Rail franchise procurement in Wales

17 February 2014

Article by Andrew Minnis, National Assembly for Wales Research Service

The current Wales and Borders Rail Franchise expires in 2018. On 19 February the Assembly will debate the recent Enterprise and Business Committee report on the Future of the Wales and Borders Rail Franchise, which includes the Committee’s charter for the next franchise. A previous blog post outlines the key recommendations contained in the charter.

The Welsh Government has now laid its response to the report. While all the recommendations have been accepted or accepted in principle, its response to many recommendations refers to the fact that franchise procurement powers are not currently devolved. This post outlines the current powers and responsibilities for procurement of the franchise, and discusses the prospect of powers being devolved.

Current statutory responsibilities in the rail franchising process

Franchising is primarily addressed through the Railways Act 1993 (the 1993 Act). For English and Welsh franchises the 1993 Act requires the Secretary of State at Department for Transport (DfT) to designate the rail passenger services to be delivered by franchise, and to prepare and issue an Invitation to Tender. The procurement process must also comply with relevant EU procurement law.

However, The Railways Act 2005 gave the Welsh Government a greater role in franchise procurement.

Currently, the Secretary of State must consult the Welsh Ministers regarding any franchise which includes a service which begins ends or makes at least one scheduled call in Wales (a “Welsh service”). This includes the West Coast and the First Great Western Franchises.

Where a franchise contains at least one service which is entirely within Wales, and doesn’t make any scheduled calls outside Wales (a “Wales-only service”), the Welsh Ministers must be a joint party or co-signatory to the franchise agreement. The Wales and Borders Franchise is the only such franchise currently in place.

It’s worth noting that In Scotland powers to specify and procure franchises are devolved. These are executive powers only and the Scottish Government remains bound by the requirements of the 1993 Act so that it cannot, for example, unilaterally nationalise rail operations.

Procuring the next Wales and Borders Franchise

If no further powers are devolved to the Welsh Government then it will be a joint party to the next franchise agreement. However, it is not currently clear what this means in practice in terms of specifying the franchise. The Secretary of State will remain both franchising authority (responsible for procurement) and designating authority (responsible for deciding which routes / services are included).

The DfT’s prior information notice for rail franchising, published in March 2013, which sets out the timetable for all the upcoming procurement exercises for which it is responsible, includes the Wales and Borders Franchise.

The Silk Commission and discussions on further devolution

Both the Welsh Government and the UK Government identify a need for further devolution of rail franchising powers in their evidence to the Silk Commission.

The UK Government believes that the current share of risk in the management of the franchise is undesirable. While the Welsh Government is responsible for management of the franchise, and therefore “in franchise risk“, the financial risk of a new franchise or “catastrophic failure” sits with the UK Government. This is described as undesirable. It also notes the Welsh Government’s interest in further devolution.

Similarly, evidence submitted by the Welsh Government confirms that it sees “scope for change in the devolution settlement” and states that it is pursuing “these options with [DfT] as part of the planning for the new Wales and Borders franchise”.

In its response to the Committee’s report the Welsh Government welcomed the recommendation that rail franchising functions, along with an equitable funding settlement, should be devolved.

During the inquiry the Minister for Economy, Science and Transport told the Committee that progress on devolution discussions should be made by early 2014 so that “the position should therefore be clear by the end of 2014 for the necessary engagement”. However, given the need to amend primary UK legislation, it is not clear when any agreement would take legal effect or when the Welsh Government will be able to begin the process of developing the franchise in earnest.