Ed Thomas, Director at KPMG’s transport advisory group comments on the recommendations of the Brown review into rail franchising:
“After six months of turmoil for the UK’s train operators, the Brown Review represents a welcome dose of pragmatism. It provides practical answers to some of the big ‘stumbling blocks’ around risk transfer and contract award thrown up by last year’s West Coast fiasco. The industry will now be hoping that the franchising programme gets back on track as quickly as possible.
“One of Brown’s key recommendations is for future franchise contracts to have a core term of between 7 and 10 years. Brown also proposes that Government takes a higher proportion of the revenue risk that is due to variations in external factors such as GDP and employment. This is no surprise as the West Coast evaluation process showed that trying to transfer virtually all revenue risk to the private sector for a period of 15 years is impractical – the numbers just become too big.
“His recommendation to limit the number of franchise competitions to around three a year is also sensible. Immediately prior to the West Coast decision, DfT was poised to launch four new competitions which would have meant that a total of seven franchises were at some phase of the bid process at the same time. This would have stretched the specialist resources in the sector.
“Following on from the Laidlaw review, Brown places a strong emphasis on DfT increasing its level of in-house franchising capability. It will be interesting to see whether in the medium term this evolves into a new Executive agency. Many industry observers believe that a new body removed from Government could attract the specialist commercial skills required to deliver and manage the franchising programme.”
Katrin Boettger, Senior PR Manager
Tel: +44 207 896 4232 / 0782 4475168
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.