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The business of change

Network Rail’s new chief executive David Higgins was visiting construction of the company’s new Milton Keynes National Centre last week. How does the development fit into the track operator’s future regionalisation plans? Jackie Whitelaw reports.

Four stylish H-locks rising from a site two minutes from Milton Keynes Central station are from next year going to be the new home for 3,000 of Network Rail’s planners, buyers, logistics specialists, timetable experts and project managers in what is going to be the company’s main operations centre.

The firm is already one of the town’s big employers with 900 people busy co-ordinating Network Rail operations. Influential visitors to the area tend to take in Network Rail before going off on a tour of Grand Prix teams in the locality. “They call in on us and then head off to Red Bull,” says one of the Network Rail press men. It’s illustrious company to be in and could be an indication of where the company’s ambitions lie in terms of efficiency and ingenuity.

Focusing teams

Certainly, Network Rail’s new boss David Higgins has arrived with a reputation for focusing his teams pit-stop style on exactly what they need to be doing so they are not side tracked by roles that can be better delivered by other people. His former employees at the Olympic Delivery Authority, where he was chief executive for much of the 2012 building work, praise his determination to have the right people doing the right job. It sounds a simple thing to do but people have an amazing facility for acquiring extra roles and responsibilities outside their skill sets and it takes a sharp mind to keep that under control.

Higgins managed it for London 2012. Now, after the years of centralisation, Network Rail has someone in place who will understand how best to allocate staff and resources as the firm moves into the next phase of its evolution and devolves authority to the regions.

“I want someone who can run a business rather than a cost centre and who can integrate functions to run a route”

David Higgins

Centralisation was a vital part of Network Rail’s development, Higgins says. “Look at what has been achieved - blockades for renewals, maintenance improvements, all brought savings. Our maintenance costs dropped from £1.5bn to £700M a year over two control periods. There have been equal efficiencies in our procurement standards.

“But the big thing now is that we are moving to a major upgrade of the network - in signal controls, projects like Thameslink, electrification - and that means we have to work closer with the train operating companies. Planning workload and getting track time is the important thing. We get a fraction of the time of the Europeans to do the work because of the density of our network.”

Working closer with the train and freight operating companies means regionalising to match their activities. And ahead of the publication of Sir Roy McNulty’s rail review, which is advocating the same thing, Network Rail is creating 10 route managing directors. The first two appointments - in Scotland and Wessex - are due to be announced this week.

The intention is to make the railway more efficient by increasing responsiveness at local level and making Network Rail in the regions much more aligned with the train and freight operating companies from a business point of view.

Tailor made solutions

“There are tailor made solutions for different routes, where our customers can give us information that we don’t have, and we can amend our management of the route for the benefit of all,” Higgins explained to a recent House of Commons Transport Select Committee meeting. “We need to be more localised in our decision making.”
Network Rail has attracted significant outside interest in the new route managing director roles, which will see individuals running significant operations with up to 3,000 staff. The company is also interviewing existing and internal candidates.

“I want someone who can run a business rather than a cost centre and who can integrate functions to run a route. The route managing directors are going to be given more authority to make decisions and more responsibility. But you do need people who know how to run railways.”

Where does that leave the Milton Keynes National Centre though?

“Most of the time you don’t save by screwing the supply chain. Waste comes from not knowing what you want to do”

David Higgins

“What’s left in the centre? The centre has to be the focus on assurance, policy and long term strategy but it has to be regionally aligned,” he says. “When we devolve more authority to the regions we are always going to require a central resource in asset management, major projects and logistics.”

Central buying, he explains, can have benefits for Network Rail and others. “It’s hard to beat our buying and we are starting to buy for outside organisations like Transport for London. We’ve put huge investment into recycling items like ballast and sleepers through distribution centres and we can service other big capital projects in rail.

“Some contractors are buying from us too. But we have to be competitive. And the best way to do that is by benchmarking.

Flushing out the facts

“People say we are 40% less efficient than Europe. I say ‘where?’. It’s an interesting statement, but a sweeping statement. Only by benchmarking can we flush out the facts.”

In line with the move away from centralisation and in the search for savings, innovation and efficiency, Higgins says he wants the private sector to take on more work and get involved earlier in the planning and design process.

“More of our work is going out to competition,” he says. “If you can do it cheaper to our level of safety and standards, then do it.”

Network Rail is using early supplier engagement on £6bn of projects, creating joint venture delivery teams that should allow the track operator to capitalise on the expertise and innovation that contractors and consultants can bring to cutting project costs. The right people doing the right job, in fact. The new £60M Hitchin flyover is the first out of the blocks (see feature, page 20); to be followed by the Edinburgh to Glasgow improvement programme, London Bridge Thameslink, high output delivery of the Great Western electrification, national resignalling projects, Birmingham Gateway and the civils renewals programme.

This is clearly not a pilot programme but the way things are going to be for the foreseeable future. Suppliers will also be helping Network Rail develop project options and then deliver the best solutions.

“You have to be an intelligent client but also use the best the industry has. I believe in bringing in contractors and designers early. The issue is to do things smarter,” Higgins explains.

“Most of the time you don’t save by screwing the supply chain. Waste comes from not knowing what you want to do.

“You create all the value in the first four (planning) stages of a project, you lose it all in the last four (delivery) if you don’t know what you want.”

Network Rail can’t afford for that to happen. It is having to make 22% or close to £7bn of efficiency savings on its £31bn allocation during CP4, the current five-year spending period to 2014, and there is close to £1bn still to find.

The regulator is going to expect more in the next CP5 spending round, probably an extra £1bn on what was asked for this time. The track operator is currently working on its CP5 outputs, which are due to be unveiled in September and which will include work on electrifying the Northern Hub, signalling and controls upgrades and all the existing programmes.

Small in-house team

And here’s another reason why Network Rail doesn’t want or need to build a big in-house project delivery team. The company is heading towards an unprecedented amount of investment as it upgrades the current network. Signalling work, a vast programme of electrification, Thameslink including the hugely challenging operations at London Bridge, the rebirth of Birmingham New Street and Crossrail, which includes network changing investment at Reading station are all on the immediate horizon. But after that, rail investment will fall back to more normal levels.

“The next three to four years will be our peak capacity,” Higgins says. “We’ll be spending £3.5bn a year in major projects. In 10 years we won’t be.”

Much better then for the supply chain to provide the resources for the work rather than Network Rail to expand and then contract, but Network Rail can provide the central resource that maintains standards and has an overview of what needs to be done.

The right people for the right jobs and some of those people and jobs will be in Milton Keynes.

The new national centre

Network Rail’s £109M National Centre in Milton Keynes is being built by Bam Nuttall, with Mace as project manager and Waterman as civil, structural and environmental consultant.

URS Scott Wilson is building services engineer, sustainability and building physics consultant. Bringing its people together under one roof is expected to save Network Rail millions of pounds by greatly reducing the amount of office space it rents around the country. The centre will pay for itself in less than a decade, the company says.

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