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"Be more transparent," ORR tells Network Rail

Network Rail should give its supply chain more detail about future workload as part of efforts to slash £1.7bn from its spending on infrastructure renewal work over the next five years.

This was one of the conclusions of the rail regulator’s assessment of the track operator’s proposed spending plans for the period between 2014 and 2019.

The Office of Rail Regulation said Network Rail should cut by £1.7bn the amount it has budgeted to spend on replacing built assets between 2014 and 2019.

This is down from a forecast of £14.4bn in Network Rail’s Strategic Business Plan for the period.

Cost cutting on such renewal work represents the large majority of the savings the ORR has proposed for the rail infrastructure operator.

In contrast, the regulator marked down by just £200M the budget for Network Rail’s enhancement work - including major projects such as the Thameslink upgrade and Crossrail. It said the track operator should spend £12.2bn.

“We robustly challenged Network Rail’s renewals plans and found unit costs that were not justified,” said a spokesman for the regulator.

“It can improve the way it manages engineering works. It could improve supply chain management by giving more visibility of the work bank.”

The ORR said Network Rail needed £21.4bn for support, operations, maintenance and renewals work from 2014 to 2019. This compared to £23.3bn outlined for the purpose in Network Rail’s Strategic Business Plan.

While the proposed budget for enhancement works was relatively untouched, the regulator warned it would be revisiting £7bn worth of spending in March 2015.

“The £7bn is for schemes at such an early stage of development that the costs are uncertain and fixing them now would incur a risk premium,” said the spokesman.

“Network Rail needs to go away and work with the operators to develop the plans further.”

Civils firms welcomed the approval of investment on the railways and echoed the watchdog’s plea for more engagement with the supply chain.

Civil Engineering Contractors Association external affairs director Alasdair Reisner said:

“We believe the demands on efficiency will be deliverable, but will require co-ordinated effort and a continuation of Network Rail’s moves to improve its engagement with its supply chain to produce optimum results.”

Network Rail “welcomed” the the regulator’s comments and said it would analyse the findings before giving a formal response in September.

Atkins managing director for rail Douglas McCormick said the regulator’s report recognised the importance of investing in infrastructure to aid the economic recovery.

“As the ORR acknowledges, there is a clear requirement for us all to continue working smarter and more efficiently to reduce the cost of running the railway,” he added.

 

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