INTRO: A consortium led by Atkins Rail has completed a strategic review for the Danish national railway infrastructure agency Banestyrelsen, setting the forecast investment budget for 2003-15. A more proactive approach to managing railway assets should make a real difference to the bottom line

BYLINE: Marius Sultan

Principal Consultant, Asset Management, Atkins Rail

BYLINE: Jens Chr Jensen

Head of Asset Management, Atkins Rail

AMONG THE MAIN challenges facing Denmark’s Banestyrelsen as an infrastructure business was the uncertain condition of its track assets, and the lack of a clear understanding of the size of the maintenance and renewals backlog. Key performance indicators for assets were not well developed, and the company was unable to predict the behaviour of track assets in terms of performance. A robust business planning process with a medium and long-term horizon was also needed.

The key objectives for Atkins Rail and its study partners BSL Consultants of Germany and IBM of Denmark were to understand the network’s current condition, produce a set of key performance indicators to define the steady or ’normal’ state and to develop a network model to predict track investment needs year-on-year. We also undertook a review of current systems and procedures to examine how best to integrate the new model within the organisation.

Our study found a substantial backlog of renewals which had built up over a number of years and which needed to be addressed in order to return the network to an appropriate level of performance. We indicated that the current expenditure on track maintenance and renewals of DKr600m a year would need to be doubled in order to reduce this backlog over the next seven years and bring the network up to the recommended standard.

Banestyrelsen had previously relied on a more subjective approach to capital budgeting, and its business plans had been criticised for lacking robustness. It has also proved difficult to measure how far investment programmes had been completed and targets met. Although aware of the backlog, without decision-support tools Banestyrelsen was unable to quantify its size accurately.

According to Danish Transport Minister Flemming Hansen, our report confirmed that ’too little money has been spent on maintenance and renewals on our track infrastructure. When assets are allowed to be run down they get relatively expensive to fix.’ On the basis of our findings, the government immediately granted an increase in funding of DKr360m as an interim measure towards improving network performance. The funding needs of the railway sector will be reviewed next year with a view to maintaining a sustainable network.

The Banestyrelsen network comprises 4000track-km where DSB and other operators achieve around 156million passenger-journeys a year, as well as freight traffic.

Overall, Banestyrelsen expects traffic to increase by up to 25% over the next five years. Passenger traffic is expected to grow as DSB implements its Good Trains for All programme. And although the recent economic downturn has seen a decrease in transit freight moving between Germany and Sweden, freight traffic is expected to pick up around 2005, as increased taxation on lorries in Germany shifts the competitive balance in favour of rail and away from the road and ferry route to Sweden.

At present, the bottlenecks on the Danish railway system are around København and Kastrup Airport for traffic to and from Sweden, in southern Jutland and on the cross-border route into Germany. With the general requirement for freight traffic expected to double to 2 trains/h by 2020, there is certainly scope for capacity enhancement.

Asset management strategy

Well established in the water, gas and oil industries, where systems have been developed to improve efficiency in response to strong competition and/or government regulation, asset management is about bringing together a consistent set of procedures, tools and resources in order to align assets with corporate objectives. Considerations will include efficiency and effectiveness, corporate stewardship, finance, risk, value for money and the legal responsibilities of the company in question.

Our model of asset management is best thought of as a cycle (Fig 1), starting with the existing data, which creates asset knowledge in terms of understanding condition, how an asset degrades and the cost of keeping it functioning over its whole life cycle. Once we know this, we set the level of performance/risk which is acceptable and produce a maintenance and renewals plan covering a particular timescale.

It is vital that the process enshrines a clear understanding of business objectives, and then establishes standards and procedures in order to meet those objectives. The correct mix of skills needs to be in place to carry out tasks efficiently, with the organisational structure and management control and review systems focused at the right level.

Atkins has been able to assist its clients by considering planning, organisational and control aspects and integrating asset knowledge with management functions. Rather than re-inventing the wheel, we have found that working with the client’s existing systems is usually the best way forward. The added value is in linking these systems together and being able to draw out specific information for management purposes using real-world constraints. More specifically, we have developed decision-support tools designed to enable senior management to make executive decisions based on reliable information which supports the operational side of the business, and also by helping to identify what needs to be maintained and renewed where and when.

The operating environment influences the decision-making process, as managers need to reconcile the differing needs of their customers and stakeholders within budgetary and safety constraints. As Banestyrelsen Chief Executive Jens Andersen has pointed out ’it is expensive to postpone maintenance and renewals activities, however, we must recognise that it is ultimately a political decision how much we are allowed to spend in order to reduce our backlog’.

With the pressure to reduce public spending unlikely to ease, getting value for money from the supply chain is a key issue. In the UK, Network Rail has decided to take back direct control of some infrastructure maintenance contract areas in order to determine how far this is the case. Other considerations include the appropriateness of engineering standards and procedures to the strategy, which in the case of maintenance might be proactive or reactive.

There are often organisational issues to be addressed to ensure that procedures and processes are in place to support the business strategy. Effective asset management that produces real benefits for the bottom line entails a holistic approach, taking into consideration systems, processes, long and short-term plans, resources, the effect of innovation and business risks. Most importantly, there needs to be a commitment from senior management and line managers to make any plan work. In short, the system needs to be aligned with the needs of the business.

Quantifying risk

Our approach to the Banestyrelsen review was to understand the company’s current asset knowledge in terms of what assets it has, as well as their location, condition, performance and criticality in the system, which aims to quantify the consequences of failure. We undertook a physical condition assessment, surveying around 400 km or 10% of the network.

Consultants joined staff from Banestyrelsen and the Ministry of Transport in workshops to establish what the steady (normal) state of the network should be. Once key performance indicators (KPIs) were agreed, they were benchmarked against figures from Germany, the Netherlands, Sweden and Switzerland.

The main KPIs established for Banestyrelsen are age of assets, rail quality, reliability of switches and crossings, track quality (including ballast and formation) and temporary speed restrictions, which form one of the outputs of our model. Overall, the network was found to be in only ’fair’ condition, at the lower end of the benchmarked countries. Maintenance activity complied with current safety standards. We found that there were very few broken rails, for instance, mainly due to the fact that a preventative grinding programme is in place.

Rails and sleepers have tended to be replaced at the same time, which sometimes sacrifices rail life but gains safety and reliability benefits. This practice is not always cost-effective, and a cost:benefit analysis should be carried out to assess where the balance lies. This will to a large extent depend on the remaining life of the rail or sleepers, but cost savings of up to 20% could be achieved by altering the work mix. The driver for renewal in one particular case was the presence of twin-block sleepers which tend to require replacement sooner due to corrosion of the tie bars.

Once basic parameters had been established, we developed a network model which simulated train operation and used track degradation models to define the expected life of the assets. The model is then able to determine the level of maintenance and renewals expenditure required to achieve the desired steady state. The difficult part is modelling the respective advantages and disadvantages of undertaking maintenance or renewal, and relating outputs to the KPIs.

DSB’s Chief Operating Officer Johannes Pedersen was convinced that ’the need for renewal is essential for us. We have no doubt that temporary speed restrictions and poor passenger comfort mean that we will lose passengers. However, it is difficult for us to say exactly how much impact the bad track will have on our business.’

The network model is able to generate a number of cost options and then optimise work in terms of opportunity costs such as train delays, failures and penalties. The investment model was optimised and prioritised on this basis. We also analysed a number of work package options combining rail, sleepers and ballast to minimise whole-life costing and obtain the maximum benefit from limited periods of access to the track for maintenance. By considering various maintenance/renewals trade-offs, we were able to demonstrate real savings of between 10 and 20% off the baseline costs. Rather than through productivity gains, these savings would be achieved by more intelligent use of maintenance possessions.

Risk and uncertainty are often overlooked, but all long-term forecasts have some degree of uncertainty associated with budget estimates. A Monte Carlo simulation technique was used to assess the uncertainty of the final estimate, and we found that there was a 95% chance of the budget being correct to within