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Spend shift from renewals to enhancements will cause asset deterioration – ORR

Network Rail is proposing to deal with the significant cost increases in civils by reducing the amount of renewals it will carry out in CP5, particularly for earthworks – instead focusing primarily on enhancement projects.

The Office of Rail and Road (ORR), in its quarterly Network Rail Monitor report, said the move would result in further deterioration of these assets, which it had hoped to stabilise during this control period.

“We recognise that civils cost pressures have to be managed within the wider challenge of delivering the CP5 settlement as a whole within the available funding,” the regulator said.

“However, we must also acknowledge the risks inherent in a decision to prioritise spend on enhancements projects over the core business of maintaining and renewing the network.”

The ORR said it is now seeking assurances that changes to planned renewal and maintenance of the existing network can in fact be properly resourced and managed safely.

Cutting the amount of renewals it does during the control period will be the “principal change” to allow Network Rail to manage its core business within its borrowing limit, the Hendy review says. Network Rail thinks this “can be managed safely and does not go so far as to create a backlog that cannot be caught up in subsequent control periods”.

“There will be an increase in renewals expenditure in CP6, particularly relating to structures and earthworks assets,” the Hendy review adds.

The ORR says it will monitor and inspect the network to ensure Network Rail remains consistent with its licence obligations on the conditions of its civils assets.

The regulator has also not been able to decide the efficient level of funding that must be sent to civils works. When Network Rail submitted a workbank for years 3-5 of this control period in March 2015, it was unable to provide enough certainty about the costs of the work – which the ORR said “appear to be significantly higher than expected during the periodic review”.

While delivery of track renewals has improved this year and is now close to the original plan, the ORR said there are still significant shortfalls in civils and signalling. Underbridges are 33% behind plan and earthworks are 8% behind plan, for example.

Maintenance work continues to vary widely compared to plan, which the regulator says actually reflects weaknesses in the plans themselves.

For plain line track, for example, less tamping and stoneblowing was delivered than originally planned. In contrast, there has been more wet bed removal, manual correction of plain line geometry, and replacement of pads and insulators.

“To address this, the routes are working with their maintenance delivery units to develop asset management plans at delivery unit level, so that plans better reflect local knowledge of maintenance needs,” it added.

“Network Rail is also employing ‘lean’ management methods to improve accountability, and to provide a line of sight from the centre down to delivery unit level. These are best practice approaches that should result in more realistic and robust plans that are better delivered in future.”

RTM has contacted Network Rail for comment but has not yet received a reply.


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