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08.09.14

Delegating NR spending decisions may not be so ‘cavalier’ – APM

A move by Network Rail bosses to “free up board time for more strategic issues” by delegating cost and contract controls to the Executive Committee may not be as ‘cavalier’ as some union leaders have suggested. 

The minutes of Network Rail’s June 2014 Board Meeting revealed that the company, newly re-classified as public sector, has agreed that for any programme already covered in the CP5 Delivery Plan, the approval threshold for the Executive Committee would be raised from £150m to £750m for both project and contract approvals. 

It was reported that the move means non-executive directors charged with scrutinising Network Rail’s activities, such as chairman Richard Parry-Jones, would only approve the biggest projects and contract awards. 

But Martin Samphire, chairman of the Association for Project Management’s (APM) Governance Specific Interest Group, told RTM: “As Network Rail has just been re-classified as part of the public sector, I would be expecting boards to be reviewing their delegation powers regularly. 

“And from what I’ve seen [Network Rail] has said that it can now – because it has enough history with managing major programmes and projects – delegate some of its powers to the Executive Committee. It has said, ‘we will make sure they have a terms of reference and we will assure ourselves that they are doing things in the right way’. 

“And because of this, it is going to increase the value that the Executive can approve. For me, yes, the value matters. But it is not majorly significant.” 

He argues that most of the projects they will be investing in, and the contracts they are awarding, are going to be sub-sets of major strategic programmes, which have already been agreed as part of the strategic plan which the board has signed up to. 

After looking at the minutes of the report, it was also revealed that for programmes not covered in the CP5 Delivery Plan, if they exceed a threshold of £250m a strategy approval would be required by the board, but thereafter the £750m approval threshold for the programmes project and contract approvals would apply. 

But new programmes not covered in the CP5 Delivery Plan under £250m would be approved by the Executive Committee, which Network Rail’s chief executive Mark Carne sits on. 

However, Manuel Cortes, general secretary of the Transport Salaried Staffs Association union, said: “Given the sums involved, the board should continue to sign off any project in excess of £150m. 

“We are talking about taxpayers’ money here for a network which already has the highest fares in Europe.” 

RTM asked Network Rail for a comment, and was told the “slight tweak isn’t as big a change as it seems”. 

A spokesperson added: “The board retains overall budget and business planning approval for all major projects and will continue to review monthly updates on them. 

“However, the delegated authority to approve spend on these big projects has been made higher for the Executive team, without having to seek formal approval from the board. ORR and DfT oversight of these projects remains and indeed becomes more exacting with reclassification with ‘accounting officer’ responsibilities for Mark Carne.” 

Network Rail says the decision provides more responsibility and accountability for the team running the company and the day to day business of the railway – the Executive team. 

Additionally, for the next 12 months until end of May 2015, all matters approved by the Executive Committee above the existing threshold of £150m will be reported to the board. 

Samphire told RTM that the APM has published a guide for boards called ‘Directing Change’, which lays down some guidelines for boards as to how they should oversee investment in projects and programmes. 

“The key premise to the guides is that the board is ultimately responsible,” he said. “But good governance is about if they delegate some of that accountability to other bodies A) those bodies should have formal terms of reference and B) the board needs to assure itself that the body is carrying out its role in accordance with the delegation powers. The board can never lose its overall accountability, so it needs to ensure delegated bodies are working effectively.” 

(Image c. Stefan Rousseau)

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