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Network Rail's next boss: 5 challenges to tackle

Following Mark Carne’s announcement that he will be retiring later this year, CN assesses the biggest obstacles his successor will need to tackle during CP6 and beyond.

Network Rail’s chief executive Mark Carne has revealed he will step down later this year after four years that have been far from straightforward.

He joined in January 2014, a month in which severe weather lashed the UK and inflicted £170m of damage to the network – an omen of things to come.

In his first two years, engineering overruns led to travel chaos in London over the 2014 festive period, the budget for electrification works ballooned by billions, and Network Rail was subject to three separate reviews into its operations in just eight months.

No doubt these led to a lot of sleepless nights for the outgoing boss. But as he told CN at a briefing this week: “The first two years were difficult; the last two years have been great.””

There have been some significant changes resulting from Mr Carne’s tenure too, with health and safety among the most significant.

Taking his experience from the oil sector, Mr Carne’s leadership has seen the UK network become the safest railway in Europe, while the safety performance of contractors has improved significantly. He has also driven the digital railway agenda and laid the foundations for full devolution of the company.

Explaining his reasons for leaving, Mr Carne said the organisation needs someone who can commit to taking it through the whole of Control Period 6 and up to at least 2024.

So what are the biggest challenges his successor will face?

Generic_financial_money_20_cash

Generic_financial_money_20_cash

Private funding

With less money available from government to fund enhancement schemes in CP6, it is imperative Network Rail secures money from the private sector.

When Network Rail accepted former government construction adviser Peter Hansford’s recommendations on bringing in more private investment, it seemed the organisation had turned a corner. Finally Network Rail would be focusing on securing funds from what had previously been a largely untapped area.

However, this momentum appears to have slowed. The pipeline of privately funded projects promised by Mr Carne last summer has not come to market, while talk of privately financed schemes has all but stopped.

In truth, much of this has been down to Carillion’s demise. Not only has the contractor’s collapse taken time and resource away from Network Rail’s other initiatives, the issues surrounding Carillion’s PFI contracts have made the client think twice about how private finance deals for carrying out future works might look.

But while such deals might be less attractive than at this point last year, the need for private money hasn’t gone away.

Mr Carne has always been keen to stress the difference between financing and funding, stating that the latter – securing money directly from private developers for projects from which they will benefit – is currently a higher priority for Network Rail.

The appetite from private developers is there, the chief executive says, but Network Rail does not have a track record of securing developers’ backing.

His successor needs to foster better relations with private funders and be clear that if the private sector needs rail enhancements to serve their developments, they are going to have to pay towards them.

Network Rail Trackwork at Shenfield 2

Network Rail Trackwork at Shenfield 2

Sorting out renewals

If there has been one constant throughout the delivery of Network Rail’s control periods, it has been the inconsistency of the renewals workbank for contractors.

Railway Industry Association policy director Peter Loosely explains: “The key is providing a smooth workflow so we don’t have this ‘factory roof profile’ we have had in previous years – firms need clear visibility.”

“The funding shortfall has been bad for contractors. You bring in 200 people because you see work at Network Rail for the next five years, then it runs out of money”

Rail industry source

CP5 was a perfect example. The slow pick-up of work at the start has been matched by a significant reduction in the latter years as the enhancement problems have sucked money from renewals.

“The funding shortfall has been bad for contractors,” one source says. “You bring in 200 people because you see work at Network Rail for the next five years, then it runs out of money and starts pulling schemes; it leaves us in a tricky position.”

Network Rail believes it has the answer for CP6. Its “top down” renewals programme planning is described as more detailed than ever before, and the client will also phase procurement of renewals work so the supply chain is not overstretched. It has also brought forward £200m of renewals into CP6 to create a smoother transition in workload from the end of CP5 to CP6.

While Mr Loosely welcomes the changes, he believes the “proof of the pudding will be in the eating”.

This will arguably be the biggest challenge Network Rail’s new boss can address for its supply chain.

With £37bn to be spent on operation, maintenance and renewals, the work is there. Now it needs to come to the market in a more reliable and controlled way.

If the next chief executive can oversee a control period that doesn’t face backlogs, inconsistencies and capacity issues linked to renewals work, they will have achieved what many of their predecessors could not.

Business_businessman_silhouette_mental health

Business_businessman_silhouette_mental health

Mental health

When CN interviewed Mr Carne early into his rein in 2014, improving safety was a clear priority. “Network Rail and its contractors’ workforce safety performance is not acceptable,” he said at the time.

But while Network Rail has made massive strides on safety, CP6 will now be about improving the health and wellbeing of its workforce, with a particular focus on mental health.

“I think we are at a very similar point with mental health to where we were with safety”

Mark Carne, Network Rail

Out of a workforce of around 40,000, at any one time around 200 of its staff members are off work for reasons linked to mental health. Network Rail has quite rightly identified this as unacceptable. “I think we are at a very similar point with mental health to where we were with safety,” Mr Carne told CN this week.

In its strategic business plan for CP6, the organisation has set out plans to reduce that number by 30 per cent.

Similar to what Mr Carne did with safety, the new chief executive will need to challenge the prevailing culture around mental health. Staff will need to be equipped with the necessary training to deal with these issues, and both management and workers must be encouraged to open up about mental health.

Nicola Shaw CEO HS1 1

Nicola Shaw CEO HS1 1

The role of the routes and IP

Since Nicola Shaw (pictured) released her report on the future funding and structure of Network Rail in 2016, its Infrastructure Projects division has been a point of contention.

Network Rail’s devolution, driven by Mr Carne, has taken power away from the centre and changed the role of IP. The chief executive insists that there is still a role for IP, but as more of a delivery service that will serve the routes. While IP will remain, Mr Carne says there may be opportunities for routes to buy services from providers other than IP if they wish.

“Going into CP6 it is still not entirely clear on who will be overall responsible for the delivery of new infrastructure”

Rail industry source

While the outgoing boss is seemingly clear on how IP and the routes will work in future, it doesn’t seem the rest of the supply chain is. “Going into CP6 it is still not entirely clear on who will be overall responsible for the delivery of new infrastructure,” one rail source says.

“We think it will be IP, but quite what that looks like, we are unsure. There is still the opportunity for routes to turn around and say we are going to do something completely different.”

Other rail sources say the increased devolution of the routes has meant more layers to get through, and confusion over exactly who needs to be spoken to at Network Rail.

There is no going back from devolution now, and it is up to the next chief executive to continue this path. However, the new boss must be clear in communicating to the supply chain the changes to Network Rail’s structure and – more importantly – who and how firms can engage with it.

Network Rail electrifcation work gantry track infrastructure railway

Network Rail electrifcation work gantry track infrastructure railway

Keeping an eye on new enhancements

While there is £37bn in CP6 for operations, maintenance and renewals work, and a further £10bn to deliver CP5’s backlog of enhancements, additional enhancements must not be ignored.

With schemes now being given funds by government on a project-by-project basis, the next chief executive’s influence in Whitehall will become even more crucial. Securing private funding for projects will also likely boost their ability to progress when put in front of the Treasury.

With new projects not having a clearly defined funding envelope and competing for cash alongside other public schemes, the new CEO’s skills in convincing government offcials will increase in importance.

They will need to lobby hard to persuade those in Whitehall of the merits of new rail projects – including electrification, Mr Loosely argues.

“Like with renewals, we want to see a clear future for enhancements on the network,” he says. “We are of the view that, given the right traffic levels, electrification is the right answer, but we do need to get the cost of it down.”

 

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