National rail review Q2 2008-09 - UK Government Web...

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National rail review Q2 2008-09

Transcript of National rail review Q2 2008-09 - UK Government Web...

National rail reviewQ2 2008-09

Contents

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Network Rail monitorFurther details of Network Rail’s performance are published in the Network Rail monitor. It is a scorecard of high-level key performance indicators (KPIs) together with a commentary. The Network Rail monitor for quarter 2 2008-09 is at:

http://www.rail-reg.gov.uk/upload/pdf/384.pdf

National rail trendsNational rail trends (NRT) continues as the main official rail statistics publication containing a wide range of data from various sources including network usage and performance.

National rail trends is at:

http://www.rail-reg.gov.uk/server/show/nav.1863

FeedbackWe are keen to receive your feedback on the usefulness, content and format of this publication. Please contact Brian Hatfield on 020 7282 2073 or [email protected] with your comments.

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1. Overrunning engineering work - have the lessons been learned? 3

� A rotten start to 2008 3

� A positive response by Network Rail 3

� Still much to do 4

� Could it happen again? 5

2. What is happening in the GB rail freight market? 6� A positive future for rail freight 6

� Recent market trends 6

� The future of freight 7

� Operating costs 7

� Investment 7

� Ability to respond to change 8

� Accommodating growth 9

� Meeting the needs of customers 10

3. The impact of ROGS on the rail industry 11� Purpose of ROGS 11

� Second survey results 12

� Next steps 13

National rail review – tenth edition 1 December 2008

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A rotten start to 2008Last New Year engineering work being carried out by Network Rail overran its scheduled timescales at Rugby, at Liverpool Street in London and at Shields Junction in Glasgow, causing severe disruption to rail users.The Office of Rail Regulation immediately launched an inquiry into the causes of the disruption, and we published our findings at the end of February. We concluded that most of the disruption could and should have been avoided with better planning and management of the projects involved and we imposed a £14m penalty on Network Rail, as we considered this to be a serious breach of its network licence.In fact we went further; we identified several areas of systemic weakness in the way that the company approached such projects and we took enforcement action. We instructed Network Rail to develop and implement a plan to address weaknesses exposed in four aspects of this activity: risk management; supplier management; site management; and communications. This plan was to be implemented by the end of 2008.A positive response by Network RailIn the months since these events Network Rail has responded positively. It has acknowledged the failings that led to the overruns, and the extent to which it needs to strengthen its processes, its capabilities and its delivery. In June Simon Kirby, Network Rail’s Director of Rail Investment, sent us the company’s plan to address the weaknesses. He said:

“Network Rail believes that this plan represents a vital opportunity to drive through improvements in our approach to project delivery and to address the root causes behind the January 2008 engineering overruns….”

1. Overrunning engineering work – have the lessons been learned?

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We scrutinised this plan and took advice from the independent regulatory reporter (Halcrow) before confirming that we were satisfied that it was a good basis for Network Rail to tackle the problems it faced.

Network Rail set up a special project team under a dedicated project manager to develop and roll-out the initiatives in its plan. Through regular top-level meetings between Network Rail and ORR, and through closer monitoring of progress by the independent reporter, we have kept in touch with progress to satisfy ourselves that this is on course to meet the 31 December deadline. The reporter has told us that “Throughout this process Network Rail has appeared committed and resourced to undertake the work necessary”.

As work has proceeded Network Rail has continued to develop its plans, in some areas (particularly communications) going beyond its original objectives and producing a plan offering greater benefits delivered in a more sustainable way.

We did note that, until quite late in the year, Network Rail had been largely working within the confines of its own business to develop its improvement measures. While this was probably appropriate we urged the company to engage more with its customers and supply chain, not least to ensure that they understand the proposals as they will affect them.

Still much to doDelivering all the initiatives in its plan is a major challenge for Network Rail. Although new processes and tools have been developed, these need to be briefed to thousands of Network Rail staff across the country. Training will need to be provided in specific areas.

1. Overrunning engineering work – have the lessons been learned?

Risk management actions include:All major projects requiring possessions will have a risk ●management plan as part of the planning process. This will include a specific possession risk register covering operational risk.Techniques for determining the likelihood and duration of a ●delay, in particular quantified schedule risk assessments, will be refreshed with reference to best practice.

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Supplier management actions include:A new contracting strategy model that allows better identification ●of the appropriate level of risk and reward and type of supplier engagement. Pre-contract assessments to include an emphasis on quality and ●reliability of programme for resource and materials as part of bid and award.

Communication actions include:Consistent instigation and use of Gold Command to assist the flow ●of accurate and timely information from work sites to operators.Identification of new opportunities to work with train operators to ●communicate with rail users in a more joined-up manner.

Site management actions include:Validation of contractors’ progress reports to support right time ●handback. A revised timeline of possession communication between the ●infrastructure support centre, operational control and Network Rail’s customers.

The plan has been drawn up to take account of best practice in rail and other industries. It identifies 20 action areas, with numerous specific deliverable outcomes – examples of these are featured opposite.

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1. Overrunning engineering work – have the lessons been learned?

‘Town Hall’ briefings have been taking place; we have attended some of these to watch the roll-out in action. More detailed briefing and training is under way. But it will take longer for the new and better approaches to be properly bedded in and to become an automatic way of managing these projects. This will call for sustained changes in culture and competence which will remain an ongoing challenge for Network Rail long after December 31.

Certain of the initiatives developed by Network Rail will not be fully rolled-out by the end of the year. We agree that it would be perverse to exclude an initiative from the overall programme where it offers important improvements but it is not reasonably possible to implement it fully during 2008 (e.g. rolling out the new contracting strategy, which is dependent on the timescales for letting new contracts).

Having made these points however, we have emphasised to Network Rail that, with these exceptions, our enforcement action calls for full implementation of its plan. In the first few months of 2009 we will be asking the independent reporter to audit how the plan has been put into practice, so that we can be satisfied that Network Rail has met its obligations.

Could it happen again?The acid test for rail users, of course, is whether Network Rail’s actions lead to a very substantial reduction in engineering work overruns.

It is not realistic to expect these to be entirely eliminated. Carrying out complex engineering work on a mature network with a diversity of modern and historic assets, sometimes in difficult environments and often at night, inevitably faces a vast array of risks. These cannot be completely neutralised without quite disproportionate cost, both in financial terms and in accepting much longer possessions – a ‘cure’ worse than the disease. So nobody can guarantee that we have seen an end to overruns.

But we do need to see a substantial reduction in their frequency and their impact.

Right now we are making special examination of Network Rail’s preparations for engineering work over the coming Christmas/New Year period. This year major work will be taking place at over 60 sites across the network, together with numerous smaller projects, and we are looking to assure ourselves that the good practices developed over the last nine months are already being applied where the risks are greatest.

Looking forward into 2009, as well as auditing Network Rail’s processes we will be monitoring new key performance indicators to measure how well the improvements it is introducing succeed in their aim. We have been impressed with the way that the company has embraced the need for change with real commitment. If it carries its plans through equally well all rail users will enjoy the benefits.

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0

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2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(billi

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oetre

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Coal MetalsConstruction Oil & petroleumInternational Domestic intermodalOther

A positive future for rail freightRail freight operators have faced some challenging market conditions recently, and are of course exposed to current uncertainties about short-term economic prospects. However a number of other developments – several arising from our recent periodic review of Network Rail’s access charges and output obligations (PR08) – point to a positive future.

Recent market trends The UK economy performed well in 2007-08,1 with continuing growth in the rail passenger market. But despite increases in road freight moved and lifted between 2006 and 2007,2 rail freight actually declined - rail freight moved fell by 3.2% to 21.2 billion net tonne kilometres.

This reduction was largely caused by structural changes in the coal and metals markets, both sectors where rail is strong but less freight was lifted. Figure 1 shows that rail freight moved increased in three sectors: construction (3.3%), oil & petroleum (3.5%) and domestic intermodal freight (9.1%). The overall decline in rail freight moved was not replicated across all operators as their commodity portfolios vary quite widely. Some operators with little involvement in the movement of coal and metal achieved business growth.

Data from National rail trends 2007-08 yearbook3 shows a strong rail performance in the domestic intermodal market but a loss of market share to road in the international market. International rail freight moved fell by 15.9%; this probably reflects the continuing impact of increased charges for freight’s use of the channel tunnel.

1 The increase in GDP was around 3% in the first three quarters of 2007-08, but 2.3% in the last quarter.

2 Department for Transport

The increase in domestic intermodal freight moved may be due in part to the growing competition between rail freight operators and road.3 It may also reflect increased container imports via the three large container ports of Tilbury, Southampton and Felixstowe,4 helped by the recent extension of the Felixstowe South Terminal to take 22-wagon trains. This port has also announced plans to increase capacity using the current rail infrastructure in advance of developments such as doubling of the branch line and a new rail loading terminal. Both of these initiatives should improve the competitiveness of rail for freight using the port.

3 http://www.rail-reg.gov.uk/upload/pdf/375.pdf4 http://www.dft.gov.uk/172974/173025/221412/221658/236005/374887/

provportstats2007.xls

2. What is happening in the GB rail freight market?

Figure 1: Freight moved 2002-03 to 2007-08

Source: National rail trends 2007-08 yearbook

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The future of freightThe Government’s white paper5 noted that movement of freight by rail is a key component of future sustainable growth of the economy and contributes towards social and environmental goals. Forecasts6 on behalf of the Rail Freight Group, published in August 2008, suggest that freight moved could increase by 30% from 2006 to 2015 and more than double by 2030. Private investment in port developments, both for coal and for containers, is helping to fuel this demand. However, the current economic downturn will put rail freight under greater pressure to increase its competitiveness against the road alternative. It now has many opportunities to do this.Operating costsTrack access charges account for around 15% of the total cost of rail freight. As a result of PR08, from 1 April 2009 these charges will fall by around 35% for freight operators, making a key contribution to greater competitiveness.PR08 also brings improvements to rail freight performance regimes. Compensation for cancellations (which are particularly disruptive for freight operators and customers) will rise, increasing the incentive for Network Rail to minimise them. Standardisation and simplification of the regimes will help to ensure that operators compete with each other on a level playing field and will reduce transaction costs, particularly as the new regimes will deal automatically with changes in traffic volume and transfer of flows between operators. 5 http://www.dft.gov.uk/about/strategy/whitepapers/whitepapercm7176/

whitepapersustainablerailway1

While rail freight moved (tonne-kilometres) fell by 3.2% in 2007-08, freight lifted (tonnes) fell 5.4% and the number of freight trains run fell by 9%. This shows that average journey lengths for freight on the network increased, as did the average tonnes per train.

2. What is happening in the GB rail freight market?

Investment6

PR08 has also confirmed funding of £208m towards the development of the strategic freight network (SFN). Network Rail has worked closely with freight operators and others on the development of the SFN and the planned outputs will be set out in its delivery plan for the next five years, to be published in early 2009. Current proposals are for work to expand capacity on the route from Felixstowe to Nuneaton and to create a diversionary route from Southampton to Basingstoke via Andover through gauge clearance work. Money has also been allocated for infill gauge clearance and projects to allow

6 http://www.rfg.org.uk/news/?pid=3158&lsid=3159&edname=26721.htm&ped=26721

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longer freight trains to run. Network Rail and the operators are now assessing specific schemes.

With the appropriate investment in capacity and gauge the network should be able to accommodate further growth from the main originating points of freight traffic (including the main ports) over the next five years. Work has already started on the freight related transport innovation fund (TIF) projects; the Hull Docks branch enhancement was completed earlier this year, Olive Mount Chord which improves access to Liverpool Docks, is due to open this month and the Gospel Oak to Barking rail upgrade should be completed by April next year.

A number of other enhancement schemes funded through PR08 will also increase freight capacity, notably the schemes for capacity relief to the East Coast main line which include upgrading the parallel line via Spalding and re-modelling Shaftholme Junction near Doncaster to reduce conflicts between passenger and freight services.

But not all investment is in the infrastructure. Investment in rolling stock continues with recent orders for further freight locomotives with designs that incorporate a number of features to reduce fuel consumption and exhaust emissions. New wagons are being procured for commodities including coal, cement and containers; these typically come with new designs of track-friendly bogies, allowing further savings in access charges.

Ability to respond to changeWe are continuing to refine our regulatory framework to enable freight operators to respond quickly and efficiently, and with minimum regulatory burden, to shifts in customer demand without distorting competition or creating barriers to entry. We have already:

introduced a freight access general approval, ● 7 which greatly increases the extent and degree of change that can be made to existing track access contracts by agreement between the operator and Network Rail without specific approval from ORR. We will keep this under review to meet industry needs. We are also considering the merits of issuing a general approval to allow new rail freight industry entrants to enter easily into a model access contract with Network Rail;

7 The text of the Freight access general approval can be found on our website at http://www.rail-reg.gov.uk/upload/pdf/freightacc-genapp2008.pdf.

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the production of route utilisation strategies (RUSs), an obligation ●on Network Rail under its network licence, aims to ensure that the company, in consultation with stakeholders, makes effective and efficient use of capacity. The strategy to accommodate freight growth is outlined in the freight RUS and individual route RUSs;strategic freight sites ● 9 are sites which are owned by Network Rail but which can be leased to train operators, and allow the freight industry to respond rapidly to market conditions and to cover short term needs; the strategic freight capacity project, which is being taken forward ●by an industry working group, aims to identify paths that are suitable for freight on key routes and enable these to be protected by Network Rail within existing industry contractual mechanisms. Train paths (mainly in the off-peak) are held for freight but if they are not used they can be offered to passenger train operators; and many freight trains run at night when there are few passenger ●services. However there are still constraints on network availability as Network Rail carries out much of its engineering work at night. Indeed, the amount of midweek night working is set to increase over the next five years as Network Rail switches much of the engineering work away from major weekend blockades to reduce the disruption it causes to passenger services. In our PR08 final determinations we placed on Network Rail the obligation to ensure that disruption to freight from planned engineering work does not increase from current levels. There will be scope to provide more train paths at weekends, as part of the related seven-day railway initiative for which PR08 included £220m of funding. A further benefit for freight operators will arise from Network Rail’s plans to use regular maintenance cycles which should allow operators to plan their services with more certainty and stability.

9 http://www.networkrail.co.uk/aspx/2222.aspx

considered, when requested by a facility owner, granting access ●exemptions for specific non-Network Rail freight networks. Our approach to granting such exemptions will remain responsive to the changing state of the rail freight market, and will take into account that anyone seeking access to exempted networks has a right of appeal to ORR for access where no viable alternative exists;approved long term access contracts to freight operators which ●span 10 years,8 instead of the standard five years, to provide greater stability and improve customer confidence;held discussions with port investors and terminal developers about ●track access options to reserve capacity for future freight traffic; and introduced contractual mechanisms to enable the transfer of ●access rights to accompany movements of customer contracts between freight operators.

Accommodating growthAs the network gets more congested the potential for freight and passenger service aspirations to come into conflict increase. There have been two recent examples of this: on the Midland main line and the East Coast main line. ORR will make decisions on competing requests for access rights on both these routes shortly.

Because this issue is growing in importance, in 2009 we will be conducting a review of evidence relevant to decisions about the allocation of capacity, and in particular the user benefits and values of time for rail freight.

Balancing the needs for extra capacity for passenger and freight operators is being addressed in several ways:

8 The text of our “Long-term track access contracts: final conclusions” can be found on our website at http://www.rail-reg.gov.uk/upload/pdf/240.pdf.

2. What is happening in the GB rail freight market?

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Meeting the needs of customersCompetition between rail freight operators has been increasing with a doubling of their number in the last five years. We continue to seek ways to develop the industry framework to facilitate an increase in the overall competitiveness of the GB rail freight market.

At present we are working with Network Rail to develop a variant form of track access contract for customers of freight operators which would allow the customer to choose which operator to use. This would provide flexibility for the customer who could select, say, under call off contracts with its nominated freight operators, the cheapest/most reliable or fastest way to convey its goods.

Ultimately, the future of rail freight will depend on continuing to meet the needs of its customers, efficiently and economically. Although the economic climate makes short-term prospects uncertain, for the medium term there are many reasons for optimism.

2. What is happening in the GB rail freight market?

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The Railway and Other Guided Transport Systems (Safety) Regulations 2006 (ROGS) were introduced in October 2006 to put the requirements of the 2004 European Railway Safety Directive (RSD) into practice. The directive aims to continue to remove barriers to providing international transport services by creating a common framework for railway safety across Europe. The RSD does not apply to heritage railways and tramways, but we took the opportunity to extend broadly similar requirements for the purposes of simplification.

Purpose of ROGSThe ultimate objective of ROGS is to maintain national standards of rail safety in line with EU requirements and strive for continuous improvement. The regulations:

transfer the mainline rail industry from a system of railway ●safety cases to a system of safety certification and authorisation and ensure that GB can respond to European Common Safety Targets in the future;

simplify the GB rail safety regulatory structure by replacing three ●sets of regulations with one;

place a duty on operator companies and infrastructure managers ●to co-operate and ensure that interfaces are being managed effectively to ensure system safety; and

replace the Safety Critical Work Regulations 1994 and impose ●requirements on those carrying out all types of safety critical work. Under ROGS the legal scope has increased as a wider range of work is now covered.

After the introduction of ROGS, ORR employed the services of Noble Denton BOMEL Ltd to carry out a three-year monitoring and evaluation exercise to assess the performance and impact of ROGS.

3. The impact of ROGS on the rail industry

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3. The impact of ROGS on the rail industryA baseline survey took place in 2007 and a report was produced by Noble Denton BOMEL in February 2008 (http://www.rail-reg.gov.uk/server/show/nav.1511). The first (baseline) report captures qualitative and quantitative data from those affected by the regulations. These include Network Rail, train operating companies, tramways and heritage operators. A survey forming part of the study explores specific areas of the regulations and reactions to those, such as developing safety management systems and managing the introduction of the concept of safety verification.

Second survey resultsA second survey was carried out in 2008 and a report has been produced by Noble Denton BOMEL. The survey report is available on ORR’s website at the link above. The second survey provides a strong indication that the ultimate objective of ROGS is on its way to being fully met. In other words, we are on our way to maintaining national standards of rail safety in line with EU requirements and are striving for continuous improvement.

Respondents were asked to indicate their level of agreement with the statement:

“From experience, I believe that standards of safety are the same under ROGS”.

In the baseline survey 69% of the 26 respondents agreed or strongly agreed that standards of safety were the same under ROGS; 15% disagreed. In the second survey the proportion of those agreeing increased to 79% (of 28 respondents); the proportion of those that disagreed fell to 11%. The remainder neither agreed nor disagreed, or had no opinion.

Individuals who believed that ROGS have changed the way safety is managed in their organisation were asked how the changes made have impacted on business operations. Just over half of respondents (52%) thought that changes had had a neutral impact, 35% thought there had been a positive impact and only 13% felt there had been a negative impact.

Safety management systems

The second survey findings also indicate that the industry is starting to view safety management as an integral part of core business. Of the 19 respondents with a ROGS compliant safety management system (SMS), nine (47%) indicated that they had integrated SMS with other systems, compared with only two out of 12 (17%) in the baseline survey. Further to this, four organisations indicated their safety management processes had become more risk based.

Safety verification

In the second survey, 52% of respondents believe that safety verification has not affected safety (compared to 36% in the baseline survey). 10% of respondents indicated that there were improvements to safety as a result of using the safety verification process. The remaining 38% were not sure about how safety verification had affected safety.

Cooperation

There appears to be progress in addressing the duty of cooperation. There was an increase in the number of organisations identifying where the majority of interfacing occurs with other organisations compared with when the baseline measure was taken (71% of the second survey respondents compared with 47% at the baseline measure).

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3. The impact of ROGS on the rail industrySafety critical work

It also appeared that respondents in the second survey find it easier to address the new safety critical work regulations under ROGS compared with the baseline respondents. For example, fewer second survey respondents required major changes to their existing methods. Furthermore, fewer respondents from the second survey were finding time/resourcing or training an issue. In fact, 43% of second survey respondents found there were no challenges with the requirements.

Risk assessments

The majority of respondents to both surveys felt there had been no change to safety as a result of the changes brought about to risk assessment under ROGS.

Annual safety reports

There was an increase in the number of organisations experiencing time and/or resourcing pressures in the preparation and submission of an annual safety report. Only 12% (2 out of 17) of baseline respondents were facing time and / or resource pressures compared with 57% (12 out of 21) of the second survey respondents.

Next stepsOverall, the research is providing a good indication that the objectives of ROGS are being achieved. However, there are some areas that we may need to explore further to see if burdens on industry can be further reduced without affecting safety, for example the annual safety reporting requirements.

The next phase of work sees the research team issuing a third survey and running a repeat of the baseline qualitative exercise. The report on this next phase will be available in 2009 on ORR’s website.