Pros and cons of franchising

Thursday 11th October 2019

I spent an enjoyable couple of days this week helping to run the twice-a-year Young Bus Managers Network conference. It’s always an inspiring event to attend with such encouraging positive energy and enthusiasm emenating from around 80 to 100 young people in their twenties and thirties; some fresh faced into the industry from University this autumn while others exuding much more experience including career progression to operations, commercial or engineering managers from driver and the engineering shop floor.

This time we were based in Croydon and enjoyed a busy 25 hour period from lunchtime on Tuesday to mid afternoon on Wednesday with site visits to Arriva’s Croydon bus garage and Purley Way iBus control centre and fascinating talks and presentations from leading bus industry directors including Transport Commissioner for London, Mike Brown, managing director for Go-Ahead London, John Trayner and managing director of UNO Bus Jim Thorpe as well as three of our own Network members giving a presentation and other speakers on legal and regulatory compliance and an update on the latest DfT quarterly statistics for the bus industry.

The task for the conference’s regular workshop session immediately after lunch was topically for the young managers to come up with three benefits of a “London style” franchise model for running buses, as well as three disbenefits. The report back after the group discussions brought forward an interesting selection of ideas which included…….

Benefits of a public authority controlled bus network with private bus companies contracted to run specified routes at predetermined fares and ticket acceptance were assessed to be:

For the passenger: integrated travel with simplified pricing and no restrictions on ticket acceptance; a unified brand identity with consistent standards; potential for greater stability in the network during the life of tendered contracts.

For the local authority: potential to actively use buses to achieve modal shift from cars as part of an overall transport policy; accountability for public officials and local politicians overseeing the tender procurement process; potential to take a lead in handling customer service directly (as TfL does); direct link between bus provision and infrastructure requirements eg bus lanes.

For the bus company: a guaranteed income stream at fixed profit margins with no revenue risk; no expenditure incurred on marketing and publicity; all bus companies are judged by the same standards; bus companies can focus exclusively on customer service; entry into the market may be easier if tenders are let on a route basis

Disbenefits were assessed to be:

For the passenger: entrepreneurial spirit and therefore innovation and creativity is stifled and likely to be absent with the public sector naturally more risk averse than the private sector; localised political pressure leading to skewed decisions about the network rather than it being market led; buses being dependant on political colour; lack of competitive pressure could mean higher (not cheaper fares) and less service provision.

For the local authority: taking the revenue risk (which is alien for a local authority culture) means harder to budget and can lead to short term decisions to correct shortfalls – but may not be possible due to contractual issues; the requirement for public funding will rise.

For the taxpayer: increased public funding will likely require higher taxation.

For the bus company: entrepreneurial spirit, innovation and creativity dies; failure in the tender market could mean loss of business; employees face uncertainty when contracts change hands; bus companies work for the contractor rather than directly for the customer; if tenders let on network basis may be difficult for small bus companies to enter the market.

A lack of time meant these were just headlines from each group’s deliberations and a number made the point the benefits listed above for the passenger and local authority can also be achieved by effective partnership working between authority and bus company as exemplefied in towns and cities where there’s been consistent growth in passenger journeys for many years. Obviously for me, Brighton & Hove comes to mind but there are many other examples around the country, particularly where there’s a strong market for student travel where growth and innovation are endemic. In such places, the local authority can concentrate on the all important infrastructure issues and complimentary policies on parking and car restraint rather than having to be concerned at day to day revenue risk of running a bus fleet, something they’re not usually equipped to deal with.

This is all very timely with Transport for Greater Manchester embarking on its formal public consultation about plans for buses in that conurabtion. It will be interesting to see how that pans out.

Finally, off topic, I couldn’t let the opporunity pass over dinner on Tuesday evening to share my hobby horse with Mike Brown of there being no map for TfL’s bus network either online or in print form. Surprisingly enough he agreed with me, which just goes to show even a Transport Commissioner can’t always achieve what he knows is right to be done!

Roger French