THE outsourcing firm that has been stripped of the Caledonian Sleeper service says that ministers are not ensuring value for money through nationalisation.
Transport minister Jenny Gilruth has said the Sleeper which operates overnight rail passenger services between Scotland and London will come under state control from June.
They have confirmed that outsourcing firm Serco will finally lose the £800m franchise seven years early and are to take over control.
But now John Whitehurst, the managing director of Serco’s transport business has said that the firm was "disappointed that the Scottish Government did not ensure value for money by examining the possibility of a direct contract award to Serco".
He said: “Since Serco took over the management of the Caledonian Sleeper in 2015, we have brought about massive improvements to every aspect of the service for our employees, our passengers and for Scotland, despite having made significant losses on the contract.
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“Today, the Caledonian Sleeper is one of the top performing train operators in the country. 2022 was the best year ever for the service as it recovered from Covid; the year saw the highest revenue since the start of the franchise with guest levels back to pre-covid; the performance on right time arrival outperforms our franchise obligation of 80%; our guest satisfaction score has just reached 90% against a target of 85%, which has never been done before; and our employee satisfaction score is at 69, an increase of 16 points on the 2021 score.
"These improvements have been an extraordinary achievement by our Serco team, and we are grateful to everyone for their hard work.
“Unfortunately, the Scottish Government has not requested a costed proposal for a Direct Contract Award, which would have allowed Scotland to benefit from the expertise of our Serco Transport senior management team who understand this complex and unique hospitality-focussed train operation like no-one else, while also enabling Scottish Ministers to be in complete control of the contract. Most importantly, this would have allowed the Scottish Government to compare the price of such an award with that of their arm’s length Operator of Last Resort company.” Serco said it remains "committed to partnering with governments to impact a better future for citizens, communities and countries".
Ms Gilruth confirmed the move five months after first indicating that it wanted to terminate the Serco franchise next year after the firm wanted more money to run the service.
The current 15-year franchise was awarded to the outsourcing company Serco in May 2014, with the 15-year contract coming into effect on March, 2015.
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The contract that was signed in 2014 included a ‘rebase clause’ that meant that, after seven years of the 15-year franchise, Serco could present to the Scottish Government alternative financial arrangements for the remaining years of the franchise.
Serco had hoped to revise the terms of the contract to put the service on a "more sustainable footing" saying that it had been "loss-making over the life of the contract".
Ms Gilruth said in answer to a parliamentary question in October that a new contract with Serco does not represent “value for money to the public”.
The SNP said at the time that it welcomed the termination of the Caledonian Sleeper contract which brought about the opportunity to "consider bringing the iconic service into public control" like with ScotRail.
It came after the Scottish Government last year took over the running of most train services in the country following the end of Abellio’s tenure in charge of ScotRail.
Scottish Conservative shadow transport minister Graham Simpson said that there can be "no conclusion other than this is an ideological decision".
He said: “If it’s about value for money the minister should have explained why she has not requested or received a costed proposal from Serco for a Direct Contract Award. She has given no idea of what this would cost, or of how she can claim that the Scottish taxpayer will receive value for money from this decision.”
Serco had warned ministers that the franchise had always been loss-making after it was first announced it was being stripped of the Sleeper contract.
But the Scottish Government appeared to do a U-turn as the transport minister later said she was constrained by UK law to consider the continued use of Serco and was making a further assessment over a direct award to them.
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Now Ms Gilruth has confirmed that the Sleeper is to come under state control.
Under UK legislation ministers had the option to put the contract out to tender, or make a ‘direct award’ back to Serco or to a company owned and controlled by the Scottish Government – the latter effectively being public ownership.
Ms Gilruth first set out that Serco would be stripped of the contract last year.
Then, Mr Whitehurst confirmed they were not able to reach agreement on revised terms, and the the management of the Sleeper was to be handed back to the Scottish Government.
He said: “We note that the Government’s decision not to accept our proposals has not been made due to any performance issues; from Serco’s point of view the service has been loss-making over the life of the contract and the proposals that we made to Transport Scotland were to put it on a more sustainable financial footing. "We will continue to work with Transport Scotland around options for the future management of the service and in the meantime will continue to deliver a world-class service for our guests.”
The decision comes after the Scottish Government was accused of “inconsistency and double standards” by not including the Sleeper franchise in its nationalisation plan.
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