First win Intercity West Coast franchise

[Wath Yard]

As far as I hear he didnt say percentage, however even if he did 40-60% is still a large difference.

Yes, you're correct. The difference between 40% and 60% is significant, so is the difference between 8% and 93%. However, none of these figures have any relevance to this thread or the ICWC bids.

He mumbled slightly but I'm fairly certain Vernon Barker said the two deliverability scores were 64% and 60%. And whilst I don't necessarily believe everything both sides say, I do consider testimony to a Select Committee to be a lot more credible than spurious one-sided quotes in the press.

 

[PaxVobiscum]

I'm with Lloyds and I've had my overdraft (£3,500) for ten years or so.

How about giving us all your date of birth and mother's maiden name while you are at it?

 

[HH]

He mumbled slightly but I'm fairly certain Vernon Barker said the two deliverability scores were 64% and 60%. And whilst I don't necessarily believe everything both sides say, I do consider testimony to a Select Committee to be a lot more credible than spurious one-sided quotes in the press.

Spot on, and I'd add one further thing: If Virgin didn't score higher on deliverability than other bidders, having run the line for 15 years, then there would have to be something seriously wrong with their bid.

 

[jon0844]

Don't get excited. I'm usually in the overdraft on my current account!

 

[Realfish]

There was something in O'Toole's evidence that I didn't understand. In answering the question about fare revenue, he seemed to be saying that if the increases in RPI (on which assuptions are based) aren't there, its ok with us, because the premiums are lower. [Video: about 46mins 40 secs in]

I know a couple of you (a couple of hundred pages back!) mentioned something similar in relation to GDP. But what is O'Toole getting at? Are the premiums promised to the taxpayer caveated by RPI?



http://www.parliamentlive.tv/Main/Player.aspx?meetingId=11378

 

[eastdyke]

Reminder:

Meeting starts at 2.05pm (today)

The work of the Department for Transport

Witnesses
Rt Hon Patrick McLoughlin MP, Secretary of State for Transport

Questioning will include West Coast Franchise.

http://www.parliamentlive.tv/Main/Player.aspx?meetingId=11406

 

[Wath Yard]

There was something in O'Toole's evidence that I didn't understand. In answering the question about fare revenue, he seemed to be saying that if the increases in RPI (on which assuptions are based) aren't there, its ok with us, because the premiums are lower. [Video: about 46mins 40 secs in]

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That probably relates to regulated fares. The ITT stated bidders should expect an RPI+3% increase for the next 2 years, and I think an RPI+1% after that. Therefore, if the Transport Secretary does another U turn on the RPI+3% this year, as this will obviously affect First's revenue, presumably they'll pay a correspondingly smaller amount in premiums. It would affect all future years, not just the one where the fare increase is adjusted.

The part that confused me was both sides stated their additional services would be legal commitments. Tony Collins corrected Virgin’s misleading media claims that they could guarantee their additional services, as the ORR decides who gets paths, but they both claimed the services were legally binding. I don’t believe that is the case.

My understanding of the franchise is the ITT contains a minimum service level from each station that the operator is obliged to operate, and there are then certain costed options like electrification to Chester. I don’t believe additional services are legal commitments and Tim O’Toole admitted as much in his phone call with analysts when asked how they would deal with revenues below expectation he said a lot of the costs aren’t committed. Vernon Barker said their additional services were in their base bid but my suspicion is that the premiums calculated assuming the additional services run are commitments but the actual additional services aren’t.

 

[tbtc]

If you say you'll "keep the Voyagers" after 2016, the Rosco just goes to sleep and cashes in for the next 9 years.
An element of doubt does wonders for competition.

I doubt the bids are framed in quite such absolute terms.
They will probably just talk about number of trains, or just seats, frequencies and journey times.
First haven't committed to new Pendolinos, for instance.

True, but my reading of the situation was that First were suggesting that they'd keep the Voyagers longer term (plus a commitment to introducing a non-specified EMU fleet), whilst Virgin were saying that they'd buy more Pendolini and get rid of their diesel fleet.

My understanding of the franchise is the ITT contains a minimum service level from each station that the operator is obliged to operate, and there are then certain costed options like electrification to Chester

I'm sorry that electrification to Chester doesn't seem to be on the agenda now - it would make so much sense.

 

[ainsworth74]

The part that confused me was both sides stated their additional services would be legal commitments. Tony Collins corrected Virgin’s misleading media claims that they could guarantee their additional services, as the ORR decides who gets paths, but they both claimed the services were legally binding. I don’t believe that is the case.

I took that to mean that in the franchise contract they would agree that, assuming the ORR grant the paths, they would run extra services to xyz from 2016 (or whenever). Meaning that they're contractually obliged to run the services. I could be wrong on this point, but that's my understanding.

 

[HH]

Let me clarify two points.

1. All bidders have to commit to various plans in their contract - indeed plans may be deemed non-deliverable if they don't. These are generally done in the form of COPAs (Committed Obligation Penalty Agreement) whereby they agree to pay a sum of money if something is not delivered or is delivered late. DfT expects these amounts to be painful enough to ensure best efforts are made to deliver. However for commitments that the TOC cannot guarantee (such as timetable changes which require ORR approval) they will caveat the commitment with a phrase such as "providing all necessary approvals are secured".

2. What Tim O'Toole was referring to when he mentioned changes in RPI was that if RPI is lower, meaning fares are lower, then the premium, which is also indexed, is also lower. Many other costs are also indexed, so there is a natural "hedge" on RPI movements. It is not 100% however, so low RPI is bad for First, high RPI good.

 

[Wath Yard]

Let me clarify two points.

1. All bidders have to commit to various plans in their contract - indeed plans may be deemed non-deliverable if they don't. These are generally done in the form of COPAs (Committed Obligation Penalty Agreement) whereby they agree to pay a sum of money if something is not delivered or is delivered late. DfT expects these amounts to be painful enough to ensure best efforts are made to deliver. However for commitments that the TOC cannot guarantee (such as timetable changes which require ORR approval) they will caveat the commitment with a phrase such as "providing all necessary approvals are secured".

OK, thanks. That does make a bit of a nonsense of the claim, by Theresa Villiers I think, that the new style franchises allow the operator the flexibility to adjust service levels depending on demand though, if the operator does enter a binding commitment.

 

[HH]

OK, thanks. That does make a bit of a nonsense of the claim, by Theresa Villiers I think, that the new style franchises allow the operator the flexibility to adjust service levels depending on demand though, if the operator does enter a binding commitment.

Well, I cannot say what either bidder's lawyers would have written, but if it were me I would commit to introduce them by 20xx, try them for n months/years, but no more. Then if they were a dog I could try something else.

 

[YorkshireRider]

[QUOTE=HH;1205835]


I find that very hard to believe. Do you have the numbers to prove this claim?
[/QUOTE]

It was well reported at the time that Virgins bid was just under £1bn over the 7 year franchise, about the same as Firsts, with NX at 1.4bn and Arriva at 1.6bn. While we don't have a breakdown of year on year payments you don't need to be top of the class to work out that quite a bit less than NXs idiotic bid. To be fair all Tim O Toole said was Virgin would have faced the same reality as NX, which of course is true but Virgin would still be running EC now if it had been chosen back in 2007. O Toole had already said on radio 4 that NXs bid in 2007 for EC was unrealistic because they predicted far too much growth on a line that hadn't seen hardly any growth in recent years. Given Virgins premiums would have been less than NXs and therefore you have to assume predicted passenger growth figures lower and maybe higher profit margins then you conclude while facing the same tough economic conditions as NX they would have been in a much better position to deal with it.

 

[LNW-GW Joint]

The DfT top official, Philip Rutnam, was the star performer in front of the TSC.
He clearly knew everything, but was saying little.
He made it clear that First was the winner of WC by a considerable margin.
Branson got a decent "thanks for everything" acknowledgement.

Rail policy is unchanged - they are progressing with HS2 but I didn't note a lot of enthusiasm. Just a hint of delay in the announcement of the "Y" route.
The Thameslink rolling stock contract will be signed "by the turn of the year".

McLoughlin did at least seem to be level-headed and without "baggage".
Amusing to hear him reflect on Crossrail and CTRL from his last stint 20 years ago, and how slowly the infrastructure wheels grind.

 

[spyontheinside]

Ref today’s DFT meeting at 2pm. The committee have agreed that First bid stands, and that the DFT will sign the contract over to First at the earliest opportunity. Obviously VT has launched court proceedings which is stopping the signing. We now have to wait until the Judge looks at the case. If he rules no case to proceed, and that the DFT followed the correct procedure then its thrown out, VT loose and First sign. This is the likely scenario. However, if he finds the process flawed then come December it will nationalised until this mess is sorted out. It’s very much uncharted territory and the scenarios’ of outcome could change dramatically.

The next update will come next week possibly the week after when the Judge reviews the case.

TBH It‘s not really news, we all knew this would be the outcome of this week’s committee hearing.

 

[HH]

It was well reported at the time that Virgins bid was just under £1bn over the 7 year franchise, about the same as Firsts, with NX at 1.4bn and Arriva at 1.6bn. While we don't have a breakdown of year on year payments you don't need to be top of the class to work out that quite a bit less than NXs idiotic bid. To be fair all Tim O Toole said was Virgin would have faced the same reality as NX, which of course is true but Virgin would still be running EC now if it had been chosen back in 2007. O Toole had already said on radio 4 that NXs bid in 2007 for EC was unrealistic because they predicted far too much growth on a line that hadn't seen hardly any growth in recent years. Given Virgins premiums would have been less than NXs and therefore you have to assume predicted passenger growth figures lower and maybe higher profit margins then you conclude while facing the same tough economic conditions as NX they would have been in a much better position to deal with it.

This is not proof that Virgin's bid was deliverable in the current economic climate. You at least have to know the size of each year's premium to be able to say that. NX didn't even get to the big payments before having to hand the keys back. Moreover Virgin's bid had a lot more investment. That means money. Even if their Premium payments were lower, their cash outlay may have been larger.

 

[Zoe]

We now have to wait until the Judge looks at the case. If he rules no case to proceed, and that the DFT followed the correct procedure then its thrown out, VT loose and First sign.

Virgin could appeal though.

 

[WatcherZero]

There was something in O'Toole's evidence that I didn't understand. In answering the question about fare revenue, he seemed to be saying that if the increases in RPI (on which assuptions are based) aren't there, its ok with us, because the premiums are lower. [Video: about 46mins 40 secs in]

I know a couple of you (a couple of hundred pages back!) mentioned something similar in relation to GDP. But what is O'Toole getting at? Are the premiums promised to the taxpayer caveated by RPI?



http://www.parliamentlive.tv/Main/Player.aspx?meetingId=11378

Theres also a profit share on top of the flat payments with the Dft which increases at stages against the bid target revenue and calculated as revenue minus gross operating costs and caps out at 15%.

Think of it as a variable performance fee on top of the flat fee, its included in the headline annual franchise payments but of course means they can fluctuate a bit based on real performance.

 

[IanXC]

The committee have agreed that First bid stands, and that the DFT will sign the contract over to First at the earliest opportunity.

Surely the committee have only *heard* that the bid stands? The committee session is really only an exercise in obtaining information, they haven't even decided whether to produce a report on their view of the ICWC franchising process.

Virgin could appeal though.

Only if they are given leave to do so. If the Judge feels there is so little case to answer he may refuse them leave to appeal which would give some clarity for First and the DfT.

 

[HH]

Theres also a profit share on top of the flat payments with the Dft which increases at stages against the bid target revenue and calculated as revenue minus gross operating costs and caps out at 15%.

Wrong. The profit share mechanism is not only more compex than this, it is based on Profit, not revenue, and the bidder can vary it (upwards only!).

Anyway I feel sure that O'Toole was not referring to this, as it would take a significant movement in RPI to trigger profit share with First's EBIT at 5%.

--- old post above --- --- new post below ---

Only if they are given leave to do so. If the Judge feels there is so little case to answer he may refuse them leave to appeal which would give some clarity for First and the DfT.

Can they even appeal if the Judge decides that there is no grounds for a Review?

 

[WatcherZero]

Thats what I said! Revenue minus operating costs is gross profit! If you dont understand what profit is perhaps you should stop trying to define it.

Listening to the second session now, Dft seems very iffy on the weasly wording of Firsts commitments, a commitment to spend all reasonable efforts to investigate is different than a commitment to operate. First themselves said in their press release that the servcies were subject to trial (In blackpools case the trial is one service per day). The mandarin doesnt seem to appreciate the difference.

 

[F Great Eastern]

TListening to the second session now, Dft seems very iffy on the weasly wording of Firsts commitments, a commitment to spend all reasonable efforts to investigate is different than a commitment to operate. First themselves said in their press release that the servcies were subject to trial (In blackpools case the trial is one service per day). The mandarin doesnt seem to appreciate the difference.

I listened to it too.

Where did First say this was a trial? I can't find anything in their own statements on their site.

Can you please supply a source?

 

[RPI]

I listened to it too.

Where did First say this was a trial? I can't find anything in their own statements on their site.

Can you please supply a source?

Is WatcherZero actually SRB? seems to be about the only pro-VT person on this forum. We all know what the result will be, we all know that First won fair and square.

 

[Stats]

Thats what I said! Revenue minus operating costs is gross profit! If you dont understand what profit is perhaps you should stop trying to define it.

Listening to the second session now, Dft seems very iffy on the weasly wording of Firsts commitments, a commitment to spend all reasonable efforts to investigate is different than a commitment to operate. First themselves said in their press release that the servcies were subject to trial (In blackpools case the trial is one service per day). The mandarin doesnt seem to appreciate the difference.

The actual words by the DfT PS were "My understanding is that what First have offered is a contractual commitment to operate those services."

which was a response to the chair's confusion on what a DfT minister in a written answer has said

"First West Coast Ltd is required by the franchise agreement to actively consider and use all reasonable endeavours to implement the following new services:

between London Euston station and Blackpool North station from the 8 December 2013;

between London Euston station and Shrewsbury station from the 11 December 2016; and

between Preston station and Manchester Piccadilly station calling at Bolton from the 11 December 2016.

These new services are subject to the necessary track access rights being granted by the Office of Rail Regulation."

Where did First say this was a trial? I can't find anything in their own statements on their site.

If FirstGroup haven't said it, Minister's have.

http://www.youtube.com/watch?v=Q7LGci055GE (1:35 in)

 

[WatcherZero]

Sorry, yes. Was a long and detailed interview with Vernon Barker in The Bolton News during his press tour of the North West. He said the Blackpool service would start with a one train per day trial from 2013 which would rise to five services per day in 2016.

edit: And Villers also says it in the video above

 

[LNW-GW Joint]

Is WatcherZero actually SRB? seems to be about the only pro-VT person on this forum. We all know what the result will be, we all know that First won fair and square.

No, he isn't.
I'm not anti-First, and if they've won, they've won.
But I do think losing the Virgin brand from the rail map is not good news, and not what even the DfT wanted.
It reduces diversity and just hastens the day when the busmen run everything.

 

[Sadsmileyface]

To be fair, First isn't really about the buses anymore.

 

[HH]

Thats what I said! Revenue minus operating costs is gross profit! If you dont understand what profit is perhaps you should stop trying to define it.

You miss out one key element - the Franchise Premium. Profit is Revenue less costs less premium. Premium cannot change. All the other numbers can.

Listening to the second session now, Dft seems very iffy on the weasly wording of Firsts commitments, a commitment to spend all reasonable efforts to investigate is different than a commitment to operate. First themselves said in their press release that the servcies were subject to trial (In blackpools case the trial is one service per day). The mandarin doesnt seem to appreciate the difference.

The trial starts BEFORE the commitment.

Give it up. I don't know what your beef is, but almost everything you post is factually incorrect.

 

[F Great Eastern]

To be fair, First isn't really about the buses anymore.

Indeed, Tim O'Toole is someone who built his career in the Rail industry.

 

[RPI]

No, he isn't.
I'm not anti-First, and if they've won, they've won.
But I do think losing the Virgin brand from the rail map is not good news, and not what even the DfT wanted.
It reduces diversity and just hastens the day when the busmen run everything.

Busmen? funny, I heard a nasty little rumour that First ran more TOC's in the UK than any other company, maybe I imagined it.