HS2

25.11.16

ORR: Shrunken NR renewals will have ‘adverse effect’ on assets

The ORR is predicting a greater reliance on a greater range of safety controls in order to maintain asset safety as a result of Network Rail’s (NR’s) shrunken renewals portfolio, with “some adverse effect” currently expected on asset condition and performance across the network, particularly earthworks, drainage and structures.

The amount of work available for the specialist supply chain is also likely to shrink in some areas as a result, which could potentially impact its ability to deliver the greater volumes of work required to recover the network in the medium term – particularly in track renewals – and thus hiking future costs.

In its half-year assessment of NR, the ORR also revealed that while the infrastructure owner expects to underspend its budget by £3m this year, work not done and to be delivered beyond 2016-17 will be worth over half a billion pounds.

The figure, forecast at £503m, is expected to include £423m on renewals work, £69m on enhancements and £11m on associated schedule 4 compensation payments for track possessions.

Taking this into account, NR is expecting to underperform against its own budget by £295m on renewals and £124m on enhancements.

So far this year, progress on renewals, which was sharply criticised by the ORR in 2015-16, has been positive in most areas – but plain line track renewal is 17% behind plan. Renewals underperformance is largely attributed to signalling delays, reduced volumes, additional contractor claims, and less work being delivered by the high output plant.

Similarly, enhancement underperformance is linked to higher contract costs, supply chain constraints and access issues on Northern Hub, EGIP, East West Rail and the rolling Scotland electrification programme. Across the latter, for example, the next delivery target for the electrification of the Edinburgh-Glasgow line is likely to be missed.

And while NR achieved seven out of the eight planned project completion milestones in the six-month period since the Enhancement Delivery Plan was re-baselined, the delivery of CP5 enhancements “continues to be challenging”, the ORR said.

“Some future milestones have slipped backwards within the control period and cost pressures across the portfolio have required some difficult decisions for NR and the DfT on scope that has been deferred to CP6,” the regulator’s report explained.

“For example, there have recently been changes to the Great Western programme announced by the DfT. This underlines the need for NR to realise the benefits of its Enhancements Improvement Programme to keep costs and schedules under control.”

The infrastructure owner has also spent more than it expected at the start of CP5, with this trend expected to continue throughout 2016-17, which means there is currently pressure on its borrowing facility with the DfT. The ORR argued it was important that NR has a “robust plan” in place to deal with any further cost pressures, since it has “continually been too optimistic” in forecasting its financial performance.

Joanna Whittington, the ORR’s chief executive, commented: “At the half way point in this five-year funding period, our analysis shows that NR has made progress on key areas including safety and asset management.

“More still needs to be done to tackle problems with performance so that the impact on passenger delays is reduced and to ensure that financial underperformance does not contribute to operational challenges in future.”

NR delays impacting TOC performance

The infrastructure owner was also blasted for its shortcomings in recovering services after incidents, which has affected the performance of operators this year – bringing punctuality and reliability levels down, “contrary to expectations”.

Delays per incident, a useful metric to measure this phenomenon, have been increasing in recent years and NR itself has described reducing them as a “must win”.

To measure NR’s performance against a range of measures, the ORR has also started using the infrastructure owner’s ‘route scorecard’, which takes into account elements like safety, financials and train performance.

“The scorecards currently show NR’s delivery to most TOCs missing punctuality and reliability targets,” said the regulator. “In the second half of 2016-17 we will be focusing on holding NR to account for its delivery to Govia Thameslink Railway (GTR), Southeastern, Virgin Trains East Coast, South West Trains and Heathrow Express.”

It highlighted GTR as a particularly notable example, with passengers experiencing train performance “well below acceptable levels”. While this is partly the result of traincrew and fleet issues outside of NR’s control, a “significant proportion” of delay is categorised as ‘uninvestigated’ and ‘unexplained’, which hinders the company’s ability to understand and address the underlying causes.

In its report, the ORR also confirmed that it backs the industry-wide view that new performance measures are necessary in CP6 to address the “limitations” in the current system. PPM and CaSL, for example, simply provide ‘pass/fail’ assessments and take no account of the numbers of passengers on the train.

 

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Comments

Lutz   26/11/2016 at 17:56

These "School Reports" always make depressing reading. You sort of hope the child will come good, but there is no hint of it yet. You have to wonder how NR is going cope, and what will actually be delivered by the end of CP5 when you at what is coming down the line in terms of difficulties in financing, costs, potential supplier collapse, and on-going failures in execution.

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