The risks of a rail franchise

Today the headline news at 7am was about a story that broke from the British Government late last night, after the newspapers had been published, so that there were contradictory messages in the press and on the radio/TV.  The story was that the government has back-tracked on awarding FirstGroup the franchise for the West Coast rail line.  (here)

(note to readers outside the UK.  Our railways run as franchises for several years - 15 in this case - and the franchises for different services are awarded on the basis of competitive  bidding.  Four companies bid for the west coast line, roughly from London to Glasgow via Birmingham and Manchester.)

When this franchise was awarded in the summer, one of the defeated bidders called "Foul" and was ready to go to court. 

The news this morning is possibly related to the call of "Foul", but nobody admits that.  Little has been said about the reasons, except that the government recognised that the measurement of risk had been less than perfect.

The word "risk" suggests operational research - we do risk analysis as a matter of course.  So either there has been some less than perfect O.R., or there has been no O.R. at all.  There is some mention of the use of a government "model" to evaluate the bids, and the finger is being pointed at incorrect data - which probably implies scenario analysis for the risk assessment.

I went to one of the news sites about this story, one which allows readers to comment on the story.  There were over 1000 comments.  I searched them for the word "risk".  And nobody had mentioned it in their comments.  They were all about politics, the way that the railways are managed and the call of "Foul".  Nobody seems to have considered the way that risk analysis had been done. What a shame that there has been so little recognition of the flaws in the analysis and how it might be done in a better way!


  1. Listening to the radio in bed yesterday morning I too immediately thought: was this a problem with the OR?

    It's telling that they pulled the plug on this thing just before the court case was due to begin. This suggests that they knew that their numbers wouldn't stand up to professional scrutiny.

    From what I understand it was an issue with revenue generation and how realistic the numbers where. Both the government and First Group had wildly optimistic numbers in the far future. This meant the revenue could be back loaded along with franchise payments. The suggestion is that First Group would have handed the franchise back long before this before this became a problem for them.

    That's only from my cursory analysis. There isn't too much info in the media so I could be wrong. Correct me if I am.

    I can see a forecasting coursework in the making here...


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