On Sun, 17 Dec 2006 14:48:13 +0000, asdf
wrote:

On Sat, 16 Dec 2006 15:49:03 +0000, Dave Arquati wrote:

The whole point of a penalty/incentive regime is that the need to make a
profit forces the concessionaire to deliver high performance - because
if they don't, they will lose money and eventually have to give way to a
more efficient company.

The difficulty running the service publicly is precisely the one you
just pointed out for a private company. Will the public sector employees
deliver a high performance service just because they have a warm, fuzzy
feeling about working for the public? Some of them may, but certainly
not all. On the other hand, the concessionaire will have to run a
high-performance service because if they don't, they will be penalised.

There have been plenty of cases of companies deciding it's more
profitable to make substantial cutbacks and pay the penalties for poor
performance than it is to perform well. Whilst it's true that when the
contract expires the company may have to give way to a better
performing one, you're underestimating the preference for short term
profit over long term viability - particulary with train operating
companies, which own very few assets and make very little investment
(e.g. all their trains are owned by someone else and leased, and a
full complement of staff is often TUPE'd in ready-made) and can be
brought into and out of existence with relative ease.

I would tend to agree with these comments. There is no such thing as the
perfect contract and inevitably circumstances will arise that will test
the arrangements in ways neither party could envisage. While the
general thrust of a contractual arrangement may very well deliver good
results these may not be sustained over time but you only find out when
it is too late (unless you have some very effective measurement and
surveillance processes in place). It is all too easy for incentives to
be wrongly pitched so that sub optimal decisions end up being taken
which either result in appalling short term performance and
renegotiation or apparent good short term performance but with an asset
base or workforce that is good for nothing long term. The only entity
that really suffers is the customer and not the supplier.

The other importance aspect is the age of the infrastructure. DLR and
Tramlink are both relatively new and have modern systems in place to
track asset condition and performance. LU and Network Rail have a
backlog of decades of degradation, lack of knowledge and under
investment to deal with. It makes a lot of difference in overall
performance terms and how well a contract works - "risk" is easier to
manage when knowledge is better.

I don't buy the maxim that private companies always run things better
than the public sector. There are plenty of counterexamples
(Railtrack, Connex, Multiplex, etc). At the end of the day there are
good and bad private companies, and good and bad public entities. TfL
has always struck me as a good one (though perhaps I'm mistaken ,
and I'd be more confident if they were running the Overground rather
than potentially a bunch of cowboys.

Again I agree - there are good and bad in both sectors. With the
Overground operation there are a few factors that I would be concerned
about if I was involved in trying to run the new arrangements.

a) disputes between the concessionaire and TfL over rolling stock
performance / reliability.
b) the role of Network Rail who are supplying the track and
signals.
c) the cultural inheritance of taking over what are in almost all
cases "cinderella" parts of the network and the need to meld a new
operational culture and deal with the pay and pensions issues
effectively.
d) the impact of the political importance of the Overground network
needing to "work" almost from day one. This will undoubtedly be
exploited by a number of parties and could cause all sorts of issues.

I'm really keen for the whole project to work but I can see it being a
bit of a bumpy ride.
--
Paul C


Admits to working for London Underground!