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The Abellio-led Greater Anglia and West Midlands Trains businesses have agreed directly-awarded National Rail Contracts with the Department for Transport, ahead of the expiry of their Emergency Recovery Measures Agreement contracts on September 19.
Both business are currently run as joint ventures between Abellio and Mitsui, with East Japan Railway also holding a stake in WMT.
The National Rail Contracts are set to run for up to five years, although in each case DfT has the option to end the agreements two years early in line with changes planned for the industry.
In similar statements, both TOCs noted that the NRCs replace the previous franchising model, providing a much more stable basis on which to operate services as they prepare for a post-pandemic economy.
The main difference is that instead of taking the revenue risk the operators will now be paid a fixed management fee for running services, plus a performance fee based mainly on the delivery of customer-focused metrics.
According to industry sources management fees are likely to be in the region of 1·5% of turnover, with an additional 0·5% to be paid if agreed targets are met.
Greater Anglia explained that ‘in the old franchising model we would be locked into committed obligations we wrote into a bid document before we took over operations. We will now submit an up-to-date and accurate business plan to DfT every year.’
This detailed document would cover plans, objectives and commitments for the year under seven areas: people; leadership, management & resourcing; train service operations; collaboration; customer & communities; revenue; environment & sustainability.
Greater Anglia said ‘annual business planning is a much better way of running the organisation versus the old franchising model, because we can adapt to changes much faster and be flexible to external developments.’
The directly awarded NRCs are expected to be followed by a move towards concession-style Passenger Service Contracts similar to those used by Transport for London. However, Greater Anglia pointed out that plans for Great British Railways are still at an early stage and ‘will take a number of years to implement.’
Industry sources report that DfT has little appetite for any further transfers to the Operator of Last Resort. Nevertheless, both TOCs had been required to spend time making extensive preparations for this eventuality in case new agreements could not be reached.
This article first appeared on www.railwaygazette.com
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