The Scottish Government

1. Portfolio/Number/Name:T/C1 - Rail Franchise - Procurement

2. Programme/Activity: Please include a short description

During the re-franchising process, bidders were asked to come up with innovative ideas for service delivery and quality improvement in the ScotRail Franchise. First ScotRail's response was a detailed proposal for at least 40m of capital investment secured over the life of the new rail franchise. These investments are cost neutral to the Executive. The franchisee is at risk on cost overruns for most commitments. The capital investment is focussed on benefits for passengers. In addition, the franchise has committed to improvements which will mean substantial revenue expenditure on the same basis which will see some train refurbishment. This passenger - and staff - focussed expenditure is forecast to be of circa 18m in value over the life of the franchise. However, unlike the capital investment the revenue commitments are output rather than expenditure based.

3. Planned Savings

2005-06

2006-07

2007-08

Cash (m)

5

5

5

Time Releasing (m)

0

0

0

4. Accountable Officer for delivery

Eddie Frizzell

5. Project Manager

Jonathan Moore

6. EGDG account manager

Iain Dewar

7. Quality Impact

Describe any impact on the quality of service delivery. Be specific and explain if the expectation is positive, negative or neutral.

Over the life of the franchise, and in particular years 2004-08, this level of investment should mean that passengers will see a significant improvement in the quality and cleanliness of facilities on trains and at stations. Work to improve reliability of trains should feed through to better punctuality. The additional numbers of staff to be employed in satisfaction of these obligations will contribute to perceptions of security on services and at stations.

8. Dependencies

Explain if your savings are dependant on legislation or other structural changes.

Savings are not dependent on legislation or structural changes - this saving is generated through the franchise agreement.

9. Description of efficiency and actions to be taken

9.1 How will the saving be made? Be specific about number/size of contracts, staff, posts dates etc.

The franchise will create the specified assets, deliver its specified services or create and maintain the necessary new posts to support their commitments.

The number and location of physical assets will be finalised as detailed proposals are worked up and agreed.

9.2 What action is critically needed to secure delivery of this saving? Be specific, and name the key action managers if they are outwith your immediate management chain (e.g. in an NDPB.)

The Franchise Management Unit in the Scottish Executive will need to oversee the franchisees delivery of these assets, services and new posts. The primary responsibility does, however, rest with the franchisee to deliver.

10. Impact on Staffing to achieve the efficiency gain

If there are to be any changes in staff numbers (at activity level) to achieve the efficiency gain, please indicate how many full time equivalents and how far you expect savings to be achieved by natural wastage (show additions as + and reductions as -).

2005- 06

2006- 07

2007- 08

+

110

110

110

-

0

0

0

Net

110

110

110

Explanation

The franchisee has contracted to create and maintain a number of new posts, most significantly:

4 additional managerial posts

20 repair/handymen

5 service quality auditors

87 additional ticket collectors

11. Benefits

In general, the benefits of the Scottish Executive Efficiency Plan are the enhanced outputs from the resources Ministers have been able to allocate in SR04. But if there is a direct connection between this efficiency saving and the enhancement of a particular service please describe it here.

N/A

12. Gross/Net Cash Savings

12.1 Please set out the gross recurring saving and any offsetting recurring expenditure.

The gross recurring saving will be in the order of 5 million a year.

The sole recurring expenditure associated with this saving is the additional cost of a Franchise Performance Manager for so long as this post is maintained.

12.2 Against what budget does this expenditure and saving fall?

The saving falls against the Transport Group: Rail Services in Scotland: Rail Franchise budget by virtue of the fact that this private sector investment means these improvements do not need to be funded through the public purse. The additional expenditure will fall against First Scotrail's budget.

12.3 Has this saving been built into your budget?

Yes. All of the saving is built into the subsidy line for the franchise and, thus, into the rail franchise budget.

12.4 If so, what is the maximum allowable expenditure against the budget data, in each year, for that saving to be delivered?

In order for this efficiency to be delivered, the additional expenditure will be:

The Scottish Executive's budget for the Rail Franchise is:

2005-6 256.360m
2006-7 263.900m
2007-8 269.500m

12.5 If not, how do you propose to invest the additional cash back into public services?

N/A

12.6 What plans do you have to exceed the required saving? Explain by how much in each year.

The original estimate of the efficiency savings was 40 million over the life of the franchise (8 years), which lead to the estimate of a recurring saving of 5 million a year. However, the capital investment is likely to vary from year to year with savings of 7.706m in 2005-06, 5.534m in 2006-07 and 4.517m in 2007-08. Over the course of the financial year, these are subject to a deviance of + or - 20% carried forward. The revenue expenditure, which was not included in the original estimate and is worth around 18 million over the life of the franchise, is likely to lead to efficiency gains of the order of 2.3m in 2005-06, 2.3m in 2006-07 and 2.4m in 2007-08.

The generation and collection of the forecast additional revenue generated is a matter for the franchisee. Where, however, in any year the additional revenue contributes to push the franchisee above the revenue share threshold, the saving will be exceeded and any additional savings will be used to reduce the necessary franchise subsidy from the Executive.

13. Time - release savings

13.1 Please explain any time-releasing savings indicated at question 3.

N/A

13.2 Please describe the method you plan to use to calculate the cash equivalent of those time release savings.

N/A

14. Measurement and Monitoring

14.1 How are you proposing to measure the expected efficiency benefits (e.g. in terms of costs, level of output or quality of service)?

The rolling series of franchise management meetings, reports and audits will allow the Executive to measure the delivery of the committed assets, services and posts. Invoices will be required of the franchisee to monitor expenditure where relevant. Quality will be monitored through the quality regimes included in the franchise and general compliance will be subject to audit.

14.2 What monitoring & reporting procedures will be put in place to measure the efficiency savings (How often will progress towards the target be monitored? Who will have lead responsibility for reporting progress and what procedures will be in place?)

Progress will be monitored against the annual forecast budgets in the franchise and also by the meeting and report cycle referred to. The Rail Franchise Management Unit (RFMU) will have lead responsibility for reporting progress.

14.3 Monitoring Data: Sources, validation and risks

• What data will be used to measure progress? Is all the required information quantifiable and readily available? If not what action will be taken to rectify this?
  
  The reports generated by the franchisee will be used to measure progress as will be findings of service quality inspections in the field. The necessary information is, or can be made, readily available.
  
  
• What measures will be in place to validate the accuracy of the data? Who will take responsibility for this?
  
  Information generated by the franchisee will be validated by RFMU, information generated by the service quality inspectors will be validated by RFMU.

• Are there any issues or risks relating to how you plan to use the data? (e.g. accuracy, difficulties in collection)
  
  We do not foresee any issues or risks relating to how we plan to use the data.