Competitive tendering of rail services.

234 Pages·2007·5.084 MB·English

by  OECD

EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORT
Competitive
Tendering
of
Rail
Competitive
Services Competitive tendering
provides a way to introduce
competition to railways whilst
Tendering
preserving an integrated network of
services. It has been used for freight
railways in some countries but is particularly
Rail
of
attractive for passenger networks when
subsidised services make competition
between trains serving the same routes
Services
difficult or impossible to organise.
Governments promote competition in railways to
reduce costs, not least to the tax payer, and to improve C
o
levels of service to customers. Concessions are also
m
designed to bring much needed private capital into
p
the rail industry. The success of competitive tendering in e
achieving these outcomes depends critically on the way risks t
i
t
are assigned between the government and private train i
v
operators. It also depends on the transparency and durability e

of the regulatory framework established to protect both T
e
the public interest and the interests of concession holders,
n
and on the incentives created by franchise agreements. d
e
This report examines experience to date from around the world r
i
n
in competitively tendering rail services. It seeks to draw lessons
g
for effective design of concessions and regulation from both

o
the successful and less successful cases examined. The work
f
is based on detailed examinations by leading experts of the
R
experience of passenger rail concessions in the United Kingdom, a
i
Australia, Germany, Sweden and the Netherlands. It also draws l

on examples of freight rail concessions in Latin America. S
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(75 2007 04 1 P1) ISBN 978-92-821-0143-8 2007
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Cover_f.fm Page 1 Wednesday, April 7, 2004 11:00 AM
EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORT
Competitive
Tendering
Rail
of
Services
EUROPEAN CONFERENCE OF MINISTERS OF TRANSPORT (ECMT)
The European Conference of Ministers of Transport (ECMT) is an inter-governmental organisation
established by a Protocol signed in Brussels on 17 October 1953. It comprises the Ministers of
Transport of 44 full Member countries: Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium,
Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Finland, France,
FRYMacedonia, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Luxembourg, Malta, Moldova, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia,
Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine and the United Kingdom. There are seven
Associate member countries (Australia, Canada, Japan, Korea, Mexico, New Zealand and the United States)
and one Observer country (Morocco).
The ECMT is a forum in which Ministers responsible for transport, and more specifically inland
transport, can co-operate on policy. Within this forum, Ministers can openly discuss current problems
and agree upon joint approaches aimed at improving the use and ensuring the rational development of
European transport systems.
At present, ECMT has a dual role. On one hand it helps to create an integrated transport system
throughout the enlarged Europe that is economically efficient and meets environmental and safety
standards. In order to achieve this, ECMT assists in building bridges between the European Union and
the rest of the European continent at a political level. On the other hand, ECMT also develops reflections
on long-term trends in the transport sector and, more specifically, studies the implications of
globalisation on transport.
In January 2004, the ECMT and the Organisation for Economic Co-operation and Development
(OECD) brought together their transport research capabilities by establishing the Joint Transport
Research Centre. The Centre conducts co-operative research programmes that address all modes of
inland transport and their intermodal linkages to support policy-making throughout Member countries.
Ministers at their Dublin Council in May 2006 agreed a major reform of ECMT designed to transform
the organisation into a more global body covering all modes of transport. This new international
transport Forum will aim to attract greater attention to transport policy issues, and will hold one major
annual event involving Ministers and key sectoral actors on themes of strategic importance. 2007 is a
transitional year for the setting up of the Forum. The new structure will be fully operational as of 2008.
Also available in French under the title:
L’adjudication par appels d’offres des services ferroviaires
Further information about the ECMT is available on Internet at the following address:
www.cemt.org
© ECMT 2007 – ECMT Publications are distributed by: OECD Publishing
2, rue André-Pascal, 75775 PARIS CEDEX 16, France
FOREWORD – 3
FOREWORD AND ACKNOWLEDGEMENTS
Competitive tendering has been used successfully for procurement of a wide range of services by
governments. It holds particular attractions as a way of organising rail services because it can be used
introduce competition whilst preserving network integrity and avoiding the difficulties of open access
competition when passenger services are subsidized. There have been some very successful cases of
competitive tendering, especially with freight railways in Latin America. There have also been some
notable failures of some passenger franchises in some OECD countries. Getting the regulatory and
contractual frameworks right is a far from trivial task. The purpose of this report is to identify the key
factors for successful tendering and examine the risks revealed by experience to date with franchises in
the countries that have made the greatest use of competitive tendering for railways.
The ECMT is indebted to the experts that prepared the papers for this report
(see table of contents) and to the participants (see annex) at the workshop organised at the beginning
of the project to review early versions of the papers. The workshop presentations can be consulted on
the web at www.cemt.org/topics/rail/Paris06/index.htm. The discussions, chaired by Fabio Croccolo
of the Italian Ministry of Transport, provided invaluable input and stimulation for deepening analysis
of the key issues. Special thanks go to a core group of the experts – Peter Kain, Chris Nash and
Lou Thompson – that devoted much time and energy to designing the project and ensuring that the
concluding paper is consistent with the experience reviewed.

COMPETITIVE TENDERING OF RAIL SERVICES – ISBN 978-92-821-0143-8 – © ECMT 2007

TABLE OF CONTENTS - 5
TABLE OF CONTENTS
ABBREVIATIONS................................................................................................................................6
1. PASSENGER RAIL FRANCHISING – BRITISH EXPERIENCE
Chris NASH and Andrew SMITH.....................................................................................................7
2. BRITISH RAIL FRANCHISING: AN EXPERIENCE IN CHOPPY SEAS
Tom WINSOR.................................................................................................................................35
3. THE PITFALLS IN COMPETITIVE TENDERING: ADDRESSING THE
RISKS REVEALED BY EXPERIENCE IN AUSTRALIA AND BRITAIN
Peter KAIN......................................................................................................................................43
4. TENDERING AND DECENTRALIZATION OF REGIONAL RAIL PASSENGER
SERVICES IN THE NETHERLANDS (1997 - 2005)
Hans van DIJK..............................................................................................................................127
5. EXPERIENCE WITH COMPETITIVE TENDERING IN GERMANY
Andreas BRENCK and Benedikt PETER.....................................................................................139
6. COMPETITIVE TENDERING OF REGIONAL AND INTERREGIONAL
RAIL SERVICES IN SWEDEN
Gunnar ALEXANDERSSON and Staffan HULTÉN...................................................................165
7. CENTRAL AND EASTERN EUROPE: A SPECIAL SITUATION
Ad TOET.......................................................................................................................................189
8. CONCLUSIONS: COMPETITIVE TENDERING IN RAILWAYS –
WHAT CAN WE LEARN FROM EXPERIENCE?
Lou S. THOMPSON.....................................................................................................................195

COMPETITIVE TENDERING OF RAIL SERVICES – ISBN 978-92-821-0143-8 – © ECMT 2007
6 – ABBREVIATIONS
ABBREVIATIONS
AFI Annual Financial Improvement
BOT Build, Own and Transfer
BR British Rail
CEO Chief Executive Officer
CER Community of European Railway and Infrastructure Companies
CN Canadian National Railway Company
CPTA County Public Transport Authorities
CUP Capacity Utilisation Policy
DB AG Deutsche Bahn AG (German Railways)
DfT Department for Transports
DOI Department of Infrastructure
DSB Danish State Railways
EWS English Welsh and Scottish Railway (freight operating company)
GDP Gross Domestic Product
GNER Great North Eastern Railway
GOVIA Partnership of Go-Ahead and Keolis (train operator)
ITC Independent Television Commission
MBO Management Buy Out
MTL Rail subsidiary of MTL Holding (operator of Merseyrail services)
NAO National Audit Office
NEG National Express Group
NERA National Economic Research Associates
NPV Net Present Value
NR Network Rail
NS Dutch National Carrier
OPRAF Office of Passenger Rail Franchising
PSR Passenger Service Requirement
PTC Public Transport Commission
PTE Passenger Transport Executive
RBI Rail Business Intelligence
ROSCO Rolling Stock Leasing Companies
RRPS Regional Rail Passenger Services
SJ Swedish State Railways
SRA Strategic Rail Authority
TOC Train Operating Company
WAGN West Anglia Great Northern

COMPETITIVE TENDERING OF RAIL SERVICES – ISBN 978-92-821-0143-8 – © ECMT 2007
PASSENGER RAIL FRANCHISING – BRITISH EXPERIENCE – 7
1. PASSENGER RAIL FRANCHISING – BRITISH EXPERIENCE
Chris NASH and Andrew SMITH*
Institute for Transport Studies (ITS)
University of Leeds
United Kingdom

* We have greatly benefited from comments on an earlier draft by a number of people including, Mary
Bonar, Richard Davies, Jeremy Drew, Peter Kain, John Glover, Lou Thompson and Stephen Perkins.
Responsibility for the final version is however solely our own.
COMPETITIVE TENDERING OF RAIL SERVICES – ISBN 978-92-821-0143-8 – © ECMT 2007
8 – PASSENGER RAIL FRANCHISING – BRITISH EXPERIENCE
SUMMARY
Abstract.............................................................................................................................................. 9
Introduction........................................................................................................................................ 9
The First Round of Franchising....................................................................................................... 10
Refranchising – The First Approach................................................................................................ 13
The Collapse of Railtrack................................................................................................................. 15
The Current Position on Franchising............................................................................................... 16
An Assessment................................................................................................................................. 18
Conclusions...................................................................................................................................... 27

COMPETITIVE TENDERING OF RAIL SERVICES – ISBN 978-92-821-0143-8 – © ECMT 2007