Delivering £3.5bn of efficiency improvements in CP6
8 January 2020
By Gordon Cole, Head of Efficiency Monitoring.
Network Rail needs to make £3.5bn of efficiency savings from its operations, maintenance and renewals work across Britain in the five-year period April 2019 to March 2024 (Control Period 6, ‘CP6’), including £385m in Scotland. This is against a backdrop of efficiency having declined and work deferred over the previous five years.
Learning lessons from CP5, we were concerned that Network Rail might not deliver the required volumes of work and efficiency improvements that it needs to in CP6. So we have been closely monitoring its planning and, more recently, delivery. We most recently reported on this in a letter to Network Rail.
Clearly, Network Rail has improved its planning for efficient delivery in CP6 compared to this point in CP5, although that was a low bar. We have seen considerably more regional ownership of plans, dedicated resources, and improved monitoring and reporting by Network Rail’s centre.
Data on actuals is now coming through; renewals volumes were 10% behind plan in the first half of 2019-20, which Network Rail plans to mostly recover by year-end. It has reported £155m of efficiency improvements halfway through 2019-20. Overall, this is encouraging progress and it seems on track to exceed its £316m efficiency target for the year.
But we are less confident about Network Rail’s efficient delivery for the remainder of CP6. The efficiency challenge almost doubles in 2020-21 and increases further in later years of CP6. Our work shows that over the next few months more still needs to be done, particularly to improve the quality of several renewals efficiency plans, as these are critical to delivering the increasing challenge. Areas include improving work bank planning and optimisation of access.
Similarly, the renewals delivery challenge grows in CP6 and the deferral of enhancements from year 1 will increase this delivery challenge. We are investigating the supply chain’s concern about lower than anticipated work orders. So that the supply chain can plan efficiently, regions need to improve their leading indicators of renewals planning and increase their early engagement with the supply chain.
Our message to Network Rail is clear; overall, it has made a good start for efficient delivery in CP6. However, we have concerns, particularly about the quality of renewals efficiency plans for later years of CP6. We will continue to report on these matters, including in our Network Rail Monitors. If our concerns are not addressed, we will escalate and will not hesitate to find the company in licence breach if justified.