worth £3.5bn and last for 15 years, it is particularly important that the Welsh government finds a solution for the challenges involved.
He recommended that the Welsh government should use bespoke contracts with Network Rail in the future, instead of using contracts based on Network Rail’s deals with private companies. This will make it easier for the government to protect its financial interests.
In addition, he said that the Welsh government should review the effectiveness of its memorandum of understanding with Network Rail during the procurement process.
Vaughan-Thomas also said that the Welsh government should ensure it records key information about the delivery stages of the South Wales Metro Phase 2 project, and the Welsh Government Audit and Risk Committee should scrutinise the procurement process for the Wales and Borders and Metro contract.
This should involve engaging with the UK DfT and reviewing recommendations from the National Audit Office and the Public Accounts Committee in order to learn the lessons from mistakes in the procurement process in the UK, such as the collapse of the InterCity West Coast competition.
3pm UPDATE
A Welsh government spokesperson said: “We welcome this report by the Wales Audit Office. Extensive research has gone into planning the procurement of the next Wales and Borders franchise. Lessons learned from elsewhere have informed our approach and we’re making sure that we follow all the correct processes to get the best possible value for money.”
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