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Railtrack rethinks spending

A HIGH level review of Railtrack's spending programme has led to a dramatic slow down in spending on infrastructure renewal, it emerged this week.

Railtrack is understood to have put elements of its spending on track and signalling renewal programme on hold while it assesses the value it is getting from its investment so far.

The change in regime is in line with the recommendations of Railtrack's Project Destiny, an ongoing study by giant US management consultant McKinsey into spending priorities. The study's goal is to identify ways to get better value from Railtrack's investments.

But the results have prompted a significant deceleration in Railtrack's renewal spending plans.

'There has been strong pressure to turn sites that were difficult to maintain into renewals,' explained Railtrack business development director Martin Reynolds. 'McKinsey has helped us to be more analytical in how we respond to requests for renewals. They are helping us to be more consistent and to look at alternatives.

'It will lead to us doing only the necessary renewals. It might lead to some renewals currently being proposed not being done.'

Railtrack's new long term spending regime will concentrate effort on less capital intensive maintenance work. It comes on top of a shift last spring in which Railtrack cut spending on structures renewal by about 20% to concentrate on planning and facilities management.

ABN Amro transport analyst Christian Curly said a spending cut was not unexpected: 'With an imminent regulatory review coming it is not surprising that Railtrack is looking to review its level of spend.'

Reynolds said he expected engineers to notice the policy shifting from replacement to enhancement work.

But although Railtrack has given some indication of the policy switch, the step change in plan - and perceived lack of warning or consultation - has left many consultants and contractors bemused about their future work prospects.

Railtrack chairman Sir Robert Horton confirmed that the new spending regime will form the basis of Railtrack's next Network Management Statement. 'One aspect of Project Destiny is to look at the way we divide spending between maintenance and renewal,' he explained. 'The output from Project Destiny will be the Network Management Statement.'

But reports by contractors indicate that current levels of track and signal renewal work are already below the industry's high expectations, and the go-ahead for many renewal projects has been held up.

'Railtrack has realised that wholesale renewal is not giving value for money,' said one contractor. 'They are trying to sweat more use out of existing asset.'

Signalling appears to be one of the worst affected areas with projects earmarked for go ahead but then stopped suddenly. NCE understands that work in Portsmouth has already been cancelled and work postponed in Basingstoke. Both projects were earmarked for spending in Railtrack's 1997-98 Network Management Statement.

One signalling contractor said: 'We are disappointed in the level of spend.'

But lack of warning across the board about changes in the spending regime is causing most concern among suppliers. One track renewal contractor said: 'Three or four months ago all the indications were that there would be an increase in work, but the work load drop off has been severe.'

'We have high fixed costs in men and machines and will suffer badly because of this,' he added. 'The problem is the speed of the cut in spending. The work programme is in considerable disarray because there are jobs to do. No-one is sure what to commit.'

Consultants are also reporting projects grinding to a halt. One Midlands- based consultant said it had carried out tunnel assessments and come up with an upgrade programme that would secure the structures for the next 10 years. Railtrack, he said, pulled the plug on more than half of the projects.

Other firms reported having to rapidly retarget their work plans and retrain staff to cope with new work predictions. One South East contractor claims it will have to lay off staff that it took on in1997.

Richard Thompson

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