The government does not have the time to run a full competition for the Southeastern rail franchise before it expires next April, the chief executive of incumbent operator Go-Ahead has warned.
David Brown said it would be “slightly wrong” and “counter-intuitive” for the Department for Transport (DfT) to bring in a new operator for the franchise.
The competition for the franchise was unexpectedly scrapped last month and a five-month extension awarded to Govia, the joint venture between Go-Ahead and Keolis, until April 2020.
Speaking to City A.M. today, Brown said: “They [the DfT] haven’t got the time to have a new competition; they can’t bring in another operator. To bring in another operator when we are achieving the best customer satisfaction would be slightly wrong. It would be counter-intuitive.”
The squeezed timeframe means that Go-Ahead could either receive an emergency direct award, or the Operator of Last Resort (OLR) – the function that allows the state to intervene in failed franchises at the last minute – could take over the line.
The cancellation of the bidding process – which the government said was over concern the process would cost the taxpayer too much – caused serious consternation among rival firms which had been gunning for the contract.
The DfT has been approached for comment.
Last month City A.M. reported that Go-Ahead and Dutch firm Abellio, which also bid for the Southeastern franchise, were considering whether they could recover costs from the government following its decision.
The DfT insists there is no recourse for the rail firms as they enter into the bidding process at their own risk.
Meanwhile, Go-Ahead’s pre-tax profits slumped by 33.4 per cent to £97bn for the year ended 29 June, it revealed today, while revenue increased by 10 per cent to £3.81bn.
Rail operating profit dropped from £44.5m in 2018 to £25.4m “primarily due to the expiry of the London Midland franchise in December 2017”, the firm said.
Go-Ahead said it expected Govia Thameslink Railway to achieve a “modest profit margin” in 2020.
It said its international division was performing well, with four new contracts. It has started operating its first two German rail contracts and its first bus contract in Ireland.
Brown said: “Overall for 2020, we are confident that the group will deliver another robust performance in line with our expectations as we continue to execute our clear and well-defined strategy; strengthening our core business, diversifying into international markets and developing new ways of responding to a changing world.”