INTRO: By contracting out every aspect of infrastructure installation, renewal and maintenance, Railtrack has given British companies a head start in exploiting a market worth US$30bn a year - if other operators follow suit
BYLINE: David Fison MA CEng FICE,
Managing Director of Balfour Beatty Rail Ltd, told Richard Hope why buying the biggest stake in British Rail’s infra-structure service units has positioned the company to offer similar services worldwide
IT IS NOT unusual for contractors to undertake specific tasks on the track. Private companies compete for track renewal contracts in France and Italy. Profile grinding and ultrasonic inspection of rails is performed by on-track vehicles which roam the North American networks with their own crews, regardless of which railroad has hired them that week.
Routine maintenance embracing everything from daily patrols to replacing a defective sleeper is another matter. Aside from major industrial plants such as steelworks, such tasks have almost always been undertaken by railwaymen employed directly by the engineering departments.
Not so in Britain. The revolution that will have swept all British Rail’s activities into the private sector by March 31 includes the contracting out by Railtrack of every manual task and a large part of maintenance management as well, leaving the infrastructure owner essentially with strategic planning and performance monitoring roles.
Equally remarkable is the decision to award multi-disciplinary contracts for complete maintenance within a region of all elements of the infrastructure including structures, fencing, drainage, track, signalling, and traction power on electrified lines.
This is big business. The world’s railways spend up to US$30bn each year on infrastructure maintenance and routine renewals. If the British experiment is seen to produce higher quality at lower cost than traditional direct labour, other operators will be swift to follow suit. Where competitive bidding is permitted on an international basis, companies that can demonstrate a good track record in this field will be able to expand fast by taking over the client railway’s existing labour force and moving in experienced managers.
Balfour Beatty takes the plunge
Last year, BR disposed of its entire labour force engaged in maintenance and renewal, having first reorganised them into seven infrastructure maintenance companies and six smaller track renewal companies, all geographically defined. Each company was sold with a contract between BR and Railtrack lasting three to five years.
As might be expected, established civil engineering contractors were prominent among the bidders, but few had any significant experience of railway work beyond new construction or the renewal of bridges. A notable exception was Balfour Beatty Ltd, owned by BICC, the only bidder to acquire three of the new companies.
Balfour Beatty has been involved in railway work since its inception in 1909, but after buying the long established tracklaying business of Henry Boot in 1989, the company also became active in export markets such as Hong Kong and Singapore. The three mainstream rail activities were switch and crossing manufacture, track installation and electrification, with annual turnover ranging from £100m to £150m .
On April 2 1996, Balfour Beatty purchased three of the 13 BR subsidiaries for a total of £50m: Southern Track Renewals Co Ltd, South East Infrastructure Maintenance Co Ltd, and Eastern Infrastructure Maintenance Co Ltd. At a stroke, rail turnover was quadrupled to around £450m and the number of staff involved jumped from around 500 to over 6 500.
On the same date, Balfour Beatty Rail Ltd was formed with David Fison as Managing Director. For the moment, the three former BR companies are still operating within BB Rail under their old names because, as Fison explains, ’there is a lot to digest and we need to understand what we have acquired - for example, the maintenance units had substantial organisations within them handling small scale project work.’ He also has to get through ’a significant regulatory process including safety cases’ before the structure of the newly acquired companies can be changed.
The objective, to be achieved by mid-1997, is to bring all the group’s rail activities within the scope of BB Rail, apart from basic civil engineering. BB Rail is already the largest of six functional groups within Balfour Beatty Ltd, and railway electrification has still to be transferred from within Balfour Kilpatrick in the coming weeks, taking turnover to around £450m.
Railtrack maintenance dominates
Fison is creating four divisions of which the largest will be BB Rail Maintenance; 4 700 mostly ex-BR staff are concentrated south and east of London, though they also look after the East Coast main line to the Scottish border and the Midland main line to Sheffield.
Whereas maintenance was an insignificant part of BB’s rail business prior to April 1996, it now accounts for 40% of turnover. ’In the past, maintenance contracts were simply not there because railways did it themselves’, Fison points out. ’What work there was arose out of new works or major upgrades, such as the National Railways of Zimbabwe 25 kV 50Hz electrification from Harare to Gwelo, completed in 1983, where the company maintained the catenary and substations for the first two years after construction.’
His aim is not only to expand maintenance in Britain as Railtrack’s original contracts run out in 1999-2001 and true competitive bidding starts, but also to look for similar opportunities abroad. Asked how soon this is likely to occur, he says ’it is happening already - there are plenty of people putting up their hands out there.’ But Fison stresses that ’each government or railway administration has to make its own decision on contracting out maintenance - it’s a question of "can we help?", not "we know better".’
Projects and design
BB Rail Projects will handle all project work, including that formerly undertaken by the BR maintenance companies. This division will also absorb the electrification team from Balfour Kilpatrick, while most of the electrification maintenance staff inherited from BR will remain with BB Rail Maintenance.
Design capability is seen by Fison as one of BB Rail’s great strengths, with 140 design staff rivalling the larger engineering consultants. This is particularly valuable in a situation where multi-discipline design-and-build contracts are increasingly common, sometimes with maintenance thrown in for good measure.
Hong Kong’s prestigious Airport line is only the latest example where the company has won separate track and electrification contracts; the Channel Tunnel and Singapore’s Woodlands extension were others. In such cases, Balfour Beatty’s track and electrification operations were able to share marketing and other functions. Fison says of Hong Kong ’it was undoubtedly a huge advantage that we could operate together and offer that to our client.’
In contrast, Sheffield Supertram was a fixed-price package deal within which Balfour Beatty provided all the infrastructure; the vehicles were supplied by Siemens. With trackwork and electrification teams integrated in BB Rail Projects, together with the group’s capacity to design and build major structures and signalling installation capability inherited with the BR companies, Fison believes that he will be well positioned for any package deal. For example, he secured in December the signalling and track elements of the Croydon Tramlink enabling works, following October’s contract for trackwork on Bangkok’s Berts project (RG 10.96 p615).
Manufacture and plant hire
Southern Track Renewals brought with it 25 tampers and over 75 other on-track machines, together with numerous items of plant. Because of the arbitrary way machines were allocated in the break-up of BR, STR had evolved a substantial plant hire business as machines were loaned to other parts of the rail business. This forms the basis of BB Rail Plant Division, which has merged the STR inheritance with the smaller plant hire activity that Balfour Beatty was already operating.
BB Railway Engineering Ltd was the company that previously handled all trackwork contracts. It now becomes solely a manufacturing unit within BB Rail, the main product being switches and crossings. BBRE’s plant at Sandiacre, near Nottingham, is Britain’s largest S&C plant with substantial exports going to North America as well as supporting the trackwork contracts obtained in the Far East.
Inside knowledge
Fison sees a detailed understanding of how engineering within an operating railway actually works as one of the major benefits that Balfour Beatty acquired when it bought its stake in BR’s maintenance organisation. ’The three companies brought with them a huge amount of knowledge of the Railtrack infrastructure that has proved invaluable. Before, Balfour Beatty was happy to lay track, but we didn’t have that knowledge in the same depth about what happened to it afterwards.’
He believes that when the original track renewal contracts expire at the end of next year, firms that did not acquire part of the BR organisation ’will have a problem because the knowledge inside the railways is phenomenal.’ For this reason, he believes that contracting out of infrastructure maintenance on other railways around the world is far more likely to involve taking over - rather than displacing - the middle managers, supervisors and staff now working for the railway in the traditional manner.
Asked whether BR did the right thing in packaging the infrastructure companies as geographically based multi-discipline organisations, where railways have traditionally kept track, signalling and electrification in separate departments, Fison has no doubts. ’I have to say from my experience that they did the right thing. It has allowed us to look at monitoring the railway as a whole rather than separating the functions. This has enabled us to improve the service and reduce costs simultaneously.’
It is not a question of training all staff to work across the disciplines ’which would be a waste of skills’, although broad knowledge to a limited depth is proving valuable in rapid response teams. Rather, it helps to make better use of track possessions when as many jobs as possible are dovetailed together - ’clearly, having an integrated management is highly beneficial in making that happen.’
Fison comes back to the value of inside knowledge, citing a recent embankment slip. ’A meeting was called at which the permanent way supervisors said there had been no warning signs such as wet spots or the need for extra tamping. Then the overhead line engineer piped up from the other end of the table saying "I knew there was a problem because we had to readjust the wires every two or three years". The mast foundations had started to lean outwards, and this actually gave the first indication of trouble. If you can get that information to everyone, you’ve got an early warning system. These are the sort of things we have to move towards to get a total perspective on our infrastructure.’
Performance payments
An elaborate process has been established by Railtrack for allocating every minute of train delays to the company responsible, and these financial penalties impact directly on Fison’s bottom line. Nevertheless, he describes it as ’a remarkably good scheme which has changed people’s thinking in the industry more than anything else. We are now focused on keeping trains running, and they are running more reliably than they were before.’
Giving up possessions on time has become a key objective. Fison claims a threefold reduction in possession over-runs since April, and when they do finish late ’it tends to be minutes rather than hours.’ Specific break points are built into plans allowing the line to be restored early if it becomes evident that the full task cannot be completed on time. Once an over-run is known to be inevitable, the control office is contacted in good time so that diversions or other arrangements can be made.
Payments under the maintenance contracts with Railtrack, which reduce annually in real terms by 2·5% compound over five years, also depend on quality measures such as track geometry being achieved. While Fison is not unhappy with the current regime ’we haven’t yet found a measure of the inherent quality of the infrastructure that would tell me we are maintaining it properly to the standard specified. For example, track geometry could still be satisfactory even though some sleepers were nearly life expired.’
What he would like to do, as techniques for measuring the condition of infrastructure are refined, is shift the arbitrary boundary between maintenance and renewals higher up the scale so that BB Rail takes more responsibility for decisions on when to patch or replace components such as rail or contact wire. ’At present, we tell Railtrack it needs doing, they come and have a look, put it into their programme, issue tenders for the work, and we bid for the job. We are looking at how that process could be streamlined as a way of offering our client a more efficient and comprehensive service.’
Fison recognises that Railtrack will want to keep up competitive pressures by bidding large renewal jobs, ’but as an industry we want to avoid duplication of effort - I don’t think its going to happen this year, but that is where we see contracted infrastructure maintenance heading.’
World markets
Fison is convinced that railway maintenance is going to be very big business, and that the market will open up quickly. The fact that BB Rail is already operating in several key markets, such as the Far East, will be a major advantage in securing work as it becomes available.
In North America, Balfour Kilpatrick won the US$360m contract for electrification at 25 kV 60Hz of the Northeast Corridor between New Haven and Boston, when it had to be rebid after a group led by Morrison Knudsen failed to deliver on the original deal. S&C from Sandiacre also finds a ready sale in the USA. Fison sees ’big opportunities arising in proposals for medium distance high speed services which will need a lot of work on the existing infrastructure.’ The point here is that American expertise is focused on high tonnage freight rather than passengers.
Continental Europe may prove more difficult, but just as rolling stock manufacture is becoming more fluid, competitive bidding for new works could soon extend into the maintenance field. BB Rail won a contract worth £5m last year for track design and installation on the Øresund link between Denmark and Sweden.
The primary objective of contracting out maintenance will be cost reduction, and some ambitous forecasts of 30% to 50% savings were made during the early stages of BR privatisation. Fison is more cautious, noting that ’BR was a good company, so we started from a good position.’ Nevertheless, ’if we look back after five years, I believe we will have gone a long way.’
The implication is that scope for savings outside Britain could be greater, but he cautions against transferring infrastructure costs from one region to another. When setting maintenance standards, ’a lot depends on how important it is that the trains don’t stop running.’ In other words, the reliability required to get commuters into a major city like London is not of the same order as moving freight on a regional railroad in North America.
Fison’s objective is simply to become a front rank supplier of comprehensive infrastructure services in the new market that the dissolution of traditional state railways is going to create. ’We have got to be able to offer total capability from design right through to maintenance. Combining our existing talents with the wealth of experience gained by taking over BR’s maintenance units has given us a unique ability to deliver on that.’ o
CAPTION: The track machine fleet inherited from Southern Track Renewals has given Balfour Beatty Rail Plant a major role in supplying plant for work on projects such as London Underground’s Jubilee line extension
CAPTION: Balfour Beatty’s 1991 contract to relay parts of the Chiltern lines was British Rail’s first major test of contract track maintenance and renewal
CAPTION: Fig 1. By mid-1997 Balfour Beatty’s rail businesses will be restructured into a single subsidiary, Balfour Beatty Rail Ltd, with four operating divisions
CAPTION: Much of Balfour Beatty’s recent tracklaying work has been in the Far East, including the Singapore MRT Woodlands extension in joint venture with Gammon
CAPTION: Balfour Beatty is starting work on a US$360m contract to electrify Amtrak’s Northeast Corridor between New Haven and Boston
La maintenance de l’infrastructure devient une grosse affaire
En passant des marchés pour tous les aspects de l’infrastructure, de la conception et la construction au renouvellement et à la maintenance, Railtrack a donné aux sociétés britanniques une tête d’avance dans l’exploitation d’un marché d’une valeur de US$30 milliards par an. Balfour Beatty a acheté la plus grande part des unités d’infrastructure de British Rail, quadruplant ainsi son chiffre d’affaires dans une entreprise qui traitait historiquement les voies et l’électrification comme des activités séparées. Cette société qui a expérimenté les avantages de l’intégration pluridisciplinaire, est bien placée pour offrir un ensemble complet de gestion infrastructurelle, en reprenant si nécessaire des employés actuels des chemins de ferInfrastrukturerhaltung wird zu einer grossen Angelegenheit
Durch die Untervergabe aller Aspekte der Infrastrukturarbeiten - von Entwurf und Konstruktion bis hin zu Erneuerung und Wartung - hat Railtrack britischen Unternehmen zur Auswertung eines Marktes mit einem jährlichen Gesamtwert von US$30 Milliarden einen Vorsprung gegeben. Balfour Beatty erwarb den gr
