On the right track?
The Assembly will debate the Economy Infrastructure and Skills Committee report, On the right track? The Rail Franchise and South Wales Metro on 27 September. The report sets out the Committee’s views on the Welsh Government’s procurement of the next Wales and Borders rail franchise and Metro phase 2, and sets out its key priorities for the new contract. The new franchise is due to start in October 2018.
This was a substantial and complex inquiry, reflecting the scale and complexity of the procurement process which represents the largest single investment decision taken to date by the Welsh Government.
The process is innovative in a number of ways. The Welsh Government and Transport for Wales (TfW) are using a “competitive dialogue” procurement procedure, untested in rail procurement. They are also seeking to award the first major “vertically integrated” contract for rail services in Britain, where both track and train services on the Core Valleys Lines will be managed by the successful bidder. Quite a challenge for the Welsh Government in procuring its first rail franchise.
You can find out more about the procurement process, including the competitive dialogue approach, in our recent blog article.
The Committee made a total of 19 recommendations in three main areas:
- The procurement process itself: a number of risks and challenges were identified leading the Chair in his forward to describe the Welsh Government’s ambition as “heroic”. Issues emerged around the need for agreement with the UK Government on devolution of procurement powers (still not devolved despite agreement being reached to do so in 2014), funding, and the transfer of ownership of the Valleys Lines to the Welsh Government to facilitate vertical integration;
- Priorities for the franchise specification: the Committee set out its top ten priorities for the new franchise (PDF 1.5MB) to improve the quality and value for money of rail services; and
- Rail infrastructure issues: the Committee made one recommendation urging the Welsh Government to continue to lobby the UK Government for rail electrification in north Wales, the redevelopment of Cardiff Central Station, and calling for clarity on timeframes for the long promised rail electrification to Swansea. Since the report was published Chris Grayling, the UK Government Secretary of State for Transport, has announced that plans for rail electrification to Swansea have been scrapped.
The Welsh Governments response was received on Thursday 21 September and published on the Committee’s inquiry webpage. The Welsh Government has accepted ten recommendations, with the remaining nine are accepted in principle.
Or leaves on the line?
Recent correspondence between the Cabinet Secretary for Economy and Infrastructure, Ken Skates, and the Secretary of State has highlighted some tricky issues that remain to be resolved.
On 20 July the Cabinet Secretary wrote to the Secretary of State (PDF 2MB) highlighting the implications of a proposal from the UK Department for Transport officials that the issue of the tender documentation be delayed from 18 August until 26 September. The issues identified included disquiet among bidders, potential loss of EU funding for the Metro, reduced time for an alternative procurement in the event of legal challenge, increased costs for the Welsh Government, TfW and bidders, and reduced time to “mobilise” the franchise once it has been awarded. The Cabinet Secretary proposed issuing the tender in draft on 18 August and continuing discussions to resolve outstanding financial issues.
On 8 August the Secretary of State replied (PDF 2MB) disputing a suggestion from the Cabinet Secretary that the delay was caused by the June General Election. Instead, he pointed to a number of outstanding issues. Among these were financial issues, including a Welsh Government claim for an additional £1bn in funding during the course of the franchise period. The Secretary of State said the Cabinet Secretary was free to issue tender documents to bidders, but that he reserved the right to amend these until they are formally authorised by him. At that time he suggested this could not take place until the Welsh Government’s funding claim has been agreed.
However, the Cabinet Secretary’s evidence paper for a meeting of the Economy, Infrastructure and Skills Committee on 27 September says a way forward has been agreed:
The Cabinet Secretary met with the Secretary of State for Transport on 7th of September to discuss a constructive way forward for the procurement process. We agreed, subject to completion of the relevant documentation, that we can progress with issuing tender documents at the end of September 2017. Discussions on the financial arrangements will continue with the UK Government.
Yet the evidence paper also identifies several issues still to be resolved:
Delivering our ambition for the next franchise is dependent on the UK Government meeting our expectations on the following:
- The UK Government transferring the [procurement] powers on time and as agreed.
- The UK Government and Network Rail agreeing our Metro plans for the Valley Lines, which are currently being discussed.
- The Department for Transport agreeing suitable financial arrangements for the Valley Lines infrastructure.
The Welsh Government response to recommendation 1 of the report welcomes an update on the Department for Transport website which says that “subject to final agreement and Westminster Parliamentary approval, it is intended that the [franchise procurement] functions should be transferred [to the Welsh Government] during 2017” suggesting the transfer of powers is imminent. The response also indicates that there has been progress on agreeing capital funding for the Valley Lines infrastructure (recommendation 5) while “discussions are currently on-going” with Network Rail regarding the transfer of ownership of the Core Valley Lines (recommendation 7).
The Cabinet Secretary’s evidence paper sets out a timeline which shows the new franchise still on target to begin operations in October 2018. However, the delay in procurement must increase pressure in a process which still seems to have many key issues still to be finalised.
Article by Andrew Minnis, National Assembly for Wales Research Service.