Competitive tendering of rail services – a comparison of Britain and Sweden

Abstract

This paper compares the experience of the two countries in Europe with the most experience of passenger rail service franchising – Britain and Sweden. It examines the nature of the contracts between the franchising authority and the franchisee, and between the franchisee and the infrastructure manager with a particular emphasis on the incentives provided, the degree to which the franchisee has freedom of action on issues such as fares, service levels and the provision of rolling stock and the sharing of risks. It concludes that the Swedish approach works well in a context in which decisions on fares and service levels are largely determined by the franchising authority. The British approach is more problematic, in that it seeks to leave the franchisee more freedom in these matters, but it is doubtful whether the incentives are fully effective. Longer franchise periods are a part of a possible strategy to improve incentives.