Report

by the Comptroller
and Auditor General

Department for Transport

The Thameslink, Southern and Great Northern rail franchise

HC 528 Session 2017–2019 10 January 2018

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Report by the Comptroller and Auditor General

Ordered by the House of Commons
to be printed on 9 January 2018

This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act

Sir Amyas Morse KCB
Comptroller and Auditor General
National Audit Office

3 January 2018

HC 528 | £10.00

This report examines the causes of poor performance on the Thameslink, Southern and Great Northern network since the franchise began in September 2014, the effects on passenger services, financial outcomes for the operator and the Department, and the Department’s handling of the Thameslink, Southern and Great Northern franchise.

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11597 01/18 NAO

The National Audit Office study team consisted of:
Hedley Ayres, William Francois, William Rollo, Michael Slater and Grace Williams, under the direction of Rebecca Sheeran and Lee-Anne Murray.

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Key facts

Summary

1 Since the privatisation of the railways in the mid-1990s it has been government policy for passenger rail services to be run by private sector companies on franchises that serve specified parts of the country for a certain length of time. The Department for Transport (the Department) aims to provide high-performing, value-for-money services for passengers, and to improve the cost-effectiveness of the railway for taxpayers. Since it relaunched the rail franchising programme in 2013, the Department has sought to place greater emphasis on improving passengers’ experiences of services.1

2 As part of the Department’s responsibility for providing passenger rail services, it is responsible for designing, letting and managing rail franchises. This report focuses on the Thameslink, Southern and Great Northern franchise (the franchise), run by Govia Thameslink Railway Ltd (Govia Thameslink), which began in 2014. Between September 2014, when Govia Thameslink took over the franchise, and September 2017 passengers using these services have experienced consistently higher levels of disruption than anywhere else on the national rail network.

3 The franchise is the largest of the 15 rail franchises managed by the Department, bringing together four rail services, Thameslink, Southern, Great Northern and Gatwick Express, connecting London with towns and cities across the south-east and east of England. The franchise operates 19% of the timetabled services operated by these 15 franchises. In 2016-17, passengers took 321 million journeys on the franchise, which is an average of nearly 900,000 journeys a day.

4 Alongside managing rail franchises, the Department also funds work to maintain and improve the rail network. One of the Department and Network Rail’s major upgrade programmes is the Thameslink programme, a complex investment in rail infrastructure and new trains, and a significant change to services. The Department designed the franchise to support the delivery of the Thameslink programme.

Scope of the report

5 This report examines the causes of poor performance on the Thameslink, Southern and Great Northern network since the franchise began in September 2014, the effects on passenger services, financial outcomes for the operator and the Department, and the Department’s handling of the Thameslink, Southern and Great Northern franchise, including:

the franchise design and levels of disruption for passengers, to date (Part One);

causes of poor performance related to the Department’s contract with the operator, Govia Thameslink (Part Two); and

causes of poor performance related to the rail network, and the role of Network Rail (Part Three).

6 We have previously published an update on the Department and Network Rail’s progress with the Thameslink programme. That report focuses on progress with delivery of the infrastructure improvements, the delivery of new trains, and progress towards meeting the Department’s objective to operate a timetable for an extended Thameslink network with 24 peak-time trains an hour in each direction on Thameslink services through central London, by December 2018.2 Collectively, these reports evaluate the Department’s management of the Thameslink programme, related franchising issues and the impact on passengers.

Key findings

The franchise

7 In letting and managing franchises, the Department seeks to balance value for money for the taxpayer and quality of service for the passenger. For this franchise, the Department’s aims were that it should:

take a lead role in enabling successful delivery of the Thameslink programme;

ensure overall passenger experience improves through the life of the franchise, including aiming for it to be among the most reliable and punctual services on the national rail network; and

deliver services in the most cost-effective and efficient manner possible.

The Department awarded the contract, worth £8 billion over seven years, to Govia Thameslink after it scored the highest of five bidders for its proposals on service quality and put forward the lowest cost to run the franchise (paragraph 1.5).

8 The Department anticipated that the Thameslink programme would cause disruption and chose a franchise model which it considered reflected this risk. In this franchise, the Department retains fare revenue rather than the operator, meaning that it bears the risk of revenues reducing should there be disruption. The Department considered that this model would incentivise the franchise operator to support the Thameslink programme rather than to prioritise generating revenue. It considered that bidders for the franchise would ‘price in’ the risks under a normal franchise model since their revenue forecasts would be subject to greater uncertainty, reducing value for money for the taxpayer. However, because the franchise route is a commuter route, despite disruption, passengers had limited alternatives (paragraphs 1.7, 1.8 and 3.2).

9 The resulting franchise contract is complex and ambitious, and it is not clear whether the Department considered the cumulative effects of its approach on passenger services. The franchise is the largest franchise in the country, bringing together two previously separate franchises including four major London train services, all of which are affected by the Thameslink programme. It operates on a very congested part of the network where the underlying infrastructure is unreliable. The Department wanted to increase capacity and improve services. The franchise contract also included commitments to increase the extent of ‘driver-only operation’ beyond the Department’s original specification and included additional train services. The Department had not developed fully how the individual elements would work together within the contract, nor the potential effects on passengers, particularly if the risks it identified around industrial action crystallised (paragraphs 2.6 to 2.15 and paragraphs 3.2 to 3.7).

10 Between September 2014 and September 2017, Govia Thameslink passengers have experienced the worst overall service performance on the national rail network in terms of the number of trains arriving on time. Additionally, since Govia Thameslink took over the running of Southern services in July 2015, around 146,000 services (7.7% of planned services) have either been cancelled or have been delayed by more than 30 minutes, compared with 2.8% on the rest of the network. The number of trains arriving at their destination within five minutes of their scheduled arrival time fell to 62% in November–December 2016 during industrial action. Since the start of 2017 service performance has been improving. The percentage of trains arriving within five minutes of their scheduled time has exceeded 80% since March 2017. This level of performance is similar to levels at the beginning of the full franchise operation in July 2015 (paragraphs 1.9 and 1.12).

11 The main cause for cancelling services was driver or train crew availability. It is difficult to attribute delays and cancellations to specific causes because the railway is a complex system. However, based on data produced by Network Rail and Govia Thameslink about services cancelled, around 56,000 cancellations (38% of the total) were related to the availability of drivers and other train crew. The Department and Govia Thameslink consider, from their analysis of performance data, that industrial action was the most important cause of train crew shortages. Other important causes of delays and cancellations include the reliability of some train fleets, Network Rail’s management of the rail network, and failures of track and other infrastructure assets such as signalling (paragraphs 1.11, 1.13 and 2.12).

12 The Department accepted Govia Thameslink’s ‘driver-only operation’ plan and, recognising it would increase the risk of industrial action, contracted some contingency arrangements. The Department told us that it supports the railway industry’s ambition to modernise and, as part of this, bidders for new franchises take the opportunity to review whether, where there are guards on trains, the role of opening and closing the doors is still best undertaken by them or the driver. This is known as ‘driver-only operation’ (DOO) or ‘driver-controlled operation’ (DCO). All of the five companies who bid to run the franchise proposed more widespread use of DOO than the Department had originally specified. The Department recognised that, given the scale of the increase in DOO, accepting Govia Thameslink’s plan would increase the risk of industrial action. It noted that previous industrial action related to the introduction of DOO on other rail services, had been limited. The Department did not fully evaluate the possible effects on passengers of different scenarios of industrial action before awarding the contract, nor did it ask Govia Thameslink to do so. It did, however, include Govia Thameslink’s contingency plan in its franchise contract. In November 2015, 18 months after contract award in May 2014, the rail unions RMT and ASLEF issued a joint statement opposing DOO, which would have been difficult for the Department or bidders to foresee (paragraphs 2.6 to 2.10).

13 The Department did not seek sufficient assurance that Govia Thameslink would have enough train drivers when it took on the franchise. When a new operator takes over a franchise, it can expect to inherit drivers from the previous franchisee. Govia Thameslink received fewer drivers than it expected from the previous operator of the Thameslink and Great Northern routes, and driver shortages have persisted on Great Northern services. Even if Govia Thameslink had received the number it expected, there would still have been some shortfall (paragraphs 2.2 to 2.5).

14 The Department contracted Govia Thameslink to deliver a specific level of increased services despite concerns from Network Rail and Govia Thameslink that the network could not support the proposed timetables reliably. Network Rail is ultimately responsible for balancing demand with available capacity to determine which timetable will operate. In this capacity, it advised the Department that the December 2018 timetable would require further development to make it workable. Govia Thameslink also raised concerns. The Department considered that the normal industry timetable development process, where Network Rail negotiates and agrees operators’ access rights to the network, would address these concerns, following which the level of train services specified in the contract would be amended to reflect the reality of what Govia Thameslink was able to deliver. It is possible, however, that the demands placed on the network by the December 2015 timetable have contributed to the service disruption which passengers have experienced. Network Rail is now carrying out work to improve its understanding of the demands being placed on the system (paragraphs 3.6 to 3.8 and 3.15).

15 The Department and Network Rail did not have a good understanding of the underlying condition of the existing network at the point when the Department set the requirements of the franchise. Between July 2015 and March 2017, 13% of all cancellations and delays to services of more than 30 minutes have been due to failures of track and other Network Rail assets such as signalling systems. While the Department’s franchise design took account of the need to deliver the Thameslink programme, it did not consider the underlying state of the network. In 2016, Network Rail estimated that an investment of up to around £900 million (cash prices) on maintenance and renewal work was needed to achieve the resilience needed to run the new services on the Thameslink network reliably, in addition to infrastructure investments already planned in that area. Limits on access to the railway means that Network Rail has prioritised a £300 million programme of work in its South East and London North Eastern routes to improve particularly vulnerable parts of the network (paragraphs 1.13, 3.10, 3.13 and 3.14).

16 The franchise has delivered some improvements for passengers. The Thameslink programme is now delivering benefits to passengers through station improvements and more spacious trains. The Department has decided to introduce new services more gradually than originally planned, deferring the full benefits of the programme by one year. We think this is a sensible step to protect value for money and passengers from further disruption. The franchise has introduced new trains on Gatwick Express services and on the Great Northern route (paragraphs 1.18 to 1.20).

17 Despite the performance of train services, fare revenue returned to the Department met its expectations. Between September 2014 and August 2017, the Department received £3.6 billion in fare revenue, which is broadly in line with its expectations at the time that it let the contract. During the same period it made franchise payments to Govia Thameslink of £2.8 billion, meaning that it has earned a return for the taxpayer of £760 million, net of £33 million of passenger refunds paid by the Department to compensate for disruption (paragraph 1.17).

How the Department has responded

18 The Department has used the performance levers in its contract with Govia Thameslink, but because of the multiple issues affecting services, while performance is improving, it is still below the average of the rest of the network. Soon after Govia Thameslink took on the franchise, performance dropped below the levels specified in the contract. The Department required it to agree a remedial plan to address the key failings for which it was responsible. The plan was agreed in February 2016 and required Govia Thameslink to introduce reduced timetables to increase the reliability of passenger services, recruit more drivers and address technical issues with its train fleet. Although service performance has improved during 2017, and is broadly back at the same level as July 2015 when the full franchise began, passengers continue to experience disruption (paragraphs 1.9, 2.13 and 2.14).

19 The Department considered its options for the future of the franchise including terminating the contract, but decided that enforcing the contract was the most appropriate option. In late 2016 and early 2017, the Department considered whether it had grounds for terminating the contract as one of a number of options. It did not pursue terminating the contract because there were insufficient grounds. The most significant reason for disruption was industrial action, a ‘force majeure’ event in the contract, meaning that the operator could not be held responsible for the resulting poor performance. Instead, the Department decided to take enforcement action and require the operator to produce a remedial plan (paragraph 2.17).

20 The Department and Govia Thameslink have agreed a £13.4 million settlement covering the period to September 2018. In July 2017, the Department agreed a £13.4 million settlement with Govia Thameslink comprising:

£2.4 million for its underperformance between September 2015 and September 2016;

£10 million as a settlement for the period up to September 2018, to avoid further protracted analyses and negotiations over the financial impact of performance during that period; and

£1 million for franchise management issues unrelated to service performance.

Instead of paying the Department, Govia Thameslink will spend the agreed sums on various measures aimed at improving services for passengers, including extra train crew (paragraph 2.18).

21 Having agreed in advance performance payments up to September 2018, it is not clear how the Department will incentivise performance in the franchise year from September 2017 to September 2018. As well as assessing Govia Thameslink’s performance for the contract year September 2015 to September 2016, the Department also negotiated a settlement for Govia Thameslink to buy out its liability in respect of the performance sums in the contract years September 2016 to September 2017 and September 2017 to September 2018. The settlements for these two latter years were £5 million in each year, totalling £10 million. The Department told us it did this in order to agree more investment in the franchise to improve performance. At the time of writing, it is not clear how the Department will incentivise Govia Thameslink to improve performance for passengers since the Department and the operator are currently negotiating a revised remedial plan and interim performance measures (paragraphs 2.17, 2.18 and 2.22).

22 In accordance with the contract, the Department also expects to pay Govia Thameslink for the additional costs resulting from changes to the Department’s requirements. At the time of writing this report, the Department and Govia Thameslink were discussing contract changes which are expected to result in a payment by the Department to Govia Thameslink, potentially amounting to tens of millions of pounds a year. The changes are needed because the Department has agreed to alter the train services required in the franchise contract and to reflect delays to the delivery of new trains for Thameslink services. The franchise contract anticipates and allows for such changes. The Department is also considering the impact of its decision to extend the final phase of timetable implementation for the Thameslink programme by a year (paragraph 3.9).

Conclusion on value for money

23 The Department intended that this franchise should take a lead role in enabling successful delivery of the Thameslink programme, improve passenger experience and deliver services cost-effectively. The Thameslink programme has a realistic chance of achieving value for money and the return to the Department from the franchise has broadly met its expectations. However, passengers have suffered periods of significant disruption during the first three out of seven years of the franchise. While industrial action has been a major contributor to disruption, on a scale which would have been difficult for the Department to foresee, the Department did make decisions on this franchise, the cumulative effects of which have negatively impacted on passengers. We cannot therefore conclude that the Department has to date achieved value for money from this franchise.

Recommendations

a When designing future franchise contracts, the Department should give more consideration to the potential impact on passengers of its decisions. For example, it should carry out scenario planning to assess how the constituent parts of the contract work together, how the performance levers would work and the likely effect on passengers should risks crystallise.

b The Department should work more closely with Network Rail to understand the impact of high frequency of services on congested parts of the network on passenger disruption, and how to manage and recover from disruption more quickly. This could enable:

the Department to make more informed decisions about the trade-offs between a high capacity but unreliable service, and a reduced capacity but more reliable one; and

Network Rail and train operating companies to return more quickly to planned patterns of services after a period of disruption.

c The Department should strengthen its monitoring of train operators’ crew planning when they are near the end of their franchise terms as well as ensuring that the workforce projections in franchise plans are realistic.

d Because any major enhancement project is likely to produce planned disruption to services, the Department and Network Rail should gain assurance at the outset that the likelihood of unplanned disruption on passenger services is minimised. This will require the Department and Network Rail to take a more integrated approach to planning renewal and major improvement work, and to consider whether renewal work that could improve resilience should be carried out before the enhancement project begins.

1 Comptroller and Auditor General, Reform of the rail franchising programme, Session 2015-16, HC 604, National Audit Office, November 2015.

2 Comptroller and Auditor General, Update on the Thameslink programme, Session 2017–2019, HC 413, National Audit Office, November 2017.

Part One

The franchise and its performance to date

1.1 This part of the report describes the Thameslink, Southern and Great Northern rail franchise (the franchise), the service disruption that passengers have experienced and the financial performance of the franchise.

The franchise

1.2 Thameslink, Southern and Great Northern is the largest of the Department for Transport’s (the Department’s) 15 rail franchises, connecting London with towns and cities across the south-east and east of England (see Figure 1).3 The Department set up the franchise in 2014, bringing together the routes of the former Thameslink and Great Northern franchise with the Southern franchise, which included the Gatwick Express brand. It also includes some services which were previously part of the South Eastern franchise.

1.3 In October 2012, following the collapse of the competition for the InterCity West Coast franchise, the Department suspended the procurement process for the Thameslink, Southern and Great Northern franchise that it had started in December 2011. During 2013, the Department redesigned its franchising programme and set up a new Passenger Services division to run it.4 The franchise was the first that the Department awarded after its overhaul of the franchising programme.

1.4 Following a competitive procurement process, the Department awarded the contract to operate services to Govia Thameslink Railway Ltd (Govia Thameslink), a joint venture between the Go-Ahead Group and Keolis, in May 2014. Govia Thameslink started operating Thameslink and Great Northern services in September 2014, some services formerly operated by the South Eastern franchise in December 2014 and the Southern and Gatwick Express services in July 2015. Its contract ends in September 2021.

1.5 In letting and managing franchises, the Department seeks to balance value for money for the taxpayer and quality of service for the passenger. For this franchise, the Department’s aims were that it should:

take a lead role in enabling successful delivery of the Thameslink programme, a major programme of investment in rail infrastructure and new trains, designed to increase capacity and improve services on the Thameslink routes running north–south through central London;

ensure overall passenger experience improves through the life of the franchise, including aiming to be among the most reliable and punctual services on the national rail network; and

deliver services in the most cost-effective and efficient manner possible.

The Department awarded the contract, worth £8 billion over seven years, to Govia Thameslink after it scored the highest of five bidders for its proposals on service quality and put forward the lowest cost to run the franchise. The franchise contract is complex and ambitious, and it is not clear whether the Department considered the cumulative effects of its approach, described in Parts Two and Three of this report, on passenger services.

1.6 We reported on the Thameslink programme’s progress in November 2017.5 The Department’s franchise design was based on recommendations by Sir Roy McNulty, in his review of rail in Great Britain, to combine two of the network’s largest franchises to form a single operator for the routes most affected by the Thameslink programme.6 Network Rail is responsible for delivering the infrastructure works for the programme, and Govia Thameslink is responsible for introducing the new trains.

1.7 The franchise has a financial basis unique to the Department’s current franchises, in which the Department retains fare revenues and pays Govia Thameslink a fee to operate services, which varies depending on performance. Most rail franchise operators receive fare revenues themselves and therefore bear some if not all of the risk associated with changes in passenger demand. The Thameslink, Southern and Great Northern franchise model follows a suggestion by Richard Brown in his 2013 review of rail franchising and analysis by the Department.7 These found that sharing the fare revenue risk between the Department and the operator – ‘partial revenue risk transfer’ – would allow the operator to focus on the delivery of the Thameslink programme and maintaining services during these works, rather than making maximisation of fare revenues its priority.

1.8 The Department subsequently chose to retain all the revenue risk itself. The Department considered that this model would incentivise the franchise operator to support the Thameslink programme rather than to prioritise generating revenue. It considered that bidders for the franchise would ‘price in’ the risks under a normal franchise model since their revenue forecasts would be subject to greater uncertainty, reducing value for money for the taxpayer. However, because the franchise route is a commuter route, despite disruption, passengers had limited alternatives. The Department designed a contract with performance incentives and obligations for the operator to deliver high-quality services in the absence of the revenue incentive. These included a number of specific commitments aimed at improving passengers’ day-to-day experience of services, for example by providing new train fleets for Great Northern and Gatwick Express services.

Service performance to date

1.9 Overall performance on the Thameslink, Southern and Great Northern routes had declined by 3% in the year leading up to Govia Thameslink taking on the first parts of the franchise in September 2014 (Figure 2). After Govia Thameslink took on the franchise, disruption to services has increased significantly, with the percentage of trains arriving within five minutes of their scheduled time dropping to as low as 62% in the four-week rail period from 13 November 2016 to 10 December 2016, during industrial action.8 The train drivers’ union ASLEF began industrial action on 6 December 2016. The RMT union had previously begun industrial action on 26 April 2016. The train services operated by Govia Thameslink have been the worst performing across the whole rail network during the life of this franchise, in terms of the number of trains arriving on time (Figure 3). However, since the start of 2017 service performance has been improving, with the percentage of trains arriving within five minutes of their scheduled time exceeding 80% since March 2017 (Figure 2). This level of performance is similar to levels at the beginning of the full franchise operation in July 2015.

1.10 Performance has varied between the franchise’s four routes (Figure 4). The performance of each route has been affected by a combination of influences, including the extent of staffing issues such as driver shortages and industrial action, the condition of the rail infrastructure and the reliability of the different types of trains used on the routes. As discussed in Part Three of this report, ‘reactionary delay’ when further delays to services are caused by initial, small incidents producing reactionary effects on a congested network, is an important issue for this part of the network:

On Southern services, which account for more than half (621,000 or 57%) of all services operated by Govia Thameslink annually, performance has corresponded closely to that of Thameslink services. Thameslink services account for 255,000 services each year or 23% of the franchise.

Great Northern services, accounting for 174,000 or 16% of the franchise, have outperformed the other routes.

Gatwick Express services are performing the worst, with the number of trains arriving within five minutes of the schedule being as much as 10% lower than other routes at certain points. Gatwick Express is the smallest part of the franchise, with 46,000 or 4% of services. Govia Thameslink told us that when there are service problems, other, longer distance and less frequent trains are sometimes given priority over Gatwick Express trains, under an established industry process agreed by Network Rail with other operators, since passengers can use other trains to reach Gatwick Airport.

The causes of service disruption

1.11 In addition to the Public Performance Measure described above, there is a further system for monitoring the causes of each individual train delay or cancellation. Network Rail and train operators review data on service cancellations and delays and assign a cause to each incident. Different causes are the responsibility of either Network Rail for issues such as track and systems failures, or the operator for issues such as train crew shortages. It is difficult to attribute delays and cancellations to specific causes because the railway is a complex system. This part of the report focuses on cancellations to services (which include services running more than 30 minutes late), as a means of indicating the most significant causes of disruption for passengers.

1.12 Between July 2015, when Govia Thameslink took over the running of Southern services, and March 2017 around 146,000 services (7.7% of planned services) were either cancelled or delayed by more than 30 minutes, compared with 2.8% on the rest of the network. Govia Thameslink has been responsible for 60% (88,000) of all cancellations (including significantly late trains) over this period (see Figure 5). Network Rail has been responsible for 37% (54,000) of cancelled services. These figures do not include train services which were cancelled before 10.00 pm on the previous day, such as pre-agreed alterations to timetables in weeks where Govia Thameslink anticipated it would not be able to operate the usual number of services.

1.13 Most Govia Thameslink cancellations, 56,000 or 63% of its cancellations (38% of all cancellations), were due to issues related to train crews, followed by problems with its trains (Figure 6). The Department and Govia Thameslink consider, from the operator’s analysis of performance data, that industrial action is the most important cause of train crew shortages. Network Rail cancellations were mainly due to failures in the rail infrastructure and its capacity and Network Rail’s ability to manage disruption on this part of the network once it occurs (Figure 7). Failures of track and non-track assets caused 18,000 cancellations (13% of all cancellations). We discuss issues relating to Network Rail in Part Three of this report.

1.14 In late 2016, the Secretary of State for Transport commissioned Chris Gibb to provide advice on how to deliver improvements to train services on the franchise. The Department published Chris Gibb’s report in June 2017 (Figure 8).

Financial returns to Govia Thameslink

1.15 Govia Thameslink has not earned the profits it was expecting on this franchise to date as its costs have been greater than it expected. Over the three years that Govia Thameslink has operated the franchise up to September 2017, it has incurred a total loss of £5.25 million after tax.9 This compares to a forecast profit of almost £130 million that it expected to make when it bid for the franchise (Figure 9).

1.16 The Department and Govia Thameslink told us that this is largely due to:

Govia Thameslink underestimating certain costs in its bid, including Network Rail charges and the cost of drivers;

unrealised efficiency savings. Govia Thameslink’s bid was based on large efficiency savings, which it expected would be realised once Southern joined the franchise;

financial penalties placed on Govia Thameslink by the Department as a result of poor performance;

Govia Thameslink adding extra operational managers to deal with timetable changes and performance issues; and

interim Govia Thameslink staff hired to deal with disruption at London Bridge and delayed modernisation plans.

Financial returns to the Department

1.17 The Department has received more than £3.6 billion in revenues through passenger fares since Govia Thameslink took on the franchise in September 2014, in line with forecasts that the Department made for revenue at the start of the franchise. Revenues in the latest year up to September 2017 have been below forecast, largely due to the impact of industrial action and an increase in refunds to passengers. Overall, after paying Govia Thameslink the franchise payments of £2.8 billion as set out in the contract for the first three years of the franchise, the Department has retained £760 million in revenues (Figure 10). This retained revenue is net of £33 million, which the Department has paid to passengers to compensate them for service disruption.

The Thameslink programme

1.18 Govia Thameslink also support the delivery of the Thameslink programme. The programme involves two phases of infrastructure works to redevelop stations and introduce new signalling technology in central London, and the introduction of 115 new longer, more spacious Class 700 trains. These will allow services to connect destinations across the South East through central London from early 2018. This will increase capacity throughout the region, and reduce passenger journey times by removing the need for interchanges through central London.

1.19 The Thameslink programme is now delivering benefits to passengers through station improvements and more spacious trains. In November 2017, we reported fully on the progress of the Thameslink programme.10 At that time, Network Rail had rebuilt and brought into use 10 platforms at London Bridge station, and opened two-thirds of the new street level concourse. Network Rail has also brought into use tunnels at King’s Cross, allowing the East Coast Mainline to connect to the Thameslink network. As of September 2017, Govia Thameslink had accepted 64 out of the 115 new trains, and brought 45 of them into passenger service. Siemens has built the two maintenance depots for these trains. Separately from the programme, the franchise has introduced new trains on Gatwick Express services and on the Great Northern route.

1.20 The Department has decided to introduce new services under the Thameslink programme more gradually than originally planned, deferring the full benefits of the programme by one year. We think this is a sensible step to protect value for money and passengers from further disruption.

3 The Department manages three of the 15 franchises, Northern, TransPennine Express and Wales & Borders, with devolved organisations.

4 Comptroller and Auditor General, Reform of the rail franchising programme, Session 2015-16, HC 604, National Audit Office, November 2015.

5 Comptroller and Auditor General, Update on the Thameslink programme, Session 2017–2019, HC 413, National Audit Office, November 2017.

6 Department for Transport, Realising the potential of GB Rail, May 2013.

7 Department for Transport, The Brown Review of the Rail Franchising Programme, Cm 8526, January 2013.

8 The measure includes both delayed trains and cancelled services.

9 Figures from Govia Thameslink management accounts submitted to the Department. Govia Thameslink’s statutory accounts, available from Companies House, cover a different time period.

10 See footnote 5.

Part Two

The Department’s management of the franchise contract

2.1 This part considers the issues on the franchise where the Department for Transport’s (the Department’s) franchise agreement (contract) with Govia Thameslink Railway Ltd (Govia Thameslink) has directly influenced services for passengers. It includes the effects of driver shortages, the impact of industrial action and train reliability issues. The part also considers the Department’s response to Govia Thameslink’s failure to meet its contractual targets.

The franchise start – train crew shortages

2.2 Govia Thameslink took on the franchise in two main stages.11 It took over Thameslink and Great Northern services from the previous operator, First Capital Connect, in September 2014. In July 2015, Govia Thameslink integrated Southern and Gatwick Express services into the franchise. Govia was the previous operator of Southern. Train crew, including drivers, transfer to the new operator when franchises change hands. The time required to train a driver, around 14–18 months, means that driver shortages take some time to resolve.

2.3 Driver shortages affected services on the Thameslink and Great Northern routes from the start of the franchise. Govia Thameslink received fewer drivers from First Capital Connect, the previous operator, than it assessed it needed to run the franchise. Several aspects of this process are disputed by the two train operators. These include the number of drivers needed, the number Govia Thameslink expected to receive from First Capital Connect, the number of drivers Govia Thameslink actually received and whether information on ‘rest day working’ (where drivers volunteer to work additional shifts) and ‘banked’ rest days (days which drivers are entitled to take as leave in the future), was shared. Govia Thameslink’s records show that it received 605 drivers, a shortfall of 77 against the 682 drivers it considered that it required. Govia Thameslink always expected some shortfall against its requirements and in summer 2014, once it had won the franchise, arranged for an additional 15 drivers to start training. The company also planned to recruit more drivers over time and reduce levels of rest day working.

2.4 Although the Department and Govia Thameslink have acted to address the driver shortages, they have persisted on the Great Northern route:

The Department made increasing driver numbers a key element of the ‘remedial plan’ which it agreed with Govia Thameslink in February 2016, because of its failure to meet its required performance levels. Govia Thameslink had already introduced a ‘driver resilience programme’ to recruit additional drivers, reduce training times and deploy drivers more efficiently.

Although Great Northern driver numbers increased from 298 at franchise handover in 2014 to 377 in July 2017, there was a shortfall of 21 drivers on the Great Northern routes. There were sufficient drivers for Thameslink services.

2.5 The Department accepts that it can do more to ensure sufficient provision of drivers when franchises are transferred between operators. The existing process, which was used on the handover of Thameslink and Great Northern services to Govia Thameslink in 2014, includes requirements for the previous operators to share information on driver numbers with prospective new operators, at the franchise bid stage, and there are mechanisms in franchise contracts to encourage previous operators to maintain staffing levels in the final months before handover. However, a consultancy report for the Department in 2016 recommended further improvements, such as the Department having a more detailed understanding of train crew rostering patterns.

Industrial action

2.6 During 2016 and 2017, the rail unions RMT and ASLEF carried out separate industrial actions which disrupted Govia Thameslink services (Figure 11):

RMT began industrial action in April 2016. The union called 38 strike days between April 2016 and November 2017. At the time of writing this report, RMT was continuing industrial action.

ASLEF, the train drivers’ union, began industrial action in December 2016 and called six strike days between then and November 2017. ASLEF drivers also introduced a formal overtime and rest day working ban that lasted 43 days between December 2016 and January 2017. A second overtime ban by ASLEF ran for 21 days between June 2017 and July 2017. At the time of writing this report, ASLEF members had voted to accept an offer from Govia Thameslink of new employment terms and conditions, pay and the use of ‘driver-only operation’ (Figure 12), which was due to be implemented from January 2018.

2.7 Both unions opposed Govia Thameslink’s use of ‘driver-only operation’ on the franchise. In November 2015, 18 months after the Department’s award of the franchise to Govia Thameslink in May 2014 and before the start of RMT’s industrial action in April 2016, the two unions issued a joint statement opposing ‘driver-only operation’. This joint statement would have been difficult for the Department or bidders for the franchise to foresee.

2.8 The Department’s approach to rail franchising is to set out its minimum requirements in a tender document while encouraging bidders to exceed the minimum requirements through its quality-scoring framework. It then contracts the winning bid, including the elements that exceed its original specification. The Department told us that it supports the railway industry’s ambition to modernise and, as part of this, bidders for new franchises take the opportunity to review whether, where there are guards on trains, the role of opening and closing the doors is still best undertaken by them or the driver. This is known as ‘driver-only operation’ (DOO) or ‘driver-controlled operation’ (DCO). All of the five companies who bid to run the franchise proposed more widespread use of DOO than the Department had originally specified. Govia Thameslink’s bid included details of its experience introducing DOO elsewhere on the network.

2.9 When the Department appointed Govia Thameslink to run the franchise, it recognised that the company’s plans carried a risk of industrial action. During its assessment of Govia Thameslink’s bid for the franchise, the Department described the plan as “…such an ambitious scale of change that the trade unions are expected to resist or delay the implementation of change”. It noted previous examples of limited industrial action when DOO was introduced on other services. The Department assessed that Govia Thameslink’s plan was likely to be delayed but would ultimately be deployed as intended. The Department did not fully evaluate the possible effects on passengers of different scenarios of industrial action before awarding the contract, nor did it ask Govia Thameslink to do so. Its contract with Govia Thameslink included the operator’s contingency plan for industrial action. Govia Thameslink implemented its contracted obligation for DOO in January 2017.

2.10 The Department recognised that this franchise contract, which was different from other franchises in that fare revenue was received by the Department rather than the operator, meant that Govia Thameslink may have less incentive to avoid strikes than other operators. Industrial action is also defined in the contract, in common with other rail franchises, as a ‘force majeure’ event, meaning that the operator cannot be held responsible for the resulting poor performance, providing certain conditions are met. In 2014, before it appointed Govia Thameslink, the Department judged that there were other financial incentives in the contract to avoid strikes, for example the potential impact on other revenues such as car-parking fees at stations.

2.11 As the employer of train crew, Govia Thameslink is responsible for engaging with the rail unions and for negotiating with them during industrial action. The Department reviewed Govia Thameslink’s industrial relations strategy before appointing it and gave the company positive feedback. The Department’s direct engagement with the unions was limited to a small number of high-level meetings and correspondence.

Train reliability issues

2.12 Some of the trains which Govia Thameslink operates have been unreliable and this has contributed to the performance of its services. Between July 2015 and March 2017, 25% (22,000) of the cancellations and delays of more than 30 minutes which were caused by Govia Thameslink were due to problems with trains. Reliability problems have affected both some older trains, which Govia Thameslink inherited from previous operators, and new trains including the Siemens-built Class 700 trains, which began to be introduced from June 2016. We examined the delivery and performance of the Class 700s in more detail in our report on the Thameslink programme.12

Govia Thameslink’s performance against its contractual targets

2.13 The Department’s contract with Govia Thameslink includes a performance regime consisting of:

Targets for service performance – limiting the number of delays, cancellations13 and ‘peak short formations’14 of train services; passenger satisfaction and ‘ticketless travel’.15 These performance measures are linked to incentive payments if Govia Thameslink achieves them and penalties if it does not.

Definitions of ‘breach’ levels of under-performance, at which the Secretary of State for Transport is required to take action. One option is to require the operator to produce a remedial plan to improve performance, if the Secretary of State considers this to be the appropriate course of action. Otherwise, the Secretary of State can act in accordance with the enforcement regime contained in the Railways Act 1993.

‘Default’ under-performance definitions. When ‘default’ under-performance is continuing, material and unremedied, according to criteria which the franchise contract defines, the Secretary of State has the power to terminate the contract at his discretion.

2.14 After Govia Thameslink breached required performance levels in July 2015, the Department agreed a remedial plan with Govia Thameslink, which was finalised in February 2016. The plan included commitments on driver recruitment and training, additional management resources, improvements in passenger information and investment in rolling stock modifications to reduce the number of technical faults, including issues with the train doors.

2.15 After industrial action began in April 2016, the Department realised that the industry performance system, on which operators normally record the reason for each individual cancelled or delayed train, could not cope with the large increase in problems reported (Figure 13). To determine Govia Thameslink’s performance, the Department and the operator needed to agree whether or not each service cancellation was due to industrial action, defined as ‘force majeure’ – meaning, providing certain conditions are met, that the operator cannot be held responsible for the resulting poor performance – or to some other cause. The large rise in cancellations would not necessarily mean that Govia Thameslink had breached its target, if much of the increase was due to ‘force majeure’ industrial action.

2.16 Govia Thameslink started submitting claims for ‘force majeure’ in June 2016. The Department’s assessment of the performance data and discussions with the operator took more than a year, partly because industrial action was continuing at the same time and partly because it had to wait for each performance period to come to an end. In March 2017, the Department’s assessment was that Govia Thameslink was in breach of the cancellations target.

2.17 In late 2016 and early 2017, the Department considered whether it had grounds for terminating the contract as one of a number of options. It did not pursue terminating the contract because there were insufficient grounds. The most significant reason for disruption was industrial action, a ‘force majeure’ event in the contract, meaning that the operator could not be held responsible for the resulting poor performance. Instead, the Department decided to take enforcement action and require the operator to produce a remedial plan, which at the time of writing was not finalised.

2.18 In June 2017, the Department concluded its analysis of Govia Thameslink’s ‘force majeure’ claim. In July 2017, Govia Thameslink accepted the Department’s analysis as part of the overall commercial discussion. They then agreed that the operator will spend £13.4 million on various measures aimed at improving services for passengers (Figure 14). The agreement included several elements:

£2.4 million is Govia Thameslink’s payment for underperformance against its service performance targets, in the franchise year from mid-September 2015 to mid-September 2016.

A further £10 million of the agreement is to buy out Govia Thameslink’s liability in respect of its performance obligations for franchise years September 2016 to September 2017, and then to September 2018; that is, £5 million for each year. The Department decided to agree these sums in order to avoid further protracted analyses and negotiations, particularly as it would also need to agree further contractual performance benchmark changes regarding the Thameslink programme and the changed timetables (see paragraph 3.9). The amount was also in line with the Department’s analysis of Govia Thameslink’s performance in the 2016-17 franchise year.

The final £1 million of the £13.4 million agreement is for franchise issues unrelated to service performance and that would have been invested in passenger benefits regardless of the settlement.

2.19 The Department initially raised settling for future underperformance at the March 2017 Departmental Board Investment and Commercial Committee, where it was explaining its approach for agreeing the amount of poor performance related to ‘force majeure’. The Committee oversees major contractual and commercial decisions and would not normally oversee commercial decisions of this size. However, given the risks around the franchise and the high-profile disruption, the Department decided it should discuss the ‘force majeure’ negotiation at the Committee. The Department did not seek a decision from the Committee on how this should be handled, or support for its approach.

2.20 At the end of June 2017, the Department had concluded that Govia Thameslink owed it £2.4 million for poor performance over the period to September 2016. On 29 June the High Court ruled that the Department had to make a final decision within 14 days about whether, in light of Govia Thameslink’s ‘force majeure’ claims, Govia Thameslink had breached its performance benchmarks, or would face a judicial review. Following this ruling, the Department decided to agree a broader package of investment in the franchise to improve passenger services within the same timescale. We have not seen evidence of formal discussions with the Department about the amount that Govia Thameslink might be willing to pay to settle its obligations.

2.21 The decision resulted in a fast-moving negotiation between the Department and Govia Thameslink. The Department told us that its senior officials, including the managing director of passenger services and the acting director general for rail, had approved the agreement and that decisions had sometimes been made verbally because of the rapid timescale. Officials also consulted the Secretary of State for Transport, who agreed to the approach proposed including the buyout of a future performance year and approved the final package.

2.22 At the time of writing, it is unclear how the Department will incentivise Govia Thameslink to deliver good services for passengers in the future, having removed its ability to use financial performance penalties up to September 2018. This is because the negotiations on a second remedial plan, and interim performance measures, are ongoing. The Department told us that this remedial plan, along with its powers to fine operators for breaches of the franchise under the Railways Act 1993, mean that it can still manage Govia Thameslink’s future performance despite the agreement.

11 In addition to the two main stages described, some services which were previously part of the South Eastern franchise came under Govia Thameslink’s control in December 2014.

12 Comptroller and Auditor General, Update on the Thameslink programme, Session 2017–2019, HC 413, National Audit Office, November 2017.

13 Both full and part cancellations. ‘Part cancellations’ are trains which ran for at least 50% of the planned journey length but which did not stop at all planned stations.

14 Services which run with fewer train carriages than planned, at peak hours.

15 Targets limiting the number of passengers travelling without a ticket or with the wrong ticket.

Part Three

The Department and Network Rail’s management of the rail network

3.1 This part evaluates how the capacity of the rail infrastructure in the franchise area, its condition and the demands placed on it have contributed to the performance of the franchise. It also considers the impact of the Thameslink programme works, managed by Network Rail, on the franchise.

The effects of Thameslink programme work on services

3.2 As noted in Part One, one of the Department for Transport’s (the Department’s) main aims for the franchise was to help deliver the Thameslink programme infrastructure (the programme). Bidders for the franchise had to provide a plan of how they would help to deliver the programme infrastructure, using information from Network Rail. Govia Thameslink Railway Ltd’s (Govia Thameslink’s) approach to the franchise took account of the Thameslink programme work and changed train services accordingly:

Diverting Thameslink services away from London Bridge, via Herne Hill and Tulse Hill, due to the closure of the Thameslink connection between London Bridge and Blackfriars.

A series of ‘blockades’ for Network Rail to carry out Thameslink programme works during 2015, 2016 and 2017, affecting London Bridge, Cannon Street and Charing Cross stations. These primarily affected Southeastern services, with only marginal impacts on Govia Thameslink services.

3.3 Beyond these pre-planned changes to service patterns, Thameslink programme works have had relatively little ‘unplanned’ effect through overrunning work on Govia Thameslink services. In 2015-16, the programme accounted for 10,338 minutes of delay on Govia Thameslink services, 0.41% of the total delay minutes (2.49 million). Other Network Rail issues, such as infrastructure work outside the programme and equipment failures, accounted for more than 1.5 million delay minutes, or 60%, in the same period. Unplanned effects of the programme have mainly fallen on Southeastern services, which fall outside the scope of this report.

3.4 The programme has caused other indirect delays to services on the franchise, however, as well as to Southeastern services. Network Rail has to take platforms and track out of service to carry out its works at London Bridge station. This means there are fewer lines available to manage trains as they arrive in the station, making it more difficult to recover from delays, and causes further knock-on delays, known as ‘reactionary’ delays, in the approaches to London Bridge station. An assessment carried out by the rail regulator, the Office of Rail and Road (ORR), in March 2017 found that reactionary delay in the Kent area and at London Bridge “…may be, to some extent, an indirect impact of the [Thameslink programme]”.16

3.5 However, Thameslink programme work at London Bridge in late 2014 and early 2015 did cause significant disruption for passengers on Southern services (Figure 15). ORR also reported on this disruption in August 2015.17 At that time, Southern services were run by Govia but under a separate company called Southern Rail Ltd. Govia Thameslink took Southern services into the Thameslink, Southern, Great Northern franchise in July 2015.

The rail network’s capacity for train services

3.6 In 2013, when the Department invited bids for the franchise, it wanted to increase the capacity of the services in line with the aims of the Thameslink programme, to benefit passengers. Passenger numbers on its routes have been increasing for many years and are forecast to continue rising.18 The Department encouraged bidders to go beyond the Department’s minimum requirements, for example by proposing additional train services or additional capacity for passengers, or introducing high-frequency services through the centre of the Thameslink route (the ‘core’) earlier than the base plan for the programme.

3.7 Network Rail is ultimately responsible for balancing demand with available capacity to determine which timetable will operate. It was concerned that even the Department’s minimum timetable plans went beyond the capacity of the rail network, and Govia Thameslink also raised concerns:

Before the Department published its invitation to tender in September 2013, Network Rail wrote to the Department stating that its December 2018 train service requirements, the second of two major timetable plans which the appointed operator would have to deliver “…did not yet constitute a workable timetable”.19 After the five bids for the franchise came in, Network Rail continued to express concerns that the timetables which bidders had produced based on the Department’s requirements were not realistic. In a report to the Department in early February, it rated all five bidders’ plans, for both the December 2015 and December 2018 timetables, either ‘Orange’, indicating ‘significant concerns’ or ‘Red’ (partly or completely unworkable plans). It gave Govia Thameslink’s plans an ‘Orange’ rating, due to the number of ‘non-compliances’ with Network Rail’s timetable planning rules and requirements for access to do engineering work.

While the Department was developing its invitation to tender, it discussed its train service requirements with bidders and invited comments on them. Govia Thameslink wrote to the Department suggesting that Network Rail was likely to object to some aspects of the Department’s specification, in a letter two weeks before the Department issued it in September 2013. Govia Thameslink detailed its concerns about specific aspects of the 2018 plans, such as the number of trains required to run to and from Moorgate station from 2018, and the number of peak time stops required at Norwood Junction on the Brighton Main Line.

3.8 The Department judged that the normal industry timetable development process, in which Network Rail negotiates and agrees operators’ access rights to the network, would allow such concerns to be addressed before the December 2015 timetable and the new Thameslink programme services in 2018 come into effect. The level of train services specified in the contract would then be amended to reflect the reality of what Govia Thameslink was able to deliver. It is possible, however, that the demands placed on the network by the actual December 2015 timetable have contributed to the service disruption which passengers have experienced. In his review of the Southern rail network for the Department in late 2016, Chris Gibb found that the timetable was “... theoretically possible to deliver, but only if every other element is operating at the top of its game”.20 The joint industry development of the 2018 timetable has continued in parallel with the operation of the franchise and at the time of this report, this timetable is not yet finalised.

3.9 At the time of writing this report, the Department and Govia Thameslink were negotiating two significant contractual changes in accordance with the terms of the franchise contract. One contractual change will reflect the impact of changes to the 2018 train service requirements compared with those in the franchise contract. These changes have to be agreed across the rail industry, and were anticipated in the franchise contract. The second major change reflects the delayed introduction of the new Class 700 trains for Thameslink services, which has meant that Govia Thameslink has needed to continue operating older trains. The impact of the changes is expected to amount to tens of millions of pounds a year. These negotiations are affected by the Department’s decision to extend the final phase of timetable implementation for the Thameslink programme by a year, as discussed in our report on the Thameslink programme.21

The condition of the rail network

3.10 In addition to the timetable issues, limitations on the network’s capability because of its condition and complexity have also contributed to the service performance on the franchise. The Department did not take account of these in its specification of the franchise.

3.11 Infrastructure failures have been a significant cause of disruption to Govia Thameslink services. In December 2016 Network Rail reported that in the previous year, there had been an infrastructure failure on average every 1.5 hours affecting Govia Thameslink services, and the failures on Govia Thameslink had accounted for 11% of all Network Rail infrastructure-related delay across the national rail network. There was a ‘significant’ incident (causing 1,000 to 10,000 minutes of delay in total) on average every three to four days and a ‘severe’ incident, accounting for more than 10,000 minutes of delay, on average every four months.

3.12 The Department funds Network Rail spending and sets overall requirements for the network. Network Rail developed its plans for work on the rail network in the current five-year funding cycle, from 2014–2019, on the basis of the Department’s priorities in its 2012 ‘High Level Output Specification’. Plans for maintenance and renewal work were then determined by Network Rail and the Office of Rail and Road, within the funding envelope set by the Department.22 This process is entirely separate from the Department’s rail franchising programme.

3.13 In 2016, as part of Chris Gibb’s review, Network Rail identified a package of railway maintenance work that would reduce the amount of delays from railway asset failures.23 This includes a range of works, such as track replacement and cutting back trees and shrubs on and around the tracks. The Department agreed the need for additional infrastructure investment on the franchise routes in January 2017, more than two years after Govia Thameslink began operating the franchise, following a recommendation in Chris Gibb’s review.

3.14 Network Rail estimated that it will cost up to £900 million to address all the issues it has identified. However, because of limits on the amount of access Network Rail has to the infastructure to carry out these works, it has had to prioritise £300 million of the works that will have the biggest impact on reducing delays to central London, which it plans to complete by April 2019. These works are on its South East and London North Eastern routes and have been funded by a £250 million grant from the Department, with the remaining £50 million being reprioritised from Network Rail’s existing maintenance budget. It is considering including the remaining £600 million of works in its plans for the next railway spending period starting in April 2019.24

Network congestion and sensitivity to disruption

3.15 In addition to increased investment in infrastructure, Network Rail acknowledges that there is a need to better understand the sensitivity of the network to small disruptions. In 2015, Network Rail and Govia Thameslink commissioned a review focusing on ‘reactionary delay’ when further delays to services are caused by initial, small incidents producing reactionary effects on a congested network. The ‘Draper review’ of reactionary delay on the southern franchise routes, excluding Great Northern, carried out by Steven Draper of Network Rail, was part of the response to the significant performance issues at London Bridge in early 2015 before Govia Thameslink had taken over Southern in July 2015. It found that the congested network had “lost the ability to recover from delay”. Key issues included trains starting late from London Bridge and Victoria stations, and reactionary delay on the Brighton Mainline near Gatwick, with Thameslink services being delayed by Southern services.

16 The Office of Rail and Road, Network Rail’s performance delivery to Southeastern, July 2017, available at: http://orr.gov.uk/__data/assets/pdf_file/0011/25202/network-rail-performance-delivery-to-southeastern-july-2017.pdf

17 The Office of Rail and Road, Network Rail’s performance delivery to Southern and Govia Thameslink Railway in 2014-15, August 2015, available at: http://orr.gov.uk/__data/assets/pdf_file/0006/18699/performance-investigation-report-southern-gtr-august-2015.pdf

18 For example, Network Rail’s 2012 plan for the Sussex route, which includes the Brighton Main Line, noted that passenger numbers were forecast to grow by 30% in the next 10 years.

19 The first timetable plan required from bidders was for services from December 2015 to January 2018. After taking on the franchise in September 2014, until December 2015, the operator would run timetables inherited from the previous operators.

20 Chris Gibb, Changes to improve the performance of the Southern network and train services, and restore passenger confidence, Department for Transport, June 2017, available at www.gov.uk/government/publications/southern-rail-network-gibb-report

21 Comptroller and Auditor General, Update on the Thameslink programme, Session 2017–2019, HC 413, National Audit Office, November 2017.

22 Comptroller and Auditor General, Planning and delivery of the 2014–2019 rail investment programme, National Audit Office, September 2015.

23 See footnote 20.

24 See footnote 21.

Appendix One

Our audit approach

This study examines whether the Department for Transport (the Department) has effectively managed this franchise to meet the objectives it set for it. Our key areas of review were:

the franchise design and levels of disruption for passengers, to date (Part One);

causes of poor performance related to the Department’s contract with the operator, Govia Thameslink (Part Two); and

causes of poor performance related to the rail network and the role of Network Rail (Part Three).

Our evaluative framework for assessing value for money considers the objectives the Department set itself for this franchise and whether these have been met.

Our audit approach is summarised in Figure 16. Our evidence base is described in Appendix Two.

Appendix Two

Our evidence base

1 Our conclusion as to whether the Department for Transport (the Department) has effectively managed this franchise to meet the objectives it set for it has been reached following our analysis of evidence collected between February and October 2017.

Our audit approach is outlined in Appendix One.

We examined whether the Department has designed, awarded and managed the franchise to deliver good services for passengers:

We reviewed the Department’s rationale for the design of the franchise including the scope, contract model and commercial arrangements within it. This involved reviewing relevant Departmental documentation and interviews with Department staff who were directly involved in setting up this franchise. We interviewed key staff in the Passenger Services area of the Department to obtain further information about how the Department managed this franchise with the operator.

We reviewed performance data for this franchise and the rest of the rail network and discussed it with the Department and Govia Thameslink.

We reviewed data on financial returns to the Department and Govia Thameslink.

We reviewed documentation and analysis supporting the Department’s financial settlement with Govia Thameslink in July 2017.

We interviewed key stakeholders, including the rail unions, to understand the decisions made and working relationships in place on this franchise.

We assessed whether the Department has integrated the franchise with rail infrastructure work, including the Thameslink programme:

We interviewed Network Rail staff responsible for the Thameslink programme and its interfaces with the operator. We also interviewed Network Rail staff responsible for managing the infrastructure at a route level.

We reviewed documents that Network Rail submitted to the Department during the development and award of the franchise to Govia Thameslink.

We reviewed documentation provided by Network Rail on rail infrastructure performance in London and the South East.

We reviewed documents on Network Rail’s work with Govia Thameslink during the franchise operation to date.

Design and Production by NAO External Relations
DP Ref: 11597-001