Passengers on the Thameslink, Southern and Great Northern (TSGN) franchise have suffered the worst disruption on the network since services began in September 2014, the National Audit Office (NAO) reported.
This contributed to only around 62% of services arriving within 5 minutes of their arrival time during a period of strike action in November and December 2016.
DfT's franchise design did not consider the underlying condition of the existing infrastructure, and it contracted GTR to deliver increased services despite concerns from Network Rail and the operator that the network could not support these reliably.
The struggling franchise, which represents Thameslink, Southern and Great Northern services, as well as Gatwick Express, has been under heavy pressure recently, with figures showing that it had been forced to pay out nearly £15m in passenger compensation in 2016-17. GTR received fewer drivers than the number it had expected, but even that would still have left a shortfall.
The NAO report points partial blame on the Department for Transport, saying the department did not take sufficient consideration of the risks involved when it agreed to retain fare revenue rather than allowing Govia Thameslink to keep it. As part of the drive to modernise, we are pioneering improvements in trains and technology, and have updated practices for train drivers and crew that other operators are only now adopting.
The DfT has considered its options for terminating the franchise, but chose to continue its contract, although it did come to an agreement with the operator to l fund a £13.4m spending programme for missing its targets to date.
Over half of those disruptions were caused by GTR, predominantly due to strikes and shortages in train crew, said the NAO report.
"The completion of the Thameslink Programme and a £300m programme to boost the reliability of tracks and signalling will deliver big benefits for passengers".
Between the start of the franchise and August 2017, the DfT made franchise payments of £2.8 billion to Govia and received £3.6 billion from train tickets.
The Department also expects to pay Govia Thameslink for the additional costs, potentially amounting to tens of millions of pounds a year, resulting from changes to the Department's requirements.
Despite efforts by the Department for Transport and Govia Thameslink to improve services, the operating statistics on the franchises are still below initial expectations and network averages, according to the report.
Amyas Morse, head of the NAO, commented: "Over the last three years long-suffering passengers on the Thameslink franchise have experienced the worst performance on the rail network". It urged the Department for Transport to "get a grip" on its monitoring and enforcement of GTR's contract, improve services and compensate passengers, as a matter of urgency.
In response Charles Horton, chief executive of Govia Thameslink, said: "The report identifies numerous root causes for the challenges it has faced. This report should be the final nail in the coffin of more than two decades of rail privatisation in Britain".
"We are glad the National Audit Office has recognised these passenger benefits and forecast Thameslink has a realistic chance of delivering value for money".
GTR said Southern, Thameslink and Great Northern was one of the UK's largest rail franchises, carrying nearly one million passengers a day.
"These difficulties have sometimes been greater than expected and we regret the disruption caused to our passengers".
Value for money has not been achieved by the UK's largest rail franchise, the Government spending watchdog said.
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