Is this a better way to run a railway?
Recently the Hants and Dorset Branch of the Chartered Institute of Logistics, based in Southampton, and Transport invited Sam McCarthy who is Commercial Director of the Stagecoach South West Trains / Network Rail Alliance to talk to their members on the creation and operation of the Alliance which is currently a unique approach to the operation of railways in the UK and which perhaps provides a better way to run the railway.
Sam opened by looking back to the forces which led to the creation of the Alliance. On one side the Government had asked Sir Roy McNulty to advise on obtaining better value for money from the railways in this country and he had advised that a key area for savings was in the interface between the operators and Network Rail as the aims of the two were not aligned and this lack of alignment led to significant wastage at the interface.
Alongside the Government pressure Sir Brian Souter who is Chairman of Stagecoach Group but was then also the Chief Executive was keen to achieve vertical integration or tracks and services and Sir David Higgins as the Chairman of Network Rail was also keen to demonstrate a positive response to the external pressures. There is also close alignment of the territory of the two organisations and SWT operate around 85% of the operations on the Network Route concerned. (Network Rail is devolved into a number of Routes with the relevant Route MD covering the lines from Waterloo to Exeter and to Portsmouth).
Negotiations commenced and it took time and came under careful and close observation by the Department for Transport. I lot of time was spent establishing what could be done in co-operation and what needed to be retained by the two separate organisations. In particular track access arrangements have to be controlled by Network Rail as European legislation forces a separation between tracks and the users. This separation is likely to be strengthened by future planned European legislation.
What factors drive the TOC – mainly and simply a desire to make a profit based on meet the demands of the passengers . .SWT is answerable to their Shareholders and of course have to live within the Franchise Agreement which is let by the Department of Transport.
On the other side Network Rail is driven by a wish to reduce the costs of the railway whilst improving performance, meeting the conflicting requirements for passenger and freight operators as well as achieving the standards set by the Office of the Rail Regulator.
Consequently two organisations spend a lot of time disputing who is responsible for which delay and there are numbers of staff on both sides who have to resolve such matters. Is this really beneficial for the end-user passenger? Or does it provide excuses? After all one of the alleged failures of the GNER franchise on the East Coast was that the amounts flowing to the operator under Schedule 8 were lower than budgeted.
Network Rail and SWT had been operating a joint control office since 2003 – again this was one of the first on the entire network and perhaps there was already a better understanding between the parties and less mistrust than perhaps exists elsewhere.
The agreed new Alliance structure is intended to work in a different way. There is a single Managing Director, a single executive team, a single profit and loss account, a single business plan, one of communications to staff and third parties, one daily safety report and one view of performance.
Sam McCarthy herself was previously the Finance Director for the Wessex Route having worked for Network Rail since 2007. Now however she is Commercial Director for the Alliance and reports to Tim Shoveller MD of the Alliance (and formerly of SWT) and the management team is made up of people who can be drawn from either employer – effectively they now just all work for the Alliance (and for example I understand that signalling staff working for the Alliance get the same discounted travel arrangements as SWT train crew – a single status of employment). She is now responsible for £900m of revenue, £300m of planned enhancements and ensuring business excellence.
Before the Alliance could come into operation however there were many third parties who needed to be consulted and involved to ensure that Network Rail met its legal duties to treat all operators buying services with equality. I think we can all understand that operators like Cross Country and Freightliner who need to achieve their timetables are not going to always run late because the Alliance give priority to SWT services. The Network Code prohibits undue discrimination between network users.
A quarterly meeting is held involving the various third parties (DfT, FGW, Freightliner, Cross Country, Southern, Underground, Overground, DB Schenker, ORR were all named) and I think it was said that there were actually around 30 members. Initially there was extensive attendance but it is understood that this was no longer the case as trust had increased between the parties. (Subsequently one of the attendees noted that on his trip to the meeting from Basingstoke a freight train had been given priority and his service to Southampton had experienced significant delays as a result).
One of the first steps taken by the new management was to visit the area bringing together the SWT and Network people to get them to work together. A roadshow and many meetings were needed with the aim of improving communication. Management were keen to ensure those running the single business understood both sides of the equation and could see that there was now a single entity and a single aim. Once these new ground rules were understood then the team could start looking for improvements in the processes and look to translate those improvements into consistent achievement of targets. Regrettably the bad weather over the last three months has perhaps set back some of the recognition of the achievements. However typically pre-Alliance there were 20,000 lost minutes per month and this is now running at 6000 lost minutes – a significant improvement we all agreed.
The process improvements looked at covered the following areas:
- Track maintenance efficiency
- Timetable changes
- Investment in Train Crew
- Emergency Intervention Unit
- Focus on sub-threshold delay.
Sam McCarthy then turned to focus on these points in a little more detail – but one major advance was achieved at one of the roadshows – the Eastleigh station staff met the Network Rail signallers who asked for access to the station toilet and were given a key – minor in itself perhaps but no doubt symptomatic of the failings of the conflict at the rail wheel interface which are costing the network greatly.
On track maintenance efficiency one of the changes was to delay the 04:00 Guildford to Waterloo by 30 minutes. It was almost entirely used by rail staff and the additional time available to the rail relaying team could not only replace a rail but they can also correctly stress it, enabling a saving on a second possession and also avoid the need for speed restriction over the rail concerned.
The timetable working group brings together all of the different disciplines to look at what causes delays and how by minor timetable amendments the overall timetable can be made more reliable. This is ongoing.
Ms McCarthy stated that there was now £1m pa extra being spent on train crew with the intention of additional resources being available to get back on the timetable when there were delays. This was having a really positive impact on lost minutes and the benefits are shared between the parties.
The focus on sub-threshold delays is also interesting. Long distance trains are not late if within 10 minutes and three minutes for applies to the other services. Now as a passenger I feel anything other than “right time” to be wrong and the Alliance agree. I think they have discovered that once little things go wrong on an intense service the lost time soon snowballs and undermines the timetable. So the Alliance is now looking at running a “Right Time Railway” – which is to be applauded when it is achieved.
By unifying management I have no doubt that matters are simplified as it has cascaded down to a single Head of Control, a single Head of Performance; implementation of “Gold Command” for major incidents – a single individual assumes overall control
Another working party is looking at Speed Restrictions – Emergency Speed Restrictions (ESR) and Temporary Speed Restrictions (TSR) delay trains – and the team are looking to find ways of getting the restrictions lifted and getting the line back to normal speed. One element of this is the language used by drivers when reporting track problems. If the driver says “kink in the line” then the track is blocked, if he merely says “rough ride” then an ER is applied. So if the driver does not give an accurate report the trackside team take the wrong action which could disrupt the service more than is needed.
Another development has been the design of a number of joint contingency plans which are applied if the service becomes disrupted. So if something goes wrong there may well be a fall back plan which the control team can simply apply with the intention of getting the service back in line with the published timetable and doing the best thing for the customer rather than the individual company. These plans cover both train and staff rostering changes and so there is a lot of detail available to control to make the changes come live quickly.
The Alliance has also deployed two Emergency Intervention Units, which includes paying for a British Transport Police officer which can be deployed to an incident and this is cutting the response time by getting people to a new incident by around 20% all of which has an impact on the delay minutes suffered.
Sam McCarthy then spoke a little about the impact of the bad weather on the Route over recent months – normality has now largely returned but she told us that Botley probably cost £6m to fix and lost revenue associated with the weather is significant. The Island line cost £1.2m for repairs.
She then turned to the way the Alliance had arranged deployment of the High Output Track Relaying train which on the rest of the network only tended to get used at weekends because elsewhere possessions could not be arranged overnight. The Alliance reckoned that things could work differently on the Wessex route and set about train retiming and replacement on the Exeter route to permit much higher usage of this expensive resource. 12 weekend closure would have been needed – but Wessex were able to provide nine hours per night, and the train averaged 700 yards with the best night being 1197 yards relaid in one night. And those saved closures saved around £1m.
Sam McCarthy clearly believes that the Alliance is a better way to run a railway and luckily there were time for some questions. A lot of this centred around how some of the finances work and I am not sure that any of us are entirely clear how the single p/l actually breaks back to the individual organisations – but does it matter? What seems to be key are a couple of elements which had not previously been mentioned. SWT is currently operating the franchise within what is known as the “cap and collar” mechanism under which after an initial period (now expired) the operator shares the revenue risk / reward with the DfT. SWT are receiving revenue support and therefore 80% of additional revenue generated is now shared with the DfT. This results in business cases to improve revenue are harder to make. Consequently it is the DfT’s own interests to ensure that revenue does not fall, so the Alliance arrangement may simply not be possible where an operator is simply interested in revenue maximisation. [NB I feel that Sir Brian Souter would also have concerns about service levels and so his team might be able to see beyond simple profiteering].
The next element raised related to the Schedule 8 payments. All of the recording and assigning of delays continues and payments still pass between the parties – but with less argument and far less confrontation. All employees were required to sign a document confirming that they would continue to diligently record the reasons for delays and that the importance of this was known by them and it was also a key DfT requirement. There is a budget for the receipt and costs of these payments and the team work to come in below budget with the saving being shared 50/50 by the two parties. However operationally the Alliance can already see the speed of recovery from incidents is improving.
Some study has been undertaken of Sch 8 payments and if an incident happens in the morning the compensation arrangements tend to work out about right on average as there is lost revenue as people simply do not travel. I had the impression that if an event happens in the afternoon upsetting the evening peak the compensation (which I believe is the same) over rewards the operator because they do not lose so much revenue as passengers have to return home (but late). She admitted that some of the compensation mechanisms have perverse results, but believes that overall they do what they were designed to do.
Customer Satisfaction surveys are undertaken they give an impression that the handling of delays is improving – the last survey showed a 10% improvement but Ms McCarthy felt that more investment in staff attitudes was needed to bring about a further improvement. There is a clear problem here in that computer systems are becoming better at keeping the passenger informed – but the systems to keep the staff up to date and for them to promulgate that knowledge is going to be slower.
Ms McCarthy was in favour of more Alliances and they are currently trying to share good practice but it is likely to be an uphill task for a number of reasons – firstly few operators provide the route overlap which exists and elsewhere the operators will see an unrewarded commercial risk which perhaps they have no appetite to take.
The SWT franchise ends in 2017 and it is simply far too early to identify what will happen. If it wished DfT could make a similar arrangement compulsory in all franchise agreements – but there is no evidence that they have even given the approach any consideration. However SWT passengers present would certainly appreciate a continuing right time railway with efficient and cost effective provision. From what was presented the Alliance is bringing those benefits.
The Alliance is also looking 5 years ahead in line with the new Network Rail control period. They are planning for an additional 10,000 passengers (a day) into and out of Waterloo; finally using all four platforms in the former International station, 135 new carriages for which procurement had commenced with deliveries due in 2016. The Alliance will deliver new trains and the infrastructure at the same time (unlike the current 485/5 deliveries which cannot run to Reading due to short platforms and power restrictions I believe). She would not comment on the 25kV ac proposal for Basingstoke to Southampton saying that much development work was needed on the proposition.
For those listening the approach outlined is so different to the way things have worked for most of the last twenty years it sounded almost as if sense had been identified and that we might really get some proper joined up thinking in future. However the circumstances which fed the arrangement – the McNulty report, an operator wanting vertical integration, co-operative leadership at Network Rail and an absence of revenue risk due to cap and collar – seem unlikely to come together again to permit another Alliance, unless it is willed by the DfT where the belief in competition over-rides a real understanding of the position of the passenger (or freight load).
Postscript
Following the meeting (and therefore not part of the presentation made) it was revealed that the DfT and First are discussing the possibility of an Alliance being formed for the Great Western direct award which is planned to follow on the current franchise whilst the line is electrified. So perhaps we shall see this development elsewhere on the railways.