INFORMED SOURCES e-Preview August 2012
As forecast in last month’s blog, it’s been a very lively time culminating in the publication of the High Level Output Specification (HLOS) last Monday. This came at the start of the week when Modern Railways is putting the news pages together and I had a lot of fun being a proper journalist and writing-up breaking news against a deadline.
Obviously, this was straight news reporting. Analysis will start in next month’s column.
Agility confirmed as IEP winners.
Alstom – seeking the value in an ‘interesting’ market
Network Rail bonus row festers on
Great Western replacement franchise slipping
But before the HLOS was published on 9 July DfT had notified Intercity Express Programme bidders, actual or potential, that Agility Trains – the Hitachi-led consortium, had been declared the winner. This triggered a 10-day ‘standstill’, during which the decision could be challenged. With this cooling-off period expiring at on 19 July I had hopped we might get an announcement in time for me to give the bare bones of the deal, but no luck.
Meanwhile, I’ve published the latest DfT figures for the IEP fleet allocations for Great Western and East Coast. With the GWML electrification extended to
On the East Coast the 10 five-car electric sets for are retained but the previous homogenous fleet of 35 five car bi-modes has become eight five-car and 10 nine-car units. What a shambles.
Pending some definitive numbers – and the bidders for the Greater Western franchise have yet to stick in their six pen’orth - I’ve being looking at the capacity of Hitachi’s Newton Aycliffe plant. At the open day at the end of June, the output was quoted as up to 35 vehicles a month with two shift working.
I make this four vehicles a week from a single production line and it provides the opportunity to run a reality check on the employment claims for the plant.
Comparing productivity at other factories I would expect each IEP vehicle to involve between 2,000 and 3,000 man hours. With a 37.5h hour working week that gives a direct workforce of between 215 and 320 for a single shift.
Add engineering, procurement and administration staff plus some research and development staff to the upper figures and ‘500+’ looks about right. Add a second shift and the ‘at least 700 permanent jobs’ quoted by a DfT spokesman becomes feasible.
But for how long? The IEP delivery schedules for Greater Western and East Coast could be met by one production line – say 30 months work.
That won’t justify a 42,700 square metre assembly plant. However, the delivery timescale and quantity of the Crossrail rolling stock fleet would match IEP, filling that second production line.
Production would then drops off a cliff in mid 2018, but that gives
But in the short term I suspect that the Government is going to face two mendicant manufacturers in the Crossrail bidding lobbying on the basis of ‘British jobs at stake’. And Siemens and CAF demanding a level playing field!
Alstom – mounting a new challenge
One man who would have been especially pleased with the announcement in the HLOS that the government building its rail strategy around a rolling programme of electrification is my old chum Terence Watson. I first met Terence in 1994 when he was Commercial Director of Alstom Traction at
In between, a lot of water has flowed under the Alstom bridge, culminating in the recent unsuccessful attempt to break back into the
As I found out when I interviewed him in June, Alstom sees value in the
He argues that in the UK Alstom has been seen as merely part of the supply chain, waiting to bid for contracts. He considers it an ‘absolute misnomer’ for groups, such as Alstom and Siemens which offer a wide range of products and services, to be seen as ‘bottom feeders, suppliers of rolling stock and that’s it’. So Alstom is now looking to play to its strengths.
Readers will know my reporting of the West Coast Pendolino and Northern Line total train service provision operations that Alstom has re-written the scope of work for maintenance depots. You can get an update on the Pendolino heavy overhaul at Longsight in this month’s news pages.
Long term rolling stock maintenance represent roughly a third of Alstom’s
But while Traincare is big business, with the parts worth £43 million alone for the Pendolino H3 overhaul currently the value in the
This is not new. This column has tracked the development of Signalling Solutions Ltd (
I had forgotten an earlier Alstom joint venture with Carillion and Travaux du Sud Ouest (ACT) which was responsible for the track, catenary and logistics for Phase 2 of the Channel Tunnel Rail Link. Now, its successor ATC, (‘C’ for Costain) is currently bidding for contracts from Crossrail worth €1 billion.
And the HLOS will have gladdened the hearts of the commercial team at ABC (Alstom, Babcock, and Costain) which is bidding on various electrification schemes. As we met it was just preparing its response to the OJEU Notice for the Trans-Penning route electrification to be let as a package together with the ECML power supply upgrade and worth £500-800 million.
Not that rolling stock new build is off the agenda. Following the trial runs on the ECML Alstom is enthusiastically promoting Pendolino as the long term IC225 replacement.
With ETCS allowing both tilt and 140mile/h running Alstom’s simulations based on the trial runs suggest that 50min could be knocked off the London-Edinburgh Journey time. Meanwhile, several Intercity West Coast franchise bidders are considering six car ‘Pendoninos’ as Voyager replacement.
There is also the EMU life extension market, an obvious application of the heavy overhauls experience gained through Traincare. So if Pendolino is a train too far for the East Coast, then IC225 was an Alstom, or rather GEC Alsthom, product.
Whether it’s new build or modernisation Terence believes that the rolling stock industry should be market makers, not market takers as at present. And he is ‘really really eager’ to try and develop a ‘proper dialogue’ that would allow the company to apply its enhancement experience to East Coast.
It was interesting to renew the acquaintance of an old chum back in the
Network Rail bonuses
In the middle of writing this I got as press release from the Labour Party denouncing Transport Secretary Justine Greening for not attending last Thursday’s Network Rail Annual General Meeting, and voting against a resolution on ‘golden handcuff’ retention bonuses for three executive directors. According to shadow Transport Secretary Maria Eagle, ‘the bonus culture that has existed for too long in the rail industry must come to an end. This is yet another example of why the debate that has begun over the future of the rail industry is so necessary and why Network Rail is an organisation in desperate need of serious reform to restore accountability to the public’.
And in this month’s column I go into the bonus issue at length (groan), inspired by leaked letters between the Chief Executive of the Office of Rail Regulation and the Chairman of the Network Rail Remuneration committee.
It is a bit of a rant because while politicians and unions go on about Network Rail ‘greed’, ORR requires Network Rail to have a bonus scheme to incentivise the executive directors under its Licence. Not only that, ‘a significant proportion of the remuneration needs to be in variable rather than fixed payment’.
Naturally ORR doesn’t get its hands dirty by specifying ‘significant’. Last year Network Rail’s executive directors were typically paid around £330,000 a year, excluding that ‘significant proportion’ represented by bonuses.
From the leaked correspondence it looks as ‘significant’ is 40-50% of total pay. So the logical conclusion is that if you paid the Network Rail executive directors a basic wage of £550,000 a year they would work ‘9 ‘til 5’ and skive off early on Friday. But a mere £4000 in the weekly pay packet, plus the prospect of the same again in an annual bonus will have them working like Stakhanovites.
Absolutely bonkers. And it gets worse because ORR believes that in the event of a fatal accident on the railway, ORR would expect bonuses to be forfeited for that year.
Meanwhile for Network Rail it’s damned if you do and dammed if you don’t. The licence condition, enforced by ORR, requires Network Rail to have a bonus scheme. When it tries to come up with a compliant scheme the company get flacked by the Regulator and blackguarded by politicians.
This is why I go into this unsavoury mess at some length. It is yet another example of the privatised railway’s tendency to generate Gordian knots. Fares is another example.
Faced with a patently ridiculous situation, Government and Regulator declare that radical change would be too difficult and go on tugging at the loose ends, while the working railway gets the public and political backlash.
With this sort of reputational damage is it surprising that top managerial talent doesn’t want to work for Network Rail? Certainly not high flying train operators who might earn more pay, but would lose out on their long term share options in the genuine private sector.
What’s the solution? Simple: get rid of Licence condition 16, pay a competitive salary, continue to grow your own management and eventually become the sort of company that ‘top talent’, should you need it, will want to work for. Could it be that the reason nobody from outside wanted asset director Peter Henderson’s job was not the money, but rows like this?
Greater Western franchise dialogue
A diverting feature of recent weeks has been the arrival in my in-tray of a succession of ‘Indicative’ Invitations to Tender (
My initial reaction was dismissive, but Informed Sources report that changes they suggested to one version appeared in the next iteration. So, plaudits to DfT for throwing their ideas on the floor and seeing what the cats lick up and what they try to bury.
But all this takes time and as a result the start date for the franchise has slipped back from April 2013 to 21 July. The last I heard was that the formal
IEP itself will require a change to the customary franchise bidding process. Previously bidders have been kept in the dark until the franchise was awarded – even when the winner was obvious at an early stage. But because of the ‘fundamental importance’ of IEP to bidders’ submissions, DfT says that Agility Trains will be contractually committed to engage with bidders ‘and help them to develop their proposals’.
Franchise bidding will coincide with the planned six months of ‘design development’ for the new trains before ‘Design Freeze’. So potentially Agility could be faced with four bidders, each with its own ideas for improving the Hitachi Super Express Train or the Depot and operating strategy. To save Agility abortive work, when bids have been evaluated, DfT may short-list the leading bids and stand-down the weaker contenders.
Roger’s blog
We seem to have struck a chord by combining the various Modern Railways Awards with Fourth Friday Club (FFC) meetings. When we started the Innovation Awards back in 1998 it was a black tie celebrity-fest at a
With the Golden Spanners, we started from the other end of the spectrum, with a low key presentation added to the already successful FFC lunchtime function. This proved a winning formula and it seemed an obvious move to do the same with the Innovation Awards.
As MC you quickly get a feel for the mood of an audience and the innovation awards on 22 June was the most enthusiastic yet. Railway people are not backward in making their views known if they think an award has gone to the wrong entrant. Fortunately, the wards attract a field of high quality entries from which the judges can pick unambiguous winners.
In the last week of June successive days saw a soiree with string quartet at Somerset House and a depot tour with hard hat and work-boots. The former was the Stagecoach annual evening reception – always rich in grist for the Informed Sources mill.
Next morning it was up early for a trip to
July began with an SWT presentation at
Domestic duties then took over for a bit, including shifting scenery at a dance show and cutting mounts for etchings to be displayed at our local art society annual exhibition. One of the members has a large painting of Tornado crossing Welwyn Viaduct on show.
Last week I had lunch with Eversholt and one of the topics was the big hole in the HLOS - rolling stock, whether new or life extended.
I’ve been going on about the inevitability of life extension, for the ex BR fleet for over five years now without anything happening. But we could soon see a policy falling into place as the replacement franchises are awarded – starting with Intercity West Coast in August.
New rolling stock on the West Coast could put a DMU cascade in play. And all that electrification to come could prod the ROSCOs into taking a commercial risk and committing to modernisation work on those EMU fleets judged to have the most potential for Continued Service Operation.
As Terence Watson told me, it’s time to be market makers not market takers. Or as they say in the city, the ROSCOs need to have some skin in the game.
Meanwhile, with the summer holiday period ahead, and the big announcements out of the way, it’s time to get into the detail of HLOS, do some analysis, start a new spreadsheet of all those new electrification schemes and see if the water level’s dropped enough to mow the lawn.
Roger