The next Network Rail control period (CP6) commences on 1 April 2019 and will run for five years until the end of March 2024. However, planning for those five years commences at least a couple of years in advance, goes through several stages, and takes up more and more management time until the Department for Transport (DfT) and the industry regulator, the Office of Rail and Road (ORR), make a Final Determination a few months before the start of the new control period.
There is, of course a degree of ‘horse trading’ that goes on prior to the final figure being agreed, not to mention some brinkmanship.
The process started with the ORR launching its Periodic Review for 2018 (PR18) in May 2016. The Secretary of State for Transport, and the Scottish transport ministers, were asked to produce Statements of Funds Available (SOFAs) by October 2017. Network Rail’s Strategic Business Plan (SBP), published on 9 February, is based on these, and lays out how much money the company actually wants for the next Control Period and what it will deliver in return.
The ORR will publish a Draft Determination over the summer, and then a Final Determination by October. Network Rail’s delivery plans for CP6 will be based on that and published just before the start of the Control Period.
The process doesn’t always run smoothly. For CP5, Network Rail’s Strategic Business Plan requested a total of £40.095 billion for the five-year period. The ORR decided that Network Rail had ‘overegged the pudding’ and knocked it back to £38.293 billion, but giving Network Rail the right to appeal.
Stating that, in effect, no puddings had been overegged, Network Rail insisted on either receiving the full amount or it would have to cut £1.8 billion of work from the programme to match the financial cuts. An appeal looked possible.
However, pragmatism overcame the arguments. An appeal could take a year, during which time the upkeep of the railway would be at a standstill, so chief executive Sir David Higgins accepted the Final Determination on 7 February 2014, just seven weeks before the control period was due to start.
Better planning
Back to CP6, and the process is well underway. As mentioned, the Secretary of State published the SOFA on 12 October 2017 and, in a remarkably concise document, suggested that Network Rail should work on a total budget of £47.9 billion in CP6. Of this, £34.7 billion would come from the government, while the remaining £13.2 billion would come from customers (passenger and freight train operators) and from property.
In response, Network Rail’s Strategic Business Plan detailed £47 billion of work to be delivered. So it seems much less contentious than the CP5 negotiations – there is rough agreement already.
That may be so, but the CP6 plan is very different from that for CP5. Chief executive Mark Carne spoke with Rail Engineer the day before the figures were released and described how he and his team had arrived at the total figure.
The biggest change was in the way the required expenditure was calculated. For CP5, Network Rail had adopted what Mark Carne called a “top down” approach. By this he meant that, in general, the amount of money had been predetermined and the decision then had to be made as to what to spend it on.
Of course, that wasn’t entirely the case – the difference of opinion as to the final figure reveals that. But it certainly could have been the case for the general maintenance and renewals budgets. As for the third element – enhancements – many of the major projects involved were at an early stage of development so the costings weren’t accurate as, in several cases, the design hadn’t even been completed. Small wonder, then, that these projects, including Great Western electrification and the Edinburgh Glasgow Improvement Programme (EGIP), overran their budgets once they were actually in construction several years later.
So, instead, the CP6 programme was costed “bottom up”.
Over the last few years, Network Rail has got a lot better at understanding both the range of assets it has and their condition. Programmes such as ORBIS (Offering Rail Better Information Services) have resulted in assets of all types being logged, plotted geographically, and assessed as to their condition, their need for major overhaul and replacement.
This has given a work bank stretching years into the future. Statistics, such as 63 per cent of the network’s signalling needing replacing in the next 15 years, provide the big drivers for the Digital Railway, which has the goal of increasing capacity through running trains closer together coupled with cost savings due to reduced trackside infrastructure and more reliable installations.
Maintenance can therefore be planned, and costed, more accurately than before, as can renewals.
Enhancements in CP6
However, enhancements are still a problem. Network Rail has, in fact, a very good track record of sticking to cost estimates and delivery schedules once a plan is fully developed – usually within a couple of per cent.
However, if asked to guestimate costs and delivery when the design is at a very early stage, that inaccuracy can reach as high as 40 per cent as estimates get overtaken by engineering challenges, political pressure, contractual difficulties and changes in scope.
The solution to the question of how to plan enhancements better in CP6 is simple. There are no enhancements in the plan.
But does that mean that Network Rail won’t undertake any major projects in CP6?
Not at all. Instead, they have been taken out of the Control Period planning process. In future, needs will be discussed both internally and with customers – the train operators – and a wish list of projects drawn up. These will be designed properly, at least in outline, costed carefully and then a firm price and timescale offered to the Department for Transport for adoption.
If selected, the project and its detailed cost analysis and business case will be submitted to the Treasury for funding. There, it will compete against road schemes, airport terminals, flood prevention, education, hospitals and a host of other demands for government money. But, if successful, it will go ahead, properly costed and funded, and will be EXTRA money, not part of the CP6 determination.
So what, then, is the final figure in the Strategic Business Plan? The figures submitted are for £47.1 billion, made up of £18.5 billion for operations and maintenance, £18.5 billion for renewals (the identical figures are coincidence) and £10.1 billion for enhancements. Included are £1 billion for enhancement project development and a £2.6 billion Corporate Portfolio Fund (or contingencies).
But enhancements were to be considered separately?
That’s true, but there are several programmes that will either run over from CP5 into CP6 or have been delayed to CP6. These include the first phase of electrification of the Midland main line, the tram-train pilot between Sheffield and Rotherham, work at Waterloo and others. A more complete indicative list can be found in the box nearby.
Devolution
This new way of separating major enhancements from the rest of the programme, and only proceeding once a proper design, schedule and business case is in place, as well as funding from the DfT, should make a big difference to the way Network Rail performs in CP6. However, it is far from being the only significant change.
The most obvious is that devolution has really taken hold. As part of the strategic business plan, every route has its own, including the ninth ‘virtual’ route for freight and national passenger operators (FNPO). Each one spells out the plans for maintenance, renewals, and even capital projects, in great detail.
For example, the LNE and East Midlands plan includes spending £147.1 million on renewals between Gilberdyke and Mirfield, while Wales plans to renew the iconic timber Grade II listed Barmouth viaduct, work which will predominantly cover the metallic spans and some of the timber spans and will continue into CP7.
In the South East, due to the current significant performance risk, earthworks investment has been prioritised over other asset types, involving work at 300 sites, or 30 per cent of the route. And the FNPO route plans both to push forward the fitting out of freight locomotives for in-cab signalling and to work with rail-charter customers to secure a number of ‘Strategic Charter Paths’, which would provide guaranteed gauge and vegetation cleared paths on core charter routes for steam-hauled specials.
But it doesn’t even stop with plans for the nine routes. There are separate plans for Asset Information Management (obtaining infrastructure information from service trains, reducing the need for a dedicated infrastructure condition monitoring fleet) and Property (although no significant disposals of revenue generating properties are included in the CP6 plan, Network Rail will continue to divest assets to assist with the cost of funding the railway where a valid business case exists to do so). Human Resources, Legal Services, Corporate Communications – they all have their own strategic plans and, together, these build up into the corporate plan introduced by Mark Carne.
Another key feature this time around is the inclusion of a plan from the System Operator. This is a new role, led by Jo Kaye as managing director, and it is intended to plan changes to the railway system so that the needs of passengers and freight customers are balanced to support economic growth. It enables the delivery of new outputs to the railway system through planning of new train services, by providing advice to the franchising process and by specifying the service output requirements of any new infrastructure and broader system changes required to support output changes.
As an organisation, the System Operator has evolved within Network Rail, being formally established in May 2017. From CP6, it will be separately regulated by the Office of Rail and Road (ORR) with its own settlement, in parallel with the arrangements for Route Businesses.
Overall plan
The result of all of these calculations is a clear plan that has been prepared in detail and shouldn’t have any unpleasant surprises. Mark Carne told Rail Engineer that CP5 had been the time of big projects – London Bridge, Crossrail, Great Western electrification, EGIP, Great Northern Rail and Borders. The reclassification of Network Rail, which it had been assumed would have very little impact, in fact made an enormous difference, revealing the immaturity of many of the CP5 plans.
CP6, on the other hand, will not be so much about big projects. Rather, the focus will be on running the railway better, more reliably and efficiently. This is reflected in a 25 per cent uplift in the budget for maintenance and operations compared with CP5.
In addition, CP6 will see the beginning of the Digital Railway – the rollout of traffic management (TMS), connected driver advisory systems (C-DAS) and some new steps into the deployment of the European Traffic Control System (ETCS) remain fundamental to the strategy of improving and replacing the network’s signalling systems over the coming years.
The routes have not only produced their own strategic plans but will be funded as separate businesses, and monitored as such by the ORR, while still having the benefit of belonging to one Network Rail.
Overall, Mark Carne likens the plan to a Greek arch (below), with the result of ‘A better railway for a better Britain’ supported by four massive columns – Safety, Reliability, Efficiency and Growth – built on the foundations of great people and great teams.
Safety
As part of the CP6 Strategic Business Plan, Mark wants a 10 per cent reduction in the train accident risk, as calculated using the Precursor Indicator Model (PIM). Produced by RSSB every period, the PIM provides a guide to the current train accident risk profile and any trends, calculated using precursor events data from nine main areas (infrastructure operations, signals passed at danger, objects on the line, track, earthworks, signalling, structures, level crossings and train operator failure).
PIM forms one element of the Passenger Safety Indicator (PSI), the other being the fatalities and weighted injuries (FWI) measure of personal injuries to passengers at level crossings and Network Rail-managed stations, as reported in the Safety Management Information System (SMIS).
Infrastructure Projects’ safety record is twice as good as that of the routes. IP mainly uses contractors, and some of those have world-class safety programmes, so this is an area from which Network Rail can learn.
During CP5, there were sadly five fatalities amongst the workforce. All of these were as a result of road traffic accidents. Many vehicles are now routinely monitored, which has cut down the incidence of speeding, and details of worker travelling distances are recorded and assessed.
At any one time, some 200 Network Rail employees are off work with mental health problems – the second largest individual cause of absenteeism. This number is typical for the industry, but Network Rail aims to reduce it by, firstly, making it a problem that it is acceptable to talk about and, secondly, by ensuring that good treatment and support is available. Mark feels that, initially, the incidence could even increase as it is more widely recognised and discussed, but then should fall – he’s aiming for a 30 per cent reduction.
Asset reliability
Train punctuality is not where it should be, and a lot of that is due to asset unreliability, even though reliability is better than it has ever been. Even more improvement is needed, and the aim is to reduce the PPM (public performance measure) deficit by 15 per cent.
Part of this problem has been caused by the popularity of train travel. Not only have access times for maintenance and repairs been squeezed, as trains run later and start earlier, but having more trains running on the network means that a shorter asset failure can now actually delay more trains than previously.
With 1,000 additional services to be added every day by 2021, that situation will only get worse. To further aggravate the situation, just having more passengers catching the same number of trains increases station dwell times, and so has the potential to increase delays.
In addition, PPM is not a great measurement of on time performance. It is only logged at the destination, so delays during the course of the journey are not included, and it counts any train that arrives within five minutes of the timetable (10 minutes for long-distance journeys) as being ‘on time’.
A much better measure is ‘Right Time’, where the running of the train is measured at every station and anything over 59 seconds behind schedule is late. The new System Operator, mentioned above, will work with existing franchises, and potential new ones at the tender stage, to sign off on timetables and make sure that on-time running is actually possible.
One benefit of the ‘bottom-up’ costing is that it has set a plan for every asset on the network. So those that won’t need intervention in CP6 can be earmarked for CP7, CP8 and even up to CP12. The 15-year signalling programme detailed above causes a spike in CP7 and CP8, but that is basing costs on a like-for-like replacement, whereas digital technology could well reduce both equipment and labour costs.
Efficiency
As the routes will, in future, be independently regulated, so efficiency improvements have to be targeted and delivered on a route basis as well.
Overall, costs of operations and maintenance have reduced over both CP4 (2009-2014) and CP5 (2014-2019). For CP6, an overall efficiency saving of £830 million represents some eight per cent of operating costs, or a net five per cent after accounting for external factors.
With the new organisation, only five per cent of Network Rail’s employees will work for the ‘centre’ – all the rest will be out on the routes.
Some savings could come from competition. Mark Carne was adamant that Network Rail has to be competitive in everything it does – “If someone else can compete then that’s good,” he said. He doesn’t see routine maintenance as being outsourced, but everything else, even high output renewals, could be if there was someone else to take it on more cost-effectively.
The System Operator will have a role in this, as will external funding. But that will also have to be selective, as building a station (often financed by local councils) is very different from electrifying a live railway.
Growth
The fourth pillar of Mark Carne’s arch is growth. This includes the growth in passenger numbers, the growth in trains, and the growth in expenditure to keep the railway running and to improve it.
The doubling of passengers in just twenty years is putting a strain on the railway. The most cost-effective way of increasing capacity is by using longer trains. Where this isn’t possible, infrastructure-based projects are required to allow the use of those longer trains (and more trains), but these are expensive and can be disruptive to existing passengers.
However, the railway isn’t the only organisation that is building infrastructure. In addition, over the next control period, HS2 will be getting into its construction phase. Heathrow will be adding its third runway, nuclear power stations will be built at Hinckley Point and Wylfa, and the water and electricity supply industries both have construction programmes.
All of these will also compete for government funding – another new challenge for Network Rail and for those that write the business cases to support enhancement projects.
People
The foundations of everything, in Mark Carne’s ‘arched’ view of CP6, are the industry’s people. Network Rail itself employs around 40,000, with perhaps 200,000 working in the industry as a whole.
However, rail has been criticised, along with a lot of the engineering sector, for not being diverse enough. Mark Carne was keen to point out that improvements have been made – Network Rail has employed 32 per cent more women over the last four years, but he admits that is starting at a low base (currently 16.8 per cent overall). Another 50 per cent will be added in CP6, and part of that growth will be from making the job more attractive to women. By the end of 2019, every worksite will have adequate toilet and changing facilities (although that begs the question, why don’t they now?) and no trains will discharge toilet waste onto the tracks.
Hopefully, these moves will help tone down the railway’s sometimes ‘macho’ image and attract young female graduates to the industry, amongst others.
Other initiatives will focus on ethnic minorities and the disabled. Network Rail recruitment teams have already received training on how to avoid ‘unconscious bias’ and that will continue during CP6 as the diversity of the industry increases.
Network Rail was ranked 66th in the top 100 graduate employers last year, up ten places from the previous year, and aims to be in the top 25. The company is proud to lead the industry in the development of apprenticeships across all levels in a range of technical and professional roles, offering a wide range of interesting and rewarding career opportunities.
Contractors will continue to be required to employ one new apprentice for every £3 million of contract value, after reaching a threshold of £10 million.
Over the next year
Network Rail chief executive Mark Carne is enthusiastic about the CP6 Strategic Business Plan. “The best plan we ever had,” he told Rail Engineer, adding “but I would say that, wouldn’t I?”
Mark leaves the company at the end of the summer, having been in post since January 2014, shortly before the start of CP5. “I think four to seven years is ideal for a chief executive,” he said, “and CP6 needs continuity.”
He wants to see the business plan process through to completion, but then give the next incumbent time to get their feet under the table before the start of CP6. The role has already been advertised, and the final appointment will be down to chairman Sir Peter Hendy.
“I’ve never enjoyed a job as much as I’m enjoying it now,” Mark reported, adding that “the first two years were quite difficult and challenging” but now everything has come together he finds it really rewarding.
There is still a lot of work to do, with the ORR’s Draft Determination the next step, in June 2018.
Until then, there is still a year of CP5 to go, and targets set back in 2013 to be achieved. But then, it’s called planning ahead…
Written by Nigel Wordsworth
