Given that virtually all British passenger train services were franchised out over the period 1995-7, and many have now been franchised for a second time, Britain should provide an excellent opportunity to study the impact of franchising passenger rail services. Moreover, since several different franchising models have been tried, there should also be some useful evidence on how best to go about franchising. In practice, however, the turbulent history of the British rail industry over this period makes drawing firm conclusions difficult. At the start, it appeared that franchising was very successful with strong competition for franchises, rapidly rising traffic, rising productivity and falling subsidies.

My 5 year-term as the Rail Regulator in Great Britain from 1999 to 2004 coincided with the most turbulent times the British railway industry has ever experienced in peacetime. It was a great honour and privilege to do that job, yielding as it did valuable lessons for rail regulation in the most testing of circumstances.

The objective of this paper is to analyse policy and experience with competitive tendering. The context of this review is the European Commission's proposal to revise Regulation 1191/69, which sets out the terms for public service provision. The proposal would require compulsory competitive tendering wherever public transport receives subsidy or has exclusive operating rights (ECMT 2005, p. 54). This paper seeks to provide insight into competitive tendering and to highlight tendering designs that undermine the tendering objectives. My focus is on passenger rail franchising models and experiences in Britain and Australia.

In the Netherlands, tendering of regional rail services has begun. In 1994, the government started tendering regional bus services as an experiment and in 2001, a law was established which gives a structural juridical basis for tendering public transport: The Law for passenger transport 2000.

The German railway sector was fundamentally reformed in 1994. The state-owned West German carrier, Deutsche Bundesbahn, was consolidated with the former East-German rail undertaking, restructured and re-established as a state-owned joint stock company. Aims of the reform were a more commercial orientation of the newly established Deutsche Bahn AG (DB) and the introduction of competition. In the rail freight market and the long-distance rail passenger market an open access regime was introduced.

The Transport Policy Act of 1988, with its ground-breaking split of railway infrastructure from operations, is commonly considered the starting point for the transformation of the Swedish railway system – from a vertically and horizontally integrated monopoly to a market characterised by decentralisation and intra-modal competition. In this paper, we focus on the reforms and experiences related to the introduction and development of competitive tendering of passenger rail services in Sweden. Competitive tendering was first introduced in 1989 on some regional lines, but since then this practice has become more and more widespread, and now encompasses the majority of both regional and interregional lines. The different types of tendered contracts for these services are described in some detail in the paper. Despite a general lack of bidders participating in most tenders, some important new entries have taken place, from national as well as international firms. For the procuring authorities, it has been a rather long period of learning over time how to improve the tendering process, also affected by Sweden’s entry to the European Union in 1995. Although there are several positive effects to highlight, such as innovation and reduced subsidies, there is also reason to consider problems like unfulfilled bids, the predatory behaviour of some bidders, and sometimes worsened possibilities for passengers to find connecting journeys involving several operators. Moreover, SJ’s (the state-owned operator) remaining monopoly on its so-called profitable lines affects the general competitive situation and prospects for sector development. The paper also includes some general statistical data reflecting the development of the Swedish railways in recent years.

CER brings together 49 railway and infrastructure companies from all EU states, Switzerland, Norway, the EU accession states, and states on a road-map towards EU membership. It provides advice on all issues relating to the EU and its laws. The CER works on all political questions relevant to the railway business (in close co-operation on technical issues with the International Union of Railways (UIC) in Paris). It provides information and advice to political decision makers in Brussels.

The role of ownership in railways is highly contentious. Railways, just like any other mode in the transport sector, are simply a collection of assets, operated by a group of people, delivering a service that is itself a derived demand. The question of who owns and manages what, though, has found very different answers in different countries and circumstances: in fact, the answer in any single country has often been unstable, seesawing back and forth depending on circumstance and political fashion.