FIRSTGROUP has agreed a national rail contract (NRC) with Britain’s Department for Transport (DfT) for Great Western Railway (GWR).

The NRC starts on June 26 when GWR’s current contractual agreement with DfT ends, and has a core term of three years running until June 21 2025. There is an option for DfT to extend this by a further three years to June 2028.

Under the NRC, DfT retains all revenue risk and substantially all cost risk up to the levels agreed in the annual GWR business plan. Contractual change mechanisms will allow the annual budget to be increased to meet items outside of GWR’s control or undertake changes requested by DfT.

GWR will earn a fixed management fee of £6.9m per annum, with the opportunity to earn an additional performance-based fee of up to £17.8m per annum.

This fee is scored against four categories set by DfT: operational performance, customer satisfaction, financial performance and business management. In each category, performance will be assessed as being below acceptable, acceptable or good, with an acceptable rating meaning that 65% of the performance-based fee element is payable.

The punctuality and other operational targets required to achieve the maximum level of performance fee are designed to incentivise the highest level of performance for customers, says FirstGroup.

Under the NRC, GWR will continue to evolve its customer offering to meet changing passenger needs, helping customers switch to digital ticketing and making digital channels and information more accessible and personalised.

GWR will develop plans to start replacing legacy diesel rolling stock, reducing the cost base of the business, and supporting decarbonisation of the industry. It will also continue work to improve air quality, increase recycling, and divert more waste from landfill, supporting the change to electric traction.

In the greater Bristol area, GWR will be working in collaboration with Network Rail and local authorities to deliver the MetroWest project, which is expected to generate 1 million new rail journeys and provide access to rail for 80,000 people.

On the reopened Dartmoor Line between Exeter and Okehampton, GWR will work with DfT and local communities to develop proposals for additional station and line improvements. FirstGroup says that GWR plans to open three new stations on the route in 2023-24.

Signing the NRC supports the continued operation by GWR of the separate Heathrow Express services agreement, covering the operation by GWR of non-stop services from London Paddington on behalf of Heathrow Airport.

GWR will operate Heathrow Express for an agreed fee with contractual protection mechanisms and no passenger revenue risk. The average annual fee over the core term of the NRC is £2.0m.

“We’re delighted to continue our partnership with Great Western Railway, and are excited by its plans to deliver more benefits for local communities,” says transport minister, Ms Wendy Morton.

“We welcome today’s agreement of a new national rail contract, which enables us to build on the GWR customer experience and encourage passengers to continue returning to the network,” says FirstGroup CEO, Mr Graham Sutherland.

“GWR’s experience of operating the route over many years puts us in a strong position to help deliver the UK’s economic, decarbonisation and levelling-up agendas and we look forward to providing vital connections for our customers as the recovery continues to build.”