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Infrastructure 2012: Thinking along the right lines

The rail industry in 2012 looks set to reward great partnering with myriad lucrative contracts on offer.

The significance of rail in 2012 will be huge for many in the civils sector. There are iconic projects, like Crossrail, that are set to scale up their engineering effort next year, while other schemes head to the finish line and yet more will be vying to get up and running. Its significance is well illustrated by the fact that for contractor Bam Nuttall, rail accounts for over half of its £760M to £770M turnover for this year. While notably that includes some of its revenue from its increasingly successful tenders for Crossrail work, even without this London mega-rail scheme, the firm will still put its rail turnover at over £250M.

“Increasing the use of early contractor involvement you can get parties together at the right time to squeeze efficiencies”

But there is more from where that came from, and the first port of call for contractors looking to win work is to take note of what’s happening with the industry’s key client. Bam Nuttall board director for rail David Belsham is one person keenly anticipating the effects of the changes planned by client Network Rail in the coming months. The rail infrastructure owner and operator is set to next year begin implementing great changes to the way its projects business operates - promising earlier involvement of its supply chain and becoming more accountable, which it hopes will be particularly helped by its plan to begin competing for some of its low risk projects (see box below).

“It’s such an interesting model and clearly reflects the opinions of Sir David Higgins, coming to Network Rail from the Olympics,” says Belsham. “By introducing or increasing the use of early contractor involvement you can get parties together at the right time to squeeze efficiencies.

“We’re on a journey. And while civils will always be our foundation we are broadening our skills.”

This is the most significant aspect of the changes, he suggests, because of the recent McNulty review of efficiency in the rail industry, which in summary, was about “doing more for less”. However, he is confident that Network Rail was not simply waiting to be told by McNulty what must change but had rather begun planning changes to its business model before that.

Bam Nuttall is eager to evolve in line with client expectations along with how it plans to position itself to win work in the future. One such shift is in the way the firm is broadening its skills from being a traditional civil engineering firm. Client expectations have urged it to begin bringing in people from the wider sector with skills such as systems and mechanical and electrical engineering abilities. “We’re not there yet,” Belsham says. “But we’re on a journey. And while civils will always be our foundation we are broadening our skills.”

Supply partnerships

But it doesn’t stop with the internal skills and - perhaps a theme reflected in Network Rail’s new preference for establishing more partnering from its supply chain in future - Belsham is careful to celebrate the notion that other contractors can help it win key work. Increased and improved partnering and early contractor involvement has been one of the great experiences of the last 10 years, he says.

Close to home, Belsham says that while traditionally from a Bam point of view the Nuttall business - previously operating as Edmund Nuttall - did only civils work, in the past few years things have changed. Bam Nuttall has begun to encourage its sister company contractor Bam Construct into the rail market. This is helping it bolster its position as a provider of more than just civils but one that can, for example, deliver associated retail, office or commercial developments for clients.

Long term commitment

One fine example of where this has worked is in Bam Construct’s recent success as the contractor for building Network Rail’s vast new headquarters at Milton Keynes, which Belsham points out didn’t even begin as a rail job as the building isn’t that close to the railway. But the client was impressed with the way the sister companies worked to tender for the work, including the demonstration of how Building Information Management software would aid quality controls.

Outside the Bam family Belsham points to long running successful partnerships without fallout, including a decades long relationship with Norwest Holst and more recently with its parent firm Vinci.

Most notable recent wins in the latter joint venture are the complex and huge jobs for Tube Upgrade station works at Tottenham Court Road and Victoria.

“Government support for electrifying much of the remainder of the rail network is another great boost for the sector”

The two firms parted to bid - both successfully - for different Crossrail contracts and Belsham points to the benefits yielded by another established relationship, this time with Kier, who it worked with closely on CTRL (now High Speed 1). But he adds that for Crossrail work these two have been joined by Spanish construction giant Ferrovial, that has brought another dimension.

These schemes are just a few that have been gathering pace and are coming to big build stages or completion throughout next year. But the rail industry is fortunate that 2012 promises more than just the long established schemes and is perhaps even more fortunate than other infrastructure sectors that have been rather thin, says Belsham.

Schemes that Bam Nuttall and the rest of the industry will be targeting in 2012 include more work on Thameslink and Network Rail station upgrades at Reading and Birmingham New Street.

Great amount of work

Recent government support for electrifying much of the remainder of the rail network is another great boost for the sector, says Belsham, adding that the scope of the work could be underestimated by focusing on the electrical engineering effort required to update the Great Western line. In fact, firstly there is a great amount of work to be done in this area in the North West, but in addition to electrifying the lines, a large number of bridges will need raising or changing making it an enormous civils effort too, he says.

It’s not just Network Rail that offers up great opportunities for rail infrastructure schemes in the UK, train operating companies are clients with rewarding opportunities too. This is illustrated by Bam Nuttall’s Evergreen 3 contract for Chiltern Railways, which completed this year thanks to a “heroic effort”, says Belsham.

Other propositions look possible north of the border, in particular because of the Borders Railway and the £1.3bn Edinburgh to Glasgow improvements. While the latter could still slip in programme, it received a firm mention in the Scottish government’s new £60bn infrastructure plan this week. This stated that work will start in the current control period to 2014 and be delivered in phases in the next period between 2014 and 2019.

“It’s a good place for us to be. So we’ve not got all our eggs in one basket.”

The broadly estimated £250M Borders scheme - reinstating the former Waverley Line between Edinburgh and Tweedbank - has been less than straightforward. Bam Nuttall was the remaining bidder out of three for the originally planned PPP arrangement for the scheme before it was reneged on and delivery got handed to Network Rail. However, Belsham says it’s a project the team will “try very hard” to win. Again this week’s announcement from the Scottish government stated that the intention was to get on site next summer to get the line operational by 2014.

All of these opportunities demonstrate a broader theme for the contractor with regard to the rail sector - that it will have a good spread of workload, clients and geography. “It’s a good place for us to be,” says Belsham. “So we’ve not got all our eggs in one basket.” The theory is one that looks set to continue to appeal to clients, along with firms’ abilities to become a more broad offering to ensure that the UK’s major rail projects are delivered on time and on budget through 2012 and beyond.

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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