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Moves for rail concessions could see contractors swoop

The government has given its backing to a move which could see contractors take control of a major railway route.

The government today published its command paper Reforming our Railways: Putting the Customer First that responds to Sir Roy McNulty’s Rail Value for Money study in 2011.

Speaking at the launch of his report in May 2011, Sir Roy said he could see larger construction and infrastructure companies taking on route concessions.

Today’s paper states: “A concession approach is not entirely new to the UK. It is already used on High Speed 1, which connects London St Pancras International and the Channel Tunnel… Government strongly supports Network Rail’s proposals to take forward concessions.

“Government believes that there are some Network Rail routes, such as Kent, Anglia and Wessex which may be particularly suitable for the letting of concessions and we will work with Network Rail to help deliver these where detailed work shows that they are appropriate.”

The paper also states that the government believes efficiencies of £2.5 billion are achievable in the rail industry by 2018/19.

CECA director of external affairs Alasdair Reisner said he welcomed the paper and that the association supported moves towards greater alignment between the various bodies within the rail sector.

He added: “As with any changes we would be concerned if implementing them were to lead to delays in delivering vital works. We hope that any efficiencies found would be returned to work in the industry rather than retained within the Exchequer.”

Reaction:

Transport secretary Justine Greening: “The programme of work that will decide rail outcomes and funding for the five-year period from 2014 is now well under way, and this sits alongside a period when we will see the biggest round of re-franchising since the privatisation of the industry. Both represent a further opportunity to really change our railways for the long-term better.”

Network Rail’s chief executive, David Higgins, said: “Today’s command paper gives us a solid platform on which to… contribute, along with our partners in the Railway Delivery Group, to the debate about how we continue to maximise performance whilst balancing it with our other objectives of increasing capacity, improving journey time and reducing cost. We look forward to the government’s next contribution to that debate in the high level output specification in July of this year.”

Office of Rail Regulation chief executive Richard Price said: “Railways are a long-term business with investment decisions made today having implications for decades to come. That is why it is essential that all players in the industry work collaboratively to deliver a railway that delivers for customers on cost, safety and performance.”

Freightliner Group chief executive Peter Maybury said: “As a member of the Rail Delivery Group I recognise the challenge of reducing the costs of the UK Railway system and I know that Network Rail and all the operators, including Freightliner, are keen to play their part and drive through efficiencies.

“The announcements made today will help to free up some of the constraints that were proving challenging in driving cost reductions and will provide continued impetus.”

The McNulty review highlighted ‘a lack of industry leadership’ and the command paper states “the industry must now show it is capable of forming a coherent and cost-effective response to investment and service decisions”.

It adds: “We will look to Network Rail to plan ahead for opportunities on the railway, collaborate with other infrastructure providers and facilitate access to its network on fair commercial terms.”

Among Network Rail’s current plans for reform are:

Involving suppliers at an earlier stage, giving them the opportunity to bring more innovative ways of working that will see improved delivery of projects and, as a result, lower costs;

Network Rail’s investment projects business will become more of a separate business within the group, providing stronger accountability, improved transparency, and reduced overheads;

Network Rail will look to work more closely with operators in relation to the delivery of projects;

Where appropriate, Network Rail will invite other companies to compete against its core business. It will also seek to establish alliances with train operators to improve services for passengers and promote further improvements in value for money.

The paper states that with the majority of franchises expected to be replaced in the next two to three years, there is now an unprecedented opportunity for supporting alliancing and other efficiency schemes and that concessions can happen whenever Network Rail is ready.

Further action to come:

By July the government will publish the High Level Output Specification which will set out required outcomes including requirements for the railway’s safety and environmental performance in the rail industry from 2014 to 2019.

Government will design future franchises to facilitate and where appropriate encourage bespoke arrangements for costs and revenue sharing, including the forming of alliances between train operator and Network Rail activities, including major renewals and enhancement projects.

Further consultations on station options for HS2 from the West Midlands to Leeds and Manchester will take place over the coming months.

Government is developing proposals that will allow train operators to finance infrastructure using Network Rail’s Regulated Asset Base.

Click here to read the full copy of the DfT report.

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