27.10.16
Digital Railway at risk of further eroding supplier confidence
If plans to enhance network capacity through Digital Railway are so over-ambitious that they later need to be scaled back, Network Rail risks discouraging future investment in the UK by rail suppliers – and further eroding confidence in the market, the Transport Select Committee has warned.
In a report published as part of its ‘Future of Rail’ series, the committee stressed that the infrastructure owner has a duty to keep plans “measured and realistic”, otherwise it risks scaring off suppliers whose confidence in the rail market is already damaged.
It argued that the rail supply chain has already suffered from “a series of procurement cancellations and programme revisions” by Network Rail, most notably by aborting the procurement of the National TMS programme.
Alstom, for example, told MPs that the infrastructure owner issued several signalling and traffic management tenders worth over £1bn, pushing the company to scale-up its UK capability and resources – only for tenders to then be “cancelled, put on hold or scaled back massively”.
Aborted procurement plans have impacted both on suppliers’ willingness to invest in the UK and in the skills of the workforce. Hitachi Rail Europe said the industry lacks the right skills to carry out innovation work at the necessary scale, while Thales and Alstom claimed the cancellation of the TMS programme caused “difficulty in keeping people” and made the UK “potentially less attractive”.
But the Digital Railway business plan, expected before the end of the year, is an opportunity to “regain eroded industry confidence”, the committee argued – as long as Network Rail is “mindful of the damage that will be done to supplier confidence if another technology procurement is started only to be halted or abandoned”.
Part of ensuring the plans are viable is about involving suppliers in the business case development, with the whole project needing a “cross-industry approach”.
Although Mark Carne, Network Rail’s CEO, and Alistair Gordon, the Rail Delivery Group’s head of technology, have already emphasised that the project will include an industry-wide approach, early signs indicate that this ambition may already be faltering. Hitachi Rail Europe told the committee that supplier input into the programme was limited, TOCs called for greater involvement in the implementation, and companies have stressed the importance of being consulted “on any process before moving technology forward”.
“The Digital Railway programme cannot be delivered without a cross-industry approach,” MPs said in the report. “Technology suppliers are clearly fundamental to a modern rail network. We recommend that Network Rail address the concerns expressed in the evidence we have taken that suppliers and the rail technology industry have not been sufficiently involved.
“Network Rail and the DfT should take steps to ensure that the views of suppliers and the rail technology industry are heard in consultations on the potential, scope, and cost of projects. It is important that work on the Digital Railway is co-ordinated and is underpinned by a whole sector approach.”
The committee’s chair, Louise Ellman MP, added that the infrastructure owner must “keep a firm grip” on its sector-wide plans: “There will need to be a full cost/benefit analysis published case by case, for consultation, before strategies can be finalised. The DfT will need to seek input from rolling stock owners, passenger and freight operating companies, technology suppliers and trade unions representing railway workers.
“This is a real opportunity to give the UK’s rail passengers a world class system. Network Rail’s past performance in planning major enhancements has been poor but this is an exciting opportunity to restore confidence by co-ordinating a whole sector approach which delivers real improvements for the passenger and industry.”
Control period restrictions
Discussing funding structures, the committee suggested the DfT should “consider carefully” whether the Digital Railway, or elements of it, should be placed outside of the five-year control period process, in accordance with Bowe Review recommendations.
MPs reported that major companies expressed concern at the control period process, with Paul Copeland, MD of Siemens Rail Automation, arguing that the “cyclical nature of the control periods has meant that the signalling industry has suffered in the past from feast and famine”. This has led to a hike in costs and to losing skilled people from the sector, “perhaps to other countries”.
In response, the DfT argued that there is no reason control periods should act as a “barrier to good planning”, citing HS2 and Crossrail as examples of where the funding structure didn’t deter investment. But the committee argued that these projects are managed under bespoke arrangements, in line with Bowe’s recommendations for major infrastructure projects.
While the department does not yet know what the best roll-out mechanism will be for Digital Railway, such as whether projects will be included in the periodic review process or not, the former rail minister, Claire Perry, alluded to the possibility of the National Infrastructure Commission becoming involved.
Capacity boost claims
With regards to capacity, MPs warned that Network Rail should be “very cautious” about how it uses its usual claim that digital signalling will boost network capacity by 40%. In practice, this means that the forthcoming business case must consider alternative ways of achieving the same level of growth in order to make an “informed decision on the likely cost/benefit ratios and funding for the Digital Railway”.
“Rather than claims of up to 40% we expect to see a more sophisticated assessment of the likely capacity gains that look at different investment scenarios and their associated costs, benefits and risks,” the report said. “It is important that the DfT and Network Rail make a realistic assessment of how much extra capacity each system within the Digital Railway programme can deliver to meet growing demand.
“Where the Digital Railway offers the best solution it is important that other work, such as that needed to improve station capacity, is done simultaneously to enable the investment in the Digital Railway to deliver its full potential.”