Rail Industry Focus

01.06.12

Network Rail becoming a 'group of companies'

Source: Rail Technology Magazine Jun/Jul 2012

Simon Kirby, director of Infrastructure Projects at Network Rail, updated the Infrarail 2012 conference on the ongoing work to set up his unit as a completely separate company, competing with the private sector for Network Rail’s work.

“We will be a fundamentally different company by the end of 2012,” Simon Kirby told a large crowd who had come to hear him speak at Infrarail 2012 – before joking that he would soon be a competitor to a lot of them.

That is because his part of Network Rail is being hived off from the rest of the company, and becoming a separate unit and eventually a separate subsidiary company, that can compete with the private sector for projects work where Network Rail is the client.

He explained: “Running a monopoly organisation, it’s virtually impossible to demonstrate value-for-money. You can benchmark things but clearly, ultimately, competition is the only way we believe we can do that. Opening the market up, as part of this process, to competition on some of our projects is one of the key elements and reasons behind doing it.”

He said: “As we move to CP5, elements of what Investment Projects in the old organisation delivered by right, will be opened up to contestability. So the Infrastructure Projects organisation will be competing in the market for projects, alongside what we believe will be new market entrants.”

He also explained: “To have a competitive market, bearing in mind that our key client will be Network Rail, we have to separate the infrastructure project business into a separate subsidiary company. A lot of work has been going into that, and the plan is to make that change next year, to enable true competition with a separate subsidiary company, with its own systems, processes, financial capitalisation, etc, to be able to operate in that environment.”

Kirby said that in CP5, Network Rail Infrastructure Projects will be “a major player, but not the only player in developing and delivering projects for Network Rail”.

The Infrastructure Projects team is not devolved in line with the route businesses, but instead into four regions: Scotland & North East, Central, Western and Southern.

He explained: “It’s aligned regionally with the route businesses: the new route businesses are the prime customers of my business.

“We’re not route-based, due to economies of scale and technical reasons behind some of the projects, but we have route delivery directors supporting each of the key customers.”

Although some programmes and functions will remain national, however, such as signalling, Kirby said that devolution plus the Infrastructure Projects spin-out means Network Rail will soon better be thought of as “a group of companies”.

Kirby said: “It’s about having clear, accountable relationships. It’s about the four regions having, this year, for the first time, profit and loss accounts, and running them as a business with accountable management teams. For me, it’s about giving those people more accountability, decentralising the organisation, and I hope for you, you start to see different behaviours on the ground.

“We do still have a central organisation, but that’s under half the size of the organisation of a month ago. It’s about moving the responsibility into the regions and having some support from the centre, rather than having the centre running the business, which is certainly where we were a couple of years ago.”

He added: “We do think this will open up the market in terms of new suppliers.”

But he went on: “Inevitably, as we get closer relationships with our suppliers, we’ll potentially have less partners in the future than we did suppliers in the past. That’s almost inevitable, as we go into more frameworks and that type of tendering. But hopefully, that will enable longer-term planning in those partner organisations. We’ll have much closer projections of work, people will know what they’ve got to deliver not just next month but next year and after that.”

He noted that the company’s changing relationships with people who might previously have just been suppliers means there are now situations where Network Rail staff are working for a contractor, who is working for a Network Rail manager. Equally, its ‘deep alliance’ with South West Trains means Network Rail staff are now working under management teams made up of both the operator and Network Rail.

The company is now expanding its horizons and considering launching an international consultancy businesses. Kirby said Network Rail is often asked for advice by foreign governments, agencies and engineers, and that although organisations like DB and SNCF offer those services, it does not. He said if it goes ahead, however, it will be small scale to start with and more about perceptions than revenue.

Kirby spoke of the need for earlier engagement with partners, and said it is happening already to some extent, for example at London Bridge: “We start construction in 2013, and as of last year, all of our key partners – certainly at first tier, and in some cases at second and third tier – are now involved in the design process, helping to deliver a safer and more constructible solution.”

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