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Rail repair jobs hit the buffers

Over £1 billion of vital repair work put on hold as Network Rail reconsiders contracts

OVER £1 billion-worth of vital rail repair work is facing massive delays because Network Rail is struggling to draft contracts to let the schemes.

The network operator has already put the tender process on hold in East Anglia, where a framework deal worth £200 million is up for grabs to repair structures such as bridges.

Network Rail has told firms chasing the East Anglia deal that it is reviewing its procurement strategy for the frameworks.

Kier, Alfred McAlpine, Balfour Beatty, Murphy, Birse and Gleeson were all lined up to price the deal in June but have been left in limbo by the decision.

It is also understood that May Gurney, the incumbent framework contractor for the London North East zone, has been approached by Network Rail about extending its contract by one year because the network operator is not ready to tender a second £400 million deal in the region.

Network Rail is planning well over £1 billion-worth of work on structures across its seven zones.

Delays have arisen because Network Rail is determined to get the best deal possible from the frameworks as part of its plans to make 20 per cent savings from contractors and encourage more work to be carried out in-house.

The planned contracts are in two parts, known as RT12 and RT24. Under the RT12, firms would work for the first six months at cost price. When the RT24 is signed, companies would take profits and overheads for inhouse work but no profits for any subcontracted out.

A form of the contract is being trialled by Alfred McAlpine in the Great Western zone but Network Rail managers are understood to be poring over the RT24 in an attempt to close any loopholes in the deal.

One industry source said:

'Network Rail's commercial teams at headquarters and all the zones are looking at the commercial aspects of the RT24 period.

They have rewritten the RT24 contracts seven or eight times in an attempt to get them right.

'The contract makes exceptions so you can claim profit when you use specialist firms but there are aren't clear enough definitions of what a specialist firm is, so Alfred McAlpine has been subbing out quite a lot.'

A second insider close to the deals said: 'This has been a total shambles and all the time there is a backlog of work building up.

These contracts may not be in place until 2005 for all we know.'

Network Rail is also planning to clamp down on costs with another benchmarking exercise across its entire range of contractors to compare unit costs for standard items of work across the network.

A Network Rail spokesman said: 'We have told prequalifiers that the East Anglia deal is on hold. We are reviewing whether the long-term framework contracts have the potential to deliver value for money and cost savings in the light of our experience with Alfred McAlpine in the Great Western zone.

'We are carrying out a value for money health check which we hope will be completed by the end of the year.'