Victorian Auditor-General releases 'Managing the Performance of Rail Franchisees' report

VICTORIAN Auditor-General Andrew Greaves last week tabled the 'Managing the Performance of Rail Franchisees' report in State Parliament, which examines how Public Transport Victoria (PTV) manages its franchise agreements and oversees the assets it leases to franchisees.

PTV is responsible for managing the contracts with the operators that run the metropolitan passenger train and tram networks in Melbourne, known as franchise agreements, which the Auditor-General said must be well-designed and have appropriate processes in place to ensure such agreements deliver value for money to the state of Victoria.

'Train Over Tram', Melbourne
Above: 'Train Over Tram', Melbourne / by Michael Coghlan.

The current train and tram franchise agreements—known as MR3—were established in 2009 through a competitive tender process. This was the third time that franchise agreements had been put in place for Melbourne's train and train services.

Under MR3, the former Department of Transport appointed:

  • Metro Trains Melbourne (MTM) as the train franchisee; and
  • Keolis Downer Rail, trading as Yarra Trams, as the tram franchisee.

Both agreements were for an initial term of eight years, and expire in November 2017. Regional train services (V/Line) are not part of these agreements. The State Government is currently in negotiations with these operators for contracts post-2017.

The report contains a range of findings, including:

  • Significant weaknesses in how PTV oversees the maintenance and renewal of assets leased to its franchisees under the current agreements;
  • PTV does not have adequate medium- to long-term asset strategies for its train and tram network assets;
  • PTV does not know enough about the condition of the assets used across both the tram and train networks, which reduces the organisation's capacity to appropriately plan, budget and prioritise maintenance and renewal work;
  • PTV does not periodically review the franchise agreements in order to track benefits, evaluate how objectives are being achieved and identify risks, issues and opportunities to improve the way the agreements are managed;
  • PTV's public reports on reliability and punctuality performance thresholds for franchisees do not clearly explain that these thresholds actually represent underperformance levels instead of performance targets; and
  • The current arrangements do not enable PTV to periodically review and reset reliability and punctuality performance thresholds.

The Auditor-General made a total of five recommendations, all of which have been accepted by PTV, including:

  • PTV should finalise and introduce a contract management framework with appropriate processes and systems;
  • PTV should improve how it monitors and manages the performance of train and tram franchisees;
  • Before the next franchise agreement starts, PTV should work collaboratively with Victorian Rail Track (VicTrack) and the Department of Economic Development, Jobs, Transport & Resources to prepare and introduce a comprehensive framework for managing assets;
  • PTV should evaluate the performance-based right to a contract extension under the current franchise agreement, to understand the benefits and weaknesses of this approach for future agreements; and
  • PTV should improve its systems and capability to collect and analyse comprehensive information on franchisee costs throughout the life of franchise agreements.

More information about the 'Managing the Performance of Rail Franchisees' is available from the Victorian Auditor-General's Office website at <>.

Photo: 'Train Over Tram', Melbourne / Michael Coghlan / Licensed under Creative Commons BY-SA 2.0.

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