Prospectus for the next East Coast franchise highlights new emphasis on prioritising rail’s long term economic value over short term financial gain

The winner of the new East Coast franchise will need to offer higher levels of investment than in the past, step up competition with other TOCs, provide services to new destinations and deliver an innovation strategy.

The requirements, set out in the Department for Transport’s prospectus for the franchise, which runs for up to 11 years from February 2015, are designed to focus bids on maximising long term economic value rather than short term premium payments to government. Investments which the DfT anticipates the new operator could fund itself include incremental infrastructure, station remodelling, integrated transport and passenger information.

Industry sources told Passenger Transport that significant projects which bidders may need to consider include electrifying infrastructure between the ECML and new ‘off-route’ destinations.

The DfT envisages that the new operator could capitalise on investment through retaining ownership of assets and charging successor franchises for their use, or through ‘residual value mechanisms’ which enable the value of investments to be realised when the franchise ends.

To maximise operator funding, the DfT is considering whether to include residual value as a specific factor in selecting the new franchise holder.

The DfT’s intention is to signal that bidders will need to offer investment and innovation, and work with communities to develop markets. “We will be offering enormous scope for bidders to invest and innovate using their own flair. In return, we want genuinely creative bids,” transport secretary Patrick McLoughlin said.

 

Further coverage on the East Coast franchise competition can be found inside the latest issue of Passenger Transport.

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