The Tyne and Wear Metro was over 30 years old and in need of a major overhaul. A gradual deterioration in its condition led to concerns over closure, with serious business impact, if funding was not secured for a significant asset renewal programme.
Following development of a business case, central government agreed to provide investment if the operation of the system was tendered to market to secure best value.
Arup led the provision of technical, commercial and operational advice to support the specification and procurement of a Metro Operating Concession. Previous experience of advising bidders for privately-run passenger rail franchises and knowledge of the approaches to structure and contractual arrangements was crucial to secure the successful completion of this assignment.
Arup and Nexus collaborated with other advisors to create the new concession, with Arup guiding Nexus through the processes, thinking and decision making.
Arup quickly identified the need for two key incentive regimes to manage the concession – the running of the trains and the presentation of the stations and trains. Arup developed a bespoke train running performance regime which better aligned itself to the ’turn up and go’ nature of the Metro service. The final solution was based on length of time between trains – a radical departure from the rigid timetable approach.
The regimes also involved input from financial advisors to understand the penalty impacts and the legal team to translate the principles into suitable terms in the Concession Agreement.
There has been a step change in the operation of Metro, which is now operated by Deutsch Bahn concession. Quality has improved and the financial parameters set within the contract have been met.