Hendy revises Network Rail project timescales as costs rise
UK: The cost of Network Rail’s infrastructure enhancement programme for 2014-19 has increased from £12·8bn to £15·3bn, according to a review by new Chairman Sir Peter Hendy which was published on November 25. He insisted that all of the planned works would still be completed, although some schemes will be deferred into regulatory Control Period 6 for completion after April 1 2019.
The report was commissioned by Secretary of State for Transport Patrick McLoughlin to investigate the delivery of committed projects following the ‘pausing’ of key investment schemes in June. Hendy emphasises that ‘the vast majority of programmes and projects will go ahead for delivery by 2019’. However, a few schemes would be deferred ‘so that Network Rail remains within its funding envelope’.
To meet the increased cost, NR is planning to raise £1·8bn through asset and property sales, while the government has increased its borrowing limit by £700m. Some renewals work will also be deferred, where this can be done without affecting safety or performance.
Revised timescales for each project will be published in early December, following consultation with the Office of Rail & Road through the formal regulatory process. Hendy says the decision on which projects to rephase was determined in part by ‘the extent to which costs had already been incurred’, or where ‘rolling stock and franchising commitments had already been made’. He also points out that ‘value engineering’ to reduce the initial outlay is ‘likely to increase long-term running costs’.
Speaking to Railway Gazette on November 26, Hendy suggested that ‘for the past 20 years the whole of the rail industry and politicians have relied on NR’s very flexible ability to borrow capital cheaply through government-backed debt.’ With the redesignation of NR as an arms-length state-owned body in September 2014, ‘those days have gone’, he warned. In future the industry would have to live with a tighter financial regime. However, the ongoing devolution of more responsibility to the eight geographical Routes should ensure ‘better sponsorship’ and a ‘sharper definition of projects’ to avoid scope creep.
November 25 also saw the publication of a separate report from Dame Collette Bowe, who had been asked by McLoughlin to investigate the reasons for the delays and cost overruns and make recommendations about future project management processes.
Bowe found that a significantly smaller proportion of schemes included in NR’s Control Period 5 business plan had reached a reasonable level of maturity compared to the equivalent schemes in CP4. The division of responsibility between the Department for Transport, ORR and NR was ‘unclear’, and lacking in focus. Changing internal structures at NR obscured lines of accountability, while there was also a lack of continuity at DfT, where the responsibilities for rail were restructured following the collapse of the InterCity West Coast franchise process in October 2012. This was compounded by the redesignation of Network Rail, which had removed the option for the company to increase its borrowing to cover any cost over-runs.
Emphasising that a long-term planning cycle brings ‘certainty’ to both the funding and planning of rail investment, Bowe says greater flexibility is needed to adjust the programme ‘in response to emerging pressures’. She recommends that ‘the role and responsibilities of ORR in respect to enhancements planning should be reviewed’. DfT and NR should also ‘reset the formal framework’ for enhancement planning to ensure ‘a clear and transparent governance process’ with ‘mutually understood criteria’ on which to track progress. She suggests that major programmes which may ‘encompass rolling stock and franchise changes as well as infrastructure upgrades’ should be ‘subject to bespoke and integrated governance’, through the creation of dedicated project delivery teams, as with Thameslink or Crossrail.
Bowe also believes that there should be greater representation of end users – both freight and passengers – in the development of enhancement projects, as well as greater engagement with the supply chain to ensure that sufficient skills and resources are available for efficient delivery.