Protecting the public interest in Melbourne’s rail franchise
Melbourne's rail operator (Metro) has recently been offered a seven year extension to their franchise. This offers a timely opportunity consider how the public's interest is best protected, to examine the existing franchising mechanism, and to see where it can be improved upon. It is also timely because other Australian states are believed to be considering adopting the Melbourne model, and the re-regulation of deregulated railways remains a live topic around the world.
The paper flags three key issues. First, the future contestability of the franchise, given that the existing operating consortium is not only involved with other capital and major maintenance projects in the region, but may also be acquiring significant skills and knowledge which may not be able to be replicated by other bidders. Second, the question of whether contractual cross subsidisation prevents efficient bid prices at future tender points. Third, the question of the treatment of legacy assets and the maintenance backlog: is a franchise with seven-year performance criteria encouraged to maintain existing assets to ensure the best outcome for the railways and the public over the long term?
Researcher, Transport Policy & Regulation
University of Melbourne