Bus franchising - the procurement route ahead
Introduction
We continue this series of guides to Bus Franchising and the Procurement Act 2023 with this second guide. We cover the decision-making process that a franchise authority is expected to follow leading up to formal initiation of the procurement process and then the two routes to contract award that are typically adopted - each of which leads to selection of a successful bidder.
Commencement of the procurement phase sees the end of the preliminary engagement period. If you have not read our first guide covering that phase you can find it here.
What you will find in this guide:
- Key steps in a franchising authority’s journey to a contract award
- Initial considerations for the authority – what it needs to get right throughout the process
- Why the authority will be awarding contracts as a utility
- The choice of procurement routes typically adopted
- Why a dynamic market approach is likely to be the route of choice and what that involves
- When the franchising authority can exclude an operator from the opportunity to participate
- The timescales that must be provided for in order to allow bidders appropriate time to respond
- How the authority will set about taking bus operators forward in the process including how operators can be excluded from the process or deselected during the process
- A brief introduction to the evaluation process leading to a contract award
- As a case study – how West Yorkshire Combined Authority has taken forward the early stages of the first bus franchise procurement exercise undertaken within a dynamic market
Key contacts
Jennifer Andrews
Managing Associate
Initial considerations for the authority – what it needs to get right throughout the process
Clearly, the franchising authority must have:
- established a good understanding of the scope of the procurement exercise. This will, in turn reflect the overall geographic area that is included in the franchise scheme and it will be ready to develop and provide to bidders a specification of the services that it will be procuring (typically described as a “statement of requirements”)
- a full understanding of the procurement rules as they will apply to the procurement. These are to be found in the Procurement Act 2023 (the “PA 2023”) and regulations made under that Act of Parliament. The Direct Award provisions of the amended Public Service Obligations in Transport Regulations amended by the Bus Services Act 2025 will also in future require to be taken into account
- an appreciation of the DfT Guidance for bus franchising – the latest edition published on January 29th 2026
The franchising authority will most likely have prepared the operator market for the procurement having undertaken a preliminary market engagement exercise.
The franchising authority will also have considered the professional support that it requires in order to successfully manage what will prove to be a complex procurement exercise. It should also have ensured that anything not yet certain but which has to be in place for the procurement to be successful is being taken forward on a basis that is consistent with the procurement timeline. An example of this in bus franchising is the ability to give possession of depots where this is essential to ensuring that service costs are as optimal as possible. Early experience suggests that Authorities may not have that aspect in place when the procurement commences – meaning that certain aspects of the Statement of Requirements in relation to the depot location, size, availability and leasing or asset ownership and TUPE costs may not yet be clear for Operators to have sufficient information to price their tenders reliably.
The franchising authority must also ensure that its actions at all stages in the process uphold four important principles set out at s12{1} of the PA2023:
- delivering value for money
- maximising public benefit
- sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions
- acting and being seen to act, with integrity
In addition, the franchising authority will be expected to have regard to the National Procurement Policy Statement published by the UK government when conducting the procurement – in essence, to look to achieve outcomes from the procurement that support government’s objectives such as the growth agenda.
Operators engaged in a procurement exercise will want to keep in mind, in particular, the last two of the principles. Straying from the straight and narrow in the way the procurement is organised and taken forward does not automatically create grounds for challenge but deviations or outright disregard can provide grounds for remedy on the part of bidders and crucially, potentially delay to the procurement process, award of contracts and franchised services beginning.
Many bus franchise procurements will include, amongst bidders, at least one incumbent bidder – already operating bus services in the area subject to franchising. This adds an additional layer of complexity to the Authority’s responsibilities – we will be covering this issue in detail in a future guide.
A further important issue for the franchising authority is the process involved in inviting interest in the procurement, avoiding taking forward candidates (including their key subcontractors) that are on the list of excluded suppliers, considering the appropriateness of taking into procurement any party that is excludable from the process and then ensuring that a fair and appropriate set of criteria are developed and published explaining how particular operators will be selected to enter into the full procurement process.
[1] This could lead to contentious issues arising subsequently as it could involve revision to risk allocation from the position initially represented or involve some other material amendment to the service requirements.
Why the authority will be awarding contracts as a utility
The franchising authority must give thought to the nature of the contract that it plans to award. Given that the franchising provisions of the Transport Act 2000, when activated, prevent operators providing services within the franchise area (save under permit or where the type of service operated is excluded from the franchising scheme) there are, effectively, exclusive rights available to the franchising authority which in exercise of these rights permits the franchise authority to award contracts that enable the franchising authority to take advantage of these exclusive rights.
This position is confirmed by paragraph 4 of Schedule 4 to the PA2023 which states:
An activity is a utility activity if it relates to the provision or operation of a network for the provision of a service to the general public for transport, whether by rail, tram, bus or other means.
But the contract to be awarded will not of itself have utility status – so what does that mean in practice?
Contracts awarded by the franchising authority will not have utility status when competitively tendered – s6(4) of the PA2003.
The franchising authority will be considered to have, by law, exclusive rights in relation to the award of contracts covering a bus network. However, the authority only has that status in order that contracts awarded by the franchising authority and taking advantage of the exclusive rights are treated correctly under procurement rules. This rather limited status means that a raft of other provisions applicable to utilities – such as water and energy supply companies – do not become relevant in consequence of a competitively tendered contract being awarded to operate any part of a bus network.
The choice of procurement routes typically adopted
An open procedure in which all interested parties that are not for any reason excluded from entitlement to tender submit tenders for evaluation. This route is not suitable for more complex procurements and is unlikely to be selected by a franchising authority as its approach to tendering.
The competitive flexible procedure under which interested parties apply through a request to qualify phase. A process of deselection can occur within the negotiation process carried out in phases and the field of bidders reduced in number through that process. Transport for Greater Manchester has selected the competitive flexible approach for two small bus franchise lots that have been retendered due to the current awarded contracts approaching their expiry date.
As we were finalising this guide South Yorkshire Mayoral Combined Authority (“SYMCA”) commenced its bus franchising procurement process. The Authority has elected not to establish a dynamic market preferring instead to follow a standard competitive flexible procedure. This will require the authority to separately publish tender notices in the future for the further contracts that it will be procuring to complete the bus franchising programme.
The conditions of participation can be used by the franchising authority to limit the number of suppliers A pass/Fail approach combined with award criteria (required to be set out in the Tender Notice) will typically be the approach taken.
Awarding contracts to members of a dynamic utilities market established by the Authority. We say more about this approach next as it is ideally suited to bus franchising.
Exceptionally, contracts can be awarded without competition – this approach referred to as a “direct award”. The option has particular relevance in public transport with the Public Service Obligations in Transport Regulations governing its use – the regulations have been recently extended to become relevant to bus franchising under the Bus Services Act 2025. We explain the role capable of being played by direct awards in a subsequent guide.
When the franchising authority can exclude an operator from the opportunity to participate
Excluded parties are suppliers who must be barred from a tender process. This is mandatory where a supplier (or a connected/associated person) meets a “mandatory exclusion ground” - such as convictions for serious offences (e.g. bribery, fraud, cartel activity, terrorism, tax evasion), or are listed on the government’s central debarment register. If the circumstances giving rise to exclusion are ongoing or likely to recur, the authority must disregard any tender submitted, making it important for this status to be identified at an earlier stage.
We explained the importance of well managed preliminary market engagement in a previous guide and the risk of a party gaining a bidding advantage through having a greater role in the way the franchising authority develops its statement of requirements and other contract terms. Section 16 (4) of the PA 2023 states that where a supplier’s participation in preliminary market engagement has put the supplier at an unfair advantage in relation to the award of a public contract, and the advantage cannot be avoided, then according to 16 (5) of the PA 2023 the contracting authority must treat the supplier as an “excluded supplier” for the purposes of assessing tenders and thereby exclude the supplier from participating in, or progressing as part of, any competitive tendering procedure.
Excludable parties are those where exclusion is at the authority’s discretion. This applies if a “discretionary exclusion ground” is met - such as insolvency, environmental or labour misconduct, professional misconduct, or poor past contract performance. Authorities may exclude these suppliers if the risk is ongoing or likely to recur.
The excludable category raises important considerations in the context of bus franchising where most, if not all, operators will be experienced providers of local bus services within the United Kingdom. All will have faced challenges of various kinds within their business. Whilst the legislation appears to allow the franchising authority to reach a conclusion without a process leading to the making of the decision the authority should ensure that it follows Cabinet Office guidance available in Guidance: Exclusions.
| It is important to appreciate that circumstances that can lead to the possibility of exclusion are widely drafted. An example provided in the Cabinet Office Guidance is failure to observe minimum wage legislation. That issue can occur without any intent to breach the law on minimum pay. The Authority is encouraged to consider whether self cleansing has occurred – for example the tightening up of payroll procedures. Similarly issues that have arisen in connection with fleet maintenance and non-compliance that has arise can be expected to have been managed and with evidence available to confirm that. Discretionary exclusions can accordingly be challenged if a franchising authority seeks to apply the right against an operator. |
It can be expected that only relatively recent circumstances – compliance incidents that occurred within the previous five years - are taken into consideration (but at the same time looked at from the point of view of any corporate group that the operator is a member of – including members of the group outside of the United Kingdom). The Authority should investigate in sufficient detail to allow it to reach a conclusion that exclusion is appropriate on the basis that the circumstances giving rise to the ability to exclude are continuing or are likely to occur again.
Both regimes extend to “connected” and “associated” persons, meaning that exclusions can apply due to the conduct of directors, parent/subsidiary companies or key subcontractors.
We’ve noted that there appears to be no obligation on the part of the franchising authority to notify a potential bidder when an exclusion (which may be discretionary) exists at the point in time when an opportunity is being presented to the market.
A discretionary exclusion could, therefore, apply without prior notice. We would expect that there would be at least a provisional decision notified to the affected party to avoid a dispute arising that in turn holds back the timetable for the procurement process itself but that is not provided for under the PA 2023.
Where a dynamic market has been established, there are two further exclusions from the right to participate these being:
- suppliers that are not members of the dynamic market at a cut off date established by the franchising authority when issuing the tender under the dynamic market, or
- suppliers that are not members of an appropriate part of the dynamic market – note that as explained above where sub-markets have been established applications can be made to participate in each part of the market but participation in any part of the market depends upon holding membership in that part
A franchising authority is entitled to set conditions for membership of a dynamic market or part of a dynamic market only if it is satisfied that the conditions are a proportionate means of ensuring that members
- have the legal and financial capacity to perform contracts awarded by reference to membership of the market or the part of the market
- have the technical ability to perform such contracts
There are also further rules to be complied with:
A condition of membership may not
- require the submission of audited annual accounts, except from suppliers who are, or were, required to have the accounts audited in accordance with Part 16 of the Companies Act 2006 or an overseas equivalent
- require insurance relating to the performance of the contract to be in place before the award of the contract
Whilst a condition may relate to suppliers’ qualifications, experience or technical ability, the condition may not
-
- require suppliers to have been awarded a contract by a particular contracting authority
- break the rules on technical specifications to be followed within the procurement process, or
- require particular qualifications without allowing for their equivalents
When considering whether a condition is proportionate a franchising authority must have regard to the nature, complexity and cost of contracts to be awarded by reference to suppliers’ membership of the market.
A condition for membership may require the provision of evidence that is verifiable by a person other than the supplier.
A contracting authority is required to:
- accept applications for membership of a dynamic market or part of a dynamic market at any time during the term of the market
- consider such applications within a reasonable period
- admit to the market or the part of the market, as soon as reasonably practicable, any supplier that
- is not an excluded or excludable supplier, and
- satisfies the conditions for membership
- consider whether to admit to the market or the part of the market any supplier that
- is an excludable supplier, and
- satisfies the conditions for membership
- inform a supplier of the outcome of their application, together with reasons for the decision, as soon as reasonably practicable
Importantly, a franchising authority may not
- limit the number of suppliers that can be admitted to a dynamic market or part of a market, or
- modify the conditions for membership of a dynamic market or part of a market during the term of the market
Once a Dynamic Market is established a Franchising Authority should consider ongoing resourcing for continuing management of supplier admission to and exclusion from the market. While continuing to assess supplier applications to the market the Franchising Authority must continue to monitor the status of existing market suppliers and must remove a supplier from a dynamic market if the authority considers that the supplier is an excluded supplier.
A Franchising Authority may also remove a supplier from a dynamic market if it considers that the supplier:
- is an excluded supplier under PA2023, or
- does not satisfy the conditions for membership, or
- has, since becoming a member, become an excludable supplier, by virtue of a discretionary exclusion ground that either did not apply before the supplier became a member, or applied before the supplier became a member by reference to different circumstances or
- where the authority discovers that, on becoming a member, the supplier was an excludable supplier
Before removing a supplier from a dynamic market, a franchising authority must inform the supplier of its decision to do so, together with reasons for the decision.
Is a fee payable for participation?
Whilst under a non-utilities dynamic market fixed percentage fees linked to the estimated award value of a contract, can only be charged to suppliers where they are awarded a contract by membership of the dynamic market, under a utilities dynamic market fees can be charged in connection with obtaining and holding membership of the market.
In the first example of its kind, West Yorkshire Combined Authority has elected not to charge fees for participation in the bus franchising dynamic market established in October 2025.
The timescales that must be provided for in order to allow bidders appropriate time to respond
A number of stages in the process leading to a contract award are governed by minimum timescales that the Authority is required to comply with. Failure to comply can be challenged.
Importantly, the franchising authority should not default to the minimum periods at any stage in the process. The PA2023 requires the franchising authority to actively consider the circumstances surrounding the time period that it will set. Specifically it must take into account as appropriate:
- The nature and complexity of the contract being awarded
- Requirements for site visits, physical inspections and other practical steps
- Any need for sub-contracting
- If the scope of the tender or any requirements to feature in the contract awarded have been modified there should be taken into account the nature and complexity of any modification of the tender notice or any associated tender documents
- The importance of avoiding unnecessary delay
Cabinet Office guidance covering the subject of timescales makes an important point in relation to the final issue above. The more complex a procurement is, the greater the risk that the detail to be shared with bidders is just not ready when the procurement starts. Later submission of important information to bidders can inevitably lead to legitimate demands for an extended bid period.
The Cabinet Office guidance encourages authorities not to commence a procurement process without having all procurement documents ready to be shared with potential operators at that point in time.
A further point emphasised in the Cabinet Office guidance is the importance of reflecting appropriate time periods where SME operators are encouraged to participate in the process. An inappropriately short period of time may deter operators in this class from participating.
Key timescales
Assuming that the franchising authority is pursuing the procurement by forming a dynamic market and then, working through a series of procurements with members of that market, the following are the key timelines.
- Joining the dynamic market: No specific timeline but the franchising authority should set a date by which an application should be made in order to participate in the first round of bidding opportunities available within the market
- Participation period where there is no dynamic market: A minimum period of 25 calendar days should be provided for operators to respond to an invitation document
- At the end of this period the franchising authority is entitled to issue its finalised instructions to submit a tender
- Tendering period: a minimum of 10 calendar days is required to be provided
A brief introduction to the evaluation process leading to a contract award
Readers experienced in public procurement exercises will appreciate that, previously, public authorities, in evaluating tenders, had the objective of identifying the most economically advantageous tender. The terminology is now contracted and is a reference to the most advantageous tender.
The removal of reference to economic is a reflection of the fact that price (which has previously been treated with particular significance) is just one of many factors that should be evaluated. Each procurement must be based upon its own specific criteria and that economic matters such as price are, in principle, no more significant than other criteria that may be adopted. In a high value procurement such as leading to the award of bus service contracts price will of course be a very significant selection criteria and can still carry the highest level of weighting but for lower value procurement exercises price may be regarded as of less importance.
What has changed is the procedural process for providing tender feedback. There is a requirement on the part of the authority to provide what is now known as an Assessment Summary – a report back to the tenderer on its tender evaluation.
Individual summaries are to be provided to all tenderers specifically – including those that are successful – and should explain why a tender was successful or unsuccessful including enough detail for suppliers to understand the evaluation process as it applied to that candidates bid.
A standstill period still applies with a minimum of 8 working days (previously 10 calendar days) and the assessment summaries must be issued before a contract award notice is published and the standstill period commences.
It can only be hoped that, given the early stage that bus franchising procurement is at, assessment summaries provide meaningful benefit to unsuccessful bidders who will, no doubt, move on to the next opportunity and able to use the feedback to win future bus franchising bids.
The franchising authority should consider carefully the timeline that it develops once evaluation has been completed. Consideration will need to be given to the level of authorisation available to the director responsible for the contract award and whether a report and recommendation must be taken to the franchising authority’s board.
Only when all procedural steps are in place can notice of the contract award(s) and assessment documentation be issued to tenderers. The 8 working day standstill period can commence immediately but consideration can be given to allowing a period for tenderers to absorb information provided within the assessment documentation and raise legitimate concerns before the timeline for standstill begins.
A final point – equal treatment for all in a bus franchise procurement? Not necessarily!
Sections 12(2) and 12(3) of the PA2003 tell us that equal treatment is not always the mantra for a compliant public procurement process. This is a particularly important issue in the context of bus franchising as operators bidding for local service contracts under the franchising scheme will in many cases be bidding to retain a business interest that they already have.
The PA 2023 makes clear that a franchising authority should consider with care the nature of the parties that are to become tenderers and if there is a difference between the bidders this entitles the franchising authority to treat particular bidders differently. But this is followed with a cautionary statement:
If a contracting authority considers that different treatment is justified in a particular case, the authority must take all reasonable steps to ensure it does not put a supplier at an unfair advantage or disadvantage.
The principle of permitted discrimination is a hugely important challenge for the franchising authority to get right. The integrity of the procurement process is at risk if this issue is not handled correctly. Next in this series will be a guide to the management of incumbent bidders in franchise procurements.
Case study
How West Yorkshire Combined Authority has taken forward the early stages of the first bus franchise procurement exercise undertaken within a dynamic market.
West Yorkshire Combined Authority (“WYCA”) formally launched its dynamic market on 18th August 2025 inviting operators to submit applications for membership and setting out the requirements necessary to secure that status.
On 3rd October 2025 a second notice was published confirming the establishment of the market and naming the operators that had been accepted into membership.
An invitation to tender document was issued to all then participants in the market (according to the lots that each Operator has been accepted into) and set out the following timetable for what is described as Tier A contracts – with three in total to be awarded with peak vehicle requirements ranging from 49 to 119. The following process was proposed:
Stage 1: Conditions of participation: Operators were required to submit responses to a Procurement Specific Questionnaire which set out pass/fail questions to be responded to. Operators passing the requirements of this phase moved on to dialogue phase
Stage 2: Dialogue: Operators passing the Conditions of Participation phase now become tenderers and in a position to submit a tender against WYCA’s request for tenders. A dialogue phase then took place with operators invited to participate in a range of thematic sessions covering matters such as Network and operations, assets, legal and payment mechanism and performance management regime.
Stage 3: Tender: Commencement marked by the issue of final tender documentation followed by submission of tenders, evaluation and contract award.
The specific timetable published was as follows:
| Event | Date |
| ITT made available | 7 October 2025 |
| Deadline for initial clarification questions (these related to the Procurement Specific Questionnaire) | 14 October 2025 |
| Final date for responses to the initial clarification questions | 21 October 2025 |
| Deadline for operators to return a completed Procurement Specific Questionnaire | 3 November 2025, 12pm |
| Dialogue stage | |
| Invitations to dialogue published | 10 November 2025 |
| Dialogue finishes |
10 November 2025 |
| Commentary on the draft Franchise Agreement required by this date |
21 November 2025, 12pm |
| Reissue updated draft Franchise Agreement | 5 December 2025 |
| Dialogue finishes | 19 December 2025 |
| Tender stage | |
| Invitation to Tender issued | 12 January 2026 |
| Deadline for tender clarification questions | 13 February 2026 |
| Final date for responses to tender clarification questions | 20 February 2026 |
| Tender submission deadline | 27 February 2026, 12pm |
| Completion of evaluation | From 1 June 2026 |
| Contract and lease documentation executed | 29 June 2026 |
| Service Commencement Date | 4 April 2027, 1am |
Stay ahead with our upcoming guides
We hope you’ve found this guide to Preliminary Market Engagement and Bus Franchising insightful.
As part of our commitment to supporting the development of bus franchising in the UK, we’re producing a series of guides exploring key aspects of the procurement process. See across for the next few issues.
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