The Last Word

01.05.15

The importance of benchmarking for cost optimisation in high-speed rail projects

Source: RTM Apr/May 15

Kimmo Oostermeijer, a director at specialist infrastructure and transport consultancy LeighFisher, says it is vital that high-speed rail promoters can demonstrate that individual projects are as cost-effective and efficient as possible.

There is no doubt high-speed rail is increasingly popular and its growth is set to continue. The global market for high-speed rail totalled £68bn in 2013 and £74bn in 2014. This market is expected to reach £88bn by 2019, registering a compound annual growth of 3.6% over the next five years. 

Countries from Poland to Turkey to Saudi Arabia are either planning or have recently opened high-speed lines, and Russia recently unveiled plans for a high-speed super highway to connect Europe and America, dubbed the Trans-Eurasian Belt Development. 

As high-speed projects grow in popularity, so too does the scrutiny they come under, especially in terms of cost. The European Commission recently opened an in-depth investigation to examine the public financing of a test centre for high-speed trains, while the proposed Californian bullet train’s $68bn (£45bn) price tag is the object of intense debate. And of course, in the UK there is the much-discussed HS2 project. While some are lauding this as a way to improve both rail capacity and north-south travel times as well as regenerate lagging regions, others object to the scheme’s £33bn proposed cost. 

This level of interest is perhaps unsurprising, as high-speed projects usually depend on an element of public funding. A positive business case, at least for the operational phase, is a requirement that ticket prices must be sufficiently low to attract a big enough user base to achieve the mobility objectives. As such, it is vital for infrastructure managers and government departments alike to be able to demonstrate that individual high-speed rail projects are as cost-effective and efficient as possible. 

Being able to benchmark performance to assess the cost effectiveness and efficiency of projects is, therefore, hugely beneficial. By analysing specific cost drivers and comparing these to high-speed railways across the world, users can identify cost optimisations and areas for improvement, ultimately leading to better decision-making. 

Benchmarking performance can be challenging, as those who have launched high-speed rail projects naturally want to protect their intelligence to maintain a competitive edge. In addition, high-speed railways are not like-for-like and there are many differentiators to take into account, such as length and characteristics of the route. 

To combat this, at LeighFisher, we have developed a new, unique tool that can deliver an independent cost analysis. This benchmarking tool compares specific high-speed railways across the world by identifying the Inherent, Structural, Systematic and Realised (ISSR) cost drivers and collecting staff and cost data for all comparators. The data is normalised for the inherent cost drivers (as these cannot be influenced by infrastructure managers). 

Using this method, cost and staff numbers per equivalent kilometre of track can be calculated, allowing for detailed comparison of effectiveness and efficiency. As such, cost optimisations in the short and long term can be identified and inform better decisions in terms of operations, staff and maintenance. 

This tool not only helps infrastructure managers demonstrate they are working cost effectively and making informed decisions to deliver more efficient and effective services, it also enables government departments to show that public funds are being well invested and managed. 

We were recently asked by a European high-speed rail infrastructure manager to perform an extensive operational, maintenance and renewal (OMR) cost benchmark, including 10 worldwide high-speed line comparators, mapping their cost to OMR activities. 

We found considerable differences with maintenance expenditure between the lowest and highest comparators, which were all directly related to decisions that infrastructure managers had made. As a result of this, we identified three main reasons for the differences: adopted maintenance strategies; maintenance staff utilisation; and ‘the learning organisation’. 

The learning organisation refers to understanding the (changes to) specific asset behaviour along the route so that maintenance processes can be tailored and optimised over time. Making even relatively small changes in these areas can have a big impact on the bottom line. We further found how choices in the development impact the operational cost, providing the insights required to design a high-speed railway with lower operational cost. 

High-speed rail is here to stay, that much is clear. It is in the interests of all involved in high-speed projects, from rail operators and infrastructure managers to government departments and passengers, for projects to be as cost-efficient as possible, not only for the initial construction but especially for the operational and whole-life cost. Having an independent, specialised way to deliver this can only be a positive move.

Tell us what you think – have your say below or email opinion@railtechnologymagazine.com 

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