Network Rail Problems – Does It All Come Down to Contract Staff?

train-527849_1280The UK government announced last week that some elements of the planned programme of rail improvements was being put on hold whilst its feasibility was considered. That follows a series of Network Rail problems, including cost overruns, delays and some major issues last Christmas when we saw large numbers of people unable to travel because of over-running engineering works. As the BBC reported,

"The government says it will delay or cut back a number of modernisation projects planned for Network Rail. Transport Secretary Patrick McLoughlin says rising costs and missed targets make the £38.5bn plan untenable. He blamed Network Rail, saying it should have foreseen the improvements would cost more and take longer."

One of the comments from the Minister was this.

"Important aspects of Network Rail’s investment programme are costing more and taking longer. Electrification is difficult. The UK supply chain for the complex signalling works needs to be stronger. Construction rates have been slow."

We spoke over the weekend to a very senior procurement and supply chain individual who has had previous intimate knowledge of rail matters and asked him - what's gone wrong with the supply chain here? Whilst his experience of the industry does not cover the past few years, in his opinion, these current problems look like a re-occurrence of past issues.

There is a pretty limited market in terms of the suppliers who can take on this sort of work. When demand is high, then of course that market and capacity is put under pressure. Suppliers will respond by putting up their prices (supply and demand coming into play) - both to increase returns, and perhaps because they will sometimes bid for a contract with the intention of NOT winning if they have capacity issues. However, our source also highlighted a very interesting issue.

"Much of this may come down to an individual level. The specialist engineers working in areas like signalling are often individual contractors, working on a day-rate basis. They used to work for British Rail of course when that was the monopoly organisation, but when that broke up, many of them went solo because they could make more money working for the different rail firms.

So I've seen problems when a prime contractor is assuring the buyer that they are resourced to carry out a particular piece of work, but it turns out later that those critical individuals go elsewhere to get a higher rate. That may well be to another prime working in a different part of the network . But the first prime then may genuinely not realise till very late that they can't get the people for a particular project."

If this is the case, it has two effects. It pushes up the costs of carrying out projects, which certainly seems to have happened according to yesterday's announcements. And it leads to projects being under-resourced and last-minute issues leading to delays and problems - as we saw last Christmas. We suspect that the recession of the past few years has also taken capacity out of engineering and related industries, which has probably exacerbated the situation.

In the past, according to our contact, the senior management at Railtrack and its predecessor organisations had to clamp down on the contractor situation - for instance by putting a cap on the day-rates paid. (You may notice real parallels here with the current situation in terms of temporary medical agency staff in the NHS.) But it is fascinating how these macro-level problems may well have very individual people issues and decisions at their source.

Whether or not this is part of the cause, which does seem likely, there do appear to have been issues of market capacity and some sort of failure of market understanding, planning and engagement from Network Rail. However, talking to another person with past rail experience, he pointed out that Network Rail has also delivered some very impressive achievements too in recent years. "Look at the work to totally redevelop Reading Station for instance - a huge achievement, delivered whilst keeping some of the busiest lines in the UK running." There are other successes too - but of course it is the failures that grab the headlines.

We'd love to hear any inside views on this, official or unofficial, so if anyone has recent experience in this area do comment here or drop us an email!

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