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Government rubber-stamps Network Rail rebirth

Transport secretary has given her full backing to Network Rail’s plan to restructure itself in order to deliver £1.8bn a year of efficiency savings.

In her Reforming Our Railways: Putting the Customer First Command Paper, Greening accepts that Network Rail is well on track to eliminating a large chunk of the rail industry’s £3.5bn a year efficiency gap identified by the McNulty rail review.

The Paper says that Network Rail, with the help of the Office of the Rail Regulator, will deliver at least £1.2bn a year savings by 2014 and at least £1.8bn a year by 2019.

The value for money study by Sir Roy McNulty concluded last year that inefficiency across the railway industry is costing farepayers and taxpayers £3.5bn a year.

“Network Rail is really grasping the nettle in responding to the challenges facing the rail industry,” said Greening. “I welcome warmly the steps it has announced to improve performance and efficiency.” From April Network Rail intends to revamp its organisation by effectively splitting its client-based function of setting outputs away from its delivery-based function of developing schemes. A new investment projects division will compete with the industry to earn the right to develop and deliver these schemes (see box).

The rail operator has also de-centralised its operations business to its routes; started the process of developing alliances with train operating companies; and started to involve suppliers earlier in the delivery of projects and to develop more collaborative working arrangements with them.

Network Rail said these moves would deliver the £1.2bn a year savings by 2014 and that it was is working with the Rail Delivery Group to identify further savings which the industry as a whole can deliver from 2015 onwards.

“Today’s command paper gives us a solid platform on which to continue to carry out that task as well as to contribute, along with our partners in the Railway Delivery Group, to the debate about how we continue to maximise performance whilst balancing it with our other objectives of increasing capacity, improving journey time and reducing cost,” said chief executive David Higgins. “We look forward to the government’s next contribution to that debate in the high level output specification in July of this year.”

Greening said the savings delivered would go towards curbing fare increases, funding investment in rolling stock and better infrastructure, and lessening the industry’s reliance on public subsidy.

Network Rail: changing track

Since the beginning of Control Period 4 (CP4) in 2009, and with the advent of the funding gap, Network Rail programme director Ian Ballentine has been leading an effort to establish it as a more efficiently run business.

By having a better visibility of its work bank it aims to better engage its suppliers - and the firm identified that a partnering relationship would help with its efficiencies. First, the organisation will create a “clienting” way of working with this role clearly defined as creating output requirements.

This means getting them clear and fixed, “but that’s as far as it goes”, Ballentine told NCE last month, adding that it is not to come up with “presupposed solutions”. Secondly, at the point at which the client begins to specify what it wants, the projects business - which will supersede the current Investment Projects division - will come in to work out the most appropriate and cost effective solution with the client.

The most significant difference is that, because the projects business will have its supply chain “bolted in” early, those relevant firms will become part of creating the solution, before they design it and then construct it, he says.

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