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ORR finds 'systemic weaknesses' at Network Rail, claims it could have breached licence

Network Rail could have breached its licence in carrying out its £38.5bn CP5 enhancement programme, the country’s chief rail regulator has said.

The Office of Rail Regulation’s director of planning and performance Alan Price told Network Rail that delays in a number of projects were the result of “systemic weaknesses” across the organisation.

Mr Price’s findings followed an investigation by the watchdog that found significant flaws in Network Rail’s delivery of its CP5 enhancement programme.

In a letter to the operator, Mr Price said: “Having carried out this work, our preliminary view is that NR may not have done, and is not doing, everything reasonably practicable to comply with condition one of its network licence in relation to the delivery of its enhancements programme.”

Condition one of the Network Rail licence includes a commitment to the operation, maintenance, renewal and enhancement of the rail network.

Mr Price continued: “We consider that the wide range of identified weaknesses indicates that NR’s project development and delivery weaknesses are systemic, rather than the result of individual project failings or adverse circumstances.

“This is also evidenced by the wide range of causes and the scale of the required long-term improvements that NR needs to develop and embed into its business.”

According to Mr Price, the weaknesses were apparent in some of the projects Network Rail had carried out during the last 12 months.

He wrote that while it was too early to set “completion milestones on much of CP5”, Network Rail’s failure to meet milestones on its GRIP 3 and GRIP 5 frameworks gave “an early indication of a level of stress in the programme”.

According to the ORR, its preliminary findings found that in 2014/15 Network Rail had missed 16 of 44 (36 per cent) of its GRIP 3 outputs, and 14 of 40 (35 per cent) of its GRIP 6 outputs.

The reasons for missing these targets included poor setting of project requirements, inadequately resourcing cost estimation and risk functions, and underestimating land and consent issues.

The letter from the ORR comes at a time when the rail operator has come under fire after failing over the delivery of its £38.5bn improvement programme.

In June, Network Rail announced it would have to “pause” electrification on the Midland mainline service and the Leeds-Manchester TransPennine route after programme costs exceeded the initial budget.

Following the revelation, Network Rail chairman Richard Parry-Jones was replaced by Transport for London commissioner Sir Peter Hendy and former HS1 chief Nicola Shaw was brought in to draw up a rescue plan for the company.

Further reading

So far this year, Network Rail has had to endure the threat of worker strikes, major projects cancelled or going awry, recriminations over a turbulent Christmas period that saw hubs including Paddington and King’s Cross closed for large periods of time, and now a damning regulator’s report.

Read our June analysis on what’s gone wrong at Network Rail.

 

Mr Price said Network Rail was first alerted about the high number of slipping or missed milestones in July 2014 and again through formal letters in November 2014 following an “unsatisfactory response” from the company.

He said despite Network Rail making a number of “iterations” to its programme to “improve its capability and address the ORR’s concerns”, the investigation still found “some omissions and underdeveloped actions” in relation to these concerns.

An ORR spokesperson said that the regulator had written to Network Rail to give the company an “opportunity to provide additional information in relation to its preliminary findings”.

They added that the regulator would then decide if any “enforcement action was required” to protect the interests of the “government’s, taxpayers’ and passengers’ funding investment in Britain’s railways”.

The spokesperson said: “ORR’s investigation will establish whether Network Rail did, or is doing, everything reasonably practicable to meet its obligations in relation to the planning, management and delivery of the enhancement projects.”

Network Rail’s managing director of infrastructure projects Francis Paonessa said: “Since 2009, Network Rail has successfully delivered over 5,000 projects worth more than £15bn. The projects set before us for our current five-year funding period to 2019 were bigger and more complex than ever and required a step-change in delivery – both for the company and its supply chain.

“Despite this challenge, over three-quarters of our regulatory project milestones have been delivered to time or within weeks of target. But we know we can and must do better, which is why earlier this year we set up a special board-led taskforce to strengthen our major-project delivery. The taskforce has produced a detailed improvement plan that is already underway and good progress is being made.”

A Department for Transport spokesperson said: “It is entirely right that the regulator should hold Network Rail to account through this ongoing investigation. As we have previously announced, the secretary of state has asked Dame Colette Bowe to look at the lessons learned from Network Rail’s enhancements programme and she will report back in the autumn.”

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