Nigel Harris says King’s Cross has shown costs can be constrained.

King’s Cross has shown how rail costs can be constrained

Using third-party contractors to deliver new or upgraded rail infrastructure is a bit like the famous ‘sasquatch’ - frequently discussed but never actually seen. Confirmed schemes seem as elusive as ever, notwithstanding Network Rail Chief Executive Mark Carne’s long-standing and frequently expressed enthusiastic determination for ‘contestability...’

There are two aspects to this: upgrades and enhancements to the existing network and then reinstatement of closed/lifted routes, reopenings of freight or mothballed lines to passenger traffic; and new railways. Secretary of State for Transport Chris Grayling’s announcement on March 20 that he is seeking a private contractor to build a new railway into Heathrow from the south rather unusually makes the most difficult of those options a priority. A new railway into Heathrow has been on and off the agenda for many years. So, Grayling’s move is a bold attempt to break the logjam and deliver a bigger railway, hopefully at lower cost. NR faces a gargantuan task in its ‘day job’ of ensuring that a largely 19th century network is made fit for a 21st century purpose and demand that would doubtless leave its Victorian builders slack-jawed with amazement. As this issue of RAIL closed for press, NR announced - just five days before it was due to reopen - that delays on the Preston-Blackpool electrification/resignalling will mean a further three-week delay (see Network News, page 8). Proof, were it needed, of the strain NR is under, and as Chairman Sir Peter Hendy CBE has stressed several times if it is to have a successful first year in CP6 the chaos of CP5 must be avoided.

I believe we should welcome an initiative designed to deliver a new, important railway at no capital cost to the taxpayer, given Grayling’s insistence that any such schemes should be ‘market-led proposals’ (MLPs) that are “financially credible without Government support”. (See Network News, pages 6-7).

That said, Government must sharpen up its act on contracting, for which its record is poor. One of the failed Carillion’s problems was that it is said to have bid too little, while on the East Coast, Virgin-Stagecoach is said to have bid too much. If Government is to contract with a third party it must do so professionally and effectively - with total clarity on what it wants, what it’s paying and when it wants it. Otherwise we’ll run the risk of sleepwalking into another mess. It needs to improve - fast.

NR’s critics say that it has struggled to bring costs down and boost efficiency because of a range of problems, including:

Poor project team incentives - the absence of competitive or regulatory pressure resulting in ‘lazy’ estimates of time/cost and equally disconnected engineering specifications. In other words, those planning the work are neither its funders nor end users, and this results in a lack of urgency and sharpness.

‘One size fits all’ thinking, leading to lengthy planning/high overhead costs, rather than a bespoke, challenging approach.

I have heard this summarised as ‘Missing Client Syndrome’ - the absence of a passionate chaser of value, who is relentless in their determination to wring maximum benefits from efficient costs. This challenging client, according to this view, must be there throughout from project inception, through specification and design to construction and delivery. Such a client must, by definition, be technically expert and have authority over delivery organisations to make sure that not only quality, but costs, are relentlessly controlled.

This view is founded in an unshakeable belief that separating authority from business responsibility effectively also separates management of costs from the product being offered to (and demanded by) customers. Break this crucial link (goes this argument), and costs soar, timescales lengthen and quality is compromised. It is a compelling argument and contracting projects such as the Heathrow southern link to a third party gives a perfect opportunity to test it. It would also produce some interesting benchmark costs in terms of standard units of railway construction - a mile of permanent way or a mile of OLE, for example. We would be clear as to who is definitively and ultimately responsible for cost control/output delivery. I wish this initiative well and will be watching with interest.

I believe a version of this approach should also be developed for reopenings and reinstatements which will otherwise end up marooned by NR’s crushing workload and stubbornly high costs. These are schemes which would not be fully financially sustainable, but which are needed. Here are just a few:

Reopening the abandoned, but largely intact, Wisbech branch. Reinstating and reopening Colne-Skipton… …Stratford-upon-Avon-Honeybourne. …Okehampton-Bere Alston. All four have solid strategic cases, but fail all financial appraisals because of the eyewatering costs produced by current methodology. The seven-mile Wisbech branch reinstatement, for example, is mired on the one hand by a consultant’s £100 million cost estimate and on the other by a blinkered local view that any new service must go to Cambridge. A realistic view on services is needed: a D-Train shuttle into the redundant Spalding Line platforms at March, with a cross-platform interchange - and a low-cost, long-siding reinstatement, with minimum signalling, a sprung-point mid-section loop and a lightweight, minimum disruption overbridge spanning the A47.

Reinstatements such as this and Colne-Skipton, could also be carried out by a third party contractor. And if the principles of flexible interpretation of standards, as proven by NR Route Managing Director Rob McIntosh at Kings Cross ( RAIL 843) were rigorously employed, then there would be a big downwards impact on costs. At King’s Cross, this sharp approach in challenging standards prevented a £ 237m budget being overshot by around £100m. This sort of thinking also led to Scot-Rail’s Paisley Canal Electrification scheme being delivered at £13m against an original estimate of £ 27m. Put that approach in the hands of an engaged third party contractor and those project-killing costs (such as £100m for Wisbech) could be significantly reduced. There is solid evidence that significant third party investment is available. In 2015, a developer offered £ 450,000 towards an NR Grip 4 study and £17m towards reinstatement of the Stratford-Honeybourne line. On March 12, I gave evidence to the Transport Select Committee, with Stephenson Harwood specialist rail investment lawyer Tammy Samuel, who repeated an oft-heard claim that there is a “wall of money” available for investment in railways - if we can find ways to secure it.

Third party development of new lines, plus efficient rail reinstatements using the challenging approach proven at King’s Cross and Paisley Canal, look very attractive.

“At King’s Cross, this sharp approach in challenging standards prevented a £237m budget being overshot by around £100m.”