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TfL have announced that four firms have been shortlisted for the Crossrail Concession.  The shortlisted firms are:

  • Arriva Crossrail Limited
  • Keolis/Go Ahead
  • MTR Corporation (Crossrail) Limited
  • National Express Group PLC

FirstGroup, RATP and Stagecoach were eliminated from the process at this stage.

Crossrail will be operated on the Concession model, similar to London Overground where it has proved highly successful. In a nutshell this means that TfL will set clear goals and objectives for the line, with a relatively fixed price being paid to the operator for delivering the services required to meet those objectives. The risk of financial or performance issues is thus largely absorbed by TfL rather than the operator.  Theoretically this allows the operator to focus on service, rather than attempting to recover the cost of operation (and any profits) during the contract period. By removing a significant percentage of the risk burden from the operator, the cost of the contract can also be lower.

The model has proved highly successful on the Overground, both for TfL and LOROL as operator. It is thus perhaps no surprise to see both MTR and Arriva on the list of shortlisted firms – as LOROL is in fact an MTR/Arriva Joint Venture. What’s perhaps more surprising is that both firms appear separately – there has been no indication, publicly at least, that they have been unhappy in the LOROL partnership, and the combination of metro (MTR) and suburban (Arriva) experience that both parties bring to that partnership would have again seemed an excellent fit here. Perhaps MTR now feel “blooded” by the Overground experience and are now more confident about their ability to deliver within the UK on their own.

Whatever the thinking, MTR’s Overground experience, combined with their extensive knowledge of working with metro systems (in Hong Kong) arguably makes them a strong favourite for the contract, on paper at least.

The award of that contract will come swiftly. The Invitation to Tender will be officially issued in September, and the contract itself awarded at the end of 2014. It’s vital this deadline be met, as the Crossrail Concession is due to commence in May 2015 when the Concessionaire will take over the Liverpool Street – Shenfield services currently operated by Greater Anglia. The timetable for transfer of services beyond this is still not fully defined, but Heathrow Connect services will be taken over in May 2018, and operation through Crossrail’s central section is due to start shortly after.

The Concessionaire will also have to make do with existing rolling stock until 2015, when delivery of Crossrail’s own new rolling stock is scheduled to begin. The process of tendering for that continues, and Crossrail will no doubt have looked on the apparent resolution of the ongoing Thameslink rolling stock saga with some relief.

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There are 30 comments on this article
  1. Capital Star says:

    I’m surprised not to see a joint bid as well. Considering how well LOROL has run LO I would have thought that an Arriva/MTR bid would have been a no-brainer for TfL.

    I guess this means that when LO comes up for tender that we may see separate Arriva and MTR bids for that too.

  2. c says:

    Nice to have a few more serious contenders these days – and that First and Stagecoach have been ditched.

  3. John Bull says:

    Yes – I too suspect we’re going to see seperate Arriva/MTR bids for Overground in light of this.

    I do suspect this is effectively MTR feeling that they’ve now served their apprenticeship, so to speak, in the UK and are now confident they’ve got both the experience and the record to allow them to be a player on their own.

    All power to them – Overground has proven they can do it, and as C says it’s actually just quite nice to see a list that isn’t just a rehash of the usual suspects.

  4. Ed Griffin says:

    I have some rather noobish questions, being uninformed on how rail franchises really work.

    1. If the price being paid to the operator is “relatively fixed” on what basis is the contract awarded?
    2. Will the outcome *actually* have a significant effect on the quality of the service?
    3. Finally given the uproar in the papers a while back on Siemens vs Bombardier for building the trains for Thameslink, is there any actual advantage to the UK taxpayer in terms of additional tax revenues or additional employment, in picking a UK firm over a foreign one? So does that make MTR a bad choice?
    Arriva – British arm of Deutsche Bahn
    Go Ahead – UK
    MTR – Hong Kong
    National Express Group – UK

  5. Anonymike says:

    It is indeed a good mix of companies for pre-selection. One does wonder if the fact it is a TFL concession rather than a DafT franchise changes the interest of different companies?

    @EG
    1) I believe it’s awarded based on service levels – i.e. we expect you to run 99% of trains, and of those that you do run 95% arrive *on time. Every cancelled train below this level will cost you x, every extra *late train will cost you y.

    2) In theory, no – so long as all of what you consider by ‘performance’ is covered under the contract.

    3) I suspect the only difference is the transfer of profit back to the parent company – which may not get taxed here. And with a concession, that level is likely to be lower than for a franchise, mainly because, as noted above, there is very little risk to be priced in – TfL keeps that, which makes sense to me.

  6. anonymike says:

    Ooops – forgot to add
    *on time – that funny definition that counts 9 minutes after the time shown in the (comfortable, plump, well-stuffed) timetable as not being late…

    *late – not *on time…

  7. John Bull says:

    1. If the price being paid to the operator is “relatively fixed” on what basis is the contract awarded?

    To quote myself from The series we did on the birth of the Overground:

    The [Overground] would be operated as a “Concession” not a Franchise. Network Rail would obviously manage the infrastructure and someone else would operate the services. TfL, however, would set the fares, decide service levels, procure and manage the Rolling Stock and basically take a more “hands-on” approach to daily decision making. The concession would arguably be closer to the way in which the DLR was operated rather than a traditional franchise – not so much a case of setting boundaries and then taking a hands-off approach, as setting ongoing goals and managing their achievement.

    This would limit the freedom within which the chosen operator could work, but that operator would get a rather large payoff in return – unlike with existing National Rail franchisees, Tfl would absorb the overwhelming majority of the revenue risk – up to 90% of it. This made the Operator’s books much easier to manage and their profit margins clearer, a worthwhile payoff for the tighter working restrictions.

    This is effectively what’s happened. As the NERA report on devolution highlighted, rail franchising doesn’t work in London and the surrounds because it relies on demand (and the danger of it falling) to be the thing that stops operators being rubbish – because if demand falls they make less money. Trouble is that’s not true here:

    [T]he creation of the Franchise system was, conceptually at least, meant to bring about a better situation for all. The introduction of a healthy dose of competition in the market place would, the theory went, increase pressure on TOCs to price competitively. The threat of dissatisfied customers abandoning rail services if they were irregular or too expensive would then ensure a better passenger experience – less passengers would mean less money in the farebox and that would be bad for the Operator’s profits. Similarly, the Operator would be naturally encouraged to bring in service improvements, as they would bring more passengers.

    As the NERA report acknowledges, however, the truth is that the above state of affairs (known as “Revenue Risk”) doesn’t actually hold true in London. London’s suburban lines are primarily utilized by commuters – a group that is relatively immune to major shifts in rail usage (at least within the timescale of the average Franchise). On top of this, many suburban services are now also often oversubscribed. Any “extra” capacity thus caused by significant service dissatisfaction is simply filled by the excess demand in place. In a nutshell, one of the primary crutches on which the Franchise system depends in reality doesn’t exist for most TOCs within London, yet in financial terms the TOCs still have to factor it in to the equation (in a “the value of your investment may go down as well as up” sense) increasing the price they charge for running the railways.

    Hope that helps explain the difference!

    2. Will the outcome *actually* have a significant effect on the quality of the service?

    Theoretically the person best placed to deliver will get the contract. Given MTR and Arriva DB’s experience on the Overground – a contract managed the same way, by the same people, with what will be broadly similar signalling and rolling stock, you have to suspect that the odds are that those two would be better placed to know what to deliver and how to do it than the other bidders.

    3. Finally given the uproar in the papers a while back on Siemens vs Bombardier for building the trains for Thameslink, is there any actual advantage to the UK taxpayer in terms of additional tax revenues or additional employment, in picking a UK firm over a foreign one? So does that make MTR a bad choice?

    Not really – the rolling stock contract is a seperate beast from the operating contract, and ultimately the people doing the operating have to be based on the line. Ultimately the economic benefits of line operation come from the passengers they carry, more than the operator – so what really matters is how well the company moves people around, not where the operator’s head office is registered.

    To be honest, I’ve argued before that the same principle applies to Crossrail’s Rolling Stock contract as the whole “British trains” issue is far muddier than the mainstream media generally present it anyway:

    As Crossrail enters the first stage of its rolling stock assessment, therefore, it is worth bearing all the above in mind. Those assuming that the contract will represent an easy win for Bombardier should be careful. If there remains a “favourite” in the rolling stock race, then it is likely still Siemens. Although both ministers and Crossrail themselves have talked up the differences between the Thameslink and Crossrail requirements, the simple truth is that they overlap considerably. Many in the industry were saying that the Thameslink contract would give a good indicator as to the likely winner of the Crossrail contract before it was announced, and that remains true still.

    Similarly although the financial playing field may have been levelled, the benefits (both in economic and in unit reliability terms) that Siemens will gain from being able to parley their work on the Desiro City for Thameslink into future work are likely reflected in their Crossrail bid.

    Finally it is worth noting once again that the almost inevitable discussions of “British trains for British contracts” that will surface as the tendering process continues are not as clear cut as they may on the surface seem. Bombardier are just as foreign (although perhaps – importantly to some newspapers – not as German) a firm as Siemens, and even if the innate (and obvious) Britishness of the Derby works is accepted, it is important to note that Hitachi too would likely offer UK based construction of trains.

    It’s also important to question just how pertinent that debate actually is to the Crossrail contract itself. Ask the average man on the platform whether they would like to see British trains running on British rails – something that both TV and newsprint will no doubt do – and they will almost certainly answer in the affirmative, but arguably that’s not the right question to ask.

    It’s almost certainly the case that the firm which gains the Crossrail contract will do so because they represent the best fit for the job, and are offering the best train. Ask the same man on the platform whether he wants the best train for the job, even if that train isn’t British, and the answer will likely be less clear cut.

  8. The Kitten of Disenchantment says:

    This whole railway franchising business is a bit of a delusion really. Our government would have us believe that we have a privately-run transport system in a free market economy, but in reality large chunks of our train and bus network are under state ownership – they just happen to be foreign states. One of the Crossrail bidders listed above was RATP – which everyone knows is the French state-owned operator of the Paris Métro. Arriva of course belongs to Deutsche Bahn, majority-owned by the German government, and Keolis is an SNCF company. We are in the perverse situation of a public sector body potentially awarding the franchise for a privatised railway to an organisation owned by a foreign nation.

    Not that there’s necessarily anything wrong with having international bidders in a free market, but this isn’t a free market, it’s simply returning the railways to state ownership. It begs the question: what profits do these so-called private franchises earn for foreign governments? Somehow, other European countries manage to retain their state railways and are now reaping the benefits of our franchising system, and nobody ever seems to question this contradiction. The involvement of state-owned corporations like RATP, SNCF, Deutsche Bahn and Nederlandse Spoorwegen in a supposedly privatised transport system certainly makes a mockery of the whole free market mythology. Because if privatisation isn’t working, surely it’s time to bring operations like Crossrail back into British state hands, where at least we can benefit from the profits instead of exporting them!

  9. Jeremy says:

    I think that the unhappy situation with foreign state railways bidding for things is that there’s not a realistic prospect of a British state railway achieving the reverse.

    For me as a passenger, the most noticeable thing about travelling on trains/being on stations operated by LOROL versus a franchisee is simple. The branding is entirely TfL’s, with only the very slightest mentions of LOROL if you really look for them. The average passenger doesn’t particularly realise it’s a private operator, as it’s even less evident than on London’s highly-standardised buses.

    With LOROL, it is also happily true that the contractual focus on turning up in the right place with the right train at the right time has produced excellent performance. The staff are also generally helpful, and I wouldn’t be surprised if that had some small part to do with the level of staffing being contractually specified to reflect what is required to do the job, rather than constantly subject to cuts to feed profits.

    The madness of franchising based on poor service risking demand dropping has been adequately demonstrated above. More generally, though, what makes sense to me about a concession arrangement is that the arrangement allows TfL to specify *what* they require to happen in exquisite detail, and agree a price at which it is to be delivered. The opportunity to make more money for the operator comes from *how* they do it, and the risk comes from not doing it correctly. One would imagine that a ‘shortage of train staff’ in the style of London Midland would be something that LOROL couldn’t possibly countenance for financial reasons.

    TfL, meanwhile, can then set fares and take the revenue risk, which has great benefits for consistency. While it would be a slight exaggeration to call increasing rail demand a one-way bet in the capital, it’s certainly not far off.

  10. Anon5 says:

    When the concession takes over the Liverpool Street-Shenfield services do we expect a temporary name will be used until the ‘real’ Crossrail services (ie new stock taking you from one side of London to two others via a tunnel) starts.

    When the tunnel opens do all Shenfield services continue through the tunnel or will some continue to terminate at Liverpool St? (If the latter, will terminating trains be operated by Crossrail or another franchisee?)

    Will Network Rail run the infrastructure up to and including the tunnel mouths, or the whole line?

    In light on BBC London correspondent tweeting today that the West Anglia rail franchise between Liverpool St and Cambridge via Stansted will be taken over by TfL, what does that mean for those services which aren’t on the TfL West Anglia or TfL Crossrail routes? Will they be split into long-distance and suburban franchises?

  11. ngh says:

    BBC saying:

    Running costs of Transport for London and Network Rail to be cut

    Which presumably aligns with the 9% cut in annually managed expenditure (i.e. non capital projects budget)

    So fare increase on TfL or reductions in service levels, staffing (ticket offices, more automated maintenance or equipment requiring less maintenance and finally driverless trains?)

    and BBC London saying

    London Mayor Boris Johnson has said his settlement for London in the Spending Review will fund the following projects:

    West Anglia suburban rail services to be devolved to the mayor and Transport for London
    A £500m borrowing guarantee to support housing and transport infrastructure in Tottenham
    A £90m commitment to carry out electrification of the Gospel Oak to Barking overground line, as a first step towards the extension of the line to Barking Riverside
    An initial commitment from the government to Crossrail 2 of £2m for feasibility studies into the vital north-south rail link.

    So GOBlin electrification and WAML upgrade

  12. John Bull says:

    Post for what we know about the settlement in general is now up, so if we could focus discussion on that aspect there that would be good.

  13. Anonymous says:

    @Anon5
    “In light on BBC London correspondent tweeting today that the West Anglia rail franchise between Liverpool St and Cambridge via Stansted will be taken over by TfL, what does that mean for those services which aren’t on the TfL West Anglia or TfL Crossrail routes?”
    I assume they would stay with what’s left of the Anglia franchise.
    I don’t think the TfL press release suggested it would go as far as Cambridge, and indeed I’m surprised at Stansted – most proposals have not suggested TfL going further up the main line than Cheshunt (plus the Hertford branch)

    Same old story – this will put most predominantly suburan services north of the river under TfL control – the principal exception being FCC (soon to be Thameslink)’s GN services – leaving those of us south of the river largely to the tender mercies of Stagecoach and Govia. Even Crossrail will only dip two toes south of the river – Abbey Wood/Woolwichat one end and Maidenhead at the other.

    Perhaps TfL should be renamed TfEM (Transport for Essex and Middlesex)

  14. Anonymous says:

    @JB 1338
    my previous (1353) post might be better on other thread, but it answers a point raised in this Crossrail one – what will happen to non-TfL (Crossrail or suburban) services

  15. Si says:

    @Anon5 (1303)

    “When the tunnel opens do all Shenfield services continue through the tunnel or will some continue to terminate at Liverpool St? (If the latter, will terminating trains be operated by Crossrail or another franchisee?)”

    All Shenfield services will go via Crossrail, however the 6tph peak Liverpool Street – Gidea Park service that is planned will go to the mainline station. It would be run by the Crossrail TOC.

    Likewise the currently specified Paddington – Reading 2tph service and the Slough – Reading 2tph service would be run by Crossrail TOC. Though I’d imagine that these won’t happen, with the planned HEx & Reading extensions occuring. I’d imagine that the Henley (1tpd to Paddington unless Crossrail extended to Reading), Marlow (same as Henley), Windsor (no through services) and Greenford (through services abolished) branches will be run by Crossrail TOC, though Greenford is a grey area – unelectrified and could be taken over by Chiltern or Overground fairly easily.

  16. stationless says:

    I am surprised that Abellio NS, as current Greater Anglia franchise-holders, were not in the bidding for this?

  17. Graham H says:

    @Anon5 – in fact, the Thames Valley branches will remain with the GW franchise under the presently envisaged franchise spec. As you may imagine, this is causing GW bidders some headaches in terms of rolling stock provision.
    @c – neither First nor Stagecoach actually wanted to pursue a serious bid for Cross Rail apparently, partly because they saw it as a killing field operationally during the inception phase (ie while construction is still underway) and partly because there are more attractive targets commercially.

  18. Greg Tingey says:

    Anon @ 13.53
    But the “people” (MP’s & appointed “Authorities” in Kent told TfL to eff off, didn’t they?
    WE want our crap services unchanged …”
    Now they’ve got exactly that.
    So mustn’t grumle, must we?
    Got EXACTLY what they (you?) asked for – tough.

  19. peezedtee says:

    Spelling check: “publically” should read “publicly”
    [Fixed. Ta.  PoP]

  20. James Hardy says:

    Who gets Romford-Upminster?

    It would seem perverse to grant it to the long-distance-focussed Anglia Franchisee, when it does not connect with any of their fast services? But I have seen no mention of it forming part of Crossrail (as a feeder service). Back to LTS?

  21. Whiff says:

    Thanks John Bull for the explanation of the differences between concessions and franchises; I’ve been struggling to get my head round that for a while.

  22. Twopenny Tube says:

    JH @ 10:36: “Who gets Romford-Upminster?”
    Not LTS surely, due to lack of physical connection at Upminster. How about the District Line? Platform extensions would be rather expensive, but there must be a way of sealing off a few carriages, or running a short train. They have a depot on the doorstep, so crew changeovers during the day would be straightforward. Perhaps the Crossrail project could chip in with a few quid towards the conversion, as they would be saved the inconvenience of empty stock movements at Romford.

  23. timbeau says:

    @2d tube

    I very much doubt that Romford -Upminster would be converted to 4-rail. If run it, it’s more likely to run as a LO service, using a 378. It’s a bit of a Crossrail orphan, like the Greenford branch

    @James hardy
    “It would seem perverse to grant it to the long-distance-focussed Anglia Franchisee, when it does not connect with any of their fast services?”
    The Liv St – Southend service call at Romford, and I think that’s staying with Anglia

  24. stevekeiretsu says:

    rail franchising doesn’t work in London and the surrounds because it relies on demand (and the danger of it falling) to be the thing that stops operators being rubbish – because if demand falls they make less money. Trouble is that’s not true here

    It seems to me that this sentence is awfully telling in rather the opposite direction, too.

    I can see that, as a point of simple, current fact, the “danger of demand falling” factor is zero in-and-around London in a way that it isn’t quite elsewhere in the country. Buuuttt… If we assume some proportion of the (non-London) rail franchise customers are ‘fixed demand’ (or whatever the economics lingo is), i.e. using it because they have to, an essential journey with no other realistic choice of mode, then to give them the “free (market) choice” of voting with the wallet by not using it, is essentially to shaft them. “Oh, you need to get to work, or hospital, and the service is crap? Well gee, capitalism will soon sort that out, if you simply stop using the service at all, the operator will soon notice the dip in their profit margin!” And as for the remainder of passengers, who are flexible in demand, i.e. they are making optional journeys (leisure) or have alternative transport options — if rail travel is more “green”, and safer, and whatever other environmental, social or non-financial benefits it may have, then surely again, no system should be created which encourages people to forgo / boycott rail travel as their only means of ‘punishing’ / influencing the quality of operation.

    I’m not explaining this very well, I don’t think, but what I’m trying to say is: ergo, surely, rail franchising is an ethically appalling way to run a public transport system, outside London as much as in, quite apart from how well it “works” (or doesnt).

  25. James Hardy says:

    Looking at the timetable they do seem to have added more trains stopping at Romford on the Southend Vic to Liverpool Street service since I last used the service regularly, but it is considerably less than half of them, only one an hour off peak

  26. Twopenny Tube says:

    JH 12:00: “Looking at the timetable they do seem to have added more trains stopping at Romford on the Southend Vic to Liverpool Street service since I last used the service regularly, but it is considerably less than half of them, only one an hour off peak”
    Do Braintree trains stop at Romford during off-peak, then non-stop (maybe Stratford?) to Liverpool Street? The down workings give Romford an hourly direct train to Chelmsford.

  27. Anonymous says:

    Colchester Town rather than Braintree.

  28. Anonymous says:

    why all the praise for MTR? for the record, they are doing an APPALLING job of running the franchised metropolitan train system here in Melbourne. many cancellations and sneaky ways of meeting their contracted standards without facing financial penalty. no improvement in customer service standards. rolling stock dirty and getting worse.

  29. Alan Griffiths says:

    Question No: 2465 / 2013

    John Biggs

    My constituents who travel to and from Maryland, Forest Gate, Manor Park and Chadwell will welcome the advent of the Crossrail services in their areas but have concerns regarding the fares’ structure. Can you confirm that fares will be in line with those of TfL and that all current Oystercards, Travelcards, Freedom Passes and Zip Cards will be valid?

    Written response from the Mayor

    I can confirm that I will be responsible for setting fares for journeys locally over Crossrail services, including fares to/from other LU/DLR stations via Crossrail.

    I intend that such fares will be in line with those charged on LU/DLR, and that the full ticketing range including Oyster Cards, Travelcards, Freedom Passes and Zip cards will be valid on Crossrail services.

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