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Cash up front

Longer franchises are on offer in return for innovative investment ideas.

This summer the first best and final offers (BAFOs) for Britain's new railway franchises will be submitted to sSRA chief executive Mike Grant in his capacity as franchise director. The negotiations that follow are part of a major shake out for the system that the sSRA hopes will generate new investment and improved services.

Three key franchises are being negotiated, two for London's commuters and the big, high speed ex-InterCity route on the East Coast Main Line, from London to Edinburgh. Three more areas including a newly created franchise for Trans-Pennine services are up for renewal in a second round and others will follow.

The sSRA's aim is to cut through the reluctance to invest shown by many of the current franchise holders which must relinquish their concessions in 2004. Short term holdings create uncertainty and an excessive focus on the 'bottom right hand corner' as one incumbent put it. There is no incentive to put large amounts of capital into projects which only pay back over years or even decades.

Improvements for both rolling stock and railway infrastructure obviously fall into such long term categories. Railtrack is responsible for the railway infrastructure and in theory should make all the necessary upgrades. But more is needed for growing railway use than Railtrack has been willing or able to finance and carry out.

The solution then, says the sSRA is to stretch the franchises over a much longer period - with periodic reviews - in some cases terminating in 2020. And rather than wait until they expire, extensions can be agreed now. But in return for the chance to hold the franchise, bidders must commit to substantial improvements to the system.

Just what they propose is open to interpretation. The aim, says the sSRA, is to stimulate innovation and imagination. Bidders can suggest restructuring as seems possible for the railways in Wales, where Prism is looking to pull the system together nationally. Or they can propose detaching parts and adding them to other sections; a proposal for the airport lines would do just that.

Innovation is part of the project, said Grant in a letter to prospective bidders last year, after sSRA chairman Sir Alastair Morton had generated widespread interest in the plan in a major speech.

He spelled out as criteria for franchise assessment 'commitment to performance, customer services, innovation, investment and efficiency; extra or earlier investment; better performance; integrated transport measures both within the rail network and between rail and other transport modes; affordability and value for money'.

Bidders could include the incumbent train operating company, other incumbents in other franchise areas, and outsiders. There are no deadlines as such for the re-letting though once bidding starts it seems to set a pace.

There is no obligation on the franchise director to re-award the franchise, says the sSRA, so the process cannot be compared to a tender for a contract.

If the ideas do not seem up to scratch, the option is to leave the existing franchise running until it legally expires in 2004.

On the shortlist So far two rounds of re-bids are under way. The first is for GNER, Chiltern and Connex South Central franchises.

Shortlisted contenders were announced in March.

These are :

Great North Eastern Railway

Sea Containers (incumbent)

Virgin Rail Group with Stagecoach

Chiltern Railways

M40 Trains (incumbent - subsidiary Laing Group)

Go-Ahead (Thames Trains)

Connex South Central

Connex Rail (incumbent - subsidiary of Vivendi SA)

GoVia (Thameslink)

The second round has three areas: the Trans Pennine Express, a new franchise for inter urban services currently in the Northern Spirit franchise; South West Trains, which allows optional inclusion of the Exeter service; and Central Trains, which also has an option to detach services, this time to the north of Shrewbury. The bidder also has to set up a separate division for West Midlands commuter services.

Interest has been strong and many prequalified bidders were announced in April.

Trans Pennine Express

Arriva (owner of Northern Spirit, which operates services likely to be included in this franchise)

Connex Rail

First Group

GNER Holdings

National Express

Virgin Rail

Serco

Via GTI

Group 4

South West Trains

Stagecoach (incumbent)

Connex Rail (franchises of South Eastern and South Central)

First Group (franchises of Great Eastern, North Western, Great Western)

GNER Holdings (subsidiary of Sea Containers and franchises of GNER)

Nederiandse Spoorwegen

Group 4

Central Trains

National Express (incumbent)

Group 4

The bid for Wales remains pending while the sSRA waits for recommendations from a study it is conducting which will assess how best to serve the needs of the area.

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