Nonetheless, Brown says he wishes to "restate the principles" of franchising and urges the government to adopt a series of measures designed to improve the way in which franchises are specified, procured and managed by the Department for Transport (DfT).
The report says the franchise bidding process is not fundamentally flawed, but there is significant scope for improvement. "The government needs to be clear about what it is seeking to buy in a franchise...and state its specific objectives for each competition," says Brown. "The bidding process should focus on these objectives and be further simplified to reduce unnecessary requirements and help reduce bidding costs."
Brown also echoes the conclusions of December's Laidlaw inquiry and a report by the National Audit Office which called for urgent reinforcement of the DfT's organisation and franchising capabilities. He suggests this should be accompanied by greater transparency in the bidding process and accountability at senior levels of management. The report says: "It is clear that the key priority is for the Department to rapidly strengthen its franchising organisation, including bringing in a number of senior, commercially experienced people," says the report. "There is a sharp asymmetry between the experience and capability of bidders and that of the Department's franchising teams."
The report suggests franchise duration should reflect the size and characteristics of individual franchises and recommends an initial term of 7-10 years with a pre-contracted continuation for further terms of 3-5 years to give eventual terms of up to 15 years with intermediate break points. Previously government policy had favoured a return to longer franchises and the abandoned 14-year ICWC contract was the first to be let under this principle.
Brown says the minimum franchise term should be five years and residual value mechanisms should be more actively used to encourage investment projects with a commercial return beyond the end date of the franchise.
Another focus of the report is allocation of risk. Brown argues franchisees should be responsible only for risks they can realistically managed and should not be expected to take external revenue risks such as macroeconomic fluctuations. He suggests that the DfT adopt a clear mechanism to adjust premium and support payment to take into account variations in GDP and central London employment growth rates. By reducing the burden of these external risks, it is suggested that bidders will offer better value.
Brown recommends that control of some franchises should be devolved to Passenger Transport Executives or Integrated Transport Authorities, and that further devolution of services in London should be considered. In the case of London Midland and Northern, this could lead to remapping of franchises to more closely reflect the operating areas of these authorities.
Brown stresses the need for the franchising process to resume as quickly as possible and in order to restore confidence has suggested that the DfT makes an early announcement on how it will bolster its resources. He has also called on the government to clarify its plans for the three suspended franchise competitions (ICWC, Great Western and Essex Thameside) by next month and make a more detailed announcement by April on how it will proceed with the wider refranchising programme.