Network Rail has earmarked £1bn to develop schemes in the next five-year spending period to get them to a point where cost certainty can be reached and avoid the cost over-runs that have plagued the current funding round.
The funding pot was announced as Network Rail chief executive Mark Carne outlined £49bn of spending on the UK network over the next five years, of which just £10.1bn will be for design, development and delivery of enhancement projects.
Carne had already revealed last November that the majority of new enhancement projects will be separately funded on a case-by-case basis in control period 6 (CP6) and beyond, rather than as part of the regulated settlement.
The Strategic Business Plan now published confirms that regulated enhancement funding will fall to £10.1bn in CP6, with much of it made up of projects that were not delivered in CP5. With Network Rail’s Infrastructure Projects team overseeing enhancement spending of £19bn in CP5, this will result in a sharp drop off in workload for civils contractors once the legacy projects are delivered and as the business cases for new schemes are fully developed.
Broadly, £7bn will be for delivery of schemes that are in Network Rail’s existing pipeline, £1bn for design and development work with the remaining £2bn covering delivery of projects not currently in Network Rail’s pipeline.
The potential pipeline for development and delivery of additional enhancement schemes on a case by case basis in England & Wales will be set out in a plan for rail investments to be published by the Department for Transport later this year.
At the plan launch Carne admitted that a ‘top-down’ approach to funding had caused overspends and resulted in the failure to deliver some projects.
“The big difference between CP6 and CP5 is that CP5 was planned top down,” he said. “In CP6 what we’ve done is start from the bottom up: these are the assets we’ve got, every set of points, every signal, every bridge every tunnel embankment and cutting.
“We’ve worked out exactly what we need to do and we’ve built the budget up from the bottom.”
The remaining £39bn allocated to Network Rail in CP6 will be largely divided between operations and maintenance projects and renewals. There will also be a £2.6bn group portfolio fund to provide contingency for risks associated with CP6 projects.
The allocation of money came after the Hendy Review into CP5 criticised Network Rail over poor planning and cost estimation, leading to over runs on some larger enhancement projects.
In response, the operator has made a number of major governance changes. Under the new structure, it will act as a “federation of devolved businesses operating within a national framework”.
Each route has developed its own plan with business development directors from Network Rail liaising with customers and stakeholders in the areas to establish what is needed.
Carne said when the new control period started, only 5% of Network Rail staff would work in the core team, with the rest assigned to the different routes.
The rail operator has also brought in a new planning system, allowing it to record maintenance records, schedules and renewal dates for each asset on the network.
“It’s that kind of detail that persuaded the Treasury to give us all the money we’ve got,” said Carne.
“They said ‘why should we give you all this money?’ We were able to say, this is what we’ve got and this is what planning to do in this control period and we could go down to every detail. It’s a basic thing, but it’s asset management on a massive scale, it’s a huge step forward.”
The Strategic Business Plan (SBP) represents Network Rail’s initial, but detailed view, following the publication of the governments’ (England & Wales and Scotland) high level output specifications (HLOS) and statements of funds available (SoFA). The Office of Rail and Road (ORR) will now review the plan and make a draft determination of Network Rail’s funding needs in June, and a final determination in the autumn.