Title: Refranchising Melbourne’s metropolitan train and tram networks

Languages: English

Type: Document

Region: East Asia and Pacific

Country: Australia

Sectors: Transportation

Topics: Procurement

Keywords: PPP Project Cycle, Preparation


Refranchising Melbourne’s metropolitan train and tram networks (PDF) bytes

Document Details:

The train and tram network has now been operated by the private sector for more than seven years. The Franchise Agreements with Connex (operating Melbourne’s train system under contract to the Government)  and with Yarra Trams (for the tram system) expire in November 2008. 

The Government therefore needs to decide whether and in what form to retain private sector involvement in the operation of train and tram services. In particular, it must decide whether private sector involvement in service delivery provides a value for money outcome to the State.

This document:

•             sets out a framework by which to define value for money;

•             lays out a definition by which to quantify value since contract commencement in 2004;

•             assesses performance of the incumbent since contract commencement against that framework and definition; and

•             draws a conclusion about whether value for money has been  achieved.

Framework for assessing value for money within the current arrangements

The framework for this review will use the same parameters used by the Auditor General in the 2005 review of the re-franchising process – cost to the State, risk allocation and performance.

The Auditor General reviewed the payments the government negotiated with the train and tram franchisees and assessed the allocation of risks within the franchise agreements.  This review will also focus on the way the franchisees have managed risks through their performance in operating the network since 2004.

To determine value for money the following components have been assessed:

•             Cost to the State – Outline of the approach taken by the State in the re-franchising process to establish the operator subsidy level review of the Auditor General’s conclusions with regard to the 2003 process Assessment of the actual outcome of costs to operate the franchises

•             Risk Allocation -Review of the 2004 re-franchising process and the Auditor General’s conclusions about that process. Assessment of the success of the risk transfer in the arrangements

•             Performance of incumbent operators –  Review of the performance of the incumbent operators since 2004 against Business Plan KPIs.

In summary:

•             the Auditor-General confirmed in 2005 that the costs, risk allocation and the performance levels negotiated in the franchise agreements in 2003/04 provided ‘reasonable value for money’ for the State;

•             the cost of operating the metropolitan train and tram network remains relatively constant when costs are normalised to reflect constant investment in rolling stock;

•             the risks transferred to the private sector have held since contract commencement; and

•             the performance of the incumbent operators has been sound when assessed against the 2004  tender evaluation criteria and KPIs in each franchise Business Plan.

For more information about this sector, please visit Public–Private Partnerships in Transport.

ref#: Melbourne_value-assesment

Updated: October 25, 2021