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Network Rail: Changing track

While the government’s rail spending remained steady following last year’s Comprehensive Spending Review, Network Rail was already in the midst of a programme of efficiencies. Now the strategy for change being led by Ian Ballentine looks likely to change the face of the organisation for good.

Rail is predominantly the good news part of the UK transport sector right now. Following the coalition government’s arrival, the industry held its breath waiting to find out how deep the spending cuts would go, only to discover that it would come through with the same money for the spending period that it had expected from the previous government.

However, for some there was little reason to become complacent. Rail infrastructure operator and owner Network Rail was already under pressure to find a way to fill a funding gap for the current control period - a not to be balked at £4.1bn to be precise - and around a year ago Sir Roy McNulty began to take an inscrutable look at the organisation in his review of the rail industry as a whole.

Efficiency drive

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, without just waiting to see if it would get more money or what McNulty would say.

Network Rail’s Efficient Infrastructure Delivery (EID) project, which Ballentine began to lead, had early on identified £1.1bn worth of savings. But rather than looking for one off cost savings, Ballentine set the organisation on a path of transformation as it began to look at being better at work bank planning and having clearer accountability.

“We started to change, started getting our own house in order, but within the existing operating model,” says Ballentine. “Then last year we began reviewing how we engage the supply chain.”

“We’ve sort of taken bits from everything because you can’t just apply someone else’s environment to your own”

By having a better visibility of its work bank it could better engage its suppliers - and rather than continue with a traditional approach, Ballentine says a partnering relationship with those firms began to look attractive.

This focus suggests an increasing awareness by the organisation that it has not always had a flawless relationship with its supply chain. In the past, it, along with many other key clients in the UK, has come under fire for not stimulating innovation and failing to engage suppliers early enough. But Ballentine suggests this criticism will be a thing of the past.

“The whole point of partnering is to get better integration with the supply chain, getting it involved earlier, and trying to reduce bureaucracy and aligning goal objectives,” he says. “You can encourage suppliers to innovate and ensure they are rewarded for doing so. This is about how you can incentivise people to go the extra mile.”

Ballentine says that, rather than just implement its own partnering approach, he looked to, and borrowed from, other industries that have already been successfully working in such a way.

Petrochem examples

Two good examples came from the petrochemical industry, which was among the forerunners of partnering, and the National Grid. But the Anglian Water @One alliance - comprising Anglian Water Engineering, Balfour Beatty Utility Solutions, Barhale, Biwater, Black & Veatch, Grontmij and Skanska Aker Solutions - was, says Ballentine, “the one I’ve been most impressed with”, particularly because of the way it has evolved over time as Anglian Water matured its relationship with its supply chain.

“You go into its offices and you don’t know who works for whom - they all work for the
@One alliance with one common goal and objective,” Ballentine says. “We’ve sort of taken bits from everything because you can’t just apply someone else’s environment to your own.”

From the partnering principle, Ballentine says it became clear that the strategy had begun to carve out a different operating model for how Network Rail delivers its capital programme in two key ways.

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”, he says, adding that it is not to come up with “presupposed solutions”.

Appropriate 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.

This is what could potentially create the greatest efficiencies. As Ballentine points out, getting a clear specification from the client is the biggest point in the value curve.

“If the client isn’t clear on what it does, the value just drops down here because you’re coming up with solutions but you don’t really know what they’re trying to solve,” he says. Once you’ve chosen your solution,
really it’s just about how effectively you deliver the solution.

“And that’s why we’re saying we want the supply chain involved. It might have completely different ideas on how to achieve those outputs.”

It is quite a departure from how things operate currently, he explains. While one part of the organisation produces the requirements, “they aren’t always exactly clear” and the output decision is then “kind of blurred onwards a bit”, Ballentine says. On top of that, there is another division that develops a solution for the requirement.

“If we got involved at the development stage we could help you come up with a far better solution”

At this point the existing projects business gets involved to do the detailed design and construction management.

But then it goes to a designer to do the basic design and possibly another to do the detailed design and then a constructor - although, he says, more often these are design and build contractors.

“But you’ve already got the solution, you’ve already got someone who does the basic design, and then this company comes along and does the design and build,” says Ballentine. “No-one owns the whole thing.”

The more streamlined, partnering-based arrangement that Ballentine and his team has come up with means that the projects business - headed up by Simon Kirby (see p18) - gets involved at output and controls the solution, the design, the detailed design, and the construction. But it can engage its supply chain at the start.

Development stage involvement

This is vital for the partnering approach to work, explains Ballentine. Recalling his attendance at NCE’s More for Less round table debate last year, he says that one of the fabricator representatives in attendance summed up the problem. “He said: ‘If we got involved at the development stage we could help you come up with a far better solution but then you go and competitively tender [our solution] and we might not win - so why would we engage with you early?’”

Now, if such firms are brought in as one of the partners, come up with some “extraordinary ideas”, and then are part of delivering them, then a pain/gain share arrangement comes in to play, says Ballentine, although levels of exposure to the pain/gain share will differ. Fabricators might only have a 5% exposure, the designer might have 10% and the constructor might have 50% share of pain and gain, he suggests.

In the midst of his excitement about the new plan, Ballentine is keen to stress that it’s as much about Network Rail becoming accountable and, possibly most important of all, truly being able to “demonstrate” that it can deliver better value for money.

This brings him on to the next, dramatic change in the organisation’s history. Part and parcel of ensuring the organisation is demonstrably efficient is benchmarking it - a tricky feat in the past, but which he hopes will become more feasible as the firm begins to contest some of its lower risk work - the equivalent of around 20% of its projects. It will no longer be a fait accompli that the projects business will win the work.

The transformation looks set to be massive. And going back to his earlier point about “getting our house in order” he says first off there’s a cultural shift that needs to happen.

“If the projects business is value for money, then it will compete in its own regulated market and hold its own”

“You have to change the culture in Network Rail because if people offer better solutions but that are maybe more difficult to manage, what would make the project team really look at that?”

It will also mean a 10% reduction of the 4,400 headcount working in the projects business when the changes begin to take hold from April. “You can’t avoid that when you’re driving for efficiency, and that’s what the transformation programme was there to do,” says Ballentine.

The plan is also to set up profit and loss responsibilities for each of the businesses to help drive the change of attitude. There will be four regional projects businesses to be exact. Alongside this, devolution of Network Rail into 10 routes, plus one multi-route for major projects such as Thameslink means that each route has its own managing director client.

Learning how to bid

One of the interesting challenges is that the projects business will have to learn how to bid, he says, and how to have a commercial relationship with its client - whether that’s Network Rail or someone else.

This last point is another potential major shift. The idea is that, as a spin-off from contesting some of this work, the projects business can become a competitor, and there will be nothing to stop it being a viable project deliverer in the unregulated rail market - most notably it could then be primed for the advent of High Speed 2.

“If [the projects business] is value for money, if it can demonstrate it is a truly value for money proposition, then it will compete in its own regulated market and hold its own, and it will also compete in the unregulated market,” says Ballentine.

While this is part of the business plan for CP5 (2014-2019) - “we don’t need to do this for CP4 efficiencies” - Network Rail will be running several pilot schemes from now and over the next 18 months.

“They’ll be real awards,” he says. “It’ll help us establish the systems and governance to do this in a relatively safe environment. This is about understanding that we will make some mistakes, we will get things wrong.

“If people offer better solutions that are maybe more difficult to manage, what would make the project team really look at that?”

“But if you’re in an environment where it’s part of your efficiency plan from today, you’re putting all your projects through the process and if you’ve got things wrong it goes out of control.

“If you’re in a controlled environment of just several pilots you can learn to manage the situation and form the
organisation before you go live.”

Along with a further grand proposal to create an international consultancy - the business plan is under development but this too could go live by April (see box, p18) - Ballentine is all too aware of the scale of changes afoot for CP5 but is still very much in the here and now, warning that while what’s ahead is “massive”, it’s all got to be managed without “dropping the ball” on CP4.

 

Network Rail has 10 devolved routes, each with its own managing director, as well as one multi-route for schemes like Thameslink. The new projects business will be divided into four regions.

● Anglia

Route managing director
Dave Ward
Route km 1,219
Stations 239
Network Rail managed stations Liverpool St and Fenchurch St
Work needed Platform extensions to allow 12-car trains to meet demand on the Thameside and West Anglia routes.

● East Midlands

Route managing director
Martin Frobisher
Route km 698
Stations 69
Network Rail managed stations None (St Pancras now managed by Kent route)
Work needed London to Sheffield journey time improvements, Thameslink Programme phase one. Schemes in development, not yet funded include electrification and line speed enhancements of the Midland Main Line from London to Sheffield, Nottingham and Corby.

● Kent

Route managing director
Fiona Taylor
Route km 1,744
Stations Over 180
Network Rail managed stations Cannon Street, Charing Cross and London Bridge
Work needed Latest strategy recommends 12-car suburban trains to provide much needed capacity.

● London North Eastern

Route managing director Phil Verster
Route km 2,706
Network Rail managed stations Leeds, King’s Cross

Work needed Projects which are funded to be implemented by 2014 include construction of an additional line in to York (Holgate) station, North Doncaster chord flyover, upgrade of the Great Northern/Great Eastern Joint Line (Peterborough to Doncaster via Spalding and Lincoln), station and track layout improvements at Peterborough including two additional platforms, capacity improvements at and between Finsbury Park and Alexandra Palace, Hitchin flyover to provide conflict free access to Cambridge line and the redevelopment of King’s Cross station. The Northern Route Utilisation Strategy makes a number of key recommendations for post-2014 including further peak train lengthening or shuttle services to make the most efficient use of capacity, construction of the Northern Hub and new platforms at Leeds, Huddersfield and Manchester Airport stations.

● London North Western

Route managing director Jo Kaye
Route km 3,298
Network Rail managed stations London Euston, Birmingham New Street, Liverpool Lime Street, Manchester Piccadilly
Work needed Passenger numbers on some Scottish routes are expected to more than double over the next two decades. Network Rail is working to expand the Scottish network having delivered a new £300M rail link between Airdrie and Bathgate in 2010 and work ongoing on a £1bn programme of electrification in the central belt which will deliver faster and more frequent services between Edinburgh and Glasgow by 2016, as well as enhancing journey times and service levels on a range of other key routes.

● Scotland

Route managing director
David Simpson
Route km 2,682
Stations 350
Network Rail managed stations Glasgow Central, Edinburgh Waverley


Work needed Passenger numbers on some Scottish routes are expected to more than double over the next two decades. £1bn programme of electrification in the central belt which will deliver faster and more frequent services between Edinburgh and Glasgow by 2016

● Sussex

Route director Mark Ruddy
Route km 1,118
Stations Over 170
Network Rail managed stations
Gatwick Airport and Victoria
Work needed Train lengthening is a key priority for enhancing services into London Bridge and Victoria.

● Wales

Route managing director
Mark Langman
Route km 1,498
Stations 240
Network Rail managed stations None
Work needed Regenerating the railway in the Cardiff area by 2015 to allow more trains to run via Cardiff Queen Street and Valleys. Improvement of stations across Wales by 2015.

● Wessex

Route managing director
Richard O’Brien
Route km 2,054
Stations Over 200
Network Rail managed stations
Waterloo
Work needed Platform lengthening to allow 10-car trains to operate on much of the suburban network. Plans are also underway to re-open the Waterloo International terminal which will enable the planned service increase on routes via Putney from 15 to 16 during the busiest hour of the day.

● Western

Route managing director
Patrick Hallgate
Route miles 1,592
Stations 197
Network Rail managed stations Paddington station
Work needed A major £5bn improvement programme to turn Great Western mainline into Britain’s most advanced intercity railway is underway. A programme of seven core packages of work, the largest of which is electrification of the lines from Paddington to Oxford, Newbury and Bristol.

Network Rail: Changing track

Readers' comments (2)

  • Barry Walton

    As an extraordinary idea, has anyone thought of redesigning the standard bulhead rail to be an asymetric section that reduces the amount of steel required to deliver a running surface over much of the track length. Obviously flexibility of laying without wondering if they were on the correct side would be lost but there might be a lot of steel cost to save.

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  • Netowrk Rail?

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