{"id":4628,"date":"2012-10-04T13:33:00","date_gmt":"2012-10-04T13:33:00","guid":{"rendered":"http:\/\/meeseeks:5080\/blog\/?p=4628"},"modified":"2012-10-04T13:33:00","modified_gmt":"2012-10-04T13:33:00","slug":"the-great-uk-rail-network-franchise-disaster-of-2012","status":"publish","type":"post","link":"https:\/\/vukutu.com\/blog\/2012\/10\/the-great-uk-rail-network-franchise-disaster-of-2012\/","title":{"rendered":"The Great British Rail Network Franchise Disaster of 2012"},"content":{"rendered":"

The British papers are full of stories about The Great British Rail Network Franchise Disaster of 2012<\/em>.\u00a0 Like Bristow’s Great Tea Trolley Disaster of 1967<\/em>, we may never learn the real reasons behind the disaster \u2014 errors are alleged in calculations (arithmetic errors? using multi-line spreadsheets?) undertaken by senior civil servants, now suspended.\u00a0 But one item leapt<\/a> out to me:<\/p>\n

Government sources said \u201cheads will definitely roll in the department\u201d over the affair, adding that \u201cthe minister cannot be expected to be responsible for a very technical models with hundreds of lines in a spreadsheet\u201d.
\nThe key error seems to have been to underestimate the potential value of the franchise – where the company pays a premium to the Government, rather than receiving a subsidy.
\nThe department said mistakes had been made over estimates of the number of passengers who would use the route and the way inflation was calculated. Three civil servants have been suspended.<\/p><\/blockquote>\n

Why on earth are government civil servants estimating future passenger numbers and rates of inflation?\u00a0 Surely, that is the business of the bidders. \u00a0 Only the bidders, after all, have the expertise, the experience, and the motivated self-interest to make these forecasts as accurately and realistically as possible.\u00a0 The Government should be making its franchise decision on whatever criteria it thinks appropriate (eg, the numbers of jobs created, the novelty of services provided, the public fares charged, the money payments offered for the franchise, etc), but not trying to second-guess the business plans of the train operators.\u00a0\u00a0 Any demand forecast will depend on assumptions about the actual services offered, the actual prices charged for these services, and the actions undertaken to market, promote, distribute, and sell them, and none of these assumptions are within the purview of the Government.
\nIndeed, not only do civil servants not know these marketing plans, civil servants \u2014 in my extensive experience of submitting telecommunications licence applications \u2014 do not even have the expertise needed to assess such plans.\u00a0\u00a0\u00a0\u00a0 How can they tell whether a marketing plan is effective or not?\u00a0 Feasible or not?\u00a0 Sensible or not?\u00a0 Even experienced marketers can get market planning wrong, so how much more so civil servants with no commercial experience at all, no direct stake in the outcome, and no ear to the market ground?\u00a0 A famous British example of marketing ignorance by civil servants was the refusal by British Treasury officials during the 1960s to approve (what is now) British Telecom’s proposed telecoms switch upgrades, since the proposed switches allowed for itemized billing of calls:\u00a0 What user would need that? asked the refusenik officials.
\nA decade of telecommunications licences awarded by beauty contests finally convinced Governments around the world to put aside any attempt to plan the businesses involved, and just ask potential operators to pay what they think each licence is worth, via auctions.\u00a0\u00a0 Of course, British regional rail network franchises are monopolies, so it is appropriate for franchise allocation decisions to be based on criteria additional to the amount of money offered for the franchise.\u00a0\u00a0 It is even appropriate for these criteria to include subjective and qualitative factors, such as the degree of risk of the bidder going bankrupt during the franchise period. \u00a0Even so, I cannot see a need for a Government to be predicting customer demand,\u00a0 or even assessing the predictions of customer demand made by the bidders.\u00a0 They should leave that job to the people with the most to lose for getting the forecasts wrong.
\nIf, for some reason, the Government does need its own independent forecast of demand, it should outsource the creation of the forecast (strictly, the forecast model) to some outside entity with the expertise, the experience, and the motivated self-interest to make these forecasts (or model) as accurately and realistically as possible.\u00a0\u00a0 Outsourcing would also more likely ensure that the generation of such demand forecasts is independent from their use in any evaluation of franchise bids, so that neither decision \u2014 deciding the forecasts nor choosing the franchise winners \u2014 could corruptly influence the other.<\/p>\n","protected":false},"excerpt":{"rendered":"

The British papers are full of stories about The Great British Rail Network Franchise Disaster of 2012.\u00a0 Like Bristow’s Great Tea Trolley Disaster of 1967, we may never learn the real reasons behind the disaster \u2014 errors are alleged in calculations (arithmetic errors? using multi-line spreadsheets?) undertaken by senior civil servants, now suspended.\u00a0 But one […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-4628","post","type-post","status-publish","format-standard","hentry","category-forecasting","p1","y2012","m10","d04","h13"],"_links":{"self":[{"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/posts\/4628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/comments?post=4628"}],"version-history":[{"count":0,"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/posts\/4628\/revisions"}],"wp:attachment":[{"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/media?parent=4628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/categories?post=4628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vukutu.com\/blog\/wp-json\/wp\/v2\/tags?post=4628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}