Railway Business Rights in the United Kingdom

The use of a similar competitive system for selecting a public transportation operator can also be seen in the United Kingdom’s tender for the railway business rights.

In the UK, the railway infrastructure, such as the railway lines and facilities, are managed by the non-profit company, Network Rail Corporation. Transportation operators must bid for the right to conduct their passenger transportation business by leasing railway lines from Network Rail through a two-tiered bidding system $ ^{25} $ .

The first step of the process for selecting the transportation operator for a railway line is a preliminary information notice posted by the Department of Transportation, detailing the end date of the current contract (franchise), and the decision schedule for the new franchise. Next, they will go through a consultation process between the Department of Transportation and market participants, then there will be a deliberation regarding the specification details within the Department of Transportation. Once that is done, the service requirements and a draft of the franchise contract will be posted. When potential bidders receive the posted specifications, they will then submit preliminary review documents that detail their company's business performance and stability to prove their operational ability. The Department of Transportation will review these documents to decide which companies are eligible for submitting a tender. Companies deemed eligible for submitting a tender will then submit a tender that details a business plan that fulfills the service requirements, along with either the amount of subsidy required or the compensation value (premium) to be paid to the Department of Transportation for executing the business plan during the

contract period. Finally, each bid will be scored according to a predetermined formula that weighs the premium or subsidy amount and service level, and a contractor will then be selected from the bids $ ^{26} $ .

In the UK, the privatization of the railways and the franchise system was implemented in 1994. The trends in the railway business since then show that the number of kilometers that passengers travel has steadily increased (Figure 2-1-13). In terms of the quality of service, the punctuality index shows a worsening trend up to the time of the Hatfield train crash in 2000, but then a steadily improving since then $ ^{Note\ 27} $ (Figure 2-1-14). In addition, the impact on government expenditure on railway operators seems to be on a decreasing trend from 2003/04 onwards (Figure 2-1-15).

Note 25 ‘Efficiency and regulations of the UK passenger rail,’ “Kobe University Economic Research Annual Report, Vol.54” by Takashi Yanagawa, Kozo Harimaya, and Ichiro Yoshino (2007)

Note 26 For more details regarding the bidding process, please refer to: Department for Transport 'Rail Franchising Competition Guide' (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/208428/franchise-competition-guide.pdf)

Note 27 The Hatfield train crash is a major derailment accident that occurred in 2000 due to lack of investment in maintenance and inspections and insufficient supervision over outsourcing by the company Railtrack, which had been entrusted with the management and operation of the rail infrastructure after its privatization in 1994.