INFORMED SOURCES e-Preview June 2014
This month’s column seems to have a higher than usual number of obscure references, topical allusions and parallels. And apart from Belshazzar’s feat and Mathew Chapter 20 there is a phrase that should give the numerous clergymen in the readership a wry chuckle.
This is probably a reaction to all the heavy stuff going down at the moment. In particular the lead item:
Network Rail – renationalisation complete
Network Rail chairman revives old railway ethos
TMS – early benefits sought
Greater Anglia - Direct Awards starting to deliver
Rolling stock engineers deliver on performance.
SSL ATC re-signalling re-bid starts
DfT woos potential new franchisees
Social media latest
Unlike some of our contemporaries, Modern Railways does not splash ‘Exclusive’ over its pages. In the case of this column it is due to a combination of arrogance (if you don’t read it here first I’m not doing my job) and the knowledge that readers would harrumph and mutter ‘I should hope so too’. But, as far as I can tell, the media in general, and not just the railway press, has missed a seismic change in government policy.
When Network Rail was reclassified as a government body, there was a tendency to dismiss this as a mere Euro-accounting nicety of no practical significance. However the subsequent Memorandum of Understanding (MOU) between the Department for Transport and NR indicated otherwise. A key passage said that the Government, the Office of Rail Regulation and NR were to ‘explore’ whether ‘alternative approaches to funding or refinements to the current system might prove more efficient’.
I assumed that DfT was looking beyond the May 2015 General Election to make any radical changes. Wrong!
On 23 April, the Debt Management Office (DMO), published its statement on ‘Central Government Net Cash Requirement out-turn for 2013-14’. And tucked away in a footnote was the revelation that in future, ‘value for money for the taxpayer will best be secured by Network Rail borrowing directly from the Government, rather than by Network Rail issuing debt in its own name’.
DMO added that DfT and NR were ‘already discussing details of a possible loan arrangement in advance of Network Rail’s formal reclassification to the public sector in September 2014’. Government could lend ‘up to £6.5billon’ to NR during the current financial year, DMO added.
Six days later, Transport Secretary Patrick McLoughlin told Parliament that DfT was seeking a £550 million advance from the Government’s contingencies fund ‘to meet an urgent cash requirement’, pending parliamentary approval of the Main estimate for 2014-15. He explained that following the decision on NR’s future borrowings, DfT had included ‘in total’ £6.5 billion in this year’s Main estimate. Note that the DMO’s ‘up to’ has gone missing.
I won’t go into the detail here, but the annual budgetary process has a gap between the start of the financial year in April and Royal Assent for the legislation authorising the budget in July. Because of the late decision on NR borrowing, DfT missed the usual procedures to bridge the gap, hence the need for a £550 million payday loan.
So 20 years after privatisation started, half of the railway is back in the public sector and dependent on Government borrowing. Heavy stuff indeed.
Network Rail reveals new bonus policy
I have always regarded the assumption behind the Network Rail executive bonus system, that only the prospect of oodles of money will get the directors to do their very best, as demeaning. And in reality, the whole bonus thing has been demotivating, with railwayman equated to city ‘fat cats’, and bonuses forfeited in the event of a fatality.
It was also very complicated. The Annual Incentive Plan (AIP), paid a maximum of 60% of salary while the rolling three year Long Term Incentive Plan (LTIP) was based on maximum of 100% of annual salary.
Anyway, on 2 May details of a proposed new bonus scheme for Network Rail's executive directors were released. Assuming it is ratified by the Members Annual General Meeting in July, the maximum bonus will be cut to 20%.
But note that in future any bonuses will be deferred for three years to ensure that the improvement is sustained. In other words, annual bonuses could be reduced or withdrawn altogether if good performance – ‘especially regarding safety’ has not been maintained for three years.
Commenting on the proposed change, Network Rail chairman Richard Parry-Jones said ‘We do understand that this will move our remuneration for executive directors further down against comparable benchmarks. However, we are confident that the unique challenge of having the executive responsibility to decide how to most effectively run Britain’s railway infrastructure is a huge motivation in itself for the kind of leaders that we need’.
That has always been the motivation of the railwaymen I have known. So why have a bonus at all? Well, it’s a licence condition and, I guess, 20% was the lowest figure ORR would accept, since it still believes that railwayman are an idle lot, responding only to juicy carrots.
There was a sting in the tail of the announcement. It read: ‘There will be no adjustment to the base salaries of the executive directors as a result of this new bonus scheme’
In practical terms, this means that long standing main board Executive Directors will be paid paid less than the recently appointed Managing Director Infrastructure Projects who is not on the board. How’s that for motivation?
TMS - incremental approach to improve PPM
It is now coming on for three months and counting since the three shortlisted suppliers for Network Rail’s Traffic Management System (TMS) were told the outcome of the latest stage of the procurement exercise. And still no official announcement of what happens next.
When I wrote last month’s last month’s column, early for Easter, a month’s delay was interesting but not exciting. But here we are at the end of May, still with no formal announcement. Clearly something has changed.
And that something is the decision to focus on getting what NR terms Phase 1 TMS, which will provide decision support for signallers, signallers into service as soon as possible. Phase 1 TM processes timetables, rolling stock and train crew information and real time train running data to predict how services will develop 20 minutes or more ahead. At times of disruption - say a late train or a track circuit failure, these predictions will be used to help signallers prioritise trains and regulate services to minimise the impact across the network.
My source document for the last month’s article was a NR presentation in February. As reported, this described TMS deployment as taking place in three ‘phases’. Phase 1 was ‘TM decision support’. Phase 2 was ‘TM Decision support plus ARS and Phase 3 was ‘Full TM Deployment’.
I missed a trick here, I’m afraid. Because I was focused on the two First Deployment schemes, I didn’t take in the small print for Phase 1 which read ‘Rapid route-wide deployment to Controls’.
So, pending final cut-over to the Rail Operating Centres, an existing power box with N/X (entry/exit) panels, could present the decision support information to signallers on a digital display. In more modern screen-based signalling centres, there could be a train graph.
This approach also explains why Thales has been chosen as sole supplier under the TMS procurement. NR’s incremental approach requires a system architecture similar to that supplied to the Thales ARAMIS kit supplied to Austrian national operator OBB in the 1990s.
This incremental policy is, I suspect, driven by the fact that NR has started Control Period 5 2.7 percentage points behind the PPM trajectory set by the Regulator. In the column I have a graph to show the performance challenge ahead.
IECC
But this emphasis on performance raises an inconvenient question. Back in 2011-12 NR decided to upgrade the Automatic Route Setting (ARS) system used in control centres and wrote the specification for ARS+. As we know, Delta Rail responded to the specification and having been trialled at York IECC, its Enhanced ARS is now fully approved and ready to roll out, as envisaged in 2011-12.
And it would be worth doing. According to Informed Sources E-ARS has been well received, cutting delay minutes by 30-40% in the trial area at York.
So with PPM the criterion of success, you might think that NR would be mad keen to roll out E-ARS to the rest of York and the other 11 IECC’s. But no. I gather the policy is to see what TM Phase 1 can do before spending on ARS upgrades.
Greater Anglia’s new Franchise Agreement
Direct Award franchise agreements, extending existing franchises until their turn comes in the new franchise schedule, are central to the policy of letting two or three replacement franchises a year for the foreseeable future. There had been concern that they could put improvements on hold, but DfT is already using them to facilitate the SWT/Network Rail Alliance capacity programme in Control Period 5 and also to maintain continuity of train operating management during the Great Western Route Modernisation.
Those are long term agreements, but what about a short term deal like the 27 month Direct Award for Greater Anglia? Well, for a start, the new Direct Award agreement includes rolling stock upgrades and the provision of additional services, both intended to carry over into the replacement franchise in 2016.
DfT believes that East Anglia deserves a ‘fresh perspective’ from the replacement franchise, backed by investment in trains and stations. Longer term aspirations could include the introduction of new and faster inter-regional connections.
As a senior DfT source explained, ‘This kind of change needs forward preparations – which is what this short Direct Award is about’. Thus, despite running for only 27 months, it includes significant investment such as fitting Controlled Emission Toilets to the Mk 3 Intercity stock and a start made on a similar retrofit programme to the Class 321 EMUs.
Add in the eight new Cambridge-Stansted Airport off-peak trains a day each way, Mondays to Fridays, and it is clear that the franchise is not marking time. But what about the finances?
Abellio Great Anglia will pay a premium of £266 million over the 27 months. Comparing the Direct Award premium payments with those made under Abellio’s existing franchise agreement is a messy business.
A particular problem is the halving of Track Access Charges when CP5 started on 1 April this year. Add in the fact that Great Anglia was receiving revenue support under Cap & Collar and we have what Sherlock Holmes called a three pipe problem.
I’ve just started up a new Direct Award finance spreadsheet and could have a detailed analysis comparing the Great Western, Greater Anglia and Northern deals ready for next month. But for the moment, had the same terms continued, I estimate that the like-for-like premium would have been £378 million compared with the actual £266 million. Similar figures are emerging from my new spreadsheet, which suggests that there is not as much money around as before and an emerging hole in DfT’s budget.
Due to be announced this month is the Essex Thameside replacement franchise. The premium profile will add more grist to this mill.
Train reliability improved over CP4
As mentioned earlier, Network Rail fell well short of its PPM targets set for Control Period 4. The rest of the industry also works to the same five year improvement cycle, including Fleet Challenge, the arm of the National Task Force (NTF) responsible for improving rolling stock performance.
With data for the last Period in CP4, available, what have my rolling stock chums achieved in the past five years? Quite a lot. While the National PPM has fallen by 0.7 percentage points since Period 13 2009-09, Fleet Challenge reports that its contribution has improved by 0.35 percentage points.
In the column I unleash a blizzard of statistics. But the top line is that on n the main Golden Spanners measure – Miles per Technical Incident (MTIN), overall fleet reliability increased by 44% over CP4.
Fleet Challenge is looking to continue this improvement over CP5. I’ll report back on the target when it has been agreed as part of the overall NTF programme.
Thales sole bidder for SSL ATC
To no one’s surprise only Thales has been invited to tender for the third attempt to install Automatic Train Control system on the Circle, Hammersmith, District and Metropolitan lines. London Underground is now working with the company ‘to secure a firm commitment with a competitive cost, delivering value for money and with a realistic and reliable commissioning programme’.
Contract award is expected ‘this summer’ (Informed Sources Third Law applies). And note that the LU statement said that the resignalling ‘remains on course to be delivered in 2018’.
Franchising – full of Eastern promise
As reported last month, the railway trade press had the chance to interview the Director General of DfT’s Rail Executive, Clare Moriarty, at the annual Rail Industry day in April. Asked by my Railway Gazette chum Nick Kingsley about DfT’s enthusiasm for new entrants to the franchising market she described them as ‘very important’. While this was ‘absolutely not to minimise in any way the contribution that the existing owning groups make’, the current franchising market is ‘quite a small’, and recent newcomers ‘have mostly been other European state owned railways’.
Clare believes that there is ‘a whole much wider market of companies out there’. DfT is ‘really interested to see if we can get more companies involved'.
I could not resist asking whether this enthusiastic wooing of new bidders meant that Clare was happy to see UK based operators go out of business? ‘I’m very keen not to put UK people out of business but I think we need to create conditions which allow the UK industry to compete on a really effective basis. I don’t think closing our doors to operators from other countries is going to be the way in which we get the best process’, she replied.
Sir Humphrey Appleby would be proud of that answer.
Internet update
For those who found last month’s item on analysis of Train Operator Company twitter feeds of interest, www.commutelondon.com provides a chance to see the system in action. It analyses the twitter feeds of the 12 TOCs running into London, and highlights possible disruption. Definitely worth a look and I will test it in anger on future trips.
Meanwhile, www.realtimetrains.co.uk – also available as an app for i-Phones and Android smartphones and tablets – has become the tool of choice for many in the industry. It presents real-time train running data in a most accessible way.
You can select a station and call up details of all trains passing and stopping. These are shown with actual and WTT timings. It’s invaluable at times of disruption or if you just want to monitor operations during a journey.
Late breaking news
Too late for the this month’s Column, DfT has just ducked a couple of written questions from Lord Berkeley on the annual costs of the total train service provision deals for the East Coast IEP replacement fleet for IC225 and the new fleet for Thameslink. Knowing annual costs is important, because it allows a value for money comparison with conventional procurement methods.
In 2012 Lord Berkeley asked a similar question about the original IEP contract to replace IC125. The annual cost was provided and analysis revealed that the cost per vehicle was twice that of Virgin’s current Pendolinos.
This could explain the latest cover-up. The sophistry and misinformation in the answers confirms that nothing has changed with the creation of the Rail Executive. As the abbreviation goes SSDD. But watch this space.
Roger’s Blog
It’s been heads-down writing since the last e-Preview. But this week I’ll be pounding the aisles at Infrarail on Tuesday, so do stop me and have a chat. Modern Railways is exhibiting on Stand D94.
On Thursday I’m nipping over to have a look round the ETCS National Infrastructure Facility at Hertford. I also hope to clear up some ambiguities which have emerged since the last briefing on Network Rail’s ETCS roll-out programme.
Immediately after the Spring Bank Holiday I’m off to Warwick to inspect the IEP interior mock up. There has been a lot of interest from readers in things like seats and window heights so it should be an interesting visit.
June starts with the Rail Freight Group conference followed by an up-date from ORR on CP5. The month ends with two of my favourite events. First there is the Stagecoach Summer Reception at Somerset House followed later in the week by the Fourth Friday Club meeting which incorporates the Modern Railways annual Railway Industry Innovation Awards.
Indicative of the status of the longest running awards in the privatised industry is this year’s keynote speaker and guest of honour, Transport Minister Baroness Kramer. As MC I shall have to be on my best behaviour. But I suppose I could ask her about that written answer she sent to Lord Berkeley.
Now to clear the camera memory and polish my sensible shoes ready for Infrarail.
Roger