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Competitive Tendering of Rail Services

Competitive tendering provides a way to introduce competition to railways whilst preserving an integrated network of services. It has been used for freight railways in some countries but is particularly attractive for passenger networks when subsidised services make competition between trains serving the same routes difficult or impossible to organise.

Governments promote competition in railways to reduce costs, not least to the tax payer, and to improve levels of service to customers. Concessions are also designed to bring much needed private capital into the rail industry. The success of competitive tendering in achieving these outcomes depends critically on the way risks are assigned between the government and private train operators. It also depends on the transparency and durability of the regulatory framework established to protect both the public interest and the interests of concession holders, and on the incentives created by franchise agreements.

This report examines experience to date from around the world in competitively tendering rail services. It seeks to draw lessons for effective design of concessions and regulation from both the successful and less successful cases examined. The work is based on detailed examinations by leading experts of the experience of passenger rail concessions in the United Kingdom, Australia, Germany, Sweden and the Netherlands. It also draws on examples of freight rail concessions in Latin America.