A review led by Professor Peter Hansford, which looks at what Network Rail needs to do to bring more private investment to the railway, was published earlier this year – and it pulled few punches.
Professor Hansford, who sat down with the Rail Engineer following the publication of the review at the end of July, was approached by Network Rail’s chief executive Mark Carne to carry out the assessment at the end of last year.
Although the review focuses heavily on investment, it also sets out the benefits of private-sector competition for Network Rail.
The review was put together by Peter Hansford with the help of the Nichols Group and Rail PR. The process was supported by an expert panel which included Alistair Gordon, the chief executive of Keolis UK; Andy Milner, chief executive of Amey; John Smith, managing director of GB Railfreight; Matthew Symes, a partner at Concerto; Mike Gerrard, independent expert; Zara Lamont, performance improvement director at Carillion; and Daniel Hanson, director of policy and economics at PricewaterhouseCoopers (PwC).
The review made 12 recommendations, which ranged from encouraging Network Rail to publish details of upcoming projects, to giving each of the routes the commercial capability to look at alternative design and delivery models for projects.
New models and behaviour
Route devolution is central to the report’s recommendations, which points to a transition away from the traditional hub and spoke contracting approach used by Network Rail Infrastructure Projects (IP), although Prof Hansford believes that there would still be a need for a centralised IP even with empowered routes. Over the next 12 months, Network Rail has been tasked with identifying ‘pathfinder projects’ to test different delivery models.
Prof Hansford said private companies should be expected to help fund projects from which they will derive benefit. That said, Network Rail would still need to provide general oversight and decide whether projects fit the wider network strategy.
Several sections of the report talk about how a lack of process and the current culture is hindering Network Rail’s ability to engage with the private sector. Companies consulted as part of the review said their experience of working with Network Rail had been difficult and “fragmented”. The review specifically talks about the need for a “welcoming, predictable and trusting environment” that would give the private sector more confidence around cost and risk.
The report made some practical suggestions for Network Rail to consider. These included creating a new service level agreement that establishes the terms of business between Network Rail and third parties. It also said that there should be a single point of contact within Network Rail to simplify the whole process.
Risk vs reward
The allocation of risk appears to be one of the biggest barriers to overcome. The uncertainty that exists during the early stages of projects can even make the cost of bidding unviable and the review found companies felt pressured to accept “emerging cost” contracts, which impose any additional project cost on them even if it is the result of an error by Network Rail.
To address these issues, the review recommends creating an “early development fund” to cover some of the initial bid costs and, as a result, allow companies to produce more “high quality proposals”.
Prof Hansford also touched on the prickly issue of standards. He highlighted scenarios where contractors are required to make changes to the cost and scope of projects to meet standards dictated by Network Rail. One of the recommendations states that an appeals process needs to be established.
The response to Prof Hansford’s review was immediate. Network Rail has already announced a series of reforms that address many of the review’s recommendations. These include publishing regular updates on upcoming opportunities, demonstrating flexibility around standards and drawing up a service level agreement. Prof Hansford believes Network Rail has even gone beyond his recommendations in places. In particular, Network Rail plans to launch a reward scheme that would see it share the profits of innovation with private-sector partners.
Mark Carne said: “I am determined to create an environment where innovative third party companies can compete for and directly deliver railway projects. These reforms mark the next stage of Network Rail’s transformation, having already decentralised into nine devolved individual businesses.”
He added: “I am also determined to find ways for the private sector to directly invest in railway projects. As a government-owned business, this has some challenges but, by unlocking private finance, we can potentially deliver railway improvements that would otherwise not be possible.”
This article was written by Marc Johnson