Investing in the rail network: The investment framework
The 2010 Investment Framework provides a means for infrastructure projects to be approved, specified and delivered outside of the periodic review process. ORR reviews and approves the Investment Framework, which is used by the UK and Scottish governments and third parties to invest in the network. It contains ORR's policy and guidelines, setting out the legislation and processes for anyone who wishes to invest in the rail industry, including the role of respective parties and remedies for any issues that arise. It also includes standard template agreements that can be used. Please note that the framework is only relevant to Network Rail - not High Speed 1 (HS1) or local railways.
Network Rail takes the lead in promoting, planning, facilitating and, in most cases, delivering schemes. They should be a first point of contact for an investor. ORR plays a role in monitoring how well the framework is functioning and Network Rail’s discharge of its responsibilities with regards to third-party investment. We also respond to any concerns raised with us by investors.
Some aspects of potential Investment Framework projects may intersect with ORR’s duties, such as granting track access rights. Investors should check with their Network Rail contacts (or with ORR) to see if any proposed works are subject to legal requirements that lie outside the Investment Framework.
Increasing the volume and broadening the source of third-party investment in the network is a key issue for control period 6 (CP6) and particularly highlighted in the Secretary of State's statutory guidance to ORR, issued in July 2017. As part of the 2018 periodic review (PR18), we are reviewing and revising this document to bring it up to date and to ensure it facilitates and encourages third-party investment in support of the UK government’s objective. This process may include an update of the guidelines if appropriate. There is reference to this in our initial PR18 consultation document published in May 2016.
What are the template agreements?
Network Rail has developed a suite of template agreements (including asset protection agreements) for projects providing enhancements to the railway, whether directly on the rail network or close to it. These templates have been approved by ORR, and aim to reduce the need for time-consuming contractual negotiations for each project, as well as provide transparency of any required payments to Network Rail.
While using them is generally more time efficient and cost-effective than developing bespoke agreements, use of the template contracts is not compulsory. You can negotiate bespoke contractual arrangements with Network Rail if you feel this would better suit your requirements. More information on the Template Agreements is available on Network Rail's website.
What are the Industry Risk and Fee Funds? Are contributions to them mandatory and how are the contributions calculated?
Note: ORR and Network Rail have recently commissioned Independent Reporters Arup to review the purpose, governance and effectiveness of these funds. Arup’s review will complete in May and they will make recommendations for the funds in order to facilitate investment and optimise risk allocation in future.
When third parties promote schemes that are located on or near Network Rail’s railway network, Network Rail may become liable for a number of costs. Network Rail needs to manage these additional costs, but receives no funding for them from the governments.
Network Rail established the Network Rail Fee Fund to cover these costs and potential contractual liabilities. This is a ring-fenced fund, consisting of agreed payments from third parties to cover Network Rail’s own costs and contingencies for potential liabilities, drawn down on as necessary by Network Rail. The Network Rail fee is specific to the type of arrangement agreed with the third-party (see below); for example, they will charge a fee of 5% of the aggregate costs for services provided under a Basic Services Agreement. While on a Basic Asset Protection Agreement, they will charge 10% of the aggregate costs.
Network Rail’s Industry Risk Fund provides appropriate funding support for industry risks. These are typically the low probability, high impact risks specific to rail industry conditions which may have a dramatic impact on a promoter's scheme - for example a major construction incident with a consequent impact on railway operations.
More information on the risk and fee funds can be found in Appendix C of Network Rail's document.
What are Asset Protection Agreements and will my project require one?
Any party requiring access or building new infrastructure on, over or near the network needs to work with Network Rail to manage risk to both parties’ assets and operations, regardless of which organisation’s contractors are delivering the project. In addition, there are some non-contestable services that only Network Rail can deliver. These tend to be focused on the safety, integrity and operation of the railway and Network Rail will make these clear to you when discussions start. Asset Protection Agreements are designed to manage this process and ensure risk is suitably managed and allocated between the parties. If your project is on or close to the network it is likely you will need an agreement and you should contact Network Rail in the first instance. Their guide provides more information on Asset Protection, Contestability and the Industry Risk and Network Rail Fee funds.
What happens if the cost of my project, delivered by Network Rail, increases?
This depends on whether you contracted with Network Rail on a Fixed Price or Emerging Cost basis. With the latter approach you would be exposed to the risk of higher than expected costs, although there would also be the potential benefit of lower costs.
What is contestability?
While Network Rail may deliver work on your behalf, it is not always mandatory to use its services. For many asset-scope items and locations that meet approved risk and delivery criteria, Network Rail is open to competition and you may find using your own firm or contractors is your preferred choice. There are however some services that are non-contestable and which Network Rail will have to deliver for you. Non-contestable scope items tend to reflect the importance of safeguarding railway operations and safety.
More information on contestability can be found in Stage 2 of Network Rail's document.
Does my project have to go through the Investment Framework? Are there alternatives?
The Investment Framework is a guidance document and set of template agreements for use by developers and Network Rail in a variety of scenarios. Using the process and agreements outlined in the framework is not mandatory, but doing so will considerably shorten the process and help ensure everyone is familiar with the mechanics. The alternative is to develop bespoke contractual arrangements with Network Rail; this may be better suited to your project requirements and budget. It may also take longer to negotiate and could be more complex.
What should I do if I have a complaint about Network Rail?
In the first instance complaints should be raised with Network Rail and settled via your contractual arrangements. The ORR has a role in some regulatory disputes; for example we determine appeals made under the Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016. We also have licence enforcement powers.