Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Network Rail sets out changes to procurement for next five years

Britain’s rail contractors will compete for work worth billions over the next six months, as Network Rail ramps up tendering for its next spending round.

By April next year, the rail operator will have let 65 per cent of work for control period 5 (CP5), which runs from 2014 to 2019.

Deals being awarded in the third and fourth quarters of 2013/14 include its £760m low-value building and civils framework in Scotland and the North-east; a £700m London, North-west and East Midlands programme which includes property, earthworks and structures; more than £1bn of multi-disciplinary route-based frameworks in the South; and a £277m renewals framework in Wales and the West.

The company has overhauled its approach to procurement for CP5 in a number of ways that will affect contractors.

Procurement step change

It plans to get a large portion of the work contracted at a very early stage – 85 per cent of CP5 deals by April 2015.

Both Network Rail and many of its suppliers agree this is a major improvement on past procurement.

WSP UK head of rail systems Chris Lawrence says the approach is a “significant improvement”, as there was often a hiatus at the start of previous control periods while projects were defined and frameworks and contracts procured.

“It is a real relief for us because it gives real visibility of future work programmes”

Phil Price, Keltbray

For this spending period, Network Rail wants to get the deals done early to ensure contractors know what their future workloads will look like and can prepare accordingly.

Keltbray managing director of rail and infrastructure Phil Price says: “It is a real relief for us because it gives real visibility of future work programmes.”

It means companies can hire and train the people they need, secure in the knowledge there will be work for them.

This should increase the amount of directly employed rather than temporary labour on projects – one of Network Rail’s goals – which it is hoped will also make it easier to raise their safety standards and skills.

Earlier contractor involvement

Early procurement also leads to early contractor involvement. “We get involved at an earlier stage of design and can influence the design for safer construction, and that is a massive step forward,” Mr Price says.

Most of the work – 60 per cent – will go through frameworks, with alliances taking 27 per cent and competitive tenders 13 per cent.

“It is about longer-term relationships to give better delivery now and in the future, rather than just getting lowest price now”

Simon Kirby, Network Rail

While contractors can often secure places on frameworks and then miss out on deals through competitive tendering with no assurances that they will win any work from them, this is set to change in some frameworks in CP5.

In certain cases there will be a guaranteed amount of work to be let under the framework but no assurances on how much an individual supplier will get.

There will also be single supplier frameworks for large banks of similar projects, such as track, where the supplier is guaranteed to get work but Network Rail cannot say for sure at the start of the deal exactly how much work there will be or when it will come up.

Building stronger relationships

The move away from competitive tendering is part of Network Rail’s desire to have closer, longer-term relationships with its contractors.

It gives contractors more long-term certainty of work and in return the contractors will invest in skills.

“If you are a good, competent supplier who wants to work with us one way or the other, there are still opportunities”

David McLoughlin, Network Rail

“It is about longer-term relationships to give better delivery now and in the future, rather than just getting lowest price now,” says Network Rail director of infrastructure projects Simon Kirby.

Longer, closer relationships will result in Network Rail having a smaller group of main contractors, he adds. This could mean that some of the tier one firms do not win as much work in CP5 as they have done before.

Switching tiers

Network Rail finance and commercial director for infrastructure projects David McLoughlin says these firms could still pick up work as tier two subcontractors rather than main contractors.

He says early tendering means companies will have time to change their business models to pick up tier two work if they wish.

“It would be interesting to see if large tier one firms would step into the tier two position. That would be a very difficult pill for them to swallow”

Phil Price, Keltbray

“If you are a good, competent supplier who wants to work with us one way or the other, there are still opportunities,” he says. Other firms may decide instead to cut back on their UK rail work and do more abroad or in other sectors.

Grant Thornton partner and head of construction Phil Westerman told Construction News last month that firms could increasingly be forced to look overseas if they miss out on the more competitive UK deals and lucrative frameworks.

Tough pill to swallow

Not everyone is convinced that the larger tier one firms would be willing to park their egos and act as a subcontractor to competitors.  

Mr Price thinks tier one firms could do it in a joint venture but is less sure whether they would do so on their own.

“It would be interesting to see if they [large tier one firms] would step into the tier two position if they weren’t successful,” he says. “That would be a very difficult pill for them to swallow.”

There could also be movement in the other direction as tier two firms could act as main contractors on some regional packages.

Mr Kirby says: “We would determine where it is better to have some tier twos becoming tier ones, or whether to have an existing tier one deliver all the packages.”

Skills shortage?

The rail industry is heading into a busy period with the ongoing £15bn Crossrail programme, the possibility of High Speed 2 on the horizon and major rail projects abroad.

Will the UK rail industry have enough appropriately skilled workers to get all this work done?

“If firms can demonstrate they have invested in skills and have the right calibre of people, the work will be theirs to have in those regions”

Simon Kirby, Network Rail

Mr Kirby is confident that it will, as long as Network Rail and its suppliers take the actions they have planned to address skills.

“One reason we are putting in place the frameworks we are going to let in the next few months is to look for investment in skills with those framework suppliers,” he says.

“If they can demonstrate they have invested in skills and have the right calibre of people, and they can achieve the right level of performance, the work will be theirs to have in those regions.”

He adds that there is also other work taking place in the industry to develop skilled rail workers, such as through a national skills academy and work with universities and schools to encourage young people into engineering.

Mr Kirby points out that HS2 would not reach major construction until near the end of CP5 and that the two companies had “pretty good dialogue” about the effects of their programmes on demand for rail workers.

Its three suppliers on Network Rail’s signalling framework have already recruited around 100 people – many of them ex-armed forces personnel – to be trained as test engineers from September, he adds.

Uncertain perspectives

Some suppliers, though, are not as confident that the industry can develop all the skilled people it needs in time.

EC Harris global head of rail Mark Cowlard says the industry should be able to develop sufficient operational staff to work on site, but there could be shortages in some areas, such as design management and professional services, and therefore a risk of cost inflation.

“What Network Rail has put in place is the right thing. I think it is for us as suppliers to live up to that”

Phil Price, Keltbray

He says some firms may choose to set up offshore design offices. In his previous role as managing director for rail solutions at consultancy Atkins, he set up offices in India with engineers working on projects for the UK.

Similarly, WSP has electrification teams in India and Sweden and Mr Lawrence says a “significant familiarisation and training programme is required upfront to bring the team’s competency into line with UK practice and procedure”.

He adds that it would be good if the industry could develop a training conversion programme for overseas engineers.

Government intervention

Mr Cowlard says the Home Office might need to make it easier for overseas professionals to get a visa for roles that are hard to fill. He adds: “We also need to encourage people to re-enter the job market in the UK and really make it attractive.”

Transport secretary Patrick McLoughlin last month met with the heads of Crossrail, the Highways Agency, HS2, Network Rail and Transport for London to urge them to collaborate to create a highly skilled UK workforce that could be transferred to other UK and international projects.

Companies are already looking at ways that they can retrain UK staff working in other areas of construction to fill the potential void in rail.

For example, Mr Price points out that people working on the decommissioning of nuclear power stations have many skills that transfer readily to the railways.

“They understand the importance of safety and quality and making sure things are controlled and managed properly,” he says.  

Keltbray is considering retraining staff who have been working on nuclear decommissioning projects to do other work, such as rail and utilities, once the staffing requirements of those projects decreases.

He believes the industry should be able to get the necessary skilled workers on board, although a lot of investment will be needed. “What Network Rail has put in place is the right thing,” he says. “I think it is for us as suppliers to live up to that.”

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.