Considerations for GB Rail Implementation

Provision Scope

E.5 CONSIDERATION OF THE MANAGEMENT OF ASSET INFORMATION

E.5.7 Considerations for GB Rail Implementation

E:326 Certain methodologies relating to the asset information lifecycle, e.g. data collection, are

likely to represent significant cost to the industry. This report has not been able to consider the current GB rail arrangements, costs and savings potential in any detail. There is a need to consider the approach giving best industry value, e.g. collective buying opportunities, centrally managed and contracted specialists, etc. This might involve specific technical specialism, e.g. deterioration modelling, investment and operation of tools or provision of plant, e.g. infrastructure monitoring trains. Such services should include defined Service Level Agreements.

E:327 Consideration should be given to the facilitation of asset information collaboration

independent of organisational constraints. This may include local placement of centrally affiliated staff to ensure local knowledge is considered.

E:328 Local arrangements need to have sufficient size, scale and evaluation/analysis capability to

identify trends and ensure suitable and consistent response. In some cases such findings will have an industry/network implication and therefore a sharing mechanism should be considered.

E:329 There is a need to recognise that people play a critical part in the asset information

management system and as well as what is in an individual’s head there remains a lot of verbal and local written instruction as part of day to day management within the industry.

E:330 There is a need to consider the required information integrity and speed of provision as part

of risk-based determination of industry needs. Examples might include providing diverse arrangements for safety-related information, more explicit specification of information supporting funding requests, stating better integration of engineering and operational information to enable real-time control and passenger information provision, etc.

E:331 There is a need to consider the assurance activities necessary to ensure the quality and

compliance of devolved asset information arrangements.

E:332 There is a need to consider industry funding and incentive mechanisms to encourage use

of the core approaches and principles but also encourage innovation in local arrangements which can demonstrate efficiencies.

E:333 The defined framework needs to be resilient to an evolutionary approach with different parts

of the industry (whether by area/geography or industry function) coming ‘on stream’ at different times and having differing maturity. Any centrally defined arrangements therefore need to be flexible to accommodate an evolving business model. There is a need to maintain the ‘line of sight’ with industry objectives at all times.

E:334 We conclude that further consideration is needed of the requirements outlined and how

these might best be developed and delivered through central or devolved provision. This should take account of (and align with) other Rail Value for Money developments. Central provision would not be anticipated to mean a single, national IT system. Fundamentally we believe there is an initial requirement for a national framework (or information architecture) which will support local decision making and enable cost to be controlled. There are lessons to be learned from other industries such as water and defence logistics which support the need to clearly define requirements before any significant devolution. The industry needs to know (and agree) what it needs to know.

Appendix F – Hypotheses

We generated a range of hypotheses with potential for generating better value for money from asset management and supply chain management, based on the findings and our industry knowledge and experience. These are shown below prefixed AM for Asset Management and SC for Supply Chain, though it was recognised that there are a number of synergies and dependencies between them:

Hypothesis AM1:

Significant cost savings can be achieved by optimising enhancement and asset

renewal appraisal criteria through rigorous modelling of lifecycle criteria (whole-life costs, performance, risk, condition and degradation), supported by improved asset knowledge and information.

Hypothesis AM2:

There is a significant opportunity to optimise asset management activity across

GB rail by having clarity and alignment of objectives (including performance objectives) and joining this up with long range strategic planning for the overall industry.

Hypothesis AM3:

More economic and efficient decisions can be made by enhancing asset

knowledge and its availability across the industry.

Hypothesis AM4:

Rigorous application of maintenance optimisation within organisations will lead to

improved asset performance, cost savings and better understanding of retained risk.

Hypothesis AM5:

Applying harmonised (industry-wide) strategic planning and specification for rail

vehicles could incentivise investment and optimise use of these assets.

Hypothesis AM6:

Better industry performance measurement (aligned with industry objectives,

outcomes and regulatory regimes) will result in strategic alignment of efforts across the industry leading to greater efficiency and effectiveness.

Hypothesis AM7:

Better infrastructure stock management and processes could save costs.

Hypothesis AM8:

A common and shared method of assessing the benefits of asset management

activity across GB rail linked to industry objectives would encourage stakeholder buy-in and investment, encouraging more innovation.

Hypothesis AM9:

Alignment of accountability for delivering outputs with responsibility for balancing

cost, safety and performance will lead to optimised decisions.

Hypothesis AM10:

Adopting whole-life (lifecycle) planning approaches as part of the asset

management strategy and aligning this with finance / procurement strategy will lead to a reduction in the whole-life cost of asset ownership.

Hypothesis AM11:

Performance-based product acceptance processes would enable more

innovation, encourage new players and reduce project costs.

Hypothesis AM12:

Early completion of long range route utilisation strategies and associated whole-

system Route Asset Management Plans (with trade-off between enhancements, renewals and maintenance) will expedite benefit realisation across the industry.

Hypothesis AM13:

Better alignment of EU and GB rail standards would aid cost efficiencies.

Hypothesis AM14:

A stable long-term industry technology strategy will promote greater innovation,

competitiveness and sustainability of GB rail.

Hypothesis AM15:

A less restrictive asset management environment between Network Rail and

TOCs will encourage facility improvement and commercialisation of railway space and retail development, the revenue from which can be used to fund infrastructure and stations improvements.

Hypothesis AM16:

Improved enterprise level risk management would help effectiveness.

Hypothesis SC1:

The current funding mechanisms for certain asset classes in the supply chain do

not take account of structural changes to the capital market and increased rate spreads between public and private sectors. If DfT were to use its covenant to underwrite funding it would reduce the rate charged on financing for assets such as rolling stock.

Hypothesis SC2:

There is evidence that NR would gain significant value through challenging the

unit costs for repeatable work in maintenance and renewals but requires a stable basis.

Hypothesis SC3:

A locked-in 3 year rolling renewals work-plan of a significant proportion of the

renewals spend will yield a reduction in cost. For civils there might be the opportunity to create a rolling programme that can be locked-in across Infrastructure UK.

Hypothesis SC4:

More accurate work specifications and a stable set of standards could achieve

reductions in the cost of renewals through less re-scoping delays, waiting on material and labour and rework.

Hypothesis SC5:

Smoothing the procurement profile of new rolling stock will give the manufacturing

supply chain surety of demand and lead to reduced capital costs of rail vehicles.

Hypothesis SC6:

The train operators should use their skills, knowledge and capabilities to take the

lead role in procurement of rolling stock. This will better enable train operators to integrate the planning of their operations, train maintenance and spare parts supply. It will also enable operators to better manage the risks associated with procuring and commission new rail vehicles.

Hypothesis SC7:

Transparency of materials inventories across NDS and contractors can reduce

working capital.

Hypothesis SC8:

An increased role for train operators in the maintenance and/or renewal of

stations and depots buildings and assets based at stations and depots will internalise cost, performance and revenue consideration. This may reduce long-term net cost, accelerate delivery and enhance the passenger facing environment.

Hypothesis SC9:

The design, procurement, funding and implementation of smaller scale

infrastructure enhancements [i.e. less than £50m] would be quicker and cheaper if train operators took a fuller role and were more easily able to openly tender packages of work to the wider supplier market.

The hypotheses were initially categorised and ordered based on the following preliminary elements (see graph):

A workshop involving key members of the Value for Money team and industry experts, drawn from different industry sectors within Atkins and our sub-consultants, was used to:

• Review a selection of these hypotheses, which we considered to have the greatest potential to deliver value. • Test our assessment of those which have the greatest

potential to deliver value. • Identify any further opportunities.

• Inform a distillation to generate the opportunities now shown in Section 4.

Key

Cash flow / value tied up with this issue High >£1bn pa Medium £100m-1bn pa Low <£100m pa Time maximum benefit realised Long-term >2 years Medium-term 1-2 years Short-term <1 year Potential for quick

wins

High good potential for early savings from pilot(s)

Medium some potential for early savings from pilot(s)

Low little potential for early savings from pilot(s)

Appendix G – Update on Network Rail’s Transformation

In document Rail Value for Money Study Asset Management and Supply Chain Management Assessment of GB Rail (Page 144-148)