I think the DfT is very reluctant to pull the plug on a franchise contract unless it is failing in a financial sense (like VTEC, and now Northern).
Financial failure means it will impact DfT and rail finances and threaten to pull the whole system down, so action must be taken.
The whole OLR/rebid cycle is horrendously disruptive and expensive, and just now the DfT has much bigger tasks like reorganising the whole industry.
Bad performance is seemingly a case of demanding recovery plans, imposing penalties and securing "passenger benefits" with threats of termination, as for WMT.
Their predecessors London Midland went through several phases like that too.
The media and unions don't seem to be able to distinguish between "failure" in a financial and in a performance sense, just demanding enstripment for both.
TOCs can't win - if they make money it's "fat cats" (possibly foreign to boot), and if they lose money they are "incompetent".