Rail franchising in Great Britain
was created by the Railways Act 1993
. Passenger services are franchised, for a limited period, to train operating companies
. The award of the franchise is determined by competition.
Rail franchise holders in Great Britain accept commercial risk, although there are clauses in newer franchises which offer some compensation for lower-than-expected revenue (and also claw back some excess profits, should these occur). This should be compared with a "concession", such as those awarded to Stagecoach for Manchester Metrolink or to Serco for the TfL Docklands Light Railway. Concession holders are paid a fee to run the service, which is usually tightly specified by the awarding authority. They do not take commercial risk, although there are usually some penalties/rewards built into the contract for large variations in performance.
Rail franchising was, initially, administered by the Director of Passenger Rail Franchising
. On 1 February 2001 the position of Franchising Director was abolished by the Transport Act 2000
and the passenger rail franchising functions were transferred to the newly-created Strategic Rail Authority
(SRA). The SRA was in turn abolished in 2006 and the SRA's franchising functions were taken over by the Secretary of State for Transport
When a franchise becomes due for renewal, the Department for Transport
(DfT) invites bidders to tender for the franchise. The DfT... Read More