ECML franchise fails .... again....

[D854_Tiger]

I think you might be out of date. Last week Dft informed VTEC that they were in breach of their payment agreements and notice has been served that the franchise agreement is to be ended. They didn't get to the point where they could legitimately blame it on NR. They didn't either get to the point where a cap and collar arrangement could be implemented - 3 years in I believe.

 

Never forget that, from a political perspective, the TOCs are conveniently available to take the heat off ministers and their civil servants, should they be able to engineer it and they can persuade the TOCs to live with it by that well known process of an assortment of sweetners.

 

That Mr Graying is a slippery s*d and there's a lot of face saving going on currently, on all sides, even when you have the feeling Mr Grayling might not be that good at it.

 

Let's see how it all pans out for VTEC first, though my gut feeling is they will be around for sometime yet.

[lmsforever]

Agree about the Dutch, I had an interesting conversation with a chap who was high up in a UK construction company who were partners with a Dutch construction company who went all over the world as well the UK.He said that they could keep costs down this way and win more contracts.

[Clearwater]

For those those of you who think you could do a better job!

 

Via LinkedIn:

Edited February 8, 2018 by Clearwater

[jjb1970]

Unfortunately it's too easy to ascribe government failings to individual ineptitude. Most civil servants I've dealt with have been intelligent and hard working. I have a genuinely very high opinion of the technical people in the MoD at Abbey Wood. I actually wish it was down to incompetence of individuals as it might mean a few dismissals would help. The problem isn't individuals, at least in the areas I observe it is a dysfunctional system which drives odd decisions.

[Mark Saunders]

The short sight saga, how much do we need to spend, what are we prepared to spend and can we get away with less!

[andyman7]

Fact - there are similar numbers of bidders to almost all franchise invitations as there were at the beginning. They are just not the same bidders. The Transport Select Committee's concerns surround the extent to which those bidders reach preferred bidders' status. see above.

 

Many have advocated the TfL style of concession award, instead of the franchising model, including me now and again. Look at the numbers. You will find this would be an even more expensive way of doing it, expensive to the taxpayer anyway. The results may well be better, but is that down to the model, or the fact that it is TfL (effectively the expertise of LUL) and not the DfT (effectively the expertise of old BR, lifetime civil service bods and new graduates)??? Would you be willing to bet the house on taxpayers being willing to shift the onus of risk from privateers to the DfT?

 

The Chiltern length of franchise may well be a better solution. But with only one example, so far, how do we actually know? Would you trust Stagecoach with the same?

There have always been a limited number of bidders and high barriers to entry, but until 10 years ago it was possible to make serious money on a bid if everything fell into place. Cap and collar has removed the upside lottery win and the returns have become small when you succeed and painful when you don't - and the vagaries of late running engineering upgrades, terrorist attacks, economic woes etc wreak havoc on the bid line in too many cases.

The concession model has always been more expensive on paper but when compared to actual franchise performance it looks more sustainable for commuter and social type operations and I expect that in the longer term the structure of the franchise arrangement will need quite substantial re-engineering.

The original franchising process contains a litany of quite breathtaking tales (of which you were privy to a fair few) and deserves to be told in more detail in due course. Certainly we are still having to unpick quite a lot of the ill-thought-through consequences of what was the biggest fire sale I've ever witnessed in my career.

[Ron Ron Ron]

......OK, perhaps a few hundred thousand up to £2M in bid costs.....

 

 

Bid costs were running much, much higher than that - unless they have come down a lot in the last few years?

 

 

The figure I saw reported was somewhere around £5m when Mr C*****n was asked where he was going to get the money from should the state decide to bid competitively for franchises (as prescribed by EU rules).

 

 

I just Googled the news stories about the 2012 ICWC award and subsequent legal battle that ended up with First not taking over from Virgin Trains (WC).

The compensation to reimburse the 4 bidders for their bid costs was said to be around £40 million.

Virgin's bid was reported to be in the £14 million ball park.

Six years on, costs have risen a fair bit since then.

 

Looking back, I was reminded of how much First Group bid and were signing up to.

£13.3 billion !!!!!!

That makes VTEC's £3.3 look like chicken feed.

Thank goodness they keep handing out contract extensions to VTWC, otherwise we might have seen another spectacular failure on the left hand side of the country.

 

 

 

.

[locoholic]

Unfortunately it's too easy to ascribe government failings to individual ineptitude. Most civil servants I've dealt with have been intelligent and hard working. I have a genuinely very high opinion of the technical people in the MoD at Abbey Wood. I actually wish it was down to incompetence of individuals as it might mean a few dismissals would help. The problem isn't individuals, at least in the areas I observe it is a dysfunctional system which drives odd decisions.

That is the classic excuse for no-one ever taking the blame for stupid decisions. A "dysfunctional system" doesn't just come into being through an act of god or some obscure law of nature - it arises because of stupid decisions made by people in authority.

[stovepipe]

Nine transport secretaries since 2002.....that's a new one every 1.8 years.

[jjb1970]

That is the classic excuse for no-one ever taking the blame for stupid decisions. A "dysfunctional system" doesn't just come into being through an act of god or some obscure law of nature - it arises because of stupid decisions made by people in authority.

 

I wouldn't disagree, but identifying those people isn't easy. Ultimately it is the Ministers and Secretary of State but they haven't a clue what goes on and depend on their civil service advisers which takes us back to where we started. I'd challenge anybody on this board to claim they were more technically proficient than some of the MoD people I worked with. And contrary to many stories those guys are neither slackers nor jobs worthies, they were generally highly committed and passionate about their work. They have KPIs, they have budgets and they're assessed against objectives that are in some cases stupid, which results in some unfortunate behaviours and decision making. You may criticise them for that (and I did) but if your continued employment, promotion and the nature of your next assignment depended to a great extent from evaluations against some silly criteria what would you do?

Edited February 8, 2018 by jjb1970

[rockershovel]

Agree about the Dutch, I had an interesting conversation with a chap who was high up in a UK construction company who were partners with a Dutch construction company who went all over the world as well the UK.He said that they could keep costs down this way and win more contracts.

I’ve had experience of working with the Dutch, including offshore gas drilling, onshore gas pipelines and windfarms. My experience has tended to be that their trades and vocational training are generally superior to ours, they are much less troubled with the adversarial attitudes between management and workforce that we often suffer from, have less management generally (because their lower levels of supervision perform more effectively) and are much quicker to make use of innovation.

 

So I don’t doubt that they are good business partners, with an effective cost base structure. They mostly pay quite well, too. You will always be an “outsider” there, and treated accordingly, but I don’t mind taking their money on occasion.

 

Regarding windfarms, they have a government minister specifically briefed to pursue their interests. They have a sizeable construction fleet operating across the dredging and reclamation, oil and gas and wind farm sectors; I certainly don’t claim that they are “rolling in money” as a result, but they DO have an effective answer to making money using those same resources, rather than segregating the sector as we tend to do.

 

I’ve occasionally worked in the wind farm sector, but don’t spend too much time and effort over such enquiries. The money is better than it was, but the quite small sector (and in O&G terms, wind farms are “Sunday League” in terms of scale) tends to produce a closed mentality with limited opportunities and the civil engineering influence has some unpleasant sides-effects. The required certification is considerably more expensive than O&G, and its short validity means it is around three times the ongoing cost of the O&G equivalent. The overall payment structure means that I regularly see enquiries which quite literally, just about pay the cost of doing the job, and why would I do that?

[jjb1970]

Never forget that, from a political perspective, the TOCs are conveniently available to take the heat off ministers and their civil servants, should they be able to engineer it and they can persuade the TOCs to live with it by that well known process of an assortment of sweetners.

 

 

 

I tend to think that is the principle purpose of the TOCs in the system now, it allows the government to micro-manage a de-facto nationalised railway at the same time as blaming somebody else for anything unpopular. Not that I'm a cynic. How many people blame Southern for the debacle in that part of the system over recent years in total ignorance of the role of DafT in that whole sorry saga?

[jjb1970]

Nine transport secretaries since 2002.....that's a new one every 1.8 years.

 

I suspect it is one of those posts like the Home Office and NI in the old days, something of a poisoned chalice in political terms as you'll be blamed for everything passengers don't like. The only politician I ever felt really had a passion for railways and threw himself into it was Lord Adonis however I'm not impressed by his recent interventions.

[jjb1970]

I’ve occasionally worked in the wind farm sector, but don’t spend too much time and effort over such enquiries. The money is better than it was, but the quite small sector (and in O&G terms, wind farms are “Sunday League” in terms of scale) tends to produce a closed mentality with limited opportunities and the civil engineering influence has some unpleasant sides-effects. The required certification is considerably more expensive than O&G, and its short validity means it is around three times the ongoing cost of the O&G equivalent. The overall payment structure means that I regularly see enquiries which quite literally, just about pay the cost of doing the job, and why would I do that?

 

I think that comment reveals one of the fundamental issues, offshore wind isn't O&G, it isn't a Sunday league industry, it is a different industry and it has evolved differently. One of the reasons many traditional offshore contractors struggle in the sector is that they still seem to think of it as an offshoot they can dip a toe into if there isn't enough O&G work. Many companies are doing nicely enough out of it, there are clearly a lot of people who are happy enough to work in offshore wind and both commercially and technologically it is developing its own solutions which work for that sector.

[ess1uk]

ITV last night’s TONIGHT show tried to pick this apart among others but kept showing images of Pendolinos whilst talking about VTEC

[62613]

 North Sea Oil revenues sustained the exchequer when, as you will recall, the economy was so parlous we had the IMF bail out of the 70s

 

Sorry, that's incorrect. The IMF crisis was in the Autumn of 1976 and was due,partially to the UK running out of money after the price of crude oil increased by 400% after the Yom Kippur war. The first North Sea oil didn't come ashore until the late summer of 1978. It was the massive increase in the oil price which made its production in the North Sea viable.

ITV last night’s TONIGHT show tried to pick this apart among others but kept showing images of Pendolinos whilst talking about VTEC

Also what looked like MMRCs 'Dewsbury Midland'

[jamie92208]

Sorry, that's incorrect. The IMF crisis was in the Autumn of 1976 and was due,partially to the UK running out of money after the price of crude oil increased by 400% after the Yom Kippur war. The first North Sea oil didn't come ashore until the late summer of 1978. It was the massive increase in the oil price which made its production in the North Sea viable.

Just as an aside, I have seen it written, I think in Andrew Marr's history of Britain, that in the end we never actually used the IMF facility.

 

Jamie

[Joseph_Pestell]

For those those of you who think you could do a better job!

 

Via LinkedIn:61DDC33E-BCBB-4E40-BA88-3D24BD880AAE.jpeg

 

These salaries don't seem very generous by comparison with the bid costs quoted above. As ever, in the modern rail industry, the figures don't quite seem to add up properly.

[rockershovel]

I think that comment reveals one of the fundamental issues, offshore wind isn't O&G, it isn't a Sunday league industry, it is a different industry and it has evolved differently. One of the reasons many traditional offshore contractors struggle in the sector is that they still seem to think of it as an offshoot they can dip a toe into if there isn't enough O&G work. Many companies are doing nicely enough out of it, there are clearly a lot of people who are happy enough to work in offshore wind and both commercially and technologically it is developing its own solutions which work for that sector.

You appear to misunderstand me. I routinely work on individual O&G projects which are bigger than the whole windfarm sector, in terms of resources deployed. I’ve just had two years’ work on a single project for Shell which at one stage had almost 1000 personnel actually deployed, before that I had three years on a single project with BP, before that, three years on a pipeline from Germany to Russia which at one stage had three laybarges, four rockdumpers, two crane vessels and various support vessels simultaneously deployed for several months. Those opportunities just aren’t available in windfarms.

 

Believe me, windfarms are at least, an order of magnitude below major O&G.

 

It also needs to be said that O&G companies don’t place much importance or value, on windfarm experience on your CV. O&G people do tend to regard windfarms as “an offshoot” because they DO have the option, which dedicated windfarm people often don’t. I regularly get enquiries which simply aren’t competitive, and the protracted recruitment process tends to mean that O&G enquiries overtake windfarm jobs before they can be brought to any useful conclusion. The required certification is an expensive headache, too; I won’t be renewing mine.

 

I spent six months last year in the rail rolling stock sector, and I met a number of other “oilfield tramps” doing the same thing. Most had looked at windfarms, and turned elsewhere. I made at least what I could have earned in windfarms with a lot less problems.

[great central]

I tend to think that is the principle purpose of the TOCs in the system now, it allows the government to micro-manage a de-facto nationalised railway at the same time as blaming somebody else for anything unpopular. Not that I'm a cynic. How many people blame Southern for the debacle in that part of the system over recent years in total ignorance of the role of DafT in that whole sorry saga?

 

Which illustrates the point I made a while back about a successful franchise bidder being given a contract to sign, knowing full well that they will be held rigidly to everything written in that contract including things they might not personally want.

[62613]

Just as an aside, I have seen it written, I think in Andrew Marr's history of Britain, that in the end we never actually used the IMF facility.

 

Jamie

That's right; I don't think the government called in the IMF so much as they were bounced into it; Denis Healey recollects, in his autobiography, going round London trying to avoid the IMF men. Eventually they agreed to a compromise package of cuts to public expenditure, but the loan was never taken up, thank goodness. Healey in any case introduced cuts in all his subsequent budgets between then and 1978, in an economy growing at a rate we could only dream of today

[rockershovel]

Just as an aside, I have seen it written, I think in Andrew Marr's history of Britain, that in the end we never actually used the IMF facility.

 

Jamie

I’ve also heard that. However according to National Archives http://www.nationalarchives.gov.uk/cabinetpapers/themes/sterling-devalued-imf-loan.htm the loan was drawn in part, although improved financial conditions (partly due to the fact of the loan’s existence providing increased confidence, partly due to oil revenue coming on stream) mitigated the situation.

 

I’ve also heard it said, more than once, that the loan provided the necessary confidence for the quite enormous expenditures required to bring oil onstream; the Arab Oil Crisis made North Sea oil viable, but didn’t provide the necessary development funding.

 

My principal memory of the time is of the inflation, and the constant rounds of strikes and unrest as people tried to increase their take-home pay to keep pace. Big Oil delivered me from that; I stepped into a new world where it quickly became obvious just how backward Britain really was at that time, industrially. It was also a real Klondike. It’s impossible to convey the frenzy, the madness of it all, to those who weren’t there. I bought my first house cash, after less than three years....

Edited February 9, 2018 by rockershovel

[Coryton]

But they don't need to win that badly. Because they are shell companies with no staff making the bids (they take over existing staff if they win), there are no serious downsides to losing. OK, perhaps a few hundred thousand up to £2M in bid costs, but that is cheap as chips compared to losing £200M a year having "won", a real Pyrrhic victory.

 

I don't know how much bid costs are (though a few hundred thousand sounds awfully low), but I'm sure it's not money that the likes of Stagecoach spend lightly - it will have to justify itself from the potential benefits. 

 

Clearly there's no point in bidding at a level where you think you will lose money, but likewise, if you take the view that a highly optimistic bid is the only sort that's going to win, there are only two choices - big as high as you dare and hope it works out, or save your money and don't bid at all.

 

Putting in a 'realistic' bid if you think your competitors are going to take a more optimistic view is just a waste of money.

 

Of course this could end with nobody wanting to bid, but we haven't got to that point....yet....

[Clearwater]

Sorry, that's incorrect. The IMF crisis was in the Autumn of 1976 and was due,partially to the UK running out of money after the price of crude oil increased by 400% after the Yom Kippur war. The first North Sea oil didn't come ashore until the late summer of 1978. It was the massive increase in the oil price which made its production in the North Sea viable.

Also what looked like MMRCs 'Dewsbury Midland'

You’re right on how the 73 oil crisis triggered the economics of oil production from the North Sea. However, your selective quoting ignores the wider point I was making that North Sea oil (and the prospect of it) materially cushioned the uk from the loss of other incone streams as traditional manufacturing declined. Looking at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/676199/Table_11.11__June_2017_v2_.pdf

You can see the sharp increases from the late 70s onwards. I think these are nominal figures and from a quick search, total uk gov expenditure in 1980 was £104bn. Ie without these revenues, our economy would have been in a woeful state. The opening of the fields and the developments would have been forecastable from the mid 70s and would, I expect, have been taken into account in the structuring of public finances.

[Clearwater]

These salaries don't seem very generous by comparison with the bid costs quoted above. As ever, in the modern rail industry, the figures don't quite seem to add up properly.

I’d be surprised if bid costs were materially more than £1m per bidder. There’s also a difference between the costs of an abortive bid and a successful bid where advisers may align their fee with their clients success. Ie a fee of say X if bid is unsuccessful and 3X if the bid succeeds. The tens of millions may also be for all bidders. As ever, the truth is clouded by statistics and spin!