Written evidence submitted by the Department for Transport (DfT) (WBR 40)

Overview

1. The DfT is currently the statutory franchising authority responsible for appointing a franchisee for the Wales and Borders franchise but has agreed in principle to transfer these powers to the Welsh Government. They will work together during the procurement process to agree the terms of this transfer.  The Contract can only be awarded by Welsh Government when and if this transfer occurs.
2. The Welsh Government has established a wholly-owned company Transport for Wales (TfW), to act as its delivery partner in relation to managing the procurement process. DfT officials are working closely with their delivery partner offering technical support at every opportunity.  
3. The Welsh Government is seeking an Operation and Delivery Partner (ODP) to realise its vision over the life of the Contract.  The ODP will have the expertise and capacity to help design and deliver major enhancements to track and trains, bringing an integrated ‘whole system’ approach to Welsh rail.

What standard of performance has been experienced under the current franchise?

4. The information included below has been derived from the publicly accessible ORR data portal.
5. The number of passenger journeys has increased by 75% over the term of the franchise with total passenger journeys reaching 31.5 million in 2015/16.

6. Over the same period passenger kilometres have increased by 54.7% to over 1.2 billion kilometres in 2015/16, resulting in a modest reduction in the average journey length (39.9km in 2010/11, 38.6km in 2015/16)

7. The financial figures presented here are from publicly available accounts accessible on the ORR website. For comparison purposes we have presented comparable figures for the financial years 2011/12 and 2014/15, aggregated data (by region) for 2010/11 is also available

Franchise Income

*The subsidy figures shown here are ‘net’ figures which include subsidy payments from both the UK and Welsh Governments as well as a rebate payable to the Westminster Government to account for changes in Network Rail access charges. The split between UK and Welsh Government contributions is not publicly available.

Franchise Expenditure

Profit – (Total Income less expenditure)

Government Funding – UK and Welsh Government

8. The Wales and Borders franchise receives subsidy payments from both the UK and Welsh Governments. The total government funding shown below is a net figure and reflects a rebate payable to the Westminster government to account for changes in Network Rail access charges from 2014-15.

9. The tables below reflect the Wales and Borders franchise’s share of net government funding both for the financial years 2011/12 and 2014/15 and as a comparison against the Northern and Scotrail franchises (2014/15).

Operational Performance

10. Punctuality across the UK rail network is measured using the Public Performance Measure metric which records the percentage of trains which arrive within 5 or 10 minutes of their intended arrival time.

11. The table below provides an overview of ATW’s performance over the past 13 years and covers both PPM performance as well as cancellations and significant lateness. Arriva Trains Wales is measured against a 5 minute delay threshold with a current contractual benchmark of 88.8%.

NRPS

12. Passenger satisfaction is measured through a bi-annual survey conducted by Transport Focus. The National Rail Passenger Survey provide a network-wide picture of passengers’ satisfaction with rail travel, consulting more than 50,000 passengers across a representative sample of journeys.

13. For the Spring 2016 Passenger Satisfaction results, published in June 2016, Passenger Focus spoke to 1017 ATW passengers. The full ATW Spring 2016 is attached as an appendix to this report, however a summary of the key outputs has been included below. 

14. The latest spring 2016 survey highlighted a number of areas where passenger satisfaction has deteriorated compared with both the Spring and Autumn 2015 results, these included:

• Sufficient room for all passengers to sit/stand, Spring 2016 satisfaction: 70%, ↓9% compared with Spring 2015 and ↓2% compared to Autumn 2015.
• Value for money of the price of their ticket, Spring 2016 satisfaction: 58%, ↑1% compared with Spring 2015 and ↓1% compared to Autumn 2015.
• Connections with other forms of public transport, Spring 2016 satisfaction: 58%, ↓13% compared with Spring 2015 and ↓3% compared to Autumn 2015.
• The availability of staff, Spring 2016 satisfaction: 55%, ↓12% compared with Spring 2015 and ↓6% compared to Autumn 2015.
• Facilities for car parking, Spring 2016 satisfaction 58%, ↓11% compared with Spring 2015 and ↓6% compared to Autumn 2015.
• Upkeep and repair of the train, Spring 2016 satisfaction 64%,↓10% compared with Spring 2015 and ↓5% compared to Autumn 2015.
• Punctuality/ reliability (train arriving/ departing on time), Spring 2016 satisfaction: 77%, ↓10% compared with Spring 2015 and ↓3% compared to Autumn 2015.

Complaints

15. ATW commits to providing a response to telephone enquiries within 3 working days, email and post enquires within 10 working days. Where a query or complaint requires a detailed investigation ATW aim to acknowledge correspondence within 5 working days and provide a response within 20 working days.

16. The below table provides an overview of complaints per hundred thousand journeys and the percentage of complaints answered within 20 working days.

17. From the start of their franchise term in December 2003 Arriva Train Wales has had 3 minor contractual breaches, in 2008 and then again in 2010 for failures to report changes in their senior management team and 2011 for exceeding their call-in threshold in the rural and inter-urban as an impact of ongoing industrial action at that time.

18. It should further be noted that the Welsh Government has devolved responsibility for enforcement of benchmarks and takes the lead in monitoring the franchise’s contractual performance.

What lessons can be learnt from the current franchise?

19. The Wales and Borders franchise was let in 2002/3 in a commercial environment when Railtrack was in administration and the Hatfield incident was having a serious impact on train performance across the network. As a result, forecasts of market growth were much lower than that which has subsequently occurred. This demonstrates how much exogenous economic circumstances and technology can change during a long contract and how there needs to be mechanisms to react flexibly to these during the franchise term once the supplier is in place.
20. In addition at that time no consideration was given to the introduction of such mechanisms as profit share or profit cap.
21. Historically franchise agreements have contracted higher levels of investment in the early years allowing the franchisee the ability to recoup some of their initial investment through increased revenue over the remaining franchise term. Consideration should be given to how investment can be made throughout the term of the franchise.
22. Increased focus and commitment should be made to enhancing customer service quality.
23. On a positive note Welsh Government has invested in ATW to develop its services and facilities for the benefit of its passengers. They has continued to achieve stable operational performance delivered by an aging fleet of passenger vehicles.
24. The ATW contract has lasted the course, despite having no government protection for cost or revenue risk and has continued to achieve stable operational and customer performance even though operating an aging fleet of passenger vehicles.

What improvements to rail passenger services should be expect under the next franchise?

25. Welsh Government will be conducting a competitive dialogue process as part of their procurement for the next Wales and Borders franchise.  This will enable Transport for Wales to take in to consideration all potential bidders ideas when developing their Invitation to Tender.  Welsh Government’s current high level vision is:

• Development of new services and increased capacity on existing congested services;
• Modern rolling stock, complying with modern standards;
• Improved efficiency realising savings which can extend the service further;
• Co-operation with other transport providers to provide an integrated public transport service; and
• A commercial structure which incentivises the right behaviours with fair commercial returns.

How do the Welsh and UK Governments cooperate in deciding how rail passenger services in Wales should be run?

26. From 1 April 2006 Welsh Government became an active co-signatory to the ATW franchise via a legally binding document called the Joint Parties’ Agreement (JPA). In essence Welsh Government has taken over the day to day management of the franchise and working relationship with ATW. In this regard they manage the Secretary of State's rights under the franchise on his behalf, in consultation with him from time to time as appropriate.
27. Under the JPA Welsh Government is responsible for managing how rail passenger services in Wales should be run. Department officials work closely with both Welsh Government and ATW ensuring contracted service levels are maintained, and provide technical support to Welsh Government when enhancements to the passenger service level are proposed and funded. A summary of the terms of the JPA are set out in Annex A.

31 August 2016