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Network Rail CEO Mark Carne on collaboration, debt and elections

Network Rail’s CEO talks exclusively to Construction News about his baptism of fire, why the industry needs to improve and how to deliver a £38bn pipeline.

On the wall of Mark Carne’s office in King’s Cross hangs a 1901 print of Isambard Kingdom Brunel’s drawings of the Dawlish sea wall.

The print was given to Network Rail’s chief executive by staff at the National Rail Museum’s archives and he need only glance to the right from his desk to be reminded of the baptism of fire he encountered when he started his role in February.

The wild winter weather which battered the UK’s coastline had led to flooding at almost 300 sites and more than 100 landslips.

Dawlish was the most high profile, with slips on two separate occasions and eight weeks of repair works. The estimated cost of the clean-up to Network Rail was around £170m.

Mr Carne brought forward his starting date by five weeks to try to become the focal point for bringing an escalating crisis under control.

Fortunate timing

Having been thrown into the depths of a debate over the UK’s crumbling infrastructure, with Dawlish making front page news and being visited by prime minister David Cameron, it is surprising to see the former Shell executive vice-president look back on that time with a smile and describe his good fortune.

“I was lucky to arrive at a time of national crisis, because it gave me the opportunity to see how well the industry can respond… and it accounted for itself extraordinarily well,” he says.

“I’m not complacent; across the industry there is an issue about talent, so we have to be competitive”

“We had 280 flooded sites, over 100 landslips; these were major challenges thrown at us.

“What struck me was that we were at our best; there was really strong collaboration between contractors and Network Rail when, in a sense, you couldn’t tell who was who.”

His pride in the work carried out daily by Network Rail and its contractors shines through as he speaks, beneath the framed photos of the Queen’s visit to open the revamped Reading station in July and the PM’s visit to Dawlish, which also adorn his office walls.

Contractor control?

But asked whether contractors should be given control of a major route on Britain’s railways, as suggested by Sir Roy McNulty, author of the 2011 Rail Value for Money study, Mr Carne is quick to argue against greater devolution of power.

He points to the “enormous advantages” in running the network as an integrated provider with unified standards and the resultant efficiency that brings.

“They are enormous benefits that would far outweigh any that one would get from further fragmentation of the network,” he argues.

“I am in favour of continuing to run the infrastructure as an integrated entity. But within that, I support the devolution of routes to local leadership teams.

“I like contractors to make a good and fair return but I like it to be earned through innovation and creativity and delivery of our performance goals”

“We have routes where we have devolved decision-making locally, working closely with train operating companies but using common standards, services and ways of working within a devolved accountable structure.”

Since taking over from Sir David Higgins as chief executive, Mr Carne has seen his predecessor joined by former Network Rail stalwarts Simon Kirby (former managing director for infrastructure projects) and Jim Crawford (former major director) at HS2 Ltd.

Others have departed for the private sector, such as former finance and commercial director for its infrastructure projects division, David McLoughlin, who joined Spencer Rail.

To those looking at Network Rail from the outside, the organisation appears to have lost significant management expertise, just as a £38bn pipeline of work is beginning to materialise in the form of Control Period 5.

Mark Carne CV

Mr Carne was formerly executive vice-president for Royal Dutch Shell in the Middle East and North Africa.

Before that role he was executive vice-president and managing director for BG Group in Europe and Central Asia following 21 years spent in a variety of roles with Shell – including responsibility for its oil and gas platforms in the North Sea.

Mr Carne, 55, studied engineering at Exeter University and is a fellow of the Institute of Mechanical Engineers. He is also an independent governor of Falmouth University.

Mr Carne points to the recruitment of Bombardier Transportation UK managing director Francis Paonessa to replace Mr Kirby as an “outstanding” recruit and is keen to play up the opportunities to promote from within.

With the rail operator under pressure to reduce expenditure and its £30bn-plus debt, promoting from its existing staff might offer a cost-effective solution for a rail operator where bonuses for the executive board were slashed from 160 per cent of annual salary per year to a maximum of 20 per cent earlier this year.

“Where we have [to improve] is in trying to resolve things in the shorter term. I think it’s an opportunity to work more closely and better”

“We have a very good pipeline of talent, I’m quite encouraged at the strength of that,” he says. “I’m not complacent; across the industry there is an issue about talent, so we have to be competitive.

“One of the great things about the railway is the scale of the projects, their complexity and the importance of them to the economy.

“This means they are incredibly exciting projects for engineers to want to be part of and it’s a really important part of the attraction [for prospective staff].”

Competition for contractors

Major contractors are turning down work, particularly in London and the South-east, where clients are increasingly having to entice firms to tender for deals as more work comes to the market.

In rail, firms are blessed with a £38bn forward pipeline of five years, much of which has already been procured for CP5 (2014-19) under long-term deals.

Those long-term deals are here to stay, Mr Carne says, but with major rail infrastructure projects such as HS2 and Crossrail 2 on the horizon, Network Rail could face a battle to ensure it has the best staff working on its projects at the latter end of CP5.

“We have to constantly ask ourselves whether our way of working is one that encourages the contractor to put its best people on our jobs. Sometimes we have managed to do that, but not in all cases.

“I’ve said very clearly I like working with profitable contractors. I like them to make a good and fair return but I like it to be earned through innovation and creativity and delivery of our performance goals.”

Network Rail is widely adjudged to have improved as a client in recent years, in setting out clearer expectations from contractors and in the way it collaborates. But its CEO is not resting on his laurels.

Mark Carne on…

HS2 “It’s an incredibly tough project, especially the terminus at Euston, but the relationship is very strong and it’s essential we work closely together.”

Efficiency “We have to achieve another 20 per cent over five years and then we will meet Sir Roy McNulty’s targets. We have a trajectory but I don’t know how exactly we’re going to deliver that. We all need to be engaged in thinking about how we’re going to deliver. I am optimistic we are going to achieve this. We all know there are a lot of inefficiencies in the way we still work and if we can work more closely there are huge opportunities.”

Safety “Throughout my life I have seen those companies with the best safety performance also have the best business performance. There’s no conflict between the two. There’s a moral and ethical imperative, but it’s also just good business.”

UK infrastructure “I wouldn’t characterise it as crumbling infra. It needs to be resilient to climate conditions that we haven’t seen in the past. We need to focus our efforts in identifying those vulnerable areas and take proactive steps to strengthen them.”

2015 general election “I don’t believe there should be any uncertainty. We’re in an extraordinarily fortunate position. We have a five-year order book here, that’s the way of looking at it and we have to get on and deliver it.”

On collaboration he says: “I don’t think we’re good enough”. On workforce safety the performance of Network Rail and its contractors is “not at all acceptable”. To counteract the threat of climate change, there is “a huge amount that needs to be done”.

On safety, Mr Carne is already taking steps to improve Network Rail and its contractors performances, from demanding those responsible for health and safety on site are directly employed by client or contractor and equipping staff with iPads to electronically map all its sites and renewal works.

“Construction is the largest contributor to industrial fatalities. We have a role to play with our major contractors to think about how work can be carried out more safely.”

He points to his former career in oil and gas, and the steps the industry took to reduce deaths from working at height as one example of how “there are lessons to be learned from other industries”.

But his trust in contractors to up their game shines through when he refers to those weeks in February and March when firms worked around the clock to get lines reopened and communities reconnected.

Energetic experience

The theme of collaboration is a constant one and Mr Carne draws on his experiences in the oil and gas industry, which he left to take the top job at Network Rail.

“In my past [work] I learned that the closer you work together, the more you create a single team trying to achieve objectives, the better the performance is.

“But I don’t think we do that well enough in the day-to-day working here so I think there is an opportunity to collaborate more to create these sorts of single teams.

“I’m not naïve. There will be certain changes, the debt is handled differently and the timing of the funding of projects will be subject to more scrutiny”

“It’s always very dangerous to make these sweeping generalisations because I can give you many fantastic examples, particularly around our big projects, where that collaboration is evident.

“Where we have [to improve] is in trying to resolve things in the shorter term. I think it’s an opportunity to work more closely and better.”

Talk turns to politics, with a general election less than nine months away.

Network Rail was reclassified as a central government body in the public sector this month. This means its £30bn debt will now sit on the government’s balance sheet, a move that increases the public sector’s net debt by around 2 per cent of GDP, according to The Office for Budget Responsibility.

The Labour Party has already pledged to bring the rail operator together with a passenger rail body to oversee passenger operations, stations, ticketing and to manage infrastructure.

As fares continue to rise and Network Rail receives fines from the Office of Rail Regulation for its performance (including a record £53.1m in July), the operator can expect to be at the forefront of plenty of political debate in the run-up to the election.

Political influence

But Mr Carne insists agreements are in place with the Department for Transport that mean the industry shouldn’t be unduly worried about greater political interference.

“Clearly there are some changes to the relationship between Network Rail and government but we also have a very clear understanding from them that they want us to continue running the railway, so I’m not expecting there to be any significant change in the degree of political involvement.”

But almost immediately, perhaps spotting an opportunity to throw down the gauntlet to the UK’s biggest firms, he shifts message.

The agreement with the DfT “preserves our independence in terms of decision-making on certain issues, including the overall level of debt and funding we will have over the CP5 period”.

“It’s not a bottomless pit. If we overspend on projects we can’t just keep going back and saying we need more money”

“I’m not naïve. There will be certain changes, the debt is handled differently and the timing of the funding of projects will be subject to more scrutiny.

“We are no longer borrowing against our own debt; we will have to go back to the Treasury and arrange for that debt.

“One could expect more public scrutiny, that’s not an unhealthy thing. We are accountable to parliament for the way we spend taxpayers’ money, so I’m not worried about that.

“But it’s not a bottomless pit. If we overspend on projects we can’t just keep going back and saying we need more money. There has to be a proper check and balance, which is entirely appropriate.”

The message is clear: for Network Rail to continue justifying its spending into CP6, contractors need to outperform expectations.

The operator needs to spend, but more than ever it will come under pressure to justify that expenditure. Collaboration is the key, with contractors at the heart, Mr Carne says.

He wants to have “a close relationship with the main contractors”, as he knows they can “make sure we deliver as promised and outperform”.

Having seen in his first days as chief executive how contractors rose to the challenge of storms battering the UK’s infrastructure, he knows there is much to be done to protect and improve the UK’s rail assets and ensure Dawlish isn’t a scene repeated year in, year out.

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