Maximising returns for the railway through growing passenger numbers (as distinct from fare levels) helps affordability, by reducing the burden on both taxes and passenger as well as reducing emissions from transport. Consequently, in the evaluation criteria set out for the franchises, with a clear indication of how points would be awarded, creative ways of increasing off-peak use was a major element.
The criteria also worked to maximise the possible broader returns for the people of Scotland. As Reeve says: “Transport Scotland spends a lot of money, but the franchisee also spends a lot of it too, so we were very keen that as much as possible should bring benefit to the economy of Scotland.
“There are limitations about what one can do about that in European law, but we can do things such as encourage opportunities for small- and medium-sized enterprises in supplying the franchise. So, for example, we have encouraged the promotion of Scottish produce as part of the enhanced catering offer on the Caledonian Sleeper.”
A persistent criticism of franchises has been the failure to align incentives to produce the desired outcomes.
“We wanted to see an alignment of incentives between Network Rail and the franchise operator so that they deliver our strategic objectives. We don’t have it now.
“Network Rail has no incentive to accelerate the times of trains - quite the opposite, given additional track maintenance costs and the adverse impact it might have on hitting performance targets. At present, neither the regulatory framework nor financial payment regimes provide an effective motivation for attracting additional passenger or freight customers to the railway network.
“We know that faster trains attract additional passengers and improve use of assets such as trains and paths, but it isn’t something that Network Rail is incentivised to deliver.
“In the franchise, we encouraged bidders to enter into an alliance with Network Rail. We awarded points not for an alliance per se, but where the bidder offered an improvement in output or a reduction in cost through that alliance. Abellio had the most ambitious plans for such an alliance. I think this will be a hugely important part of the strategic future for the railway in Scotland. Watch this space!”
A paradoxical challenge for franchise bidders was ScotRail’s high current PPM performance standard. The Invitation To Tender criteria assumed competence at maintaining this standard and gave no additional quality points for doing so, instead raising the bar by introducing scores for new qualitative improvements.
Says Reeve: “We would like punctuality to be a little better, but it is not a priority for improvement because it is already pretty good. We chose to award a high percentage to quality rather than finance - 50/50 for the Sleeper and 35/65 for ScotRail - focusing on areas where we wanted strategic changes such as new electric trains and creation of a proper inter-city network.
Smart Ticketing
“From Edinburgh and Glasgow, faster services with higher standards of comfort will serve the more northerly cities of Aberdeen, Dundee, Inverness, Perth and Stirling. A Class 170 to Inverness is OK, but it’s pretty draughty when the doors open at Aviemore in December.
“We allocated 25% of the 35% to SMART integrated ticketing. Abellio produced a very high-quality response to this, thanks to its experience of inter-operator SMART ticketing in the Netherlands. Abellio would realise and add to the potential of what has already been put in place, with a target of 60% SMART tickets within four years.
“Transport Scotland has already required and funded the fitting of ITSO ticket readers on all buses in Scotland, which has paid for itself many times over in producing auditable figures of claims for concessionary travel. There is also the potential to extend integrated ticketing to ferry services. But the Abellio bid also covered more basic improvements such as integrated timetables.”
Scotland offers some of the most dramatically scenic rail journeys in Britain. They are not only vital lifelines for remote communities where many inhabitants are on below-average incomes, they also have tremendous potential for tourism when imaginatively managed and promoted. Whether it is bird-watching from the RSPB visitor centre in the station building at Forsinard on the Far North line, Jacobite steam specials on the West Highland line to Mallaig, or using the train to access bike routes, there is great scope for developing eco-tourism in areas that need such appropriate development.
“We specified a minimum of the Kyle and West Highland lines for the introduction of ‘scenic trains’, and encouraged simple improvements such as seats aligned with windows,” says Reeve.
Abellio’s bid promises refurbished PRM-compliant Class 158s, catering featuring Scottish produce and a ‘tourist ambassador’ on board trains. The operator has also added the Far North, Stranraer and Borders lines to the ‘Great Scenic Railways of Scotland’, aimed at attracting more people to the regions and making the train journey part of the visitor experience. This isn’t new thinking, but it has perhaps been lost in the cut and thrust of franchising. It’s clearly not the most important part of the franchise, but the bid teams responded enthusiastically to this part of the specification.
“As far as I know, this is the first time that a franchise contract has included a commitment to operating additional steam trains on an occasional basis over various routes,” enthuses Reeve. That’s right - a franchise seeking steam operation!
“Besides making sound economic sense, these steam and scenic trains build goodwill. It was notable that a radio commentator in Scotland, talking about the January 2015 fare increases, cited windows aligning with seats as one of the positive developments of the new franchise.
“We were very consistent about all these strategic priorities. We began giving market briefings two years ago, flagging our priorities in the pre-qualification process, so by the time we published the Invitation To Tender for ScotRail in January 2014 there were no surprises. Bidders and their suppliers knew what was important to us. They had a lot of time to think about solutions to our problems and ways to meet our aspirations. We got better quality bids as a result.”
Before the bid results were announced, the Laidlaw Inquiry and the Brown Review of the rail franchising programme published their findings.
One recommendation of the Brown Review suggested that “bids should also be explicitly scored on their proposals for improving service quality for passengers and their approach to management”.
The structure and approach adopted by Transport Scotland was further endorsed by Laidlaw’s conclusion that the West Coast franchise competition had failed “because of an accumulation of significant errors related to inadequate planning and preparation, complex organisational structure, and a weak governance framework”.
And Brown further commented: “The temporary suspension of franchising has also had a very negative impact on the industry’s supply chain, with many companies having to reassure their investors in its aftermath.”
This is particularly the case with rolling stock procurement. As Reeve observes: “Very few passenger trains have been built except by an act of government will. New trains are bought because of growing demand met by a franchise specification or a variation to an existing one; regulatory requirements such as Mk 1 replacement or accessibility; and because of new projects such as Crossrail, Thameslink or the Edinburgh Glasgow Improvement Programme EGIP.
New Rolling Stock
“The short length of franchises compared with asset life means it is highly unusual for a TOC to invest in new trains unless it is underwritten by government. Government is necessarily involved, so the question becomes not whether but how should government be involved in rolling stock procurements?
“We knew through consultation what we wanted, and how suppliers could meet those wishes. We included a mandatory output specification plus a detailed, but advisory, technical spec for the new electric rolling stock.
“We had good feedback from suppliers and bidders that it had concentrated minds on what was wanted. We signalled that we were prepared to underwrite the rolling stock over a longer period, and we have got better value deals as a consequence. We have also removed the risk of inflation, when a train gets re-priced at inflationary rates at the end of a franchise contract.
“Historically there has been a reluctance by government to underwrite rolling stock beyond the length of a franchise. Most trains in Scotland have spent their life in the country, and those we are ordering are likely to be here beyond the life of the new franchise contract. We have to assure ourselves that they are trains we wish to continue using well into the future.”
New rolling stock was the headline component of the 15-year Caledonian Sleeper franchise announced in June 2014. New trains with four types of accommodation and Club Car will be built to enter service in 2018, with interiors by leading Scottish designer Ian Smith Design. Serco is partnering with leading Scottish hotel and catering suppliers to devise the hospitality offering and Club Car fare. And during the first two years, 15 apprentices will be trained, followed by two a year, Staff pay and conditions are also protected.
Abellio was announced as the ScotRail winner in October 2014. What has the outcome been?
