Rail 459: Macho rhetoric of the SRA is alienating railway industry

The row over the exclusion of First Group from the new Greater Anglia franchise will be just the first of many unless Richard Bowker reins in the belligerence being displayed by the SRA, and particularly its chief spin doctor, warns CHRISTIAN WOLMAR.

Richard Bowker, the chairman of the Strategic Rail Authority, and his communications chief, Ceri Evans, can consider themselves jolly lucky that there is a war on. Otherwise the recent spat between the SRA and First Group would have attracted considerably more attention both in the City and in political circles.

Dropping First Group from the shortlist for the new Greater Anglia contract, at the pre-qualification stage, has caused the biggest ruckus in the rail industry since Railtrack’s demise.

Why should we care? After all, First Group has had a patchy record in the industry, particularly on its Great Western franchise which has not thrived under its control. In any case, is it not inevitable that the SRA will anger losers in the bidding process? Yes, possibly, but there are two issues of concern here – the controversial nature of the decision given First Group’s good record on the Great Eastern franchise, one of the principal components of the new contract, and the explanation provided by the SRA, particularly the intemperate language used by Evans in the national press.

The decision appears inexplicable to many senior rail managers who hold no brief for First. Great Eastern is, according to the SRA’s own figures, one of the best-performing franchises. There are some killer points in First’s defence: Great Eastern has been the best of the London commuter TOCs, with recent figures of 88.6% punctuality; moreover, the bidders left in the race – Arriva, GB Rail and National Express – all have franchises under management contract after getting into financial difficulties, including, in the case of GB Rail, Anglia itself, while Great Eastern has successfully gone from receiving a subsidy to paying a premium; and FGE’s most recent safety case audit by the Health & Safety Executive achieved 100% compliance, while WAGN (NEG) had 22 noncompliances and GB Rail 11.

So why was First Group omitted? Publicly, the reason given is that First’s application was just not up to the mark. This was made clear in a number of pugnacious statements by Evans. He told The Independent : “This is a company looking for someone to blame and the finger is conveniently pointing at us. They basically underestimated the quality and the depth of the information we expected from them. They flunked it big time and if the only way they think they can be part of a professional railway is by taking us to a judicial review or whatever, that is pathetic. Not only have First Group thrown their toys out of the pram but they have now got out of the pram and they are scrabbling around on the floor… they took their eye off the ball and came in with a second-rate submission.”

The Financial Times was told “this is a self-inflicted wound. They are looking for an assailant – they should look in the mirror,” and in The Guardian First Group was virtually accused of lying: “They are being about as misleading as it’s possible to be. They thought they’d be a shoo-in but the industry has changed – you either change with it or you don’t.”

This is extraordinary stuff and deeply damaging to a publicly-quoted company. Is the SRA trying to deter First from bidding for other franchises, because certainly that is how its senior managers have interpreted this message? Moreover, such talk from a regulatory body will do the share price no good at all. Owners of First Group shares may well reckon that if the SRA holds such a disparaging view of the company which is highly dependent on getting franchises, then they better sell ASAP.

Even the normally cautious George Muir, the head of the Association of Train Operating Companies, has been incensed by the tone of Evans’s comments, saying: “The language was unfortunate. It would have been better to have explained the process and left it at that.” Muir, incidentally, is reluctant to get into an argument with the SRA over the manner of the decision-making, which seems rather pusillanimous given that some of his other members are deeply concerned about what has happened.

In a damage limitation exercise, the SRA’s head of franchising, Nick Newton, has been reported as phoning managers saying that First Group did not fill part of the pre-qualification form properly. Yet the process of pre-qualification involves meetings with SRA officials who clearly should have pointed out the inadequacies in First Group’s form-filling abilities. But even if there were blanks on the form, is that more important than the clearly impressive record of FGE? Is the SRA seriously arguing that box-filling is the only measure of an operator’s ability, in which case Wolmar Rail may decide to put in a late application as I’m jolly good at filling in forms.

In the SRA’s defence, one could also argue that FGE is no longer going to be run by the well-respected Bob Breakwell, who has effectively retired, and that its performance can be explained by having a new fleet which runs on many little-used lines. But those arguments were not used by Evans in his public pronouncements and while they might be used to explain the eventual loss of a bid, they do not seem sufficient to cost First Group a shortlisting.

There is an issue about tactics here. Even if the SRA felt that First Group’s eventual bid was likely to be substandard, why did it not keep the company in the process as late as possible in order not to destabilise the current operation? Pre-qualification is a relatively low hurdle designed to get rid of the no-hopers rather than to disbar incumbents. Now, for over year until the new franchise starts, the staff running the trains will be demoralised because of the uncertainty about their future.

Within the industry, two possible explanations are given: vindictiveness or the SRA’s grand plan. First Group has apparently angered the SRA by pressing to try to get the Greater Western franchise (Thames and Great Western combined), and more than a year ago drew up a plan to improve the service out of Paddington. After the SRA had failed to respond, First went over the head of Bowker and discussed the plan with ministers, who were keen on the idea but clearly this caused bad blood at the SRA.

Alternatively, the explanation is that First will get the Greater Western franchise anyway, so it is better to ensure it is not in the running for Anglia. Moreover, it would be difficult to eliminate First at the full bid stage, where the process is subject to more outside scrutiny, so therefore better to ditch it now and ride over the fuss. There were, note, five shortlisted for the new Northern franchise, announced on the same day.

I find neither of these explanations particularly credible. I am sure Bowker would not allow personal feelings to get in the way of ensuring that the best bidders win the franchise, nor could the SRA prejudge the whole franchise process in that way. However, I cite these explanations only in the absence of any other coherent reason for this controversial decision.

Perhaps we will find out more in the courts. First’s belligerent chief executive, Moir Lockhead, is consulting m’learned friends and a judicial review will shed light on the SRA’s decision-making practices. My bet is that the SRA will be forced into a retreat before the matter gets to court precisely in order to avoid such scrutiny. But the SRA is in a pickle because should it readmit First, the other three might then immediately call their lawyers…

The SRA will have to be able to demonstrate in court that its public procurement procedures deliver the best for the public, offer value for money, and, especially, are carried out in a way that is clear and transparent. The case will not be helped by Evans’s intemperate comments, especially if they can be traced back to Bowker.

At first, when Evans, a veteran political spin doctor, began to throw his weight around in the industry, I thought that he was acting beyond his remit and that Bowker would rein him back. However, Evans’s rottweiler act seems to be conducted with Bowker’s consent and even, possibly, at his instigation. In January, Evans left an obscene message on the voicemail of Andrew Goodman, the editor of Rail Professional , criticising Rail Freight Group chairman Tony Berkeley after the magazine ran an editorial entitled ‘Stalinist Rail Authority’ and an interview with Berkeley that was highly critical of Bowker. Berkeley was incensed and complained to Bowker, who made Evans apologise.

However, Bowker also sent out a memo which said that while he would “never condone the use of inappropriate language by anyone in carrying out the public duties of the SRA”, he seems to do precisely that in the following paragraph: “However, this organisation and its people will come under frequent attack for the decisions we take… This is partly because you cannot please all the people all of the time. But we are not going to be deflected from our work and we are going to continue to do the right thing. Our communications team at the SRA are right at the sharp end of ensuring that when external parties attack what we do, the record is put straight.” This sounds more like the right approach for a political party’s rebuttal unit than a government press office.

Does Bowker have a point about the SRA making unpopular decisions and therefore having to defend itself? Well, cast your mind back to the days of OPRAF under Roger Salmon and John O’Brien which let out 25 franchises within 15 months in 1996/97 without any of this acrimony and with no leaks. Salmon had spent a long time establishing correct procedures, and created a healthy and positive ethos within his organisation and that paid dividends when it came to the sharp end.

Much of the growing antipathy felt towards the SRA in the industry is as a result of the type of belligerence exhibited so publicly by Evans. If Bowker does not change his approach and approach players in the industry in a more emollient way, then this row will be the first of many and the railways will suffer.

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