Public Accounts Committee: Department for Transport still facing rail capability gaps despite pay flexibility

Transport department has improved its ability to let rail franchises, MPs say, but still lacks the capability to manage them, and does not have a “coherent strategic vision” for the rail system

By matt.foster

12 Feb 2016

The Department for Transport (DfT) has “not noticeably improved” its capability to manage rail franchises since the collapse of the InterCity West Coast franchise, according to a report from the Public Accounts Committee.

The committee said it was “encouraged” by the improvements to the way franchises are let, and welcomed a greater focus on passenger experience when awarding contracts.

However, the report noted that 7% of positions in franchise management teams remain vacant, with 11% filled by interims.

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Recognising that developing contract management capability is a challenge across government, the report said it was “surprising that the department has not been able to attract more of the right people, despite having the flexibility from the Treasury to pay more additional allowances to high calibre experts".

MPs also called on the department to take a more flexible approach when it is letting and managing franchises, to encourage more innovation from train operating companies.

Officials have “previously been too focused on over-specifying the detail”, says the report, constraining train operating companies and reducing efficiency.

The department has begun to review standard contracts to allow more flexibilty, the committee found, but it asays that “the challenge is more about developing better relationships with operators, and [it] has not made best use of flexibility available to it unde the [current contracts].”

Lack of competition in the rail market, and uncertainty over infrastructure projects such as High Speed 2, are also threatening to undermine the effectiveness of the franchising process, the report says.

It notes that the “scale and uncertainty of planned infrastructure improvements is delaying franchise contracts…which will come at a cost".

Meg Hillier, PAC chair 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 last week it was announced that only two companies will compete to run the South Western franchise from June next year.
“This hardly inspires confidence and highlights the urgent need for the Department to develop new approaches it can draw on when there is a risk competition will not deliver the result rail users and the wider public deserve.”

A spokesperson for the DfT said the department had introduced “a series of measures which has brought new companies to the market”.

They added: “We have 11 owning groups already able to bid for franchises and we are working to actively seek further new entrants to the market.”

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