Crossrail will be the UK’s newest rail line when construction of the central tunnel section is completed in 2018. It is a significant project with eight giant boring machines being used to construct tunnels under central London and, when completed, will bring an additional 1.5 million people within a 45 minute commute of London’s main business and entertainment districts. It will connect with 41 other rail lines including the London Underground, London Overground, the National Rail Network, Heathrow Express and the Docklands Light Railway. The cost of the project has been shared between the UK Government, Transport for London (TfL) and the business community.
As construction progresses, two significant operational milestones have recently been achieved. The first is the announcement by TfL that the procurement of the new train fleet and maintenance facilities will be publicly funded. The commercial objective is to ensure that services can open as scheduled in 2018. Under previous proposals it was estimated that there would be a GBP 350 million public sector contribution. The revised arrangement will see the public sector finance contribution increase to 100% or around GBP 1 billion. The second milestone is the procurement of an operator of the new rolling stock.
Unsurprisingly, the competition for the Crossrail concession has generated a great deal of interest, in part due to the fact that the UK rail franchise letting programme will now see just three rail franchises being let by central Government before the end of 2015. Prior to the West Coast mainline procurement being cancelled it was anticipated that up to 12 rail franchises would be let over the next three years.
It is believed that most of the UK’s transport groups have submitted expressions of interest as well as Hong Kong’s MTR, France’s RATP and Arriva which is a subsidiary of Deutsche Bahn, the German state owned railway. The procurement timetable anticipates TfL announcing a shortlist of three to five bidders by the end of June with tender documents then being issued in September and final bids due by mid-January 2014. The winner of the competition is expected to be announced in September 2014.
It is anticipated that the Crossrail concession will be operated on a fixed fee management contract basis with very little revenue risk. This is also the model adopted on TfL’s other heavy rail concession, London Overground. In contrast, most of the UK’s heavy rail franchises provide that operators take some of the revenue risk in return for a greater share of any profit. As a result, it is anticipated that the profit margin in relation to Crossrail is likely to be below the UK industry average of between 3% – 5%.