INFORMED SOURCES e-Preview April 2012
This month’s column was rolling along nicely when DfT decided to publish the long awaited Command Paper responding to Sir Roy McNulty’s Rail Value for Money study the day before my final copy date. So my Birthday was one of those adrenaline-driven days spent absorbing the main features of a 78 page document and then summarising them in a snappy 1,500 words – all I had left from my allowance.
Actually, it wasn’t that difficult because the Command Paper is a thin re-hash of the McNulty report, with added miracle solutions. You’ll find my initial report at the end of the blog.
Crossrail - Greening’s ‘responsible procurement’ sham
Crossrail rolling stock bidding starts
Who runs the railways 2012
Command Paper far from commanding
But to get you in the mood here’s another example of the Orwellian double-think which seems to be endemic among Transport ministers.
On 28 February, Crossrail issued the Invitation to Negotiate (
While bidders are being asked, to specify from where each element of the contract will be sourced, ‘this is not an assessment criterion in the decision process’. So if the only
Fine words
So for all the fine words about studying how railways on the European mainland seem to be able to buy trains from national factories, in the end the Government has concluded that we can’t emulate them. Surprisingly, the industry pressure group the
Not only did it ‘welcome’ the Secretary of State’s vapid announcement but added ‘the
DDRF took particular comfort in the statement that bidders will be expected to ‘provide opportunities for training, apprenticeships, and small and medium size businesses within their procurement strategy’. And also that bidders will be ‘required to establish an appropriate local presence to manage the delivery of the contract’.
But if ‘expectations’ were horses beggars would ride. As for an ‘appropriate local presence’, since the deal includes a new depot at Old Oak Common, you won’t need a separate plant to assemble and commission the vehicles as they arrive from
Note that I am not saying that the Crossrail order should go to Bombardier automatically to keep the Derby plant open. In fact, the rational solution is a follow-on order for more Thameslink trains from Siemens.
But I am all for Government bodies managing procurement to favour the
Remember the real value in a train is not the body shell, but all the clever kit which goes into and under it. And the cleverest and most expensive bit is the electric traction package.
Now Voyager
This brings me to E-Voyager – the proposal to add a pantograph and transformer car to Cross Country’s Class 22x Voyager DEMUs so that they can run as EMUs under the wires. Known as Project Thor this is promoted as a way of preserving ‘British jobs’ at
Alstom, supplied the Voyagers’ original electric drives and has been discussing the hardware and software to fit out the additional vehicles and integrate them with the company’s existing equipment. But now, according to informed sources, Bombardier is considering sourcing the transformer and power electronics from its in-house traction company in
So with a major lobbying exercise, supported by the Daily Mail and the Mirror, based on ‘saving British jobs’, Bombardier apparently thinks it might be better to spend UK taxpayers’ money to save Swedish jobs by importing the high-tech, high-value bits of Operation Thor.
When you consider that the bodyshells would probably be fabricated at
Anyway, what is ‘responsible procurement’ rally about? According to Ms Greening ‘the Mayor of London and I are also keen to understand and communicate the benefit of this contract to the
And there we have it. If CAF,
Offset
But why shouldn’t the Government make
For example, when the Army bought Boeing’s AH64 Apache attack helicopter, the GE turbo-shaft engines were replaced with more powerful Rolls-Royce units and a new countermeasures system was supplied by Marconi.
Currently
Crossrail train fleet bidding
Crossrail’s nominal requirement is for 63 10-car units to cover 57 diagrams or 90% availability. Like Thameslink this is a total train service provision deal including a new depot at Old Oak Common. The capital cost of the rolling stock and the new depot facilities is around £1bn
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Crossrail bidders
Bombardier Transportation (UK) Limited
CAF SA
Hitachi Rail Europe Limited
Siemens plc.
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Tenders are due to be returned on 29 August and Crossrail expects to award the contract in the second quarter of 2014. The first units are scheduled to enter service on the Liverpool Street- Shenfield service in May 2017.
Crossrail is looking for ‘evolutionary, not revolutionary technology for utmost reliability from day one’. This is prudent because when it comes to signalling and control the trains are going to be high-tech, and low-tech Christmas trees, with TPWS and AWS, ETCS and
In the column I have a go at Crossrail for the ‘utmost reliability from day one’ bit. Life isn’t that kind, whatever manufacturers might say. In the real world you grow reliability. For example the Golden Spanner winning Class 350/2 EMUs were recording 30,000 MTIN a year ago. Currently they are on 68,000.
There will be two rounds of bidding. The first will cover technical proposals plus the bidders’ approach to securing finance. Shortlisted of bidders will contest Round 2, which this will focus on the provision of fully funded proposals. ]
Crossrail warns that at the end of each round only bidders meeting the ‘minimum technical and delivery requirements’ will be considered. I must find out what the minimum requirement for ‘utmost’ reliability will be?
Selection will be based upon the most economically advantageous bids submitted. No mention of
Even without the politics it’s going to be an interesting contest. Contract signing in mid 2014 leaves 30 months to have the first trains infiltrating into passenger service on Liverpool Street-Shenfield services. That seems tight.
Who runs the railways 2012
Back in the May 1997 column I published a simple table comparing the Managing Directors of Train Operating Companies immediately before and after franchising. There were two columns and a modest 17 footnotes.
Year-by-year, the table gained extra columns and by 2004, ‘Who runs the railways’ occupied a double page spread and ran to 70 footnotes. But, then, more important things going on meant that I let it drop.
Since when, readers’ FAQ has been ‘When is who runs the railway coming back?’ So with a quiet week in the writing schedule I got out the 2004 spreadsheet, copied it to a new workbook and got down to some serious research.
To avoid having a double-page spread fold out, it is now based on five year intervals, plus 1997 and, of course 2012. So 1995 is the base-line, with 2000 the high-water mark of the original privatised railway before the collapse of Railtrack. Then 2005 conveniently brings in the first round of franchise restructuring and 2010 shows what happened in the last set of changes. Finally 2012 brings the sequence up to date and also includes, for the first time, the Network Rail Route Managing Directors.
Even so it still fills two pages and has 60 footnotes. I won’t spoil your enjoyment with a sneak preview, except to say that it metaphorically raises two fingers to John Major!
Command Paper – first look
(http://assets.dft.gov.uk/publications/reforming-our-railways/reforming-our-railways.pdf
According to DfT, the Command Paper (link above0 published on 8 March ‘sets a clear and firm framework for reforming and improving the railways for the benefit of passengers, freight and the taxpayer’. Put another way ‘The framework for reforming and improving the railways set out in this Command Paper empowers the rail industry to deliver the changes that will close the £3.5 billion efficiency gap identified by Sir Roy McNulty’s Rail Value for Money Study, putting us amongst the best performing of our European comparators’.
So there is the first weakness. DfT is taking Sir Roy’s ‘top-down’ potential cost savings as gospel, when the Office of Rail Regulation is even now engaged on a ‘bottom up’ analysis of costs, aimed at ‘re-working’ the McNulty Study data . In other words, while ORR is still trying to understand the savings identified by Sir Roy’s consultants, DfT ploughs on regardless
Thus, the Command Paper believes that, ‘as a minimum’, efficiencies of £2.5 billion per year by 2018/19 are deliverable. Given that £1.8 billion a year has already been earmarked from Network Rail in CP4 and CP5, this implies that franchise replacement is looking to save at least £700 million a year from the TOCs.
Actually DfT expects the rail industry, ‘incentivised to outperform through dramatically better whole industry partnership working.’ to achieve a far more demanding goal. The combined impact of the reforms in the Command Paper ‘has the potential to deliver savings of a further £1 billion by 2018/19, closing the high end of (McNulty’s) efficiency gap range – £3.5 billion per year’.
Vague
So where does the rest of the DfT’s £1.7 billion a year come from? The Command Paper claims that it is ‘clear’ that some of the additional Network Rail efficiency is only deliverable through partnership working with train operators.
But no one knows yet how partnerships might work, let alone the savings they might deliver. It is back to 1992 when everyone ‘knew’ that privatisation would cut costs.
And this is the worrying aspect of the Command Paper – it is full of such unconsidered and untested assertions. For example, with ORR still consulting on the concept of operators sharing in Network Rail’s out-performance on efficiency targets, and sharing the financial pain of under-performance, DfT assumes that this Regional Efficiency Benefit Share mechanism is a done deal which will provide the foundation ‘behavioural change’.
Franchising
Clearly, the £700 million a year for the train operators to find is only a starting point. The Command Paper declares that it is ‘essential’ that train operators play their part in ‘driving for further efficiency’. DfT will put ‘much greater weight’ on bidders’ proposals for achieving greater efficiency and cost savings in the up-coming refranchising programme.
Incidentally we were led to expect a separate paper on franchise reform. That idea has been dropped.
In parallel with longer franchises, the ‘skewed’ bidding incentives created by the cap-and-collar revenue support regime will be addressed. DfT doesn’t explain how Cap & Collar skewed bids, although we know it encouraged back loading of premia to the later years of a franchise when it provided insurance against over-ambitious premium profiles.
Anyway, DfT believes its unspecified approach to franchising will make it easier for bidders to identify ‘substantial, innovative cost reduction plans that can also deliver commercially for train operators’. DfT concedes that train operators are better placed than Government to determine how detailed savings should be achieved. I translate this as ‘we don’t know where the savings are but we are sure you private sector chappies can find them’.
According to the Command Paper the more flexible franchising specifications will allow greater innovation in the way train services are scheduled. Then there is ‘driving better value out of the rolling stock market’ and ‘increasing staff productivity across the industry’.
Across all franchises, cost savings in the order of £1.2 billion a year are expected to be ‘identified and delivered by 2018/19’. The proof of this pudding will be in the bids for the new franchises, starting with Intercity West Coast.
Roger’s Blog
Last month I left you with me facing the prospect of industrial quantities of laxative before a colonoscopy. Thanks for the best wishes and commiserations. The result showed I was completely clear, so no more watching colour television images from my insides!
I had a very interesting session with Office of Rail Regulation Chief Executive Richard Price, mainly on expectations for the next Control Period. The write-up got shunted out of this month’s column by the Command Paper, but you will be able to read it next month.
That evening it was the annual Hugh ford Management Lecture at the IMechE inaugurated by my late uncle. It was about the lessons to be learned from the success of three British engineering companies. The key is to dominate an international niche which is either too specialised for the multi-nationals or if they do try, superior technology will see them off. Very relevant to the ‘British Jobs’ debate, and they are several such companies in our industry.
Last week, I enjoyed a cracking day out at Shoreham-by-Sea. When DfT announced a research project into improvements in diesel traction efficiency my heart sank with visions of more weird and whacky solutions along the lines of those which appear in the Rail Technical Strategy.
I expressed my doubts to consultants Ricardo who were doing the technical stuff. ‘We’ll invite you in when the report is ready’ they promised. Hence my visit to Shoreham-by-Sea.
Now ever since I fell in love with the internal combustion engine Ricardo have figured large in engine technology. And I have to say that the best parts of the visit were on the tour of the facilities, including engines being built for the new McLaren supercar and some truly mind-blowing Computational Fluid Dynamics visualisations.
Back to the business of the day, the results of the study were distinctly encouraging in that they reinforced my prejudices! Not much technically that you have not read in the column already, but plenty of solid analysis of fuel savings and pay-back periods. In addition to 1980s DMUs they also looked at the Class 66. Full report next month.
Coming up this week, it’s the Fourth Friday Club, with Howard Smith of TfL the guest speaker. Venue is the former Shoreditch Station, which should be interesting.
But before heading East for lunch I have an interview with Network Rail Director Network Operations Robin Gisby. We’ll be talking about the ‘triangulation’ of performance, capacity and cost.
April is currently quiet. I’ll be catching up on developments with my chums at Angel, but an update from Network Rail on ETCS progress has been cancelled.
So now, it’s into the depths of the Command Paper. I’ll do my best to make it interesting!
Roger