Version 07.10

Access Dispute Resolution Rules

Joint

Network Rail / First Greater Western Reference

Submission to Access Disputes Panel ADP20

January 2007

1 details of parties

1.1 The names and addresses of the parties to the reference are as follows:-

First Greater Western Limited, whose Registered Office is at Milford House, 1 Milford Street, Swindon SN1 1HL (“FGW” ("the Claimant"));

and

Network Rail Infrastructure Ltd, whose Registered Office is at 40 Melton Street, London NW1 2EE (“Network Rail” (“the Respondent”))

2 The Parties’ right to bring this reference

2.1 The parties are party to three passenger track access contracts which operate in parallel in respect of the period covered by the matter in dispute. The three contracts were each transferred to FGW by a statutory transfer scheme with effect from 1 April 2006 and their brief details are as follows:

(i) contract dated 14th June 2002, originally entered into by Great Western Trains Company Limited (referred to as HSS) which is in respect of service groups coded "HJ",

(ii) contract dated 30th March 2004, originally entered into by Wales & West Passenger Trains Limited (referred to as West) which is in respect of service groups coded "HK" ; and

(iii) contract dated 7th December 2004, originally entered into by First Great Western Link Limited (referred to as LTV) which is in respect of service groups coded "HN".

This matter is a reference under Schedule 4 Part 3 of each of the three contracts. Subject to the particular details of the services covered by each contract, Schedule 4 Part 3 in each contract is the same and for convenience this reference is presented as if the three contracts were one (referred to as the "Track Access Contract").

2.2 The dispute concerns the calculation of the compensation due to FGW for the effect on its passenger train services of Network Rail Restrictions of Use under Part 3 of Schedule 4 of the Track Access Contract. This matter is referred to an Access Disputes Panel ("the Panel") for determination in accordance with paragraph 8.4 (d) of Part 3 of Schedule 4 of each of the contracts referred to in paragraph 2.1.

2.3 Network Rail has in accordance with paragraph 8.1 of Schedule 4 Part 3 notified FGW in each relevant period of its calculation of the compensation payable, FGW has disputed the notification within the prescribed timescales and the parties have followed through the dispute resolution process in paragraph 8.4 to the point of referral to the Industry Committee. The relevant provisions of paragraph 8 of Schedule 4 Part 3 are as follows:

“8.1 Network Rail Restrictions of Use

(a) Within 14 days after the end of each Period, Network Rail shall provide to the Train Operator a statement showing:

(i) all Network Rail Restrictions of Use taken during that Period;

(ii) all Competent Authority Restrictions of Use taken during that Period; and

(iii) any compensation payable in respect of the Network Rail Restrictions of Use identified,

in sufficient detail to enable the Train Operator to make an informed assessment thereof.

(b) The aggregate liabilities of Network Rail and the Train Operator, in respect of any and all compensation for which either is liable to the other under this Part 3 and under Part 5 in respect of each Period shall, to the extent that such compensation is not under dispute, be set off against each other and the balance (if any) shall be payable by Network Rail or the Train Operator, as the case may be, within 35 days after the end of that Period.”

“8.3 Disputes

(a) Within 10 days of receipt of a statement from Network Rail under paragraphs 7.4, 8.1 or 8.2, the Train Operator shall notify Network Rail of any aspects of the statement which it disputes, giving reasons for any dispute. Save to the extent that disputes are so notified, the Train Operator shall be deemed to have agreed the contents of the statement.”

“8.4 Dispute resolution

The procedure for resolving disputes notified under paragraph 8.3 shall be as follows:

(a) within 7 days of service of any notice under paragraph 8.3, the parties shall meet to discuss the disputed aspects of the statement with a view to resolving all disputes in good faith;

(b) if, within 7 days of that meeting (the “first meeting”), the parties are for any reason still unable to agree the disputed aspects of the statement, each party shall promptly (and in any event within 7 days) prepare a written summary of the disputed aspects of the statement and the reasons for each such dispute and shall submit the summaries to the senior officer of each party;

(d) if no resolution results within 14 days of that meeting, either party may require that the matter be resolved by the Industry Committee; and

(e) if either party is dissatisfied with the decision of the Industry Committee or the ruling of the Chairman (as the case may be) such party shall be entitled to refer the matter for arbitration, pursuant to Part C of the Access Dispute Resolution Rules (except that paragraph C6.3 of those rules shall not apply).”

3 Contents of reference

The Parties have together produced this joint reference and it includes:-

(a) The subject matter of the dispute in Section 4;

(b) A summary of the issues in dispute in Section 5;

(c) A detailed explanation of the issues in dispute prepared by the claimant with a paragraph by paragraph response from the respondent(s) in Section 6;

(d) Confirmation no further issues are raised in Section 7;

(e) The decisions of principle sought from the Panel in respect of legal entitlement and remedies in Section 8; and

(f) Appendices and other supporting material.

4 subject matter of dispute

4.1 Part 3 of Schedule 4 of the Track Access Contract provides the rules and mechanisms concerning compensation for restrictions and amendments to passenger services able to be included in the railway timetable caused by Restrictions of Use. Its terms follow the established industry template.

Appendix 4.13(a) sets out in diagrammatic form the relationship between the Schedule 4 and Condition D4.8 processes.

4.2 This dispute arises because FGW and Network Rail disagree on the calculation of compensation by Network Rail to FGW under Schedule 4 in respect of Periods 1 to 6 2006/7 (excluding the last Week 24). In particular while there is agreement on what Restrictions of Use should be compensated, there is disagreement in applying the Schedule 4 formula for calculating the compensation payable. The particular parameter within the formula that is the subject of the dispute is the Notification Factor. Network Rail has regularly used the early Notification Factor, while FGW maintains that the rules of Schedule 4 clearly require the Late Notification Factor to be applied.

4.3 Under Schedule 4 Part 3 the effect of Restrictions of Use is measured first by analysing the timetable for missed monitoring point and extended journey time effects. The analysis is carried out by Service Group in respect of each day of operation. The analysis is carried out first by reference to the First Working Timetable, comparing that timetable with a "Corresponding Day" on which there were no Restrictions of Use, and second by reference to the Working Timetable at 22:00 hours on the day before its operation, comparing that version with the First Working Timetable. The combined analysis captures all the effects of Restrictions of Use and converts them into a delay value which can be processed through the compensation formula.

4.4 The compensation formula derives a monetary value for the delay associated with the Restrictions of Use by applying the value of the marginal revenue effect of delay for the relevant Service Group from Schedule 8 and adjusting the amount to take account of the relative busyness of the day and, by applying a Notification Factor, taking account of the point at which the relevant Restrictions of Use were included in the Working Timetable.

4.5 There are three Notification Factor rates: an early, intermediate and late notification rate. Paragraph 4 of Schedule 4 Part 3 set out the terms regarding which rate should apply. In particular there are requirements on each party regarding the timetable process steps which it must take by when for the particular Notification Factor to apply. Criteria depend on when the particular Restriction of Use was both advised by Network Rail and then included in the Working Timetable, with allowances made where a train operator is responsible for delaying the revision of the Working Timetable. The structure and value of the rates has been calibrated and determined by the ORR as part of its regulatory charging reviews.

T-12 weeks is a significant date in the timetabling process, reflecting licence obligations on the parties and the point at which advance ticket sales booking systems are required to be loaded with the timetable information. For this reason, achieving upload of the Working Timetable to the train service database by T-12 weeks is a strong requirement in the Notification Factors and the requirement is specific that the Working Timetable must not just be prepared but actually entered into the train service database ("TSDB").

4.6 The dispute concerns whether in each particular case the early, intermediate or late Notification Factor should apply.

4.7 Paragraph 4 of Schedule 4 Part 3 is as follows:

“4. Notification Factors

“4.1 Early notification

The NF in respect of a Network Rail Restriction of Use in respect of any Service Group shall have the value specified for that Service Group in column C of Annex A to this Part 3 if and to the extent that:

(a) the Network Rail Restriction of Use is reflected in the First Working Timetable; or

(b) (i) details of the Network Rail Restriction of Use are notified to the Train Operator on or before the end of the Drafting Period in the Applicable Rules of the Route for the Timetable Period in respect of the Restriction of Use Day but, at the request of the Train Operator (as accepted by Network Rail), are not reflected in the First Working Timetable; and

(ii) subject to paragraph 4.1(b)(iii), the Network Rail Restriction of Use is reflected in the Working Timetable as entered into the train service database at 2200 hours on the day which is 12 Weeks before the Restriction of Use Day; or

(iii) where paragraph 4.1(b)(ii) does not apply because the Train Operator has failed to give Network Rail a Revised Bid in accordance with Condition D4.8.3, the Network Rail Restriction of Use is reflected in the Applicable Timetable in respect of the Restriction of Use Day.

“4.2 Notification by Revision Notification Date

The NF in respect of a Network Rail Restriction of Use in respect of any Service Group shall have the value specified for that Service Group in column D of Annex A to this Part 3 if and to the extent that paragraph 4.1 does not apply, and:

(a) details of the Network Rail Restriction of Use are notified to the Train Operator by the Revision Notification Date; and

(b) (i) the Network Rail Restriction of Use is reflected in the Working Timetable as entered into the train service database at 2200 hours on the day which is 12 Weeks before the Restriction of Use Day; or

(ii) where paragraph 4.2(b)(i) does not apply because the Train Operator has failed to give Network Rail a Revised Bid in accordance with Condition D4.8.3, the Network Rail Restriction of Use is reflected in the Applicable Timetable in respect of the Restriction of Use Day.

“4.3 Late Notification

The NF in respect of a Network Rail Restriction of Use in respect of any Service Group shall have the value specified for that Service Group in column E of Annex A to this Part 3 if and to the extent paragraphs 4.1 and 4.2 do not apply but the Network Rail Restriction of Use is reflected in the Applicable Timetable, and includes where paragraph 4.1(b) or paragraph 4.2 would have been applicable but for a failure by Network Rail to fulfil the terms of paragraph 4.1(b)(ii) or paragraph 4.2(b)(i) respectively, notwithstanding the Train Operator having given a Revised Bid in accordance with Condition D4.8.3.”

4.8 The following table is compiled from the Track Access Contract detailing the Notification Factors established by regulatory charging review that apply in accordance with paragraphs 4.1 to 4.3 of Schedule 4 Part 3 to each of the FGW Service Groups.

Name of Service Group	Service Group	NFMRE
A	B	C	D	E
		to FWT	FWT to ITWTT	from ITWTT
Great Western
Avon	hj01	0.19	0.50	0.8
Bristol-Didcot-Oxford	hj99	0.40	0.60	0.8
Cotswolds	hj03	0.19	0.50	0.8
South Wales	hj02	0.19	0.50	0.8
West of England	hj04	0.19	0.50	0.8
Thames Trains
Inner Charter (off peak)	hn02op	0.40	0.60	0.8
Inner Charter (peak)	hn02p	0.40	0.60	0.8
Inner Other	hn04	0.40	0.60	0.8
Outer Charter (off peak)	hn01op	0.40	0.60	0.8
Outer Charter (peak)	hn01p	0.40	0.60	0.8
Outer Other	hn03	0.40	0.60	0.8
Reading - Gatwick - Three Bridges	hn05	0.15	0.48	0.8
Wales and West
Bristol Commuter	HK11^{4th SG}	0.40	0.60	0.8
Devon	HK12^{4th SG}	0.40	0.60	0.8
Wessex Mainline	HK14^{4th SG}	0.40	0.60	0.8
Plymouth and Cornwall	HK15^{4th SG}	0.40	0.60	0.8

4.9 Condition D4.8 of the Network Code sets out the Supplemental Timetable Revision Process, which is referred to in the Notification Factor mechanism, through the references to "Revision Notification Date" in paragraph 4.2(a) (where it is a critical date by which details must be provided if the intermediate Notification Factor may apply) and to Condition 4.8.3 in paragraphs 4.1(b)(iii), 4.2(b)(ii) and 4.3 (in respect of the train operator's obligations to make a Revised Bid).

4.10 In respect of the "Revision Notification Date", this term was included in Schedule 4 as a defined term in the version of Part D of the Network Code applying in respect of the period until 11^th June 2005. It was there defined as:

"in respect of any Supplemental Timetable Development Period, a date to be specified by Network Rail in accordance with Condition D4.8.1, being the last date for notification by Network Rail of the scheduled Train Slots to be amended in the Timetable Week to which the Revision Notification Date applies".

Condition D4.8.2 of that version of Part D then referred to the Revision Notification Date as the date by which Network Rail had to notify its required amendments, with notification by that date being the trigger for the requirement on the train operator under Condition D4.8.3 to submit a Revised Bid.

This particular definition is then omitted from the later versions of Part D which apply to Periods 1-6 of 2006/07.

However, the process to which the Revision Notification Date definition relates in Condition D4.8.2 is retained and developed in the later versions of the Code. Under this Condition Network Rail has to provide outline proposals for timetable revisions by the Revision Period Commencement Date, develop these in consultation and then:

"(c) within four weeks of each Revision Period Commencement Date, notify each affected Bidder:

(i) of its capacity allocation decisions and proposed structure for the amended train plan for the relevant Timetable Week; and

(ii) whether Network Rail requires any Bidder to prepare a Revised Bid in respect of any Timetable Week Slot in that Timetable Week."

The trigger for the Train Operator's obligations to prepare a Revised Bid under Condition D4.8.3 is then the service of notice of the requirement under Condition D4.8.2(c)(ii) (see Condition D4.8.3).

Accordingly the date "within four weeks of each Revision Period Commencement Date" under Condition D4.8.2(c) constitutes the Revision Period Notification Date for the ongoing application of Schedule 4 Part 3. In practice the Revision Period Commencement Date is T-26 weeks and the Revision Notification Date is therefore T-22 weeks.

4.11 Paragraphs 4.1(b)(iii), 4.2(b)(ii) and 4.3 of Schedule 4 Part 3 each refer to the requirement on the Train Operator to comply with its obligations under Condition D4.8.3. The key components of this obligation are:

(a) the Train Operator must first have received a notification from Network Rail under Condition D4.8.2(c)(ii) in respect of the particular Timetable Week Slot, that is within four weeks of the Revision Commencement Date, for it to apply;

(b) then the Train Operator must submit a Revised Bid for the Timetable Week Slot (and any other week slots which may be affected) no later than four weeks prior to the applicable Revision Finalisation Date (which is a date specified by Network Rail, usually T-14 weeks); and

(c) for these purposes a "Revised Bid" as defined in the Part D definitions is any "Spot Bid" to revise a Train Slot in these circumstances made in accordance with Condition D4.8.3.

4.12 The matters in dispute in connection with Periods 1-6 of 2006/07 therefore focus on whether in respect of each relevant Restriction of Use in dispute:

(a) FGW is due to be compensated based on the early Notification Factor, because:

(i) details were notified by the end of the Drafting Period for the Applicable Rules of the Route and FGW requested they were not reflected in the First Working Timetable; and

(ii) it was either in the Working Timetable as uploaded into the train service database at T-12 weeks or not uploaded by then because FGW had failed to provide a Revised Bid in time as required by Condition D4.8.3; or

(b) FGW is due to be compensated based on the intermediate Notification Factor because:

(i) details were notified to FGW by the Revision Notification Date as required by Condition D4.8.2(c)(ii); and

(i) details were not notified by either of the dates specified in paragraph 4.12(a)(i) or (b)(i) above; or

(ii) where details were so notified, it was not included in the Working Timetable as uploaded into the train service database at T-12 weeks for a reason other than breach by FGW of its obligations under Condition D4.8.3.

4.13 The evidence supplied by FGW with this reference therefore includes:

(a) a comparison industry timeline for activities pertinent to Schedule 4;

(b) a detailed schedule by week of the Revised Bids made by FGW to Network Rail for alterations to the timetable in response to notifications under Condition D4.8.2(c)(ii) (including an explanatory note);

(d) a resume of timing for each bid and offer/upload FGW/Network Rail for the periods 1 to 6 2006/7 compiled by FGW detailing the views of both parties for each week and FGW’s view of the financial value of the dispute;

(e) a copy of the national Informed Traveller report indicating the level of compliance of the Working Timetable as at T-12 weeks for periods 1 to 6 2006/7. It should be noted that as this report does not exist for weeks 1 to 6 as from week 7 the responsibility for production moved from ATOC to Network Rail. Appendix 4.13(e) contains information detailing the timing of upload;

(f) a copy of the ORR Press Release from September 2004 regarding Network Rail compliance with T-12 timetabling obligations;

(g) a schedule detailing Network Rail’s position on FGW bidding for each of the weeks as supplied to FGW on 30 November 2006;

(h) a schedule detailing Network Rail’s position on upload for each of the weeks as supplied to FGW on 7 December 2006 (including financial information for each week);

(i) a copy of the template Schedule 4 Part 3 (for information, although the key points of this Schedule are included within the main body of this paper); and

(j) correspondence between the parties with regard to this claim.

The evidence supplied by Network Rail with this reference includes:

(k) a resume of timing for each bid and offer/upload FGW/Network Rail for the periods 1 to 6 2006/7 compiled by Network Rail detailing the views of both parties for each week dated 15 December 2006;

(l) a schedule detailing Network Rail information on HSS Bids and uploads dated 20 December 2006; and

(m) a tabular presentation of HSS and LTV bids for Sunday week 11.

5 summary of dispute

5.1 In line with the workings of Schedule 4, Network Rail has undertaken calculations of the compensation payable under Schedule 4 Part 3 in respect of Periods 1-6 of 2006/07. In calculating those amounts it has applied either the early or the intermediate Notification Factor as if paragraph 4.1 or 4.2 applied. FGW has contested these calculations and believe that Network Rail is not entitled to apply the early or intermediate Notification Factors but should instead have applied the late Notification Factor under paragraph 4.3 of Schedule 4 Part 3.

5.2 Applying the tests established in paragraph 4.2, the issues are, in respect of each Restriction of Use for which Network Rail claims the early or intermediate Notification Factor, as summarised in paragraph 4.12. FGW considers that in all the disputed cases Network Rail failed to achieve the T-12 deadline for uploading the timetable in circumstances where the delay was not caused by any failure in the FGW Revised Bid.

5.3 Network Rail believes that the vast majority of all the disputed Restrictions of Use were notified either by the end of the Drafting Period or in accordance with Condition D4.8.2 and either uploaded into the timetable data base by T-12 weeks or, where this was not the case, that this was due to FGW failing to provide it with a Revised Bid in accordance with Condition D4.8.3 or that the bid was of poor quality or incomplete.

5.4 FGW believes that Network Rail has consistently failed to present a reasoned response to the dispute until December 2006. This is six months after the dispute was first raised and more than nine months after the first bids in question were submitted by FGW and accepted by Network Rail. Since the dispute was first raised by FGW there have been a number of discussions between the parties with many of the issues resolved, however the objection by Network Rail on grounds of quality timeliness has only been raised in December. Not only does FGW reject this allegation but it believes that these reasons for objection are without foundation and are also far out of time having regard to the requirements under paragraph 8.4(b) of Schedule 4 Part 3 for issues to be promptly raised and under paragraph 8.5 for payments to be made. Network Rail believes that it is entitled to raise this objection to the claim made by FGW and is within its rights to do so. FGW further believes that even if there were any justification in the complaint, it would be inequitable to allow Network Rail to deny recovery of the Schedule 4 entitlement when the Informed Traveller report had continually indicated compliance by FGW and Network Rail had continued to accept bids without previously raising any concerns of this nature.

5.5 FGW claims that it has submitted Revised Bids compliantly with Condition D4.8.3 in respect of all but one Service Group and that Network Rail failed in respect of Periods 1-6 of 2006/07 to reflect the relevant Restrictions of Use in the timetable as uploaded at T-12 weeks. Furthermore FGW believe in some cases Network Rail failed to comply with the timescales applying under Condition D4.8.2(c), notifying amendments to possessions proposals later than permitted, with the consequence that FGW's response was also delayed.

5.6 In accordance with paragraph 8.4 of Schedule 4 Part 3 discussions between the parties have taken place, culminating in the senior parties, Tom Stables (Commercial Director, FGW) and Richard Cole (Route Commercial Manager, Network Rail) meeting on 27 September to discuss periods 1 to 3. A further meeting was held between Alison Forster (Managing Director, FGW) and Robbie Burns (Route Director, Network Rail) on 20 October, at which Network Rail offered a sum to settle the dispute, which it believed showed a willingness to resolve the dispute. FGW has considered this offer, rejected it and made a counter offer which Network Rail rejected. In the absence of an agreed settlement the parties have no option but to bring the matter before the Access Disputes Panel.

6 explanation of each issue in dispute with response

6.1 FGW Position

6.1.1 Summary of FGW Position

Principles of Claim

(a) This is a simple claim for the correct application of Schedule 4, as established by the ORR.

(b) In each of Periods 1-6 2006/07 Network Rail failed to update the timetable by T-12, while FGW met the requirements for Revised Bidding. The T-12 delay was not because of FGW Revised Bids and the late Notification Factor should therefore apply. (See paragraph 6.1.2)

(c) Network Rail applied the wrong Notification Factors in its initial calculations. FGW disputed these promptly from Period 1 onwards. Network Rail has at times agreed corrections should be made, but not actually made any correcting payments. Only some nine months after the Revised Bids were first being made and six months after the dispute was first notified has Network Rail raised the objections to the claim set out in this document and these are all rejected. The corrections must now be made without further delay. (See paragraphs 6.1.5(b), (c) and (d) and paragraph 6.1.6)

Why the Late Notification Factor Applies

(d) FGW's fully-timed Revised Bids equalled or exceeded the Network Code requirements throughout the disputed period, as seen by the bid content (this is listed in detail at paragraph 6.1.5(e) and shown by the Week 1 Revised Bid in Appendix 4.13(c)) and timing, comparison with other TOCs and FOCs, the Informed Traveller record and Network Rail's own agreement at earlier stages in the dispute. (See paragraph 6.1.2(b), 6.1.3 and 6.1.5)

(e) Throughout the disputed period Network Rail have failed to achieve T-12 upload, despite FGW requests to upload Revised Bids as bid – causing FGW adverse publicity and damaging its advance ticket sales. (See paragraphs 6.1.2(c) and 6.1.3)

(f) Where there have been delays in Revised Bids (eg Wootton Bassett and week 24), this was because of significant late changes to restrictions of use by Network Rail, after the T-22 deadline. (See paragraphs 6.1.4 and 6.1.5(l)(iv))

(g) In any event. Network Rail's failures to achieve T-12 in the disputed period were due to factors like Network Rail shortages of train-planners and not the standard or timing of FGW Revised Bids, as seen from Network Rail correspondence, the evidence of Network Rail's train planning backlog and the scale of the shortfalls in Network Rail achieving TSDB uploads. So even if there were any failings in Revised Bids, these were not the cause of T-12 uploads being missed and the Late Notification Factor should still apply. (See paragraphs 6.5.1(h) and (l))

Network Rail Arguments

(h) Network Rail in its argument first raised in December 2006 alleging inadequate detail in FGW's Revised Bids wrongly states that Condition D3.3 of the Network Code requires rolling stock diagrams. FGW Revised Bids are fully timed, include all the rolling stock information required and meet or exceed the requirements of the Network Code. Network Rail's argument if correct would have very serious implications for the wider industry which bids on similar bases or often with less detailed specification bids. (See paragraph 6.1.2(b), 6.1.3 and 6.1.5)

(i) Network Rail in its argument first raised in December 2006 alleging late Revised Bids has confused Spot Bids with FGW's Revised Bids. The Revised Bid relates to a particular point in the supplemental timetable revision process only, and not the totality of the train operator response throughout the process. FGW has made Spot Bids after its compliant Revised Bid, but this is normal, permitted by the Network Code and does not affect the compliance of its Revised Bids. (See paragraph 6.1.5(j) and (k))

(j) There is no requirement, as Network Rail first raised in December 2006, that bids made by separate TOCs should be consistent with each other, particularly where the bids were made by those TOCs before they were transferred to FGW and before a single FGW TAC was put in place. (See paragraph 6.1.5(i))

(k) Network Rail's allegations of poor quality or late Revised Bids were not made until December 2006. These allegations are rejected as wrong and out of time: Network Rail should not be permitted to rely on them given the history of its agreement to parts of FGW's claim, failure to raise this point earlier in the dispute and failure to raise any concerns during the time of the timetabling process. (See paragraphs 6.1.5(b), (c) and (d) and 6.1.6)

(l) Finally, and even more extraordinarily, on the morning of the final deadline for submission of this paper, Network Rail has claimed that FGW agreed that the 2005 T-18 recovery plan would have a knock-on effect on T-12. This is categorically not the case. In fact, the intention was to improve the delivery of the timetable through these actions, for the benefit of FGW and its customers.

Intermediate Notification Factor

(m) In any event where the late Notification Factor does not apply, Network Rail should apply the intermediate Notification Factor where restrictions of use were notified after the Drafting Period for the Applicable Rules of the Route. (See paragraph 6.1.7)

Other Arguments

(n) For completeness arguments addressing other issues raised by Network Rail in the course of discussion are retained at the end of Para 6.1. (See paragraph 6.1.8).

All the above show that FGW has acted throughout in good faith with Network Rail and in accordance with its contract and the Network Code. FGW accepts that Network Rail has worked in good faith through a difficult period for the supplemental timetabling process, but the track access contract does not provide for Schedule 4 to be disapplied because delays arose despite Network Rail acting in good faith. FGW and its passengers have still suffered from the TSDB uploads missing the T-12 deadline. (See paragraph 6.1.9)

6.1.2 Grounds of Claim under Schedule 4

(a) Schedule 4 Tests are clear

Schedule 4 Part 3 lays down a clear set of tests to determine which Notification Factor to apply in the compensation calculation formula. Network Rail made errors in selecting the Notification Factor, which applies under those tests.

(b) FGW's Revised Bids were compliant

FGW made Revised Bids compliantly during this period, as evidenced by:

(i) the National Informed Traveller record for Periods 1-6 (see Appendix 4.13(e));

(ii) detailed analysis of every bid made for every week contained within Appendix 4.13(b) and summarised in Appendix 4.13(d); and

(iii) Network Rail's failure to raise concerns on compliance with FGW during the timetable development process or the first six months of this dispute.

Compliance took the form of Revised Bids being made by T-18. Later bids were either Spot Bids or Spot Bids made in response to late changes (after T-22) in Network Rail’s engineering possessions (as explained at paragraphs 6.1.4, 6.1.5(j) and (k) and 6.1.5(l)(iv)).

Further explanation of the supporting evidence is set out in paragraph 6.1.3.

Further explanation of why the content and timing of the Revised Bids was compliant with the Schedule 4 and Network Code requirements is set out at paragraph 6.1.5.

Network Rail failed to upload the timetable by T-12 weeks in respect of weeks 1-23 inclusive, as evidenced by:

(i) the National Informed Traveller reports for Periods 1-6 (see Appendix 4.13(e));

(ii) by Network Rail's admissions in regular correspondence at the time (see Appendix 4.13(j));

(iii) in respect of the majority of weeks as detailed in Network Rail's document set out in Appendix 4.13(g);

(iv) FGW back-checks against Network Rail offer dates (which under the Network Code process should precede upload); and

(v) Network Rail's failure during the timetabling development process (or the first six months of this dispute) to raise with FGW the quality or delay in Revised Bids as a factor.

Network Rail has not disputed the failure to achieve T-12 upload for 18 of the affected weeks, and while it has disputed it for 6 weeks (as detailed in appendices 4.13(f) and 4.13(g)) has been unable to provide any evidence whatsoever to support this.

Further explanation of the supporting evidence is set out in paragraph 6.1.3.

(e) The late Notification Factor should apply

The late Notification Factor should therefore apply in accordance with paragraph 4.3 of Schedule 4 Part 3 to Periods 1-6 because Network Rail has failed to meet the T-12 upload deadline for all of these weeks and the failure was not in any case due to FGW failing to submit a compliant Revised Bid as required by the Network Code.

(f) Alternative grounds for applying the late and intermediate Notification Factors

Paragraph 6.1.2(e) provides the principle and conclusive grounds for why the Late Notification Factor should apply In accordance with Schedule 4 throughout Periods 1-6, rather than the early Notification Factor generally applied by Network Rail.

However, if and to the extent this reasoning is not applied, the late Notification Factor should still apply to each restriction of use notified or materially amended by Network Rail after T-22 and the intermediate Notification Factor should still apply to other restrictions of use notified by T-22 but not by (or in a materially amended form from that notified at) the end of the Drafting Period in the Applicable Rules of the Route.

6.1.3 Further detail on the factual background to the processes undertaken in Periods 1-6

(a) Details of FGW's compliant bid history in Appendix 4.13(d)

Appendix 4.13(d) contains an overview prepared by FGW of each week in Periods 1-6 of 2006/07, demonstrating when FGW submitted its Revised Bid; FGW's position on the timing of the upload by Network Rail to the database; the Network Rail national report position on the timing of the upload to the database (also contained in Appendix 4.13(e)); and the Network Rail Western Route position on FGW’s bid and Network Rail’s upload (see Appendices 4.13 (g) and 4.13(h)). Appendix 4.13(d) also details the financial amounts in dispute in respect of each week.

(b) Network Rail's national Informed Traveller report confirms failure to achieve T-12 upload

Network Rail produce a national report on Informed Traveller compliance for the industry, which is supplied to all TOCs, ATOC, DfT and ORR and is used by the ORR to assess compliance with licence obligations (see Appendix 4.13(e)). This National Report confirms whether amendments to the Working Timetable were uploaded into the timetable database in accordance with the informed traveller timescales. This demonstrates non-compliance by Network Rail for each of weeks 7-23 in 2006/07 with the requirement to update the train service database by T-12 weeks.

Network Rail’s Western Route has written to FGW (see Appendix 4.13(k)) detailing its position on the timing of upload, which is different from the confirmed position as reported by Network Rail in its Informed Traveller national report. FGW has cross-checked the Route position with FGW's records of when it received notification of decisions from Network Rail under the Condition D4.8 Supplemental Timetable Revision Process. Under Condition D4.8.7, decisions should be notified by Network Rail by the Revision Finalisation Date and implicitly this notification should precede the amendment of the Working Timetable. FGW's record of receipt of decisions ties in with the national Informed Traveller report: in a number of cases the upload time claimed by the Route significantly preceded the issue of its decision to FGW. The Network Rail national Informed Traveller report position on the timing of the upload should therefore be treated as the accurate record.

(d) FGW cross-check confirms T-12 non-compliance for weeks 1-6

The national Informed Traveller report does not exist for weeks 1 to 6, as the responsibility for production moved from ATOC to Network Rail from week 7. However, FGW has records of email correspondence between itself and Network Rail confirming the upload and offer position of each of these weeks (see Appendix 4.13(j)). This correspondence shows Network Rail aiming to achieve issue of offers by T-5 weeks, substantially later than the T-14 weeks required to achieve upload by T-12 weeks. This confirms that the T-12 weeks deadline for upload was not achieved in respect of weeks 1-6.

(e) Network Rail National Informed Traveller report confirms FGW Revised Bids were on time

The national Informed Traveller report also shows that FGW has bid at T-18 weeks (subject to the situations addressed at paragraphs 6.1.3 and 6.1.4 below), in compliance with Condition D4.8.3 but Network Rail has not uploaded any of the alterations for weeks 7 to 23 at T-12 weeks. In respect of Week 24 a timetable was uploaded at T-12, but this was significantly in advance of the Network Rail offer, which was not made until T-7, and the timetable was subject to further amendment when the T-7 offer was made.

(f) Further detailed evidence

Further detailed evidence is contained within Appendix 4.13(b) on the bid and offer position for each week. FGW has a detailed record of every train alteration that is bid to Network Rail and the relevant offer position for each week. These sheets detail the date of the bid, the type of alteration (e.g. related to engineering works and therefore payable under Schedule 4, or for special events or other necessary changes), whether the alteration was for passenger or empty stock and the number of alterations made. Furthermore all bids made for changes to possessions after the deadline established by paragraph 4.2(a) of Schedule 4 Part 3 and Condition D4.8.2(c)(ii) are also contained within this report, demonstrating why an alteration payable under Schedule 4 may have been bid after T-18 weeks. This point is covered in more detail in paragraphs 6.1.4 and 6.1.5(j) and (k).

(g) A separate set of files are available for the Panel in hard copy, should they be required, which sets out the contents of every bid made by FGW to Network Rail in respect of Periods 1-6 2006/07, including the alterations to each service and the date at which the bid was made. These files also contain the information supplied in summary as Appendix 4.13(b) to this paper (as referenced in paragraph 4.13(b) and the national Informed Traveller report. (This set of files comprises 16 lever arch folders of information.)

6.1.4 The Late Notification factor applies where Network Rail makes a late notification or late amendment after T-22 of Restrictions of Use by Network Rail

(a) Network Rail cannot avoid the Late Notification Factor if it notifies restrictions of use after T-22

Network Rail can only claim the early or intermediate Notification Factor if the details of the Restriction of Use as eventually included in the Working Timetable are notified in accordance with Condition D4.8.2(c)(ii) (within four weeks of the Revision Period Commencement Date, ie by T-22). Where T-22 is missed, Bidders do not have the time provided in the Network Code to make a Revised Bid by T-18 and so Network Rail remains responsible if there is no Revised Bid by T-18 and the T-12 upload is missed. (This is in circumstances, as here, where there is no dispute over what was included in the First Working Timetable.)

If Network Rail misses the T-22 deadline, this prevents the application of the early or intermediate Notification Factor on three independent grounds which all point to the significance of the T-22 date :

(i) the route cause of the failure to reflect the Restriction of Use in the Working Timetable upload by T-12 weeks will be Network Rail's failure to notify the details by T-22 as required in the Network Code, and not the consequent failure or delay of the Revised Bid by T-18 (see paragraph 6.1.5(l) for fuller explanation);

(ii) Network Rail's delay means that it will not have provided notification of the requirement for a Revised Bid in accordance with Condition D4.8.2(c)(ii), which is a pre-requisite of Condition D4.8.3 which provides:

"each Bidder shall, following receipt of notification from Network Rail under Condition D4.8.2(c)(ii), …. submit….a Revised Bid"

Network Rail's non-compliance with this pre-condition means FGW will not then be non-compliant with Condition D4.8.3 if a Revised Bid is delayed beyond T-18. Network Rail cannot then claim the benefit of paragraph 4.1(b)(iii) or 4.2(b)(ii) of Schedule 4 Part 3, which both require the delay in upload to be because of the Bidder's non-compliance with Condition D4.8.3; and

(iii) Network Rail will not then be compliant with paragraph 4.2(a) of Schedule 4 Part 3, which is essential if the intermediate Notification Factor is to apply. This expressly requires Network Rail to have made the notification by the Revision Notification Date.

(b) Changes and amendments as examples of late notification

Neither the early nor the intermediate Notification Factor can apply if:

(i) the Restriction of Use as reflected in the Working Timetable downloaded at T-12 weeks or later is not notified under Condition D4.8.2(c)(ii), by T-22; and similarly

(ii) a Restriction of Use is notified in accordance with Condition D4.8.2(c)(ii) but subsequently amended in a material way by Network Rail after T-22.

Also the early Notification Factor cannot apply where the details of the Restriction of Use as notified under Condition D4.8.2(c)(ii) is materially different to what was notified by the end of the Drafting Period for the Applicable Rules of the Route. In this case the intermediate notification is the lowest factor which can apply.

Furthermore, Condition D4.8.2(c)(ii) must be read recognising that it follows on from Condition D4.8.2(c)(i). Network Rail is required within four weeks of the Revision Commencement Date to notify both (i) its capacity allocation decision and amended train plan for the relevant week and (ii) whether a Revised Bid is required. It is essential that Bidders should have the detail contemplated by Condition D4.8.2(c)(i) in order to be in a position to provide a Revised Bid and this is why both elements are referenced together on Condition D4.8.2(c). So a notification should not be treated as duly made under Condition D4.8.2(c)(ii) if at the time Network Rail has failed materially to comply with Condition D4.8(c)(i) in respect of the relevant Timetable Week.

It is not unusual for CPPPs provided by Network Rail to contain errors and omissions. This has been the subject of complaints raised by FGW on Network Rail. However generally these are not of sufficient magnitude to prevent FGW submitting a Revised Bid, albeit that they may give rise to an increased requirement for later corrections and amendments. In this dispute FGW is not raising these general Network Rail errors and omissions as a factor to challenge Network Rail's compliance with Condition D4.8.2(c).

However on occasions there have been very significant omissions from the CPPP where key information on blocking points have been omitted and in those case FGW claims that Condition D4.8.2 has not been complied with, so that the late Notification Factor must apply.

(d) The Wootton Bassett Example of late amendment

The Wootton Bassett example shows major revisions and ongoing developments to Network Rail possession requirements post T-22, which first delayed the Revised Bid and then led to ongoing development until well after T-18. This example is critically important, as its value alone is worth £2.4m of the total claim:

In weeks 22 and 23 Network Rail undertook works at Wootton Bassett Junction. These works were included in Rules of the Route and the relevant Confirmed Period Possession Plan (CPPP). FGW prepared Revised Bids to the timetable for these works and was in a position to bid these at T-18 weeks and therefore compliantly. However, Network Rail advised FGW in April 2006 at T-20 of a material alteration to the method of working relating to the possession, at Chippenham station, not reflected in the CPPP or previously advised to FGW. This required further alterations to the amended timetable which could not all be worked through in the reduced timescales and therefore FGW actually bid the alterations at T-17 weeks.

Network Rail then held a trains meeting with all affected operators three weeks after FGW’s bid was made, which led to further alterations to the details of the Restriction of Use being required by Network Rail. Network Rail did not upload the final alterations into the Working Timetable until T-7 weeks.

In this case Network Rail is therefore non-compliant with the provisions of paragraphs 4.1 and 4.2 of Schedule 4 Part 3 in terms of both notification of the details of the Restriction of Use and the timing of the update of the Working Timetable. The late notification of the details of the Restriction of Use and the scale of subsequent delays in achieving the upload establish that non-compliance by FGW with Condition D4.8.3 was not the cause of the delayed upload of the Working Timetable.

Clear evidence of the events surrounding this Restriction of Use is provided in Appendix 4.13(j) (email correspondence between Tom Stables and Neil Sutton of FGW and Richard O’Brien of Network Rail).

Network Rail's arguments now based on the quality and timing of Revised Bids by FGW wholly fails to explain why, as it claims, the early or intermediate Notification Factors should be applied to a restriction of use subject to such ongoing and significant amendment late in the planning process.

6.1.5 Quality and timing of Revised Bids

(a) Overview of FGW's rejection of Network Rail's claim regarding quality

Network Rail claims that in almost all cases FGW's Revised Bid may be discounted by Network Rail as a valid Revised Bid on account of quality or timing issues. This is comprehensively rejected by FGW, for all the following reasons:

(i) FGW has complied with the Network Code requirements for the content of Bids, which requires only the Bidders requirements (if any) for the Train Slots to be stated (see paragraphs 6.1.5 (e), (f), (g) and (h));

(ii) the consistency of FGW's Revised Bids with its long-established practice for Revised Bids, which exceeds what the Network Code requires by way of bid content (see paragraphs 6.1.5 (e), (f), (g) and (h));

(iii) the standards of FGW's Revised Bids in comparison with that of other operators, which shows that its standards are good (see paragraphs 6.1.5 (e), (f), (g) and (h));

(iv) in relation to consistency between bids by the different constituent parts of FGW, the fact that FGW did not bring together the three track access contracts until 1^st April 2006, so that there was no requirement for internal consistency between the bids made by different Bidders in relation to bids before that date (or until a single track access contract was established after the period in dispute) (see paragraph 6.1.5(i));

(v) the confusion by Network Rail of Revised Bids with subsequent Spot Bids (see paragraph 6.1.5(j) and (k));

(vi) the failure of Network Rail's allegations to take any account of the requirement that the Notification Factor mechanisms be applied in a proportionate fashion and by reference to the requirement that any non-compliant Revised Bid must be shown to be the cause of the failure to achieve T-12 (see paragraph 6.1.5(l));

(vii) the failure of Network Rail's allegations to justify the application of the early Notification Factor when the details of the Restriction of Use were not included in Applicable Rules of the Route by the end of the Drafting Period (see paragraph 6.1.4);

(viii) the failure of Network Rail's allegations to answer the circumstances of Network Rail late amendments to restrictions of use, as in the case of the Wootton Bassett example (see paragraph 6.1.4(d));

(ix) Network Rail's acceptance of the Revised Bids (see paragraphs 6.1.5(b), (c) and (d)); and

(x) Network Rail's failure to raise any concern over quality or make any purported rejection of any Revised Bid on quality grounds during the relevant supplemental timetable revision process, despite the reports of compliance by FGW in the Informed Traveller reports and furthermore during the first six months of discussions on this claim. (See paragraphs 6.1.5(b), (c) and (d))

(b) Failure by Network Rail to raise any concerns over bid quality

No issue concerning the quality or timing of FGW Revised Bids has been raised by Network Rail with FGW except in general terms and then only at a late stage in the process of attempted dispute resolution in this matter. In no instance did Network Rail raise any issue over the quality or timing of FGW's bids during the course of the timetabling process, in response to the compliance confirmed in the Informed Traveller reports, prior to the date of operation of the revised timetable or during the first six months of attempts to resolve this dispute.

Indeed Network Rail issued FGW timetable offers in respect of each of the Timetable Weeks which took account of the Revised Bids and from which it was apparent that the Revised Bids were being accepted into the Condition D4.8 process. Network Rail has failed, as would otherwise have been required by Condition D4.8.5, to provide a concise explanation comprising inadequate quality as the grounds for modifying or rejecting any of FGW's Revised Bids. Network Rail further failed to provide any indication that it considered more detail was required or would be helpful in order to meet the requirements of Part D or to make any indication that the Informed Traveller reports indicating that FGW were in compliance were incorrect.

(d) Delay in raising the issue of quality and timing means that it should not be accepted as a defence

It appears to FGW therefore that Network Rail has sought to raise this issue only significantly after the event either:

(i) in an attempt to find some justification after the event for its actions in denying FGW's request for the correct Notification Factor to be applied. However, if the quality or timing of FGW's Revised Bids was at the time such a serious and material factor as it suggests, Network Rail would surely have raised the issue in some manner at the time (not necessarily by rejecting bids, but certainly by indicating requirements for further information) or in answer to FGW's original dispute, and done so persistently in fulfilment of its obligations regarding stewardship of the timetable development process; or

(ii) because it wished to hide as long as possible the true grounds on which it was founding its approach to Schedule 4, so delaying as long as possible the point at which any corrective action might be taken. In which case, particularly coupled with its acceptance of the Revised Bids, the publication of contrary national Informed Traveller data showing FGW compliance and the failure to raise this issue at the outset as required by paragraph 8.4(b) of the Schedule 4 disputes process for the prompt raising of issues, Network Rail should not now be permitted to raise or rely on this issue.

(e) The content of FGW Revised Bids is compliant

FGW's long established custom and practice is to provide Network Rail with Revised Bids which are fully timed bids. These show:

(i) the dates on which the Train Slots will operate;

(ii) start and end points of the train movements;

(iii) intermediate calling points, as well as major junctions;

(iv) timings at start and end points, intermediate calling points and major junctions, all timed in accordance with the timing load of the type and length of the rolling stock to be used;

(v) connections with other services, where required;

(vi) all Ancillary Movements identified as required at the time;

(vii) platforming requirements at most stations (minor stations where there are no alternatives are sometimes omitted); and

(viii) commercial and service codes.

An example of a Revised Bid is included at Appendix 4.13(c).

The rolling stock types are readily identifiable from the timing loads used to time the bids and relate to the Specified Equipment types now specified in the track access contracts. In the case of ancillary moves, the practice is to include all necessary ancillary moves as they are understood to be required at the time of the bid. FGW does not hold any track access rights for platforming, save in a specific case for the sleeper service at Paddington, and therefore Network Rail determines the platforming arrangements, often at a week's notice: nevertheless it is FGW's practice generally to include platform numbers for stations where this is relevant.

The adequacy of FGW's Revised Bids for TSDB upload purposes is demonstrated by the practice now adopted by Network Rail since Week 27 of uploading FGW Revised Bids directly into the TSDB. This shows the adequacy of the level of information provided for timetabling purposes.

(f) FGW Revised Bids are compliant with the requirements of the Network Code on the content of Bids

Condition D3.3 provides that (with bold added to provide emphasis):

"A Bidder shall, in making a Bid, indicate, in respect of the Train Slots for which the Bid is being made, the extent of its requirements (if any) as to:

[there follows a list of items not reproduced here]".

This theme is picked up in the Rules of the Plan regarding Bids which states:

"2.3.3 Bids must include sufficient detail to make the Train Operator’s intentions clear to Network Rail."

Consequently Bidders are not required to make Bids which contain all the details listed in Condition D3.3, but only those which indicate the extent of the Bidders requirements (if any) and which are sufficient to make intentions clear to Network Rail. FGW's Revised Bids met this standard.

The Network Code focuses on the Bid needing to state the Bidder's requirements (if any), rather than setting minimums which must be provided to meet Network Rail's requirements for the timetabling process. Under Conditions D4.8.4 to D4.8.6, Network Rail has the responsibility for compiling amended timetables, taking account of any Revised Bids submitted, consulting with Bidders and with extended powers to make necessary changes where no Revised Bid is received.

FGW maintains that its Revised Bids exceeded the standard required by the Network Code. Network Rail is mis-applying the Network Code in seeking to introduce a requirement that Revised Bids are complete Bids which both include all the elements listed in Condition D3.3 plus rolling stock diagrams (rolling stock diagrams are not listed as required in Condition D3.3).

(g) Comparison with the Bids made by other Bidders demonstrates that FGW's Revised Bids are to an acceptable quality

Amongst the passenger TOCs there is a widespread practice of specification bidding, with bids provided at a less detailed level than FGW's fully timed bids. This practice is understood to include Cross Country and significant parts of the north and to be widely accepted by Network Rail.

With Network Rail's agreement, FGW in 2005 for a period of ten weeks made Revised Timetable Bids on a specification bid basis, which provides only a higher (ie less detailed) level of bid information, to assist in fulfilment of the Network Rail led industry recovery plan to achieve T-12 timescales. After the ten week period FGW reverted to its established (and currently ongoing) custom and practice. Network Rail appeared content regarding the level of detail provided both in relation to the higher level (ie less detailed) specification bid and to FGW's application of, and then reversion to, its custom and practice. This demonstrates that specification bids can meet the quality requirement, as can more detailed, fully-timed bids.

Although the Network Code does not differentiate freight and passenger operators, freight is understood generally to bid on a specification bid basis which is looser than that applied by passenger TOCs, with less detail on timings and intermediate points. Again this practice is understood to be widely accepted by Network Rail.

The broad acceptance of these less-detailed specification bidding approaches demonstrates that specification bids meet the relevant Part D and Rules of the Plan standards and, this being the case, fully-timed bids exceed the standard even more so. This is fully in accordance with Part D and if this were not the case the implications for the wider industry timetabling development process would be very serious.

(h) The historic and the current Informed Traveller performance demonstrates that FGW's Revised Bid established practice is to the required standard

FGW has made Revised Bids in the same manner before and after the period in dispute, but this has not been identified as a cause of Network Rail not achieving T-12 in those periods.

In the period leading up to this dispute, ORR investigated Network Rail's compliance with its Informed Traveller licence obligations. Neither ORR nor Network Rail identified FGW's Revised Bidding practices as the cause of Network Rail's non-compliance with its licence obligations. Appendix 4.13(f) includes a copy of the ORR's press notice of 2^nd September 2004 included findings that Network Rail was failing to meet its licence requirements and securing a recovery plan from Network Rail covering its operational and long term planning and greater control over late changes. The background to the dispute is therefore one of Network Rail's failure to meet licence requirements, rather than of inadequate Revised Bids causing Network Rail to miss T-12 deadlines.

The correspondence included at Appendix 4.13(j) (for example David Beadle's e-mail in Neil Sutton's email of 24^th February 2006 and Simon Whitehorn's e-mail of 4^th April 2006) demonstrates that during the period of dispute Network Rail was wrestling with major issues concerning internal train-planning resourcing levels and the knowledge and expertise of its staff. These challenges had a critical part to play in Network Rail's ability to process Revised Bids and achieve T-12 uploads during the period of dispute. Network Rail train-planning backlogs were seriously delaying Network Rail's ability to start consideration of bids to the timescales required to achieve T-14 offer and T-12 upload: FGW suspects that Revised Bids it made were often not being reviewed until after the T-18 deadline, resulting in the Network Rail offers being well after T-14. The Revised Bid quality (and even timing) becomes irrelevant as a cause of T-12 non-compliance where Network Rail's review and validation processes, which should happen between T-18 and T-14, are significantly delayed beyond those dates for Network Rail backlog or resourcing reasons.

During the periods in dispute FGW raised concerns with Network Rail over its resourcing and Network Rail's arrangements for carrying out the supplemental timetable revision process, because of its concerns at the backlog. Network Rail offered an outline recovery plan during the summer, which it failed to meet. Further details of its internal resourcing and programming arrangements have not yet been available to FGW.

Following the periods covered by this dispute, FGW has continued its practice of Revised Bids. Except in the context of its December response to this dispute, Network Rail has made no other objection or comment regarding the quality of FGW bids. Network Rail has from Week 27 agreed with FGW's earlier requests that its Revised Bids be uploaded directly into the TSDB, without delaying them for Network Rail validation. This shows that the Revised Bids are sufficiently complete for TSDB upload purposes.

(i) Internal Consistency of Bids

Network Rail has argued, as first raised by it in December 2006, that the Revised Bids under each of the three separate track access contracts should have been internally consistent as if they were made under a single track access contract. This is rejected since throughout the periods under dispute separate track access contracts have applied. The requirement is only for internal consistency within the bid made under each individual track access contract.

In respect of the periods covered by this claim, all of the bids for alterations, were made within 3 separate databases reflecting the three separate track access contracts, either before 1^st April by the three separate TOCs which were brought together on 1^st April to form FGW or after 1^st April by FGW. The detailed plans were therefore accepted separately by Network Rail and processed accordingly.

Furthermore it is noted that Network Rail's concerns are in respect of two early weeks (weeks 3 and 11) of the six periods in dispute. The Revised Bids for these two weeks were well before the separate predecessor entities had their access contracts transferred to FGW and accordingly before there could have been any opportunity to apply any special new rule Network Rail may now propose regarding coordination across contracts held by the same TOC.

Neither FGW nor the relevant predecessor TOCs can be argued to have been in breach of the Rules of the Plan requirements of internal consistency of bids under a particular track access contract in relation to bids as between the different, separate predecessor legal entities which were made before the track access contracts were transferred to FGW.

(j) Revised Bids do not prevent, and should not be confused with, later Spot Bids: they do not delay the timing of initial Revised Bids

Network Rail has argued, as first raised by it in December 2006, that once a Revised Bid is made, a subsequent Spot Bid amendment or addition must be treated as delaying the point at which the Revised Bid is treated as complete. This would mean that a later Spot Bid would make the Revised Bid originally given in time no longer compliant with Condition D4.8.3. This is clearly wrong and not in accordance with Part D. Later Spot Bids do not render an earlier Revised Bid out of time or non-compliant.

The Informed Traveller report was therefore right in reporting FGW's Revised Bids as being compliantly given by T-18 and not taking account of later Spot Bids. Network Rail is wrong to claim so long after the event that the fact of later Spot Bids means that the Revised Bids should now be regarded as late.

The Revised Bid is not intended under the Network Code to be a final statement of the Bidder's position on the supplemental timetable. It is a stage at T-18 along the way in the process of development of the supplemental timetable, to be followed by Network Rail's timetabling activities and offer at T-14. Bidders are expected to continue to consult post-Revised Bid with Network Rail on the development of the timetable (see Condition D4.8.4): the results may lead to Spot Bid amendments (as expressly envisaged in Condition D4.8.4(b) and (c) – which specify separately that Network Rail is to take account of both Revised Bids and Spot Bids) or changes in Network Rail's T-14 offer. Bidders can then be expected to respond to Network Rail's T-14 offer, either accepting it or further modifying their bids to optimise the outcome. Bidders always retain the right to Spot Bid, as specified in Condition D4.1 during and beyond this part of the timetabling process.

This is also clear from the definitions in Part D. A "Revised Bid" is defined as a Spot Bid, only when submitted in accordance with Condition D4.8.3. A "Spot Bid" is defined as "any Bid (other than a Revised Bid)…". The two definitions are therefore mutually exclusive: once any Bid is made outside of the period which would be in accordance with Condition D4.8.3 it will be a Spot Bid and not a Revised Bid. The late Spot Bid is simply a Spot Bid, not part of the Revised Bid and not capable of delaying the Revised Bid such that it is rendered non-compliant. The Revised Bid is simply a stage in the ongoing supplemental timetable development process.

(k) The ability to Spot Bid is not compromised and Schedule 4 caters for Spot Bids

Under Condition D4 Bidders have the right to make Spot Bids to change, delete or add to Train Slots shown in the Working Timetable at any time from and including the Supplemental Period onwards. This right is not constrained by the Revised Bid, so FGW is entitled to make Spot Bids following its Revised Bid.

The process of Spot Bids following on from the Revised Bid stage in the process is an integral part of the timetabling process. There can be wholly legitimate reasons for change wholly unrelated to the engineering works. Also Spot Bids form a legitimate part of the ongoing timetable revision process, after the time of the Revised Bid: for example, where a Bidder wishes to respond to an offer made by Network Rail by further varying its service, or where differences between the Revised Bid and Network Rail offer call for further minor changes to take account of traincrew diagramming, or where there are other corrections or changes to be made.

Schedule 4 caters for the interplay of timetable changes due to restrictions of use and timetable changes due to Spot Bids. Under the formulae in paragraphs 3.4(b) and (c) of Schedule 4 Part 3, only changes as a result of the Network Rail restriction of use are taken into account.

In any event FGW Spot Bids are generally concerning ancillary matters, such as replacement buses and ancillary movements, which do not fall to be taken into account under the Schedule 4 formulae and do not have any material effect on TSDB upload issues, or they are requirements extraneous to engineering works (for example in relation to special events) or they are in response to late notified possession requirements.

(l) Even if Revised Bids were not perfect, this should only affect the Notification Factor if and to the extent the shortfall caused T-12 to be missed: in this case delays were due to other factors

If (which is not accepted by FGW) any of its Revised Bids are determined to fall short of the standard or timescales required by Condition D4.8.3, then the ability of Network Rail to rely on this shortfall to claim the early Notification factor under paragraph 4.1(b)(iii) or the intermediate Notification Factor under paragraph 4.2(b)(ii) is in each case dependent on the failure to achieve upload by the T-12 deadline being (with emphasis added):

"because the Train Operator has failed to give the Train Operator a Revised Bid in accordance with Condition D4.8.3".

The Train Operator failure must be the cause of the delay, rather than the delay being caused by other factors.

In paragraph 6.1.5(h) evidence is referred to of material factors which have impacted on Network Rail's compliance with T-12 obligations which are wholly unrelated to FGW's Revised Bids.

Appendix 4.13(b) shows the spread between Revised Bid dates and timetable offer dates. These should indicate T-18 and T-14, but frequently the offer date is very substantially later, with the spread sometimes as large as T-18 to T-2. FGW submits that a combination of internal Network Rail issues including related to backlog, volume of possessions, staff shortage and knowledge and expertise issues had the major part to play in causing delays, rather than any alleged shortcomings in Revised Bids.

FGW responds to Network Rail's examples as follows:

(i) Week 7: Network Rail claims that final unit diagrams are required by it to consider Revised Bids and that final unit diagrams are often not received until late in the process (it gives an example of T-5 for provision of drafts and T-2 for provisions of final diagrams in respect of Week 7). This is rejected by FGW as a valid reason for not achieving T-12. As explained in paragraph 6.1.5(e), the Network Code does not require Bids to contain vehicle diagrams. Condition D3.3 does not include any reference to vehicle diagrams. FGW's Revised Bids, being fully timed in accordance with the timing load of the applicable Specified Equipment, already include the required level of rolling stock information. It is also Network Rail's practice to offer amended timetables before receiving final unit diagram information (so in respect of Week 7, offers were made at T-4, despite receipt of final diagrams at T-2).

(ii) Week 14: Network Rail claim FGW bids in relation to Week 14 were three days late and this resulted in failure to meet the T-12 deadline. FGW disputes the alleged delay, since it regards its bid made on Monday 27^th February for SX slots as 18 weeks in advance of the period from Monday 3^rd to Friday 7^th July 2006. However the actual timetable offer was not made until T-7, seven weeks later than the due date. So even if the Revised Bid was late, it cannot be the case that this small period of delay at most over a weekend caused seven weeks' delay to the process.

Network Rail also refers to a bid for Sunday being received five weeks late. This was a later Spot Bid – the initial Revised Bid had already been made – and should not have held up the TSDB update, being reflected later if needed (as is implicit in Condition D4.8.4(c), which refers to Network Rail taking into account Spot Bids received no later than T-14 at this stage in the process). In any event this Spot Bid was made following consultation between Network Rail and FGW to re-time some shuttle services included in the Revised Bid: this is precisely the type of activity contemplated in Condition D4.8.4 regarding actions taken as a result of further consultation following submission of the Revised Bid.

(iii) Week 16: Network Rail cites Week 16 as an example where some Revised Bids were made late. FGW confirms as explained at paragraph 6.1.5(j) and (k) that the later bids were Spot Bids and not part of the Revised Bid, frequently for reasons not connected with restrictions of use or related to minor ancillary matters related to restrictions (such as bussing arrangements and ecs moves) or (as in this case) due in part to a late notified restriction of use.

(iv) Week 24: In this week, there was a delay in the submission of the Revised Bid in respect of the Sunday services which was submitted at T-16. Also seven trains not addressed in the original main bid were handled by a Spot Bid revision at T-9.

The later timing in submission of the Sunday bid was however because before T-18 Network Rail had put FGW on notice that a Sunday possession might be cancelled, but that this was subject to confirmation. Confirmation of the cancellation was provided by Network Rail on 12 May 2006 (just after T-18) and FGW then revised its draft bid and submitted it to Network Rail on 22 May 2006. Consequently this was a case of post-T-22 amendment by Network Rail of its requirements for a restriction of use resulting in a later submission, rather than FGW delay.

Other changes were minor Spot Bid amendments of the nature referred to in sub-paragraph (iii). In any event, despite these delays, the Network Rail amended offer was not achieved until T-7.

Consequently in the case of these disputed weeks, any shortfalls established with the Revised Bids should not affect the Notification Factor applied, or at most should do so only to the extent the relevant shortfall identified can be shown by Network Rail to have caused particular items not to be able to be included in the T-12 download. Network Rail has failed to demonstrate this.

6.1.6 Issues arising from the conduct of the Dispute

(a) Overview

In this section FGW explains:

(i) how Network Rail has acknowledged underpayments at times during the disputes process and should have made payment in respect of those acknowledged items, rather than bundling all six periods together and continuing to withhold payment;

(ii) Network Rail's defence regarding poor bid quality and delayed bids was first raised only after excessive delay and in circumstances which mean that Network Rail should not in any event be allowed to rely on it. Section 6.1.5 details why this defence itself is in any event without foundation; and

(iii) how Network Rail has offered different analyses of the bid/offer processes during the period of the dispute, providing a different analysis in its own favour only after some six months of dispute and why Network Rail should not be allowed to rely on the latest changed analysis.

(b) Level of Underpayment

FGW claims that in respect of the weeks concerned, it is due to be compensated at the late Notification Factor rather than the rates actually used by Network Rail, which in the vast majority of cases have only been paid at the early Notification Factor. This has led to an underpayment by Network Rail to FGW of 67.4%, when compared with the Late Notification Factor (and an intermediate amount where the intermediate Notification Factor applies).

During extensive discussions, Network Rail has been unable to give a consistent explanation of why it has failed to pay at the appropriate rate, and has agreed in varying degrees with FGW’s evidence that the higher rate is payable. This acknowledgement is given within the letter from Network Rail to FGW dated 20 September 2006 and the Network Rail Region's assurance of re-processing of payments given by e-mail on 26 September 2006, all contained within Appendix 4.13(j). However, these have not converted into the payment that is required under the terms of Schedule 4.

(d) Example of Network Rail acknowledgement of under-payment – Weeks 1,2 and 7

As an example, weeks 1,2 and 7 of the affected period were bid in line with requirements by FGW and not uploaded by Network Rail, as agreed by Network Rail in its letter of 20 September 2006 (see Appendix 4.13(j)). During 6 months of discussions Network Rail has not disputed the facts of a compliant Revised Bid and failure to achieve T-12 upload, for example as evidenced by the letter of 20 September 2006.

(e) Requirement for Payment of Undisputed Amounts

The payment mechanism of Schedule 4 requires at paragraph 8.5 that the parties settle any portion of a dispute that is not itself disputed or which is resolved. But Network Rail has failed for 6 months to make the required settlement, for example as periods appeared to be resolved as indicated in the email of 26 September 2006 from Network Rail to FGW contained in Appendix 4.13(j). Network Rail should have paid the amounts in respect of individual restrictions of use as these were agreed rather than delaying until the whole six periods could all be settled.

(f) Very late introduction by Network Rail of arguments on quality of Revised Bids

Belatedly, two weeks before the original proposed ADP hearing, 6 months after FGW first disputed the payments and more than nine months after FGW had first submitted and had accepted by Network Rail Revised Bids in respect of the disputed periods, Network Rail have indicated that they consider there was a problem with the quality of the bids during the period of the dispute. FGW strenuously refutes this view. In 6 months of discussions this had not been raised by Network Rail, as would be required under Schedule 4 paragraph 8.4(a):

“within 7 days of service of any notice under paragraph 8.3, the parties shall meet to discuss the disputed aspects of the statement with a view to resolving all disputes in good faith”

and as might be expected of Network Rail as custodian of the Part D process and having regard to the undertakings it has made regarding industry responsibility for the informed traveller process.

(g) Reasons why the late defence regarding bid quality should be disallowed

To allow such a late objection would render worthless the entire dispute resolution process, as in all the intervening periods FGW has continued to bid in the belief that the bids are compliant, having been provided with no indication to the contrary. Even if (which FGW disputes) there was a problem with the quality of bids, Network Rail should not now be permitted to rely on this claimed ground having both accepted the Revised Bids and withheld this information regarding bid quality, while both the dispute and larger Schedule 4 process was ongoing, so hiding from the train operator any requirement for corrective action, with the apparent intention of frustrating the dispute for later periods and avoiding what would otherwise be its commitments under Schedule 4.

(h) Provision of inconsistent data by Network Rail

Network Rail has supplied its position as to when FGW’s bids were received and when the information was uploaded on a number of occasions during the dispute. Initially this information was supplied in the national Informed Traveller reports (see Appendix 4.13(e)). Information was then supplied on weeks 1 to 12 in the letter of 20 September 2006 (see Appendix 4.13(j)) which agreed the principle for weeks 1, 2 and 7. Further information was then supplied by Network Rail on 30 November 2006 (Appendix 4.13(g)) on bids and then on 7 December 2006 for upload (Appendix 4.13(h). In each of these cases the information supplied confirmed to FGW that Network Rail should have paid the Late Notification rate (0.8) for a significant number of weeks. However, the payments have not been forthcoming as required by paragraph 8.5 of Schedule 4. Network Rail then supplied further information (Network Rail Appendix 4.13(k)) extremely late in the process (one day prior to the first date set for the hearing), which disputes a number of the dates at which FGW sent its initial bid. FGW does not agree with a number of the claims made in this correspondence.

FGW is deeply concerned that Network Rail does not have consistent information on the bid and upload position and has spent 6 months sourcing data which is at odds with the national industry report. Under the terms of Schedule 4, as this information has not previously been advised, Network Rail should have already paid FGW the appropriate compensation for the weeks with which it is non-compliant (i.e. as detailed in the national Informed Traveller report (Appendix 4.13(e)) as based on the information originally provided. Given Network Rail's responsibility under paragraph 8.1 of Schedule 4 Part 3 for the initial, timely provision of periodic statements of its liability to pay compensation under Schedule 4, Network Rail should not be permitted to withdraw after many months from information originally provided and then substitute revised data in its favour.

6.1.7 Intermediate Notification Factor

(a) If FGW's claim that the late Notification Factor applies is rejected, the intermediate Notification Factor should nevertheless apply for those restrictions of use taken in the disputed periods which were not notified by the end of the Drafting Period for the Applicable Rules of the Route or were subject to subsequent material change (as in the case of Wootton Bassett referred to at paragraph 6.1.4).

6.1.8 Treatment of Heathrow Connect Services

(a) FGW acknowledge Heathrow Connect services were not bid compliantly

With regard to LTV services, FGW acknowledge that certain services were not bid compliantly at T-18 weeks. These services are those known as Heathrow Connect (HC), which FGW operates under a bespoke contracting arrangement with Heathrow Express. Due to specific industry system constraints FGW is not able to timetable and therefore alter services that operate as Heathrow Connect. These services are planned by Heathrow Express, and are detailed separately on the national Informed Traveller report. The FGW portion of the Heathrow Connect Services form a separate Service Group in the Track Access Contract, which is Service Group EE01. FGW recognises that as Heathrow Connect services were not bid compliantly at T-18 weeks then the argument for the late Notification Factor cannot be made for the relevant Restrictions of Use affecting that Service Group, as the test under paragraph 4.1(b)(iii) and 4.2(b)(ii) of Schedule 4 fails (i.e. FGW did not bid compliantly for these services).

(b) Heathrow Connect non-compliance does not affect other Service Groups

However, FGW maintains its position in regard to all other LTV services in other Service Groups, as these were bid compliantly at T-18 weeks. The fact that the early or intermediate Notification Factor applies in respect of the EE01 Service Group does not prevent the late Notification Factor applying in respect of the other Service Groups.

(c) Heathrow Connect non-compliance does not affect treatment of Restrictions of Use impacting on other Services in its Service Group

Also FGW maintains its position in respect of non-Heathrow Connect services in Service Group EE01 which are affected by other Restrictions of Use. Non-compliance in respect of Heathrow Connect services in the Service Group will not affect the calculation of compensation for other services in the Service Group which are bid compliantly in connection with other Restrictions of Use.

(d) Schedule 4 analysis in respect of Heathrow Connect

Each of paragraphs 4.1, 4.2 and 4.3 of Schedule 4 Part 3 which detail the relevant Notification Factors commence:

"The NF in respect of a Network Rail Restriction of Use in respect of any Service Group shall have the value……"

This shows that Notification Factors are determined by Restriction of Use and by Service Group. Consequently the application of a Notification Factor in respect of one Service Group does not affect the identity of the Notification Factor which applies to other Service Groups and the application of a Notification Factor in respect of one Restriction of Use does not affect the identity of a Notification Factor in respect of another Restriction of Use.

Furthermore paragraph 3.1 of Schedule 4 Part 3 in setting out the compensation calculation formulae confirms the per Service Group approach, stating that:

"For each Period and for each Service Group, Network Rail shall calculate the compensation payable in respect of each Network Rail Restriction of Use on each Restriction of Use Day in that Period….."

This confirms the position as applied by FGW and referred to in paragraph 6.1.8 (b) and (c).

6.1.9 Allegations by Network Rail of FGW Bad Faith and Breach of Track Access Contract

(a) In December 2006 Network Rail produced its response to this claim which for the first time claimed that FGW's conduct in making Revised Bids and disputing Network Rail's Schedule 4 calculations were in bad faith and in breach of its track access contract. FGW wholly rejects these extremely serious and unwarranted allegations.

(b) FGW's response at paragraph 6.1.5 shows how these claims are unwarranted in the context of Network Rail's conduct of the matter, changing position during the course of discussions and failure to suggest any such failings at any of the extensive earlier stages of timetable development and dispute and unjustified because FGW has been compliant throughout.

(c) FGW's explanation of the situation has been forced to work through the detail of the contract and Network Code to substantiate what compliance requires. FGW is only seeking compliance with the terms for running the industry established by the ORR and the industry. FGW has raised the disputed issues promptly as required by Schedule 4 and Network Rail has taken a long time to respond, contributing to the escalation of the dispute.

(d) This is not a question of penalising Network Rail, but applying the terms established between the parties. These terms are carefully structured to take account of Network Rail's obligations under its licence and Part D of the Network Code and the significance of T-12 to passengers and TOC revenues. FGW has suffered poor publicity and lost revenue because of the failure to achieve T-12 throughout the disputed period. FGW tried to get Network Rail to agree quicker uploads to mitigate the situation: this has now been agreed since week 27 – but the fact that FGW was requesting this earlier, and being rejected by Network Rail, further serves to demonstrate that FGW's motives have been good throughout.

(e) Network Rail and FGW were both working together in the Supplemental Timetable Revision process in good faith, with FGW submitting Revised Bids and Network Rail working as it was best able to develop the amended timetables. The volume of restrictions required by Network Rail has put the industry under pressure. The manner of application of Schedule 4 to the outcome of the process is however an objective matter and not an issue going to the standard of faith of the parties.

(f) The contract does not allow Network Rail to avoid the consequences of failing to achieve the standards required by Schedule 4 because it was acting in good faith. FGW and its passengers have still suffered as a result of the failure and Network Rail has still required FGW to make full payment of its access charges (which are well in excess of £300 million for 2006/07). Applying the contract terms as established by the ORR is not a matter of profiting or penalising, as Network Rail claim.

6.1.10 FGW’s Response to items in Network Rail’s final edit of this document

On the morning of the final deadline for submission of this document, a final edit of Network Rail’s section 6.2 was received. There has not been time to update FGW’s section 6.1 to reflect the points raised and so FGW response is listed below:

·(a) Network Rail paragraph 6.2.1(e) states that FGW’s objection has used a “general phrase” repeated each period. The phrase in question is in fact very specific, and has indeed been repeated each period, as the circumstances require.

·(b) Network Rail’s paragraph 6.2.1(f) states that Network Rail had previously agreed with Wessex Trains that Revised Bids would be loaded into TSDB at T-12 weeks regardless of slippage to the bidding deadline. However, Network Rail has failed to point out that this was only agreed by Wessex Trains on the basis that this had no bearing on Schedule 4 payments, i.e. that as this was not a final upload it would not count under the terms of Schedule 4 as an upload at T-12 weeks.

·(c) Network Rail paragraph 6.2.2(e) states that FGW’s Schedule 4 team had been instructed not to engage with Network Rail. This is not the case. There have been extensive and detailed contacts at all levels between FGW and Network Rail during the period of the dispute, particularly as FGW had been keen to understand the Network Rail position, and understood that Network Rail had been trying to source additional data to determine the date of upload of FGW’s Revised Bids. The letter of 20 September 2006 from Network Rail was the first time that its position on the dispute had been made clear to FGW.

·(d) Network Rail paragraph 6.2.2(f) states that the dispute involves only 2 weeks of FGW’s West Sector. This is not true.

·(e) Network Rail paragraph 6.2.2(f) states that the week 24 is excluded from the dispute. This is not true.

·(f) Network Rail paragraph 6.2.3 (c) states that FGW accepted that Network Rail’s T-18 efforts would have a knock-on effect on the T-12 weeks part of the process. This is categorically not the case. FGW’s understanding is and was that the efforts to address T-18 were in fact key to solving Network Rail’s timetabling issues.

6.1.11 Conclusions

(a) The late Notification Factor under paragraph 4.3 of Schedule 4 Part 3 should be applied to periods 1-6 inclusive of 2006/07.

(b) FGW made compliant Revised Bids. Network Rail mis-states the requirements for bid content, mis-applies the requirements on internal consistency and mistakes the relationship of Spot Bids with Revised Bids.

(c) Network Rail failed to achieve the T-12 deadline for uploading the Working Timetable in Periods 1-6 of 2006/07. The reasons for the delay were not because of the FGW Revised Bids. Other Network Rail reasons can be identified as the cause.

(c) There is no basis for Network Rail's claims that FGW's actions in making Revised Bids or promptly claiming the correct application of Schedule 4 through the specified disputes process is in bad faith or in breach of the contract. Network Rail may legitimately have been expected to raise this as an issue well before December 2006, if these claims had any substance.

6.2 Network Rail Position

6.2.1 Introduction

Network Rail agrees with FGW’s explanation of the Schedule 4 criteria on Notification Factors. These criteria are partly linked to the provisions for the timetable change process set out in Part D of the Network Code, and it is the consideration of these provisions which forms the major part of Network Rail’s response to the FGW position.

Network Rail believes that:

a. the facts as put forward by FGW about the actual events during the timetable change process as provided for in Part D are inaccurate in a number of respects;

b. in any event, to the extent that Network Rail may have not taken specific steps that would enable it to claim the benefit of the relevant Notification Factor in the instances set out below, it has been prevented from taking such steps by earlier failures on the part of FGW to comply with industry procedures as set out in Part D, and it is unconscionable that FGW should seek to profit from such failures on its part;

c. Despite FGW’s failures to comply with the Part D processes, Network Rail has continued to progress the development of the timetable in good faith (consistent with the contractual obligations of the parties as set out in Clause 4 of the track access agreement) to deliver the best timetable, given the circumstances, for end users of railway services and should not be penalised for doing so;

d. Whilst Network Rail could have rejected non-compliant bids such an approach would have jeopardised the timetable process and thus been significantly detrimental to passengers, other passenger operators and freight users;

e. Network Rail accepts that FGW has challenged the periodic schedule 4 “Day 42” financial statement within the contractual deadline of 10 working days after receipt in most cases, and have sought an extension when it could not meet those deadlines. Where this challenge has been about specific items on the statement Network Rail has been able to respond and reissue the statement with any agreed revised figure. However, in the case of this dispute a general phrase of “First Great Western is disputing all of the notification factors for First Great Western, First Great Western Link and former Wessex. This is on the basis that early notification discounts only apply when Network Rail have uploaded the train operators T-18 bid to TSDB to be uploaded by the T-12 deadline. As laid down in section 4.1(b) of Schedule 4 of the Track Access Agreement” has been repeated each period. FGW’s schedule 4 team had been instructed not to engage with Network Rail on this issue so a process other than the normal Schedule 4 process had to be sought. Network Rail attempted to begin this engagement with the letter to FGW dated 20^th September 2006 seeking a meeting to discuss the detail. FGW’s first draft of this paper in late November revealed FGW’s position further.

f. The dispute involves only 2 weeks of FGW’s West sector as the previous franchise had agreed with Network Rail that their bids would be loaded into TSDB at T-12 to ensure compliance with Informed Traveller and this arrangement continued into the new franchise. The reasoning behind this agreement was that Informed Traveller timescales were met despite any slippage to the bidding deadline of T-18 and, as a result the validation and upload process. Once aware of the benefits of this arrangement FGW asked for it to be extended to LT&V and HSS and this was duly done in Week 24 – hence this week is excluded from the dispute.

6.2.2 The role of the Bid in determining the Schedule 4 Notification Factor

6.2.2.1 Timing of the Bid

a. In respect of paragraph 6.2.1(a), Network Rail emphasises the provisions of paragraphs 4.1(b)(iii) and 4.2(c)(ii) of Schedule 4 of the track access agreement, set out in full in section 4.7 of this joint submission, which entitle Network Rail to claim the early or intermediate Notification Factor where the operator has failed to give Network Rail a Revised Bid in accordance with Condition D4.8.3. This sets out why Network Rail was entitled to claim higher discount even in those cases where it did not reflect the Restriction of Use in the appropriate Working Timetable (under paragraphs 4.1(b)(ii) and 4.2(b)(i));

b. While Network Rail accepts that there may have been certain errors in its original calculations and is still trying to evaluate the likely impact of any such errors, Network Rail believes that only exceptionally were Bids received from FGW in accordance with Condition D4.8.3, in terms of timing and quality, meaning that the conclusions drawn by FGW are incorrect in most instances;

c. There are, for example, instances where FGW claims that it has bid on time. It may be the case that its first Bid was made on time, but it has then issued subsequent Bids which are of significance to the overall train plan, in order to encompass its own late amendments or additional information;

d. The national Informed Traveller report referred to in para 4.1.3 is not and is not intended to be a measure of contractual compliance. The report is compiled to give a high level industry view of whether T-12 is likely to be met by recording a subset of key information about the performance of Network Rail and the train operators. It records whether the operators bid at T-18 as they are obliged to do, or not. It does not record each subsequent bid because usually any subsequent bids can be managed to achieve compliance whereas those that have bid at T-18 at all are flagged as having a possible systemic problem and require some extra-ordinary action to be taken. Its context is therefore an exception based report designed to trigger particular action in certain circumstances. It has served the industry well in this respect for well over a year. It is not a record of all bids, nor a record of contractual compliance. Those records are held by the train planning offices. First Great Western appear to rely on a purposely partial report to imply that Network Rail believed that they had bid compliantly. Such reliance is not justified.

e. Condition D3.3 sets out the criteria for the contents of a Bid. Network Rail believes that the definition of a “Bid” and a “Bidder” indicates that all of these details should be provided satisfactorily in respect of all Train Slots for which the Bidder is being made before the Bid can be considered to be complete and fully compliant with the operator’s obligations under Part D.

f. The Bid can therefore only be considered as being given when the final Bid for that week has been received along with unit movements, unless any subsequent Bids are as a result of Network Rail taking a Restriction of Use at late notice. In many cases FGW has bid late for its own reasons, not as a result of a late notice Restriction of Use. This subsequent Bid date should be taken as the Bid date, not the first Bid date as FGW has assumed.

g. Appendix 4.13(k) sets out information concerning the summary of Network Rail’s bid receipt records with those from FGW and Appendix 4.13(l) sets out a detailed list of all FGW HSS bids for Periods 1-6. There are late Bids in every week and in most weeks these are of significance to the overall train plan.

h. Looking specifically at one example in week 14, bids in the name of FGW HSS (HJ) for SX were received 3 days late and another Sunday revised bid was received 5 weeks late, in which case Network Rail would be entitled to claim the earlier or intermediate Notification Factor under the provisions of paragraphs 4.1b(iii) or 4.2b(ii) of Schedule 4.

i. Similarly, in week 16, a total of 17 Revised Bids were received from FGW HSS (HJ) of which only 3 were received on time in accordance with D4.8.3.

j. Week 24 is another example with bids received outside T-18 weeks.

6.2.2.2 Quality of the Bid

a. Network Rail believes that FGW has failed to submit Bids which were compliant with the requirements of condition D3.3 of the Network Code with respect to the completeness of the Bid:

b. As part of the timetable production process Network Rail is obliged under condition D2 of the Network Code to establish a Rules of Route and Rules of Plan. Within section 2.3 of the National Rules of Plan the short term timetable bidding process is outlined and reads as follows;

2.3 Weekly Train Plan - Preparation of Bids

2.3.1 Where Network Rail has identified a need for Revised Bids in accordance with para 2.6 above, and where a Train Operator wishes to specify any new or altered service requirements during the Timetable Week, detailed Bids will be prepared by each Train Operator (or agreed agent) to specify the Operator’s service requirements. Except by prior arrangement with Network Rail, e.g. where major engineering works are planned, a positive Bid should be made for all services to run on Bank Holidays, including where appropriate confirmation in the Bid Commentary that the normal SX, SO or Sun service should apply, either in its entirety or with specified alterations.

2.3.2 Bids should be compliant with Rules of the Route/Plan (including any agreed amendments) and the relevant Track Access Agreement. Compliance with Rules of the Plan implies that there are no conflicts between individual paths bid by a single Train Operator (‘internally conflict free’). So far as reasonably practicable, Bids should also avoid conflicting with other Train Operators’ Permanent Timetable paths not notified by Network Rail as requiring amendment unless the other Train Operator(s) submit a compatible short term Bid. Network Rail recognises that this requirement could be difficult to observe completely in some circumstances and where such conflicts are identified by Network Rail, they will be resolved by discussion with the Train Operators concerned.

2.3.3 Bids must include sufficient detail to make the Train Operator’s intentions clear to Network Rail. Unless otherwise specified in Rules of the Plan, short term Bids should contain the same level of detail as Bids for paths in the permanent timetable. If a Train Operator requires additional section running time information to enable a compliant Bid to be prepared, that information should be requested from Network Rail using the Timing Links Request Form shown in Appendix F to Section 1 of the National Rules of the Plan.

Clause 5.2 of the model clause track access contract makes it clear that the rights granted to the TOC are subject in all respects to the Applicable Rules of the Plan and the Network Code. It follows based on this and on Part D of the Network Code that Network Rail is entitled to reject Bids that contain internal conflicts and are therefore non-compliant. In most cases it reworks the Bids to remove such conflicts, rather than introduce additional time into the process which would see a deterioration in service to end users of railway services (passengers and freight users).

c. A clear example of a non-compliant Bid was over the Easter period (week 3) where bids in the name of FGW LTV (HN) were received from T-18 weeks through to T-12 weeks which clashed with Bids received in the name of FGW HSS (HJ). This was contrary to a Network Rail and Operator trains meeting that was held prior to the Bid deadline, and capacity allocation was agreed with all parties. This resulted in considerable reworking by the Network Rail Train Planning Centre team at Paddington and formal offers not being made until T-2 weeks, a delay of more than ten weeks beyond the intended industry agreed timescales.

d. Condition D3.3 requires that a Bid is complete - it defines the items that a Bid must contain. The Bids that FGW claims have been given in accordance with D4.8.3 are not in fact compliant, because they do not contain rolling stock information, as required by D3.3(e). The Bid that contains all information, including the rolling stock diagrams, to complete the plan usually comes in, at a later date and therefore the Bid can only be considered as being given when the final element of it has been received (unless, as stated above, any subsequent Bids are as a result of Network Rail taking a Restriction of Use at late notice).

e. Although the completeness of a Bid leads to difficulties in train planning, Network Rail does not, where possible, allow late rolling stock information to delay industry timescales. Nevertheless, this does introduce increased pressure into the process as well as a performance risk which Network Rail has to manage.

f. Condition D3.3 also requires a Bid to contain necessary diagrams to cover ancillary moves and platform working. These are frequently missing from FGW’s Bids, and contribute to the difficulties, e.g. over the Easter period, as outlined above, meaning that planning can not be completed until late in the process tying up valuable resources. The later in the process these details are finalised the more performance risk is introduced as checks and balances are forfeited.

g. Another example of this incompleteness in terms of bids is week 7 where the main SO and Sun bids in the name of FGW HSS (HJ) were received by the T-18 week deadline but the main SX bid was received 3 days late but in all cases the necessary unit diagrams were received in draft form 5 weeks later with final unit diagrams not being received until T-2 weeks.

h. Appendix 4.13(m) sets out in tabular form another example from week 11 were bids in the name of FGW HSS (HJ) are in conflict with bids from FGW LTV (HN)

i. Whilst Network Rail accepts that the FGW franchise was at this time formed of three separate track access agreements this is simply, as it were, a temporary accident of history. The train operator under each of these agreements was the Claimant in this case, and it cannot sensibly argue that it should be treated any differently from any other operator in terms of ensuring that all its Bids are internally consistent. In any event, as a matter of practicality the actual compilation of the three revised Bids was being undertaken by one train planning team within one company and thus as outlined in section 2.3 of the National Rules of Plan document it is not unreasonable for each bid to be internally conflict free between the three parties as they are based on one possession planning document issued by Network Rail.

6.2.3 Standard of performance

a. In respect of paragraph 6.2.1(b), Clause 4 of the model clause form of the track access agreement between Network Rail and passenger operators, which is applicable to all three of the agreements here under consideration, reads as follows:

STANDARD OF PERFORMANCE

4.1 General standard

Without prejudice to all other obligations of the parties under this contract, each party shall, in its dealings with the other for the purpose of, and in the course of performance of its obligations under, this contract, act with due efficiency and economy and in a timely manner with that degree of skill, diligence, prudence and foresight which should be exercised by a skilled and experienced:

(a) network owner and operator (in the case of Network Rail); and

(b) train operator (in the case of the Train Operator).

4.2 Good faith

The parties to this contract shall, in exercising their respective rights and complying with their respective obligations under this contract (including when conducting any discussions or negotiations arising out of the application of any provisions of this contract or exercising any discretion under them), at all times act in good faith.

b. Network Rail believes it has, throughout this matter, acted in good faith in attempting to satisfy the underlying aim of the timetabling process and to produce a robust timetable for the benefit of the industry as a whole and consequently for passengers and freight users. This has proved extremely difficult at times because of the inadequacy of the input to the process from FGW.

c. Network Rail’s role in co-ordinating the overall timetabling process in the wider industry interest was recognised by ORR as an essential element of the plan to recover and maintain “informed traveller” timescales in 2004/05. Network Rail took and continues to take this role seriously, acting in good faith to support all industry parties, including measures to assist FGW in its train planning activities, both during and since the recovery plan. Network Rail specifically set up a project team, at no extra cost to FGW, for 3 months in 2005 to assist in recovering the T-18 bidding timescale which FGW had not been achieving consistently for over a year. The team converted a basic service specification into a workable plan – something that operators normally have to resource. These valuable Network Rail resources were deployed for the good of the industry as compliance by FGW was seen as one of the first steps in the recovery of Informed Traveller timescales. At the time it was stated by Network Rail that being without these resources would have a knock-on effect on the T-12 part of the process – a fact which FGW accepted at the time.

d. Network Rail has frequently been put in a position, by virtue of failings on the part of FGW, whereby Network Rail was obliged to make a choice between rejecting Bids and other requests outright (as it was entitled to do under Part D4.8.5) and requiring FGW to rework and resubmit material; or working with FGW to improve the quality of the FGW material so that it was fit for purpose. Network Rail chose the latter course because it believed it was more in the interests of FGW and the industry as a whole to do so. It may be argued that Network Rail should have raised their concerns more consistently with FGW but regrettably, over time the Network Rail train planning team has become so used to coping with sub-standard specifications that it has become ‘normal’. The complete Bid records show how complex the overall train plan can be if a TOC needs to send in a large number of Bids (at least ten per week on average).

e. Had Network Rail rejected FGW bids outright because of non-compliance, there would have been negative impacts on the rest of the industry, with both Network Rail and other operators unable to comply with the timescales set out in their licences for making timetable information available. The impact of this would have been felt by the travelling public, who would have suffered significantly from the late availability of timetables.

f. Network Rail maintains that through non-compliance with its Part D obligations, not only did FGW’s standard of performance generally in this respect fall short of that required by clause 4.1 of the track access agreement, but that FGW has itself not acted in good faith by failing to recognise the potential implications for the wider industry of its own shortcomings and trying to profit from its own failings in this regard.

g. As detailed above, Network Rail believes that FGW’s failures amounted to breaches of their obligations under Clause 4 of the track access agreement. Even were that not to be the case, it is still the position, in Network Rail’s contention, that it would be contrary to accepted principles of law and entirely inequitable that FGW should be able to profit from circumstances which are attributable to its own historical underperformance in the way it is now seeking to do.

6.2.4 Conclusions

In the situation where a Network Rail Restriction of Use is not reflected in the Working Timetable in accordance with paragraphs 4.1b(ii) and 4.2b(i) of Schedule 4 of the track access agreement, Network Rail is nevertheless correct in its identification of the earlier or intermediate Notification Factors. This is because paragraphs 4.1b(iii) and 4.2b(ii) of the same agreement require FGW to have submitted a Revised Bid in accordance with Part D4.8.3 of the Network Code.

Revised Bids were, however, not submitted by FGW in accordance with D4.8.3 and the Rules of Plan, as Bids contained non-compliances associated with content, quality and timing.

Network Rail did not reject these non-compliant Bids, as it was entitled to do under D4.8.5, and as implied as an option by FGW in its paragraph 6.1.5(a) because it acted in good faith in accordance with Clause 4.2 of the track access agreement and chose to work in the interests of both FGW and the wider industry to finalise a timetable within the timescales set out by industry licences. To do otherwise would have had profound impacts on the travelling public and freight users.

7 any further issues raised

7.1 No further issues are raised.

8 decision sought from the PANEL

8.1 FGW asks the Panel to determine that:

(a) the late Notification Factor under paragraph 4.3 of Schedule 4 Part 3 applies in respect of all the Restrictions of Use as shown in Appendix 4.13(d) (or if it does not apply to all those Restrictions of Use, it is asked to determine to which of those Restrictions of Use it applies and which Notification Factor should apply to the balance of the disputed Restrictions of Use);

(b) Network Rail should be instructed to pay FGW on the basis of the amounts detailed within Appendix 4.13(d) (subject to adjustment to the extent that it may determine that other Notification Factors should apply to those Restrictions of Use) together with interest in accordance with the terms of Schedule 4 Part 3; and

(c) as a result of the decided principles above, the Respondent is to pay to the Claimant the full sum payable under Schedule 4, estimated by the Claimant to be £12,480,140.49, compiled as £11,552, 655.28 (HSS), £684,865.71 (LTV) and £242,619.49 (West) plus interest at the Default Interest Rate calculated in accordance with paragraph 8.5 of Schedule 4 Part 3 (subject to adjustment to the extent that it may determine that not other Notification Factors should apply to those Restrictions of Use).

Network Rail asks the Panel to determine that:

(d) Determine that the effect of paragraphs 4.1(b)(ii) and 4.2(b)(i) of Schedule 4 of the track access agreement, in those cases where FGW failed to give Network Rail a Revised Bid in accordance with Condition D4.8.3, is that the relevant higher Notification Factor should apply;

(e) Instruct the parties to carry out further work to agree the matters of fact on the disputed weeks, and determine separately how much money, if any Network Rail does owe to FGW, with recourse to mediation if the parties are unable to agree

9 signatures

Signed by

Position

Date

For and on behalf of

First Greater Western Limited

Signed by

Position

Date

For and on behalf of

Network Rail Infrastructure Limited