Southeastern to be taken over by OLR

[Mojo]

Just Tweeted by Grant Shapps, that the Southeastern franchise will imminently transfer to the Operator of Last Resort (OLR), appears to suggest some form of corruption. No further details at the moment.

https://twitter.com/grantshapps/status/1442731050468270080?s=21

Investigations have identified a serious breach of good faith by Southeastern.

To protect taxpayers’ interests and passengers I have ordered the Operator of Last Resort to urgently take over the running of rail services in the South East.

Over £25m of historic payments due to the Department were not declared - a significant breach of the franchise agreement.

We won't accept anything less from the private sector than a total commitment to their passengers, and transparency with taxpayers.

Fares, tickets and services are unchanged for passengers.

Through the OLR we’ll prioritise the punctual, reliable services passengers deserve, rebuild trust, and deliver the reforms set out in our #PlanForRail.

 

[Class360/1]

Just Tweeted by Grant Shapps. No further details at the moment.

https://twitter.com/grantshapps/status/1442731050468270080?s=21

Wow! Was not expecting that!
Good on Shapps

 

[Snow1964]

Press Release by Government, takes effect 17th October

Government takes over running of LSER services in response to over £25 million breach of franchise agreement

Decision will have no impact on passengers or the frontline staff of LSER.

www.gov.uk

• Government’s Operator of Last Resort to take over running of London & South Eastern Railway (LSER) services from 17 October.
• Decision follows an investigation which identifies over £25 million of taxpayer money was not declared by LSER, amounting to a significant breach of the franchise agreement, undermining trust.
• OLR will prioritise punctual and reliable services for passengers and delivery of crucial reforms set out in the Williams-Shapps Plan for Rail.
• • Fares, tickets and services unchanged for passengers and no impact on frontline jobs.

The government will also continue to deliver tangible improvements across the network, including:

• completing the roll out of the Class 707 trains onto Metro routes to provide more spacious, comfortable journeys
• investing in passenger improvements on the existing fleet of trains
• improved security across the network

 

[telstarbox]

Omg !

 

[NSE]

Did not see that coming!

 

[Robertj21a]

Good to see decisive action. Many will be surprised - well done Shapps.

 

[Ianno87]

Blimey.

 

[Class800]

not with immediate effect though, which if it is a serious breach may have been preferable.

even if LNER for example had to run the trains until a new Operator of Last Resort could be set up. Giving 3 weeks is maybe a pragmatic compromise, but does mean a company continues to run trains when accused of something serious

 

[JaJaWa]

Govia announcement:

Important announcement​

Southeastern will transfer to new ownership on 17th October​

The Government has today announced that the operation of all Southeastern services will transfer from London South Eastern Railway (LSER) to SE Trains Limited on 17th October 2021.*

Our passengers will see no change in our day-to-day operations. All tickets will remain valid after transfer and new tickets can continue to be purchased in the usual way.

*SE Trains Limited is a wholly owned subsidiary of DfT OLR Holdings Limited (‘DOHL’), the Public Sector Owning Group with responsibility for LNER and Northern Trains Limited.

Media enquiries relating to this announcement should be directed to the Department for Transport’s press office on 0207 944 3021.

Important announcement

www.southeasternrailway.co.uk

 

[millemille]

Second time that franchise has been removed due to financial irregularities.....

 

[Domh245]

not with immediate effect though, which if it is a serious breach may have been preferable.

even if LNER for example had to run the trains until a new Operator of Last Resort could be set up. Giving 3 weeks is maybe a pragmatic compromise, but does mean a company continues to run trains when accused of something serious

LNER are busy running LNER!

It also presumes that legally they can go much faster than 3 weeks, theres a lot that will require moving from LSER to OLR(SE) such as payroll and various operating licenses. I'm not convinced that moving it to LNER gets rid of govia much sooner and adds the complication of then having to do everything twice

 

[Class800]

Probably right - it's just if an employee was fired for serious breach of contract he wouldn't get three weeks notice. But with firing an operator, it's probably too hard to strip it immediately, even though there were apparently serious irregularities. No solution here for these 3 weeks is satisfactory

 

[DelW]

Will there be implications for other Govia franchises? I suppose it depends how high up in the company the irregularities occurred, and whether top brass knew about them.

 

[yorkie]

For speculation please use:

https://www.railforums.co.uk/threads/southeastern-to-olr-what-could-happen-next.222795

Will there be implications for other Govia franchises? I suppose it depends how high up in the company the irregularities occurred, and whether top brass knew about them.

There is only one other Govia franchise, namely GTR, and they are in big legal troubles as it is; see: https://www.railforums.co.uk/threads/gtr-face-group-litigation-claim-for-unlawfully-limiting-rail-passengers’-rights.220433/

If there are any developments with GTR these should be posted in a separate thread to this one though.

 

[Domh245]

Probably right - it's just if an employee was fired for serious breach of contract he wouldn't get three weeks notice. But with firing an operator, it's probably too hard to strip it immediately, even though there were apparently serious irregularities. No solution here for these 3 weeks is satisfactory

I think the expected solution of LSER running it and preparing for the handover whilst under scrutiny is OK, and I'd be amazed if there weren't additional penalties (beyond the recovery of monies already mentioned) headed LSER/Govia's way - be that a fine or disqualification from future bids.

 

[londonteacher]

Quite ironic that a Conservative is talking about a breach if good faith!

But, a good decision. Slowly taking over the network to prepare for GBR!

 

[Roast Veg]

Arguably the most cursed franchise! Fingers crossed that new management comes up with an exciting fleet strategy.

 

[big_rig]

Go Ahead have announced their CFO has “decided to resign” as reported by Rail Magazine

DfT today announces that it will take over Southeastern on October 17 after an investigation found the operator kept £25m more than it should under a profit share agreement. Today SE shareholder Go Ahead Group announces the resignation of its group chief financial officer.

https://twitter.com/philatrail/status/1442743203350958080?s=21

 

[Roast Veg]

Go Ahead and stop running rail franchises?

 

[mike57]

I suspect that the 17th October is almost 'with immediate effect' in this sort of situation. Assuming that the issues leading to suspension have only just been discovered (and there certainly havnt been any rumours as far as I can tell) then that gives the OLR less than 3 weeks to get everything lined up. Even if it turns out that the problem is deliberate fraud rather than oversight or incompetance there will be close oversight of all activities over the following days so no chances to cover up/hide stuff

 

[JaJaWa]

Go-Ahead statement:

Southeastern, Board change & Full year results​

The Board of Go-Ahead regrets to announce that the Department for Transport ("DfT") has chosen to appoint the Operator of Last Resort (OLR) to take over delivery of passenger services on the Southeastern franchise from 18 October 2021, when our existing agreement expires. While the Group is naturally disappointed by this, the decision relates only to Southeastern. Our other rail business, GTR, is not affected.

This decision is a consequence of ongoing discussions with the DfT regarding the historical calculation by London and Southeastern Railway Limited ("LSER") of the profit share over a number of years and related additional matters, as disclosed in our announcement on 27 August 2021.

LSER's shareholders (Go-Ahead and Keolis UK) commissioned an independent review into this matter on 11 August led by their respective Chairs. Although the independent review is ongoing and the contracts concerned are highly complex, the Group acknowledges that errors have been made in relation to the franchise. The Group has repaid the £25 million referred to in the DfT's statement of this morning and will provide a detailed update on further liabilities in its full-year results.

The Go-Ahead Group's Chairman, Clare Hollingsworth, said: "It has always been this Group's intention to provide the best possible public transport, and to work in partnership with the Government and related agencies. We recognise that mistakes have been made and we sincerely apologise to the DfT. We are working constructively with the DfT towards a settlement of this matter."

As a consequence of these ongoing discussions with the DfT regarding the LSER profit share, the announcement of the Group's results for the year ended 3 July 2021, currently scheduled for 30 September 2021, has been postponed. A revised announcement date will be confirmed in due course.

The Group also advises that, after a period of 13 years with the Group, Elodie Brian has decided to resign as Group Chief Financial Officer and will be standing down from the Board with immediate effect. A process to appoint a successor is underway and, in the meantime, Gordon Boyd has agreed to join the Board as Interim CFO with immediate effect. Gordon is a highly experienced interim CFO and has previously held senior financial roles within Drax, Infinis PLC and Capita PLC.

The Group's financial results for the year ended 3 July 2021 (including the expected provisions related to the matters under discussion with the DfT but excluding any potential financial penalty) remain in line with the Board's expectations.

Investors

Go-Ahead is a high quality transport operator with an industry leading position in the bus and rail sectors. We operate in a market that has many long term fundamental strengths.

www.go-ahead.com

 

[DNCharingX]

Literally a day after the 707s. Still trying to piece together what happened but something sounds dodgy.

I'm excited to see what changes a public SE brings though this is quite shocking.

 

[fgwrich]

Second time that franchise has been removed due to financial irregularities.....

… and the second time it will the run by the government!

 

[Watershed]

'Significant breach' sounds like code for suspected fraud (or something of that ilk). Notable that the CFO has resigned without comment. You have to wonder about the future of GTR, if another arm of Govia has done this...

 

[brad465]

Literally a day after the 707s. Still trying to piece together what happened but something sounds dodgy.

I'm excited to see what changes a public SE brings though this is quite shocking.

Yes I find it somewhat amusing that all that PR they were making for the 707s with their "City Beam" branding has just been for nothing (or at least nothing to their benefit).

 

[dk1]

Yes I find it somewhat amusing that all that PR they were making for the 707s with their "City Beam" branding has just been for nothing (or at least nothing to their benefit).

But it won’t be because it’s just business as usual.

 

[Roast Veg]

Yes I find it somewhat amusing that all that PR they were making for the 707s with their "City Beam" branding has just been for nothing (or at least nothing to their benefit).

The staff responsible will continue to have their jobs in four weeks time.

 

[brad465]

But it won’t be because it’s just business as usual.

The staff responsible will continue to have their jobs in four weeks time.

Okay maybe for many of the staff below board level, but if the Govia exec board originally running things were to benefit from this in some way they won't now I'd have thought.

 

[LNW-GW Joint]

It's not obvious when this "breach" took place, either during the formal (pre-covid) franchise contract period, or during the more recent EMA/ERMA contract periods.
I suspect it's the former, as the DfT takes all the revenue for a management fee in the present situation, with less scope for fiddling the books.
Really the action amounts to removing Govia from the expectation of a direct award for the South Eastern service contract.
It does turn the spotlight on other Govia matters, though (ie GTR), if they allowed irregularities like this to happen at SE on their watch.
Keolis are in there too as part of Govia, but I imagine they wouldn't be involved in day-to-day operation of the franchise.

Is Michael Holden busy at the moment?
It could be déjà vu, all over again...

Going right back, apart from DfT intervention over the two South Eastern issues, the franchising process found irregularities at the LT&S (now c2c) BR operation which delayed the initial franchise award.

 

[skyhigh]

I think the expected solution of LSER running it and preparing for the handover whilst under scrutiny is OK, and I'd be amazed if there weren't additional penalties (beyond the recovery of monies already mentioned) headed LSER/Govia's way - be that a fine or disqualification from future bids.

Indeed. With a business as complex as a train operator even a 3 week hand over will be tight. Suggesting an existing operator could take everything over sooner is highly impractical. I'm sure there will be significant DfT scrutiny over the next 3 weeks.