McNulty’s rail value for money study – Realising the Potential of GB Rail

writer Graeme Bickerdike

And now for something completely different

It can’t have escaped your attention that the nation’s Garden of Plenty, cultivated by easy credit, has been rather blighted by the slash and burn antics of The Chuckle Brothers (Financial Services) PLC. But the taxpayer put the fire out leaving the City’s have-lots to stash away their bonuses whilst builders, mechanics, steel workers and the like enjoy more leisure time and learn the art of thrift.

Expectations through the first year of coalition government were that the railway, now subsidised to an unprecedented extent, would also suffer surgery by chainsaw. But no. Crossrail, electrification, IEP, high speed – all survived with just a few contusions. It was though inevitable, indeed only right, that the industry would be forced to share the pain being inflicted across the rest of the public sector. Interface overload and misaligned incentives, cultural flaws and an absence of coordinated leadership have done it no favours, offering sizeable targets for any passing report writer given their impact on costs.

It’s a little unfair to compare Britain’s railway with those across the Channel, with its previously-neglected and foible-ridden infrastructure, dearth of diversionary routes and a uniquely fragmented structure largely foisted upon it by our politicians’ privatisation model. So the much-quoted figure of a 40% efficiency gap against four European comparators (France, Sweden, Switzerland and the Netherlands) does not shine a bright light; a fair slice of that gap is systemic. That though is the benchmark against which the industry is being judged; we are where we are.

Undeniably, the status quo was unsustainable – a reality accepted by almost everyone. What Network Rail’s critics rarely acknowledge though are the strides already taken to reduce its cash take. Many at project level are eager to embrace innovation and do things differently – some succeed – although an institutional resistance to change across the industry continues to impede progress. Occasional but costly project management gaffes have not enhanced its reputation, sullying what otherwise has been a generally solid performance in an exceptionally difficult climate. The company has been working hard to address its perceived failings, entering a new era that has brought with it more engagement and less arrogance, a reality that’s welcomed universally. But we tend to remember the bad times, don’t we?

No ‘big bang’

So along came the independent chairmanship of Sir Roy McNulty and his Rail value for money study. Last month’s final report, adding much flesh to December’s interim version, is a 320-page tome, optimistically entitled Realising the Potential of GB Rail. (Is it me, or does that have overtones of Richard Beeching’s report title from 1963?) Its findings had been widely briefed before their publication so came as no surprise to many key players – indeed they prompted some pre-emptive manoeuvring.

From an engineering perspective, reviewing the report in a thousand words is not straightforward. Not because there’s too much to say – quite the opposite. There’s no explicit showstopper; a ‘Eureka’ clause. If fully implemented (and there is wriggle room – the government has already ruled out some proposals aimed at moderating peak passenger loadings), the industry would feel quite different. Contractors could have new clients, with the project manager not always employed by Network Rail. But engineering would continue its evolution, albeit at a quicker pace as the barriers to innovation are dismantled.

Vertical or horizontal?

The report asserts that the railway’s total costs in 2008/09 were £2.5-3.5 billion above what might have been expected. To bring about a partial reset, it is challenged to deliver a 30% reduction in unit costs by 2018/19, rising incrementally over the intervening period to produce around £1 billion in savings during the final year.

Recommended is a suite of actions involving considerable structural change. But there is a stated recognition that the real barriers to value are often much woollier, less easy to build: good leadership from the top and a “culture where the status quo and previous assumptions are continually challenged”.

Cooperation, or lack of it, is another recurring theme. Network Rail’s heavily centralised decision making, with its often complex and rigid processes, has at times seemed “insufficiently concerned about the needs of the customer”. In that respect, things have changed positively over the past 12 months and route devolution is a clear demonstration that it intends to be more accountable. Wessex and Scotland have already become semi-autonomous business units; seven others will go the same way, probably by next spring. And McNulty puts forward three new ones – Wales, Northern and Merseyside.

Whilst some infrastructure management functions – such as procurement and heavy plant – will remain centralised to ensure economies of scale, the aim of devolution is to bring delivery closer to the train operators – realigning interfaces and incentives. The study sees no reason why the infrastructure should remain under the control of a single company, claiming that there are “many advantages to diverse ownership and management”. So three possible alignment levels are put forward –

• cost and revenue sharing, with Network Rail and the train operators having common targets

• joint ventures/alliances between NR and TOCs (two to be in place by 2013/14)

• full vertical integration through a concession of infrastructure management and train operations. The study maintains there is a strong case for this where one franchised operator is dominant – Anglia, for example – and that a pilot should be instituted by 2013/14.

Taking the lead

Sitting above and behind this will be the Rail Delivery Group (RDS), comprising nominated CEOs or Executive Board members from the major TOC owners, a freight operator and Network Rail, working with a wider coalition of suppliers and representatives from other operators and the rolling stock sector. Instigated on the premise that the industry needs more effective leadership and to accept “greater responsibility for its own future”, the RDS must “make happen what would not happen otherwise”, driving a cross-industry programme of substantial change.

A key theme will be to make better use of what we already have (is that a new idea?), moving from a ‘predict and provide’ approach to ‘predict, manage and provide’. That will mean evening out train loadings (jemmying sardines into carriages at peak times, but thereafter hauling fresh air around the network) and the implications they have for fleet sizes. ‘Demand management’ would partly involve adjustments to fares but, the study insists, not just in an upwards direction.

As an industry, we are clearly short of acronyms so the study spawns a few new ones. Together with RDG, you will need to get your head around RSA (Rail Systems Agency), RIGT (Rail Innovation and Growth Team) and NSTF (National Safety Task Force), and all that they stand for. The study concluded that tinkering with the existing “silo-based approach” to technical challenges would not have delivered the radical change needed.

The NSTF will provide “clear and credible leadership for safety and risk management” whilst the RIGT would draw on operating practices or technological opportunities from elsewhere (the aerospace and automotive sectors for example) to push innovation. The study sees the need for “more lean and agile engineering approaches”. Both bodies would function with the support/direction of the RSA which, in turn, will sit beneath the RDG and lead on system-wide issues, combining the technical and professional functions of the DfT, Network Rail, ORR and RSSB.

It would be the focal point for tackling standards issues, identifying those that are no longer needed to operate a ‘value for money railway’. Whilst clear in its assertion that the industry’s safety record is good, the study found that this was achieved through “an excess of process”, using standards as “a defence mechanism against change”.

One concern is whether all this will simple involve the same faces bringing the same cultures and processes to bodies with new names. But only time will tell.

In the sticks

A revisiting of standards creates an opportunity to look differently at regional railways, where a trade-off in flexibility would allow the provision of bespoke low-cost solutions. Defining a more appropriate spec level for operations and infrastructure has had a positive impact in Europe and the study recommends that several of our routes, with different characteristics, are identified so the principles of lower-cost regional networks can be developed, piloted and benchmarked.

Sizeable cost savings are waiting to be banked, the study claims, through the reduction or elimination of lineside signalling using a ‘drive-on-sight’ approach or dispatch-based control where instructions to proceed are given to the driver over the mobile phone or GSM-R networks. Lessening the financial burden of civil engineering could be achieved by tailoring maintenance regimes to reflect actual loadings rather than theoretical capacities. The adoption of ‘perpetual maintenance and life extension’, used on low-density freight lines in the States, would bring an end to capital intensive track renewals whilst the introduction of lighter vehicles, bringing less wear and tear, would allow inspection intervals to be extended.

What about the workers?

The industry’s short-term approach to relationships, planning and investment has imposed very uneven demands on the supply chain, with some companies suffering a terminal decline. Much is to be gained from modernised procurement practices, say the report. ‘Feast or famine’ resulted in some haemorrhaging of skills and difficulties meeting emerging needs, driving costs upwards. Again, there has been a change of tone and approach from Network Rail recently, with a focus on drip-feeding sustainable workloads to suppliers and even some talk of making limited commitments to named individuals.

But its people cost the industry almost £4 billion a year, with salary increases outperforming average earnings. “This area cannot be immune from the changes” is a line that Bob Crow will have highlighted. There would be fewer railwaymen (but more opportunities for women) as automation is increasingly deployed and the resilience of the infrastructure improves. “Much railway activity would be attractive to part-time employees”, the study notes.

Hard choices confront the industry and they will not be made without conflict. But it either makes them itself or allows the government to do so. The right course is self-evident. Establishing new bodies and contractual relationships will be complex but manageable; the greater challenge is posed by mindset shift – thinking smarter, delivering leaner, behaving more appropriately. The same test faced Britain’s bankers, having obliterated the economy. The railway cannot afford to adopt the same complacent and entrenched position.

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