DELIVERING CHANGE
Network Rail’ s Infrastructure Projects arm is delivering billions of pounds worth of investment in Britain’ s railways while undergoing sweeping internal changes to make it more efficient. Paul Stephen talks to Dr Francis Paonessa, IP’ s Managing Directo
Control Period 5 (April 2014-March 2019) will long be remembered as one of the most transformative Control Periods not only for Britain’s railways, but also Network Rail itself. NR is not just engaged in delivering the biggest programme of UK rail investment for more than a century, but has initiated sweeping internal changes that will make it a leaner and fitter organisation. Internal restructuring and wholesale cultural shifts will ensure that NR emerges from CP5 as a more commercially-driven and customer focused organisation than the one that existed five years earlier. Playing a leading role is NR’s delivery arm Infrastructure Projects (IP), which is responsible for implementing more than £25 billion of enhancements and major renewals during CP5. As a result, by 2019 there will be an additional 170,000 seats into major cities across the UK and a 30% increase in capacity into London at peak times. Those 170,000 seats equate to approximately 142,000 commuting cars, which would cause a three-lane traffic jam from London to Cardiff. By 2020 there will also be enough additional capacity for an extra 6,415 carriages to run on the network - equivalent to a train 87 miles long.
With 4,300 employees, IP represents just 12% of NR’s total workforce but over two-thirds of its spending power, utilising a supply chain of over 3,000 suppliers and more than 100,000 individual contractors.
Grand Scale
The scale of IP’s construction activity is enormous. It spends more than £130 million a week and has more than 15,000 live projects at any one time, including headline programmes such as Crossrail, the Great North Rail Project and Thameslink.
Annual spend in 2016/17 was over £6bn, making IP responsible for delivering 22% of all new UK infrastructure. Its total workload has been estimated as the equivalent of delivering an Olympic Stadium every month, but with the added complexity of working in and around an operational railway.
The way IP delivers this work has undergone major changes since 2014, reflecting the wider decentralisation of NR and devolution of greater powers to its eight geographic Route businesses (plus its virtual Route for freight and national passenger operators).
IP now operates as a matrix delivery organisation, and is aligned with the Route-based structure via four regional delivery teams. These operate alongside separate delivery teams for IP’s two largest projects, Thameslink and the Great North Rail Project, and specialist teams in track and signalling.
IP’s Managing Director Dr Francis Paonessa explains: “Some people have a historical view of where we sit structurally within NR which is no longer accurate, and needs updating. We’ve done a lot to reposition ourselves within the business, and to alter how we interact with the rest of it.
“IP sits as its own project management and infrastructure delivery organisation, providing functional support to the Routes. The common
“N R is not just engaged in delivering the biggest programme of UK rail investment for more than a century, but has initiated sweeping internal changes that will make it a leaner and fitter organisation .”
misconception is that IP is spending IP’s money but we don’t actually have a budget. We spend the Routes’ money, and provide support to them and in turn, their customers.”
Under this new structure, the Routes and project sponsors define the scope of what enhancements are needed, and then fund them from Route-based settlements. IP then costs the work, and takes individual projects through NR’s eight stage Governance for Railway Investment Projects (GRIP) process from output definition through to delivery, handback and project closeout.
Paonessa adds: “We spend about £2 in every £3 the Routes have, but we don’t actually control scope, spec or access. Those outputs come from different parts of NR, and we act as that interface and intelligent client between what’s wanted and the supply chain delivering it.”
National Role
It is this vital national role that has prevented IP from being devolved to Route level, as has previously been suggested, not to mention the considerable benefits to be gained from the economies of scale and capability that a national IP business possesses.
Having a team with a national portfolio also enables a more efficient allocation of resources, as opposed to confining them to Route level where fluctuations in workload tend to be more amplified.
IP is also better placed to prioritise resources and expertise when there is limited capacity in the supply chain to where they are needed most, rather than operating on a first-come-first-served basis where key projects could be overlooked.
“I think we have the best of both worlds at the moment,” says Paonessa. “We have the Routes, which are more outward facing and better placed to understand the needs of train operators and passengers, and then you have the size, scope and capability of the IP organisation to deliver that work effectively.
“Also, if you broke the teams up into eight geographic areas, it would be very hard to manage the peaks and troughs in planning workload. We smooth those out on a national level and can talk to the supply chain on behalf of NR as a whole, instead of eight different teams trying to engage with the same suppliers. It’s far easier to do on an aggregated level, when you’ve got a consolidated and co-ordinated business.”
Strengthening the relationship between IP and the Routes is a deep level of integration within NR. In addition to operating its four regional delivery teams, Paonessa attends NR’s monthly
“In the last two years IP has halved its number of possession over run delay minutes, which now cause less than 0.3% of total delay minutes on the network .”
Route Performance Review to hear how IP can better serve them, and reports back to Route Managing Directors on what progress has been made. In turn, Paonessa reports directly to NR’s executive team to discuss any changes that need to be made on a national level, providing two separate layers of accountability to his Route-based customers.
“We are seeing if we can refine that relationship as the devolution model gains more maturity, and we constantly ask ourselves if there are better ways to align my team with the Routes. But we’ve come a long way from saying ‘anything to do with budgets and delivery sits with IP’ to the Route MDs having a new set of accountabilities.”
Operational Gains
These key structural changes have been accompanied by impressive gains in output, and notable improvements in IP’s operational results.
For instance, in 2014, IP was hitting 62% of its entry-into-service milestones (GRIP Stage 6). By 2016 this had climbed to 92%, giving much greater certainty of the delivery of passenger benefits.
CP5 did not begin well for IP after an ambitious package of works over the Christmas 2014 period resulted in two well-publicised and disruptive over-runs. That was followed in November 2015 by the Hendy Review which recalibrated IP’s portfolio in light of the over-optimistic timescales and inaccurate cost estimates applied to some major projects - the Great Western Route Modernisation in particular.
Although much improvement has been made in project delivery since 2015, Paonessa points out that almost 50% of CP5 enhancements were still in development at the time of the Hendy Review, and so IP is still dealing with the legacy left by those initial project difficulties.
Even so, significant advances have been made in the estimation and costings of projects, especially following the publication of illuminating research from University College London. This found that the level of ‘optimism bias’ commonly given to infrastructure projects was 66% at GRIP stage 1, reducing to 40% at GRIP 2 and 17% at GRIP 3.
Equipped with this knowledge, IP has amended the way it estimates the cost of enhancements, while also placing more emphasis on the need for greater cost effectiveness and efficiency.
For new projects, final cost estimates are now only provided once project development is complete, which is called the Final Investment Decision Point, and changes in scope beyond this point are strictly limited to prevent cost increases or delays in delivery.
“Our record of delivering enhancements that have come out of development is very good, and we’re doing that to within 2.7% of budget at the moment. Most of the large cost increases came from the estimation phase and we’ve still got development projects that suffer from that historical optimism bias.
“They are now working their way into delivery and we are having to put some much firmer estimates next to them.”
Better Possessions
Another area where IP has increased its understanding and proficiency is in access planning. IP requires up to 40,000 possessions a year, and Paonessa says that the greatest potential for unnecessary cost and disruption to projects lay here.
In the last two years IP has halved its number of possession overrun delay minutes, which now cause less than 0.3% of total delay minutes on
the network.
But as part of its firmer grasp on access planning, IP must still strike a difficult balance between minimising disruption to passengers and completing projects within budget.
A doubling in passenger numbers since 1997/98 combined with more than a million more services every year has reduced access to the railway for engineering work, and increased the potential disruption caused by over-runs. But to achieve the same output by taking shorter possessions requires the mobilisation of increased resources, and therefore greater cost.
Even so, Paonessa is extremely happy with the progress that’s been made by his team in this complex arena. Ever greater amounts of work are being completed on time and within budget but with minimal impact on Routes, train operators and, ultimately, the passenger.
“We have lots of data now on access planning, particularly for trackwork, where costs can double when you try and do it in shorter possessions. Two-thirds of our possessions are shorter than eight hours, and our greaterthan-12-hour possessions are down by 40% on CP4, making it more expensive to mobilise the resources you need than for longer jobs.
“I wouldn’t say that we don’t have operational issues, but we’re delivering the Great Western Route Modernisation at the moment with about 22 hours of access a week, broken up into short, typically four-hour blocks. It’s a difficult environment in which to deliver that scale of work, and we’re delivering that while still maintaining a 90% performance railway, which is incredible.
“The travelling public is just not prepared to accept large over-runs at short notice, which is fully understandable, so we’ve put a huge emphasis on reducing possession overrun delay minutes. I think we’re now down to an acceptable level where we’ve got the balance of cost-versus-disruption about right.
“We know the railways are only going to become even more intensively used in future, so we’ve got to do this work in ever shorter windows. Our priority is therefore to develop the tools, techniques and capabilities to do that cost-effectively, while safety for passengers and the workforce remains paramount.”
New Funding
Looking to the future, IP is being increasingly opened up to external contestability from the supply chain, so that its cost efficiency and competitiveness can be properly benchmarked.
This will also make it easier to bring in new sources of funding for the railways, and create attractive opportunities for the private sector to become more involved.
In December 2016, NR Chief Executive Mark Carne commissioned the Hansford Review which considered the best way to achieve these goals. On July 31 the findings of this review were published, recommending a raft of reforms within NR to remove barriers to investment, enabling third party funders to have a choice over who delivers projects for them, and for third parties to directly compete and deliver that work.
The reforms will include publishing a regular pipeline of third party opportunities, introducing flexibility in railway standards and the launch of a rewards scheme to share savings achieved from innovative ideas between NR and the company or individual.
Paonessa welcomes the recommendations made by the Hansford Review, and the increased contestability it will bring to IP. His view is that it will either confirm that IP is delivering projects in an optimal way, or bring good ideas to the fore which will enable it to improve. Whatever the outcome, it will mean gains for the taxpayer and reduce public spending on the network by increasing the efficiency of the supply chain. “It’s easy to see the things we don’t do well, but it’s very difficult to see the things that we do well, because there’s no-one to compare to. I’d really like to see other people
“IP’ s total workload has been estimated as the equivalent of delivering an Olympic Stadium every month, but with the added complexity of working in and around an operational railway .”
delivering the same kinds of projects in the same challenging environment. We’ll either find we’re doing a good job, or other people will set the bar even higher. I think we’ve moved forward a lot in three years and I can see a lot of opportunities from this. Being able to properly compare and contrast is at the heart of being a commercial organisation, and something I really welcome.”
Enabling third parties to deliver enhancements is also a natural progression on the chosen delivery model for Crossrail, where Crossrail Ltd was the client and NR was directly commissioned to do a significant proportion of the work.
But Paonessa warns that IP was well placed to manage the risks of working on the operational railway by integrating its Crossrail programme with other workstreams, including the Great Western Route Modernisation.
This demonstrates the difficulties that a commercial organisation could face by working on the operational railway, where project overruns incur financial penalties.
Suitable mechanisms have yet to be created to balance that risk, but it is the focus of a report commissioned in December 2016 by the Secretary of State for Transport Chris Grayling into the potential private delivery and operation of the planned East West Rail link between Oxford and Cambridge.
It is being written by NR non-executive director and East West Rail chairman Rob Brighouse, but has yet to be published.
“Access can massively drive your costs, which can be quite a difficult thing for commercial organisations to deal with. It’s the same reason that Crossrail Ltd is delivering the work within the portals, and we’re delivering £2.3bn worth of enhancements on the existing network.
“There are some complex interfaces with the operational railway and what we anticipate we’ll see from Rob Brighouse’s report is the best way of managing those. How exactly do you manage that risk?
“But cost effectiveness is at the heart of all this, and we really want to be able to compare and contrast by opening up our schemes. It’s up to the industry collectively to convince people that investing in our railways is a good thing, and that having investment delivered by IP is a good thing too.”