Unpacking new guidance to the bus franchising process
Major changes to the bus franchising process
Building upon the successful passage through Parliament of the Bus Services Act 2025 the Department for Transport has just published revised guidance to local transport authorities pursuing plans to explore and then implement bus franchising. There are some major changes to the guidance as we explain below.
Franchising schemes in scope
Bus franchising schemes are preceded by a business case (known as the franchising assessment). This is the first stage in the franchising scheme process and begins with the publication of a notice of intent. Authorities that have not yet published their notice of intent must have regard to this edition of the guidance in full. Other Authorities are impacted to a lesser degree (for example if pursuing variations to an existing franchise scheme) and will generally continue to follow the last published version applicable to the Authorities scheme.
Understanding the status of the guidance is important. In certain cases the guidance is identified as statutory in effect. In other cases it is less formal guidance intended to help the Authority progress its franchising work smoothly. Where the guidance is identified as statutory the Authority must have regard to the guidance. In practice if it does not follow the guidance it would be prudent for the Authority to have a record of reasons for not doing so – as with any statutory duty the Authority could be tested on its decision making later.
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Key points in the new guidance
Enhanced partnership or franchising?
With growing recognition that bus franchising is far from the only road to travel down when considering bus reform, DfT have included in the guidance a requirement that Authorities that have issued a notice of intent to consider franchising will be expected to pause the process at that stage and provide operators with a statement in the form of proposals that it has developed representing commitments that it is prepared to make that would improve local bus services.
Bus operators are then expected to table any improvements they are willing to see incorporated into the existing enhanced partnership. A three month period (calculated from the date of publication of the notice of intent) is provided for - by the end of which operators are (presumably collectively) required to respond with their commitments to improvements.
Should the Authority be sufficiently impressed with the outcome of this exercise it may elect not to continue to pursue the franchising option. But the consequences do require the Authority to insist that the Authority commitments and Operator improvements are written into the enhanced partnership or become legally binding obligations in another way within a further three months.
Given that each three month period must take account of Authority and Operator decision making processes and the statutory requirements to consult that are likely to apply to an enhanced partnership variation we would question the feasibility of this timeline.
Infrastructure investment – what does the guidance say?
The guidance makes clear the importance of improvements in infrastructure calculated to benefit local bus services and also, the importance of Authorities investing in measures such as enforcement of bus priority lanes and parking restrictions. This is welcome – there is a real need for Authorities proposing franchising to accept that many of the factors that Operators currently experience affecting for example punctuality will still exist and require addressing regardless of who has responsibility for providing the services.
But later in the guidance, when the financial implications of franchising are explored, there seems to be no expectation that an Authority will have costed plans in place and evidence of support for any capital investment required to at least deal with the most difficult issues. The most that may be evident will be any commitments that were outlined during the three month period facilitating Operators setting out improvements to the enhanced partnership.
Ticketing and bus franchising
With the franchising Authority taking responsibility for fare structures, the guidance notes that there will be an opportunity in the near future to take advantage of Project Coral – A DfT funded project to develop a national solution to the need for tap on tap off technology available across travel modes with fare capping. The potential of this project is huge in terms of the part that it can play in encouraging more people to travel by bus. Authorities pursuing franchising are encouraged to keep up to date in developments within that project hosted by West Midlands Combined Authority.
Decarbonisation has its place in the guidance
Every Authority adopting the bus franchising model must recognise that in the medium/longer term a roll out of zero emission vehicles will be at the heart of bus services. DfT recognises that within the economic model created by franchising, operators will need to be on as level a playing field as possible in the procurement exercise but, at the same time, will benefit only from short (5-7 year) contracts.
Currently, operators make their own decisions on when and to what extent to switch to electric powered buses. Market conditions are such that EVs are more expensive - making investment a difficult decision. Operators will be aware that the cost of providing the service under a franchise is a key factor within the bidding process. But the contracts awarded are typically for considerably less than the life of vehicles that may have to be procured.
Authorities are increasingly taking the lead on fleet procurement. The feasibility of every Authority intent on franchising being able to follow that approach is questionable given that local authority finances are stretched.
The guidance also notes the challenge of securing grid connections with sufficient capacity to meet the demands of a fleet of vehicles. The guidance recommends early liaison with the District Network Operator. In doing so, they will join the ranks of other energy users – such as data centres. There is no evidence of any priority being afforded to public transport as grid capacity is increased over time.
Route and area designation
The Bus Services Act 2025 addresses an important technical deficiency in the original franchising legislation. When making its franchising scheme, the Authority must specify in specific terms the routes that it is to assume responsibility for under the franchising scheme. Effectively, the network to be franchised becomes frozen in time for the period up to the first franchised services taking to the road.
New services introduced or variations to existing routes that occur during the lengthy period before bus franchising commences will not form part of the scheme – requiring permits to operate instead. Authorities will now be able to specify the scope of a scheme more flexibly and avoid this problem.
Broader rules will apply to the issue of local service permits
And whilst on the subject of permits, there are welcome improvements to the scope of considerations that an Authority should take into account when considering applications for permits from Operators who provide local services that are routed to come into the franchised area at any point in their journey. As previously phrased, relevant considerations were limited to any adverse impact a permitted service would have on franchised services (perhaps the legislation was partly influenced by revenue abstraction principles within rail franchising).
Operators running services that cross into franchised areas will, in future, have a clearer, more permissive route to securing permits, provided they can demonstrate community or economic value. This could for example include the benefits to passengers travelling out of the franchised area and not just into it. Facilitating travel to, for example, a workplace or education centre outside of the area of the franchise scheme clearly carries indirect economic benefits and should be a relevant consideration.
Further updates
There is much other new detail in this edition. Here, very briefly, are some of the other updates included.
- DfT Resourcing: DfT plans to bring additional resource into the team engaging with Authorities on franchising. This should be welcomed – particularly if the priority is to support a process of consistency across Authorities in how they adopt franchising ensuring also that lessons learned are efficiently circulated
- Franchising and socially necessary services: The concept of socially necessary services stems from s14 of the 2025 Act. The legislation is directed at Authorities with enhanced partnerships but the guidance makes clear that franchising Authorities should apply judgements of this kind to inform its decisions on the route network to be adopted. More detail to follow in the updated enhanced partnerships guidance due to be issued by DfT
- Bringing Social Value into fleet procurement: An interesting point made in relation to fleet procurement is the reminder provided to the effect that social value is an important evaluation factor in procurement decisions. This is interesting and could it be because of the need to maintain vehicle manufacturing capacity within the UK?
- Local authority bus companies: The 2025 Act provides a power for Authorities to form a local authority owned bus company. If Authorities currently involved in bus franchising wish to introduce this element into their plans they must go back to square one and redevelop their assessment
- The public sector equality duty: this section has been further developed and also now includes public safety considerations. These are expected to form part of the Authority’s service specifications and in its own commitments to the operation of bus services
- Template documents: DfT propose to publish template documents to support the business case (assessment) development process
- Auditing of the Bus Franchise Assessment: The statutory requirement for the auditing of the assessment is required by law to be carried out by an auditor with finance qualifications. The Bus Services Act gives the Secretary of State powers to designate a broader range of expertise as appropriate qualification for the role. Regulations are awaited
- A Bus Franchising Manual has been published: A Bus Franchising Manual providing further information and guidance (including case studies) has also been published and is available below
One key takeaway
With increasing appreciation within Authorities that bus franchising is a complex process and expensive to set up, taking the time to engage with Operators in the exploration of alternative routes to securing improvements to local bus services will be seen by many as a positive outcome from the revisied guidance. Operators will want to understand how Authorities intend to manage the process of exploring improvements to enhanced partnerships as an alternative to franchising within what looks to be an extremely compressed period.
With our in depth understanding of the legislation and the practical steps involved in developing and varying enhanced partnerships and our work in supporting franchise schemes, our transport team will be on hand to support Operators in the process.
If you have any queries regarding the content of this legal article and the new guidance to the bus franchising process, please get in touch with Frank Suttie, Michael Bray or Tom Johnson.
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