Orange Futures: A Look At The New Overground Concession

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Recent articles looking at the TfL Board and Financial papers have focused on the Underground, and we will return to that subject shortly. It is worth taking a brief break, however, to highlight one other element they cover – the imminent award of the new Overground franchise.

Trading Places

Since November 2007, London Overground services have been operated by London Overground Rail Operations Ltd (LOROL), a joint venture between Arriva UK Trains and MTR Corporation. This was initially under a seven year contract, but TfL exercised a two year extension option in 2013. This means a new operator will take over those operations in November 2016.

The tendering process started 18 months ago and duking it out for the concession are four potential operators: Arriva and MTR are bidding separately this time around and are joined by LoKeGo (a joint venture between Keolis and Go-Ahead) and Metroline.

A late Valentine gift

An announcement of the successful future franchisee has been on the cards for some time and, with the purdah related to London’s mayoral elections imminent, this board meeting represents that last real opportunity to award and announce in time to give the incoming operator the opportunity to fully prepare. It is thus no surprise to see the topic appear on the agenda for tomorrow’s TfL Board Meeting and we look forward to discovering who the new operator will be.

Insider information

A change of operator, of course, is hardly unusual and not normally something worth watching closely. There are certain elements of the new franchise, however, that may prick up ears – even in the mainstream press. Although much of the detail is still under wraps, and will remain so until after any announcement, there are a few interesting details lurking in the Finance and Policy appendices that suggest some interesting changes might be coming.

The gorilla in the guard’s van

Firstly, there is an indication that all-night services may not be far away, at least on parts of the network. This isn’t entirely surprising. The mayor hinted at these as early as February last year, and with the Night Tube now back on track Overground was always going to be a natural next step for TfL. This perhaps represents the first time we have seen any detail about what these first services might be though – all-night running on Friday and Saturday nights between Highbury & Islington and New Cross Gate, it confirms:

The new Concession Agreement includes a number of pre-priced options for introducing additional services (Service Increments) on many routes including: extended evening and weekend services, Boxing Day and New Year’s Eve services, increased service frequencies between Clapham Junction and Stratford and East London Line routes, and the introduction of all-night running on Friday and Saturday nights between Highbury & Islington and New Cross Gate.

The Finance Committee papers also give a good breakdown of the current and future fleet:

From the start of the next concession the Operator will lease a fleet of 96 rolling
stock units comprising:
(a) 8 x 2-car Class 172 diesel units leased from Angel Trains and maintained by Bombardier as part of the new LOTRAIN contract;
(b) 31 x 4-car Class 315/317 electric units leased from Eversholt with maintenance procured by the Operator and undertaken by GAF; and
(c) 57 x 5-car Class 378 electric units sub-leased from RfL and maintained by Bombardier under the existing train services contract.
4.15 The 31 x 4-car Class 315/317 units are currently receiving refreshment and reliability modifications, which will be completed by the start of the next concession. From May 2018 this fleet, along with the 8 x 2-car Class 172 units, will be progressively replaced by the LOTRAIN fleet consisting of 45 x 4-car units built and maintained by Bombardier.

Avoiding the short sell

It looks like the concession will include some interesting measures aimed at targeting operator behaviour that can have serious negative effects for passengers, particularly during periods of disruption.

These measures include a move to a three minute service punctuality measure, rather than the standard five minute measure seen elsewhere on UK railways. In real terms this means that a train arriving three minutes late at its final destination will, from TfL’s perspective, be seen as a punctuality failure by the operator. It’s an interval they feel better reflects “the high frequency, urban nature of services on London Overground and the typical short duration and enroute nature of journeys made by customers.”

This change will have a statistical knock-on: it will mean that, on paper, the Overground will suddenly become less punctual from November onwards:

A consequence of moving to a three minute measure of punctuality is that target levels defined in the Concession Agreement cannot be compared to historical performance based on a five minute measure. For example, the network target trajectory for the new three minute measure under the new Concession Agreement will start from current levels and reach 94.1 per cent which is equivalent to 97 per cent for the five minute measure. We believe this is achievable considering performance achieved historically or expected to be achieved with new infrastructure and rolling stock.

It will be interesting to see if this gets spotted and reported elsewhere in the media or Assembly when the first post-takeover numbers come in, through a lack of awareness (genuine or feigned) of the change.

This measure could, in theory, also lead to some negative behaviour by the operator should they be looking to make up time – most specifically station-skipping. To help counter-act this it seems that TfL have tightened up their service reliability measurements:

A measure that service capacity is delivered as planned, namely cancellations (all services operated from origin to destination), part-cancellations (service call at a all booked stations with emphasis on interchange stations), short formations and train services are arriving significantly later timetabled (greater than 10 minutes)

They have also made it explicit that station-skipping will void any potential financial reward:

bonuses under the Service Punctuality regime are only available where all measures under the Service Reliability regime have been met thus avoiding a situation where the Operator is perversely incentivised to miss station stops in order to arrive at final destination within the three minute punctuality measure.

Putting pressure on the market

Finally, there is one more element of the committee papers that is worth highlighting here: they indicate that the concession will incentivise the successful operator to put pressure on freight services and Network Rail:

Under the operating performance regime the Operator will be incentivised to bear down on the impact of delays caused by Network Rail and other train and freight operating companies. For incidents where Network Rail or another train or freight operator is deemed responsible the Operator will suffer financial deductions calculated at 10 per cent of the equivalent Operator caused incidents. The Operator will therefore be financially incentivised to exert maximum pressure on Network Rail with respect to its performance.

Ultimately, the award will mark a genuine milestone in the history of the London Overground and, with LOROL having proven more than up to the task over the course of their contract, the new operator will have a high standard to meet. Once we are aware of who that operator is, we will update this article.

Update: 18th March

The contract was indeed awarded at the meeting. The successful concessionaire is… Arriva. Press release below:

Transport for London (TfL) has today announced that it intends to award the new London Overground operator contract to Arriva Rail London Limited. The £1.5 billion contract will cover seven and a half years with an option to extend for up to two additional years.

Arriva will take over from existing operator LOROL in November 2016, and will support TfL in delivering further improvements for customers on the already hugely popular network. These will include modernised stations and more frequent services, the first of which will be on the North London line. New trains will also be introduced in 2018, transforming journeys on London Overground routes out of Liverpool Street and on the Gospel Oak to Barking line.

Under the new concession, customers on some routes will benefit from extended operating hours, and new services will be introduced on some routes on Boxing Day. Arriva will also be expected to deliver sustained improvements in performance levels, which have improved hugely since TfL took responsibility for London Overground routes in 2007. To support this, new incentives have been incorporated into the new contract including financially penalising Arriva should incidents caused by Network Rail, train and freight operators impact on London Overground services. Along with the tightening of the rail industry standard measurement for punctuality for commuter services to three minutes within the scheduled arrival time. These measures are being implemented to encourage closer working with Network Rail and Bombardier to continue to improve reliability and provide high quality services for customers.

Written by John Bull