Can somebody please help me out with this question - franchising

[dstrat]

Don't get me wrong, I'm an advocate of the rails being run not-for-profit. Cut the middleman out and run them ourselves. We know how to do it and when run properly, we don't have ulterior motives such as the deadweight loss of delivering profits as the reason for operating.

I just want to hear the other perspective though...

What is the value added by private operators running rail franchises?

I mean, lets take East Coast as a recent example. I fail to see how we can differentiate between National Express East Coast and East Coast in terms of the service that they provide - in general they run the same trains each day to roughly the same service.

If we compare investment into services from TOCs compared with British Rail, essentially its non-existent.

If we look at payments for operating the franchise, this clearly is offset by the profits that are made and spirited away, to non-railway usage.

So I ask, what actually are the benefits of the system, as it is done now?

 

[AndrewP]

Whenever I am working to obtain a service in my core field of facilities management (the same logic applies to rail) I always look for the best value service for the cost of providing it and this may be through an internal option or an external option (whether not for profit or otherwise).

By outsourcing the biggest advantages are:
- The formalising of the contract which gives a requirement to provide a service
- The bringing in of ideas and concepts from other organisations

If outsourcing then it is of little relevance whether a supplier is distributing profits to shareholders, not making a profit or reinvesting them in good causes. What really matters is:
- Is the service offer compliant with legislation, specification and company policy
- The cost of the service and can it be sustained at the price bid
- Any 'added value' which can be offered - whatever this may be

Profit is not a bad thing (excess profit is) so is not relevant in the decisions if the above have been used to objectively select - you have obtained a good value supplier who has demonstrated capability to deliver.

The typical reasons why not-for profit organiations do not deliver are:
- Excessive management and administration
- Lack of expertise compared to commercial organisations
- Focus is outside delivering efficiency
- Lack of ability to access scale economies with other contracts

However, none of these reasons are structural and personally I would have no issue with a not for profit organisation being awarded a contract.

 

[W230]

I find the whole area puzzling.

People in the know say franchises should be longer. This seems to make sense as a longer commitment, suggests at least, that there should be some interest in running the railways well or you lose business. However, as has already been pointed out on this thread, if you run a franchise for 15 years, some assumptions will have to be made when you take it on. There simply have to be.

Furthermore, many people have to use the railways. It doesn't matter who they're run by or how well/badly they are run - some people have no choice. This should not excuse a crap service by whoever is providing it.

Does the rail franchise system actually work? There are benefits to 'outsourcing' operation of railways I assume but there are also drawbacks. Equally, nationalisation has its benefits but also its problems. Are the people who want the railways to be nationalised just hankering after a bygone age or is there now a real case to this with companies dropping out of franchise agreements and the costs of operating the railways spiralling ever higher. Some european countries who do have nationalised railways seem to be making a good job of it. However, I can't help but think that the general public opinion of British Rail was a poor one (at least in the later years). But in hidsight did they actually do a good job or were they simply no worse than the current franchise system. I can just imagine the Daily Mail articles on re-nationalising though...

Then there is the political side of re-nationalising. Conservatives attacking Labour for the problems left by their last goverment and previous collapsed franchises. Labour attacking Conservatives for privatising the railways in the first place. I have no political allegiance but you can just see each party sniping at the other in pointless, never-ending, point scoring exercises...

So, if someone would be good enough to explain the above and give me the answer as to whether it's worth re-nationalising or not (FWIW I don't think that any goverment would do it anyway) then i'd much appreciate it!