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Armitt's focus is on the future

RAIL

Britain's rail network has seen a Lazarus-style revival since John Armitt joined a bankrupt Railtrack as chief executive in 2001. He talks to Alasdair Reisner about his plans for the future and tries to reassure contractors that he will not try to grab back renewals

JOHN Armitt is running late. Making his apologies as he arrives he explains that he has been in a meeting about the Gerrards Cross tunnel collapse.

The issue has been at the forefront of his thinking since the end of June when the tunnel, which was being built over the railway to make space for a new Tesco store in the town, failed, leaving a large section of the Chiltern line out of use.

Major incidents are sadly nothing new to the rail network. When Mr Armitt left the chief executive's role at Costain in December 2001 for the same position at Railtrack the latter was already in administration following a string of disasters including the Hatfield derailment in October 2000. The four Hatfield fatalities followed previous tragedies at Ladbroke Grove and Southall. Confidence in the rail network was at an all-t ime low. Mr Armitt's brief was to give the kiss of life to a network on its last legs and encourage passengers to return.

A further unwritten brief was to attempt to make sure such incidents never happened again.

Despite a baptism of fire (the Potters Bar rail crash happened only months af ter he took up the post) few could suggest that there has not been a dramatic improvement in Britain's railways under Mr Armitt's stewardship.

'When you look at where we are today with performance improving, safety indicators all getting steadily better and the asset condition considerably improved from where it was then, yes, things are looking a lot better, ' says Mr Armitt. 'But we are not satisfied by any means.

We know that our customers are not satisfied, even if they are more sat isf ied than they were.' The satisfaction of rail passengers seems to drive Mr Armitt's strategy for Network Rail. Whether he is talking about the decision to bring maintenance back in-house or the future of planned major improvement schemes, his reasoning behind his decisions always comes back to what is best for the passenger.

Take Gerrards Cross for example. Detailing the results of his morning meeting Mr Armitt says: 'I think the people of Gerrards Cross are being very tolerant and pat ient. It must be a sou rce of considerable irritation. My objective is to get trains running as quickly as possible. The second phase will be to reinstate the project and rebuild it such that passengers, train drivers and Tesco can be confident that they have a structure that will last for 100 years.' So Mr Armitt's customers seem well looked after.

But what about his suppliers? Over the past few years working for Network Rail or its predecessor Railtrack has been an uncertain occupation. Since Hatfield, the conf licting pressures of making sure that the rail network is in safe working order while also t rying to hold down the amount of money spent have left contractors not knowing which way they were going. Do you step up your operations to help deliver the vital works or scale back in the face of potent ial cutbacks in spending?

Firms claim that recent figures claiming Network Rail had underspent by £920 million against its budget show which way the wind is blowing.

One frustrated rail contractor says: 'The main issue for us at the minute is the major underspend by Network Rail last year. John Armitt will say that it is because of efficiency savings but I'm not convinced. They could have spent more money but they didn't have their strategy sorted out, so they couldn't let work. They are now building up a backlog of work like in the old BR and Railtrack days.' The Office of Rail Regulat ion agrees in part, saying in June that Network Rail had 'spent substantially less than its 2004-05 budget due to a combination of cost control, improved efficiency rescoping and deferral of a substantial amount of work. This is being investigated further to identify any effect on outputs in the short or longer term.' Unsurprisingly Mr Armitt disagrees that works have been deferred, fighting back with f igu res of his own.

'It is totally unfair comment. The volume of work that is being done now, particularly on renewals, varies between two and three times what it was five years ago. It is as high as it was in the 1970s when renewals were at their peak. Contractors are getting more work ? maybe not in value terms but simply in volume terms. Forget about pounds and inf lation and all the rest of it. Simply think about the volume of the work going into the ground. It is probably greater today than it has been for 30 years, if not 50 years.' But, as rail suppliers will no doubt mut ter, companies do not su rvive on volume of work , it is the amount of money that goes through the books that is important. Losing nearly £1 billion-wor th of work to eff iciency savings is always going to get people's backs up.

But Mr Armitt will not be cowed by this suggestion.

He says: 'If I can deliver the output the railway requires in terms of performance and asset conditions without spending £900 million I am duty-bound not to spend it. I have made no apologies for this.

We are not going to place contracts in a rush at what we consider to be uneconomic prices. We have consciously and deliberately been continuing negotiations with suppliers to get prices down.' The motivation for this has been the 30 per cent cost reduct ion over f ive years demanded by the rail regulators. So, apart from negotiations with contractors, how else does he expect to bring efficiencies?

'The big challenge for us and our contractors going forward is in efficiency of operations within possessions, ' he says.

Mr Armitt has made improving possessions ? where the rail is shut down to allow work to be carried out ? key to his strategy as he believes there is currently massive inefficiency. It's hard to disagree. On one trial possession on the West Coast Mail Line, the team targeted delivery of what would have been a 54-hour possession in just 27 hours.

In the end the work was managed in 29 hours.

Clearly there is inefficiency in the system if such results can be achieved with a little forethought.

'The challenge for contractors is that in order to meet these efficiencies the works need to be planned in as detailed a way as you would a refinery shutdown. You need to know about every bolt and washer and piece of pipe so at the end of the period you are able to get back up and running.' Mr Armitt recognises that the problem with long possessions or possessions that overrun is not simply the cost to Network Rail. To explain he returns to his passengers.

'The issue is that at 7.30 am on Monday people get up and go to the station to go to work. The fact that a train isn't there because a possession has overrun is an out-and-out failure of the network. Extending a possession may not cost a great sum in financial terms but what it does for the reputation of rail and the aggravation it causes to passengers is tremendous.' With this customer focus Mr Armitt is dragging the rail network back onto its feet at a pace few would have thought possible when he joined in the dark days of Railtrack's administration. So, while contractors may gripe occasionally about workloads and spending, the work Mr Armitt and his colleagues are doing is mak ing su re there will be a thriving rail network for these firms to work on in the future.

The £2 billion question

IF THERE is one issue that must bounce around the m ind of any contractor working in the rail sector on a reasonably regular basis, it is the fear that Network Rail will look at the ? admittedly highly-successful ? decision to cont rol costs by tak ing control of rail maintenance from contractors and bringing it in-house and wonder why it doesn't do the same for the £2 billion it spends on renewals each year? Yet John Armitt seems keen to play down any suggestion that this will be the case.

'There is no danger of us br inging renewals in-house as long as the contractors perform, ' says Mr Armitt.

'As long as we can see the benefit from keeping renewals out there in competition it will stay there. There are benefits of contractors using their own initiative and ideas to improve productivity and output on renewal. At the moment there is no reason to say that is not happening and no reason to think about taking renewals back.' Will these words calm the nerves of contractors concerned about losing their renewals work? Maybe.

But they may also look at a similar Network Rail press statement from September 2003 and feel a sense of déjà vu. 'There are no plans to take further maintenance areas in-house unless there are compelling cost and performance benefits, ' said the statement.

One month later Network Rail announced it was taking all maintenance contracts back in-house.