Procurement of rail franchise presents risks, challenges and opportunities for Welsh Government

Monday, September 5, 2016 - 10:43am

Key decisions still to be made on multi-billion pound contract

The Welsh Government must manage the risks around its approach to the procurement of the next Wales and Borders rail franchise if it is to fully realise the intended benefits. This is according to a report released today by the Auditor General for Wales on the Welsh Government’s investment in rail services and infrastructure.

In 2017, the Welsh Government expects to gain powers to procure the new franchise which is likely to operate for 15 years from 2018 onwards, with current plans to procure an integrated contract worth an estimated £3.5 billion, which would incorporate both the franchise and infrastructure work to deliver the South Wales Metro. Further to this the Welsh Government expects to deliver a step change in quality that will include faster journey times, improved reliability and less overcrowding. However, the report points to problems with the InterCity West Coat franchise procurement in England during 2012 and urges the Welsh Government to learn from this and other examples to ensure that it gets the procurement right and can demonstrate value for money.

The Welsh Government has taken steps to increase its capacity to manage the project, setting up both the ‘Transport for Wales’ company and a strategic advisory board to manage and advise on the procurement. However, there are key decisions still to be made, including the operating model for the new services, some details of the financial settlement with the UK Government and the approach to managing and acquiring rolling stock. There is a requirement for all trains to be accessible to persons with reduced mobility by 2020.

Despite limited powers over rail infrastructure, the Welsh Government contributed around £362 million to wider public sector spending on Welsh railways between April 2011 and March 2016. Investment in infrastructure projects, including European Union funding, totalled £226 million with a £109 million also spent to fund ten ‘enhanced services’ on Wales and Borders routes. Other costs relate to performance incentive payments to Arriva Trains Wales. The report notes that the Welsh Government could have acted sooner to strengthen oversight and contractual arrangements for the infrastructure projects it has funded and that it is strengthening arrangements to better evaluate the value money of its investment in rail services.  

Since 2006, services on the current Wales and Borders franchise have shown improvement with Arriva Trains Wales largely meeting the performance targets set under the franchise agreement. Passenger satisfaction has improved in some respects, but comparisons with other train operating companies show a mixed performance.

Auditor General, Huw Vaughan-Thomas said today:
“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.”