Local Services Franchises

The consultation paper explained that franchising is a system that allows an LTA to award exclusive rights to run certain bus services to the most competitive bidder for a set period; during this period, no other operator can run those services. Part 3 of the 2019 Act makes provision which enables LTAs to create and operate local bus services under a new franchising model.

A number of different franchise models have been adopted in the UK and across Europe, the most widespread one being one in which all of the services are franchised to a number of different operators.

The franchising model provided by the 2019 Act involves an LTA putting in place an overarching franchising framework beneath which it can enter into franchise agreements with bus operators. The consultation paper provided details of the franchising framework, along with the steps that an LTA needs to complete before it can implement a franchising framework. Question 20 asked:

Question 20: What should the guidance to LTAs on preparing a franchising assessment contain?

A total of thirty-eight respondents answered this question; and a wide range of comments were made.

A few local authorities requested the provision of detailed case studies or best practice, along with examples of franchises that have been successful and unsuccessful, what a franchise should include and detail each step in the process of developing and preparing a robust assessment and the risks associated with this option. That said, there were a small number of suggestions from a trade union / campaigning organisation and an equalities organisation of the need to avoid the barriers to franchising that exist in England. An operator and a representative body also noted that London is not a good example to use, given differences with Scotland in terms of geography, population size, car ownership and so on.

Further information and clarity was requested on a number of different elements of franchising. These included the need for clarity on:

The context of the franchising model
The process to follow, and expectations on each element of the Five Case Model, and the interface with STAG (Scottish Transport Analysis Guide)
The criteria an auditor will expect from an LTA in a franchising assessment
Factors that should be taken into account by an LTA when selecting an auditor
The broad expectations for engaging with bus passengers and / or the general public in preparation of a franchising network
The need to compare the proposed franchising framework with other options is only needed while making strategic and economic cases; also to set out the anticipated role of statutory assessment processes in preparation of a franchising assessment

There were a few requests for reference to employment conditions such as employment rights or worker protection

While not directly answering the question posed, some respondents commented on a need for external funding and support for local authorities. There was also a suggestion that the Scottish Government should set up a team with the expertise and resources to support LTAs, for example, to address legal challenges from commercial vested interests or to achieve economies of scale.

Pre-empting a later question, a small number of individuals and a trade union / campaigning organisation referred to the need for panel members to bring a wide range of perspectives and knowledge, with a suggestion of a need for a background that will allow them to assess potential schemes against wider public interests on which national and regional transport policy is based. One trade union / campaigning organisation noted that the panel system in England has been discredited and replaced. They also noted a concern that the Traffic Commissioner will have too narrow a base of professional knowledge and experience to be able to select a suitable panel.

A small number of respondents in the operator and representative body sectors noted their dislike of a franchising approach and noted their support for BSIPs instead. They also noted concerns that LTAs do not necessarily have the necessary knowledge, expertise or funding to set up franchises and, that if an LTA wishes to consider introducing franchising it should have to demonstrate it can meet a specific set of criteria. They also queried what would happen to depots, staff, vehicles and so on if changes to operators occur.

There were also a small number of comments that it is unlikely that the new measures proposed will result in any franchised networks and that there are more fundamental challenges to encouraging the bus transport sector regardless of whether there is a deregulated or franchised local bus network.

Other comments made by two or less respondents, including trade unions, third sector organisations, local authorities and individuals included:

LTAs should have the powers to take decisions in the best interests of the communities it represents
An assessment business case template should be provided for mandatory elements of the franchise assessment
All market information should be complete, for example, accurate data on passenger numbers
Any franchising network should consider all provision in an area to achieve a more integrated local network and achieve better alignment and collaboration between providers of different transport modes
There should not be a reliance solely on the most competitive bidder; financial measures of efficiency and service delivery are only one element of consideration; there is also a need to consider customer care and accessibility issues
Bus operators should share all data for an LTA to be able to properly plan and co-ordinate a fully integrated transport network
Local authorities have to be clear about the potential benefits of franchising
There should be provision for an LTA to revoke a franchise if the operator fails to meet agreed service levels
Any payment of subsidies should be linked to the reliability and punctuality of services
Guidance should have a long term vision for bus services
There is a need to include clear outcomes to be achieved for example, increase passenger numbers, modal shift, societal benefits and so on
Access to new powers should be enabled by expanding and facilitating the ‘options assessment stage’
Targets need to be set to enable LTAs to measure progress in improving bus services; this should be accompanied by a plan of actions designed to drive up overall performance
Guidance should provide an overview of the resource, time and legal implications for local authorities in preparing a franchising assessment

Provision of information for preparing and assessing proposed franchising frameworks

The consultation paper noted that at present, LTAs can gather some information from bus operators under section 43 of the 2001 Act in connection with the formulation of their relevant policies. The 2019 Act gives LTAs more powers to require further relevant information from operators of local services in their area when the LTA is exercising certain functions in connection with local franchising.

Question 21: What relevant information do you think LTAs should be able to require from bus operators for the purposes of preparing and assessing a proposed franchising framework?

A total of thirty-one respondents answered this question; and references were made to a wide range of different types of relevant information.

There were a number of responses across most sub-groups, with the exception of operators and representative bodies, noting that any information deemed relevant by the local authority should be provided or all financial and operational data needed to compile a business case in line with the Five Case Model. There was also a comment from a local authority that all information should be mandatory, rather than optional. A couple of respondents noted LTAs should be able to require the same information as they would be entitled to request in considering a bus partnership or what is required to properly plan and co-ordinate a fully integrated public transport network that meets the needs of the communities they serve.

Conversely, operators and representative bodies wanted to see a limit on the information LTAs should be able to require; that this should be kept to a minimum and exclude any commercially sensitive information; and only be provided if an existing operator or partnership model is failing.

There were a number of references, from local authorities and regional transport partnerships, to the provision of financial data; these included information on revenue, revenue generated by passenger and ticketing usage, operational data related to performance, an operator’s financial position, staff wages / operational and management staff employed, and past and planned investment such as future financial planning in terms of vehicle investment and staff, as well as the level of investment needed to ensure an ability to continue with the service.

The quality of service was cited by some respondents, with references to the need for information on cancelled / late journeys, data on delays to services, and levels of service by time, vehicle type and route; as well as origin / destination data.

There were also a few requests for information relating to the types of vehicles used in terms of their age, emissions, type of fuel and so on.

In line with the consultation paper, passenger numbers and ticket sales data were suggested by a few respondents. Allied to this, there were also mentions of data on fare structure and fare policy.

Other mentions, each made by very small numbers of respondents included:

Journey time data
Routes that have been cut
The number of depots
Passenger feedback and complaints
Numbers of drivers proposed for each route in the proposed franchise area
Details of any marketing activity undertaken and the impact of this
Impact assessments, including social impact assessments and equality impact assessments
How service provision will be guaranteed

Two respondents suggested that all information should be provided for the previous three years.

Question 21a: In preparing and assessing a proposed franchising framework, are there any circumstances in which you think the LTAs should not be able to require relevant information ( or types of relevant information)?

A total of twenty-six respondents answered this question; many of whom simply answered ‘no’ or ‘none’. Of those who provided more detail, reasons from a local authority, a third sector organisation and individuals included that LTAs are offering a service to the public and this information is needed or that the provision of information is essential in assessment of franchising arrangements. There were a small number of references from local authorities that there needs to be robust processes in place to ensure that any commercially sensitive data which is shared with the LTA is kept confidential, with one of these suggesting a need for a confidentiality clause; a trade union / campaigning organisation commented that operators should be subject to Freedom of Information.

A local authority and a regional transport partnership noted that there would not be any circumstances providing the initial case for establishing a franchising network has been satisfied.

As at the previous question, an operator noted that there are circumstances where an LTA should not be able to require information and these were instances where the information is commercially confidential or where the information will be used to set up a route in direct competition with an existing commercial route.

The audit process

The consultation paper explained that once an LTA has produced an assessment of their proposed franchising framework and they wish to proceed with their proposals, they must obtain a report from an auditor on the financial analysis contained in their assessment.

Question 22: What should be included in the guidance for auditors?

A total of twenty-one respondents answered this question; and a wide range of elements were noted for inclusion in the guidance for auditors. A small number of respondents noted their support for utilising an International Standard on Assurance Engagements (ISAE) 3000 approach or noted that existing audit standards should apply, without providing further detail.

Key comments tended to focus on social, environmental and economic benefits. Social benefits referenced by a few respondents included increased social inclusion and social mobility, more access to jobs / education or healthcare, impact on human rights and so on. A trade union / campaigning organisation also commented that the Public Sector Equality Duty (PSED) should be considered in all decisions.

Climate and environmental benefits included information on reduced greenhouse emissions, moving towards electric or hydrogen buses and future ecological costs. Allied to this, a small number of trade unions / campaigning organisations noted the need to ensure that policies outlined in the National Transport Strategy (NTS2) are being delivered, with one of these suggestions that there should be a Public Sector Value Test that applies specific criteria to prioritise the need for a long term modal shift from cars in line with NTS2 commitments. Economic benefits tended to focus on increased passenger numbers and improved integration across the public transport network.

Other elements for inclusion in guidance and cited by very small numbers of respondents included:

Review of franchisee’s financial health / robustness
The costs of the proposed service, its financial viability and its impact on the LTA’s income
Timescales of the proposed service
Consultation among stakeholders and the general public; considering the views and data provided by stakeholders as well as having access to any analysis of data to ensure its robustness and accuracy and ratified from a recognised source
Ability to maintain the proposed service
Proof that the franchising framework will improve on existing bus services models and that no other option will achieve these improvements
Include good practice, with one respondent citing Transport for Greater Manchester Franchise Assessment as an example
An assessment on value for money
The role of cross-subsidy in the costing
The timescales for the audit, with one local authority noting that audits must be timely and stick to reporting deadlines
An assessment of the conclusions drawn up by the franchising authority; as well as ascertaining and confirming the benefits claimed
A comparison with other options, for example, partnership proposals
Detail in advance what information will be required from an LTA; and details of the criteria under which auditors will review proposals
The provision by the auditor of clear reasons for any decisions made

A few respondents commented on the audit process specifically, with two local authorities suggesting an audit should be light touch or not too onerous. An operator and a representative body noted that any commercially sensitive data should be excluded from a publicly available report.

Guidance to LTAs for making a new franchise assessment

The consultation paper explained that if the consultation findings suggest that modifications to a proposed franchising framework are required, and these will materially affect any of the key parts of the franchising assessment previously prepared, the LTA will need to undertake a new franchise assessment. The Scottish Ministers must issue guidance in relation to circumstances in which an LTA must prepare a new assessment.

Question 23: What should be included in guidance to LTAs in relation to the circumstances in which the LTA must prepare a new assessment of a new proposed framework?

A total of twenty-one respondents answered this question. A wide range of comments were made, each by small numbers of respondents.

A key comment, made by a few regional transport partnerships and local authorities was that the guidance needs to contain a clear and concise explanation of what is specifically required in a new assessment, including information on what sections need to be revised and what the new assessment is expected to demonstrate. Linked to this, a small number of local authorities commented that the requirement to start a franchising assessment would be very onerous and require significant resources, so the guidance should be specific and provide details on where a full restart is required.

As at previous questions, there were a small number of references to the need for LTAs to engage with consultees and trade unions / campaigning organisations, with one local authority requesting that guidance provides a template on the consultation process.

There were a small number of comments of a need for worker protection to be embedded as a set of minimum conditions in tendering rules and how conditions for bus service employees will be maintained and improved.

Other comments relating to what should be included in guidance made by single respondents included:

The likely impacts on user groups
Highlight how the level of service will be improved and maintained, with reference to rural access, additional and upgraded routes and the reliability of services
Inclusion of case studies and directing LTAs to best practice franchising arrangements
Guidance should be based on addressing errors, unreasonable assumptions or unsupported hypotheses that cast doubt on forecast benefits

Some respondents (from the equalities sector, a representative body, a trade union and an operator) made comments about the process of assessment, rather than the guidance, with a small number noting that LTAs should be provided with sufficient stable and long-term funding for the provision of public bus services that meet the social and economic needs of users.

Again, there were a small number of references to the need for the Scottish Government or Transport Scotland to set up a team with expertise and resources to support LTAs, along with providing financial and political backing to those wishing to exercise any franchising powers.

An appropriate timescale for the new assessment was requested by a small number of respondents, with an operator and a representative body suggesting that LTAs should not have unlimited attempts at modifying a proposal as this could stall or delay any planned improvements on the part of existing service providers. There were also a small number of comments that there might be specific occasions when a new assessment would be needed; these would include when there is a change in the bus market, if a major employer moves in or out of an area or if there is a change to the number of operators available.

Independent panel appointed by the Traffic Commissioner

The consultation paper explained that once the process for developing the proposed franchising framework, carrying out the assessment and obtaining the report from an auditor as well as publicising and consulting on the proposals has been completed and the LTA decides to proceed with making the framework, they must request that the Traffic Commissioner appoints three people to form a panel to decide whether or not to approve the making of a proposed franchising framework. Question 24 asked:

Question 24: Do you have any views on the constitution of the panel, including any criteria for potential panel members?

A total of thirty-four respondents answered this question and a wide range of criteria were cited as being necessary for potential panel members.

Some respondents – primarily local authorities and regional transport partnerships – made general comments about panels and the need for them to be committed to undertaking a balanced, objective, evidence-based and transparent perspective; that panels should not create an undue barrier in exercising franchising powers and they should not be allowed to refuse a franchise because they object to the principle of franchising. There were also a small number of comments of the need for the make-up of the panel to take the Equality Act (2010) into account or for at least one panel member to have an expert knowledge of equality impact assessment and groups at risk. A small number of respondents within a local authority and a regional transport partnership also noted that panel members must be protected from any potential repercussions or litigation. A trade union / campaigning organisation suggested that any panel should not be dominated by individuals from the bus sector.

There were some comments on the skills needed by panel members; the key one mentioned was financial expertise and a capacity to scrutinise an auditor’s assessment and documentation or the business case for any proposed franchise, although there were also references to a need for transport expertise, or an appropriate professional / public background. There were also a small number of references to the need for a range of skills to be represented on any panel, including legal, financial and industry experience; or for representation from all key organisations affected by the transport framework.

There were a small number of references to the structure of any panel, with a small number of suggestions for a pool of panel members who could be appointed on a case-by-case basis. A local authority noted that the panel should have a strong understanding of the local context.

A number of respondents cited specific types of individual who should be on a panel and these included:

Transport professionals with experience within the transport sector or the economics of bus operations
Bus users and those who are familiar with the routes within a proposal
Passenger representative organisations
Trade unions / campaigning organisations
Members of the general public / local community / community groups such as Community Councils
An LTA member with experience at a senior level and the knowledge to consider any proposals and the benefits to passengers; or a panel member from an LTA which has a franchising operation in place
A professional with a background in economics
A bus operator representative who can understand and explain operational requirements
The Traffic Commissioner
A professional with a legal background
Councillors / elected members

While most respondents focused on the structure of a panel, there were some comments on the types of individual or organisation who should be excluded from panel membership. A key issue highlighted concerned personnel currently working for a bus operator, and the potential for a conflict of interest. However, there were also references that anyone with an interest in any company that could be part of the franchising structure should also be excluded.

While not relevant to the specific question, a few respondents referred to the guidance, with requests that this should include information on the selection of panel members, taking into account any issues of bias and the experience that would be required. A small number of trade unions / campaigning organisations focused on the need for any panel membership to gather a breadth of perspectives and knowledge so that a range of policy aims and human rights duties inform any decisions made.

Question 24a: Do you have any views in relation to the appointing, removing or replacing members to the panel and why?

A total of eighteen respondents within the local authority, operator, trade union, regional transport partnership sectors and some individuals, answered this question, some of whom reiterated answers they had given at the previous question. The key theme was of a need to ensure there are no conflicts of interest such as financial ties to a private bus company, and if a conflict of interest is discovered, this should lead to immediate removal from the panel.

As at the previous question, there were some comments on the structure of the panel, including the need to ensure the selection process is transparent and the panel should consist of members who are accountable and independent. Other comments referred to the types of individual who would be suitable as panel members, for example, passenger groups or transport stakeholders. There were a small number of suggestions that LTAs should be considered on the constitution of the panel.

A few respondents referred to guidance; for example, the need for guidance to provide information on the selection of panel members who have an appropriate level of understanding of the bus industry or a proven track record of experience and involvement in similar processes. One local authority also asked for inclusion of examples of good practice taken from similar panels elsewhere, and including information on lessons learned.

There were a small number of suggestions for regular reviews of panel membership to ensure duties are being conducted properly or for the position of panel member to be restricted to a period of four years, with a maximum of two periods of election.

Functions of the panel

The consultation paper went onto explain that the panel appointed by the Traffic Commissioner will consider all the documents and any representations provided and will decide whether the proposal should be approved and whether the panel has satisfied itself that the LTA has fulfilled a number of criteria.

Question 25: Do you have any views about the process that the panel should follow in making their decision?

A total of twenty-two respondents across most sub-groups answered this question. A key theme emerging was that all decisions made by the panel must be fully justified, transparent and accountable, with a small number of references to making this information publicly available. There were also a small number of references that to ensure all decision making is open and transparent, there should be public hearings, similar to public enquiries, although one local authority felt these should be brief in order to avoid delays and additional costs. An operator noted that representatives of all parties should be able to attend a formal public hearing, interview or enquiry and be allowed to provide written or oral submissions.

Allied to these points, there were a few comments that the process to be followed must be specified and have robust and detailed criteria to follow. There was also a lack of support noted over the term ‘the panel must satisfy itself…that it has reached a reasonable conclusion on the proposal’, as this was felt to lack transparency. A small number of respondents within local authorities and regional transport partnerships noted concerns that panels may be risk averse in their decisions unless they are protected from litigation as they would be open to legal challenge.

Once again, there were some references of the need for panel members to consult with stakeholders via a consultation process.

An operator and a representative body suggested that a panel should seek clear evidence that franchising will deliver improvements not offered by any other model.

Other comments made by very small numbers of respondents included:

A need to establish the relevance of each panel member according to their experience and expertise
The panel should appoint a professional competent operator
The panel should focus on value for money in providing a service that meets government targets in the desired modal shift away from using private vehicles, and meet climate targets
Comparisons should be made with other countries and cities
A panel needs to understand about the operation of local bus services, relevant legislation and socio-economic objectives
There is a need to consider adverse and unintended negative consequences for other businesses in the area
The panel needs to take a holistic approach when considering the cost / benefit analysis

Question 25a: Are there any matters which you think should be prescribed in regulations that the panel must be required to consider (in relation to whether the LTA has given appropriate weight to such matters)?

A total of twenty-two respondents answered this question. A key theme mentioned by a few respondents, was of a need to consider the LTA’s general policies, including the Local Transport Strategy, Regional Transport Strategy and National Transport Strategy.

Another issue, cited by a few respondents within the local authority, operator and representative body sub-groups was of a need for the panel to give appropriate weight to the cost of moving to a franchising model and the impact this could have on the existing network; for example, a loss of operators or disruptions to public transport. One operator noted the need to consider the long term deliverability, sustainability and affordability of any proposals. There were also a few concerns that there could be an impact on the local economy.

A small number of respondents within the trade union, equalities and individual sub-groups commented on the need to take into account the full range of benefits to be offered by any proposal, rather than just focusing on a cost benefit analysis, with a couple of comments from other respondents of a need for any decisions to take into account the sociological, human rights, environmental and financial impacts.

There were a small number of references for a need to carry out consultation with the general public and bus users.

Other comments made by single respondents included:

The rules around procurement of services should be included; these include community needs, accessible services and bus provision
Decisions should be based on the fit with the long term and aspirational plan for bus services
The Public Sector Equality Duty and long term need for modal shift should be central to decisions
The panel should not be expected to require a similar level of assessment for all franchise proposals
Levels of car use in an area and whether an area suffers from high levels of pollution

Information relating to services

The consultation paper noted that as well as making new provision for local authority-run services, bus service improvement partnerships and franchising, section 39 of the 2019 Act inserts new provision into the Transport Act 1985 to allow LTAs to obtain certain specific information from an operator when the operator proposes to vary or cancel the registration of a local service. Any information requests must relate to the authority’s obligation to ensure that here is a sufficient bus service provision in their area.

At present, regulations require operators to notify the LTA 28 days before they submit an application to the Office of the Traffic Commissioner to amend, vary or cancel a service and a voluntary arrangement is in place whereby operators provide service information to the relevant LTA.

Question 26: How long should an LTA be given to require provision of service information and why?

Twenty-seven respondents commented at this question. Opinions were split on the length of time an LTA should be given to require the provision of service information, somewhat exacerbated by a number of respondents either appearing to misinterpret the question or preferring to discuss the length of time an operator should be given to provide the requested information (Question 27).

The most common perception (by a large minority of respondents, consisting entirely of local authorities or regional transport partnerships) was that there should be no specific timescale or time limit. Reasons for this tended to coalesce around the differing nature of requests, summed up by a local authority as follows:

In some cases it will quickly be clear to the LTA what information is required, and this will be actioned. In dealing with more complex registrations, it may take some time to analyse the changes and the impact of them. Other work pressures, staff absence, etc. will also impact on the time taken to analyse the changes. Information requested may be used to discuss possible changes to the proposed registration with the existing operator, to negotiate a replacement with another operator, or to prepare a tender specification. It may be that concerns over an apparently innocuous service change only come to light when the change becomes public knowledge. Therefore, there should be no prescribed limit to the time period when the LTA requests the information.

Amongst those respondents who did specify a length of time, similar small numbers vouched for each of the following:

Two days / three days / four days / one week, with the reasoning being that the requests should be a form letter in response to the operator
Two weeks (so that issues can be addressed promptly)
Twenty eight days / four weeks (as it is the existing process already agreed by operators and LTAs which works well and does not cause major delays)
Three months / six months (as LTAs should retain the ability to request information for longer periods after the date of the service revision)

In addition, three local authorities thought it would be more effective if the process and format was similar to the registration notice period, whereby the operator had to give set agreed information as a minimum, and further information could then be requested as necessary.

A couple of respondents suggested that transfers of data and requests should be in electronic format to speed up the timescales and improve the quality of information provision.

Question 27: How long should an operator be given to provide that information?

A total of twenty-eight respondents gave a response at this question. The vast majority of respondents recommended short time periods (two weeks or less) for operators to provide the necessary information.

The largest numbers of respondents, comprising local authorities, individuals and operators, cited periods of between four working days and two weeks. Reasons given included the following:

Avoiding delays
The data should be easily compiled or readily to hand
The data should have formed part of the decision-making for the operator’s service change
Operators should know all aspects of their business requirements and what does and does not affect their services

However, a large minority of respondents desired that all information should be provided quicker: either on the day or within one working day of the variation or revocation service change notice being submitted, as it was thought the operator will have already assembled all the information necessary to make a commercial judgement.

Two individual respondents suggested longer time periods of either four weeks or three months, without stating reasons.

A few respondents thought there should be no specific timescale or time limit, or that the timescale should depend on the nature of the request.

A few respondents focused on specified information types which would enable an LTA to analyse travel patterns: these included passenger type (per week, Mondays to Fridays, Saturdays and Sundays), boarding and alighting points, revenue information and all data necessary for an LTA to plan to meet community needs. Two respondents suggested that the development of a consistent information format would help expedite information provision, both within an LTA and across the country.

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