Changes to capital project delivery announced

Network Rail has announced changes to the way it delivers capital projects, with the implementation of ‘Project Dime’, which aims to deliver better value for money.

The McNulty report published earlier this year suggests that 10-20% efficiencies are needed in the capital investment programme. The changes to achieve this include operating as an effective client, improving delivery of projects and working together earlier in the project lifestyle.

From April 2012, parts of Network Rail will operate as a ‘client’ and tender some low risk projects to external deliverers in order to introduce competition. Additionally, the internal deliverer will become a separate legal entity from 2013, to enable open competition in which it can participate.

Simon Kirby, Network Rail managing director of investment projects, said: “Network Rail is in the midst of a significant period of investment, with major projects such as Thameslink, Crossrail and, hopefully, the Northern Hub providing the capacity we need to cater for the ever-increasing popularity of rail and making a substantial contribution to national economic growth.

“The rail industry must reduce costs and these radical reforms will revolutionise the way we deliver our capital projects. The changes will encourage competition, innovation and closer partnerships with our suppliers to deliver these projects, and many others, more competitively, safely and efficiently.”

Stakeholders including major contractors and unions have been briefed on the progress on Project Dime over recent months, with varying conclusions.

The TSSA union, for example, said that “simultaneously creating a tendering organisation and a bidding organisation” could increase bureaucracy, and make project planning less secure in a competitive market. It added: “Network Rail’s rationale supposes that market forces will drive down back office costs and improve efficiencies by reducing bureaucracy. Of course, the alternative view is that this inevitably results in simply forcing down labour costs in a race to the bottom and under-bidding as has been the case in tendering for TOC franchises (e.g. NXEC).

“A potential opportunity offered by Project Dime lies in the fact that competing with project management companies for business with Network Rail projects allows IP to be benchmarked for value for money against comparable companies, rather than the likes of Deutsche Bahn and NSCF as in the McNulty report. The main risk is that rather than preserving our members’ future in Investment Projects, the function moves increasingly towards the private sector and eroding terms and conditions for the workforce.”

Mark Loader, MD of infrastructure delivery at Mace, wrote in Building magazine: “The new approach, under a newly-formed autonomous company within Network Rail, will provide an excellent platform for achieving the levels of efficiency improvement recognised as needed by Network Rail, the McNulty report and most importantly by the travelling public who need reassurance that their fare increases are necessary and provide value for money.”