Strategic Freight Network Governance and …

1 Irresistible creativity to inspire and change the world 1 Strategic Freight Network Governance and deliverability review independent Reporter (Part C) Mandate CN/019 Office of Rail Regulation Network Rail Report Summary October 2012 irresistible creativity to inspire and change the world 2 Report Summary Background to the report The CN019 mandate has been issued to gain assurance that the schemes being delivered by Network Rail through the Strategic Freight Network (SFN) Fund are on target to be delivered within the agreed timescales and have effective Governance arrangements in place. In addition, the ORR also wants to gain assurance that the in-fill gauge projects are being designed and delivered in an efficient manner.

2 The Strategic Freight Network Fund The concept of a Strategic Freight Network was enshrined in the Department for Transport s 2007 White Paper. The Strategic Freight Network Fund is valued at in current prices, and is managed under the auspices of Network Rail s Control Period 4 (CP4) (2009 2014) Delivery Plan. This document is the baseline delivery document for Network Rail, against which progress in delivering outputs and targets is monitored. Progress is publicly reported on a quarterly basis. Figure 1 illustrates the structure of the Fund and the projects that are being delivered within each portfolio; taken together these constitute the SFN Fund.

3 The March 2009 document also sets out the Governance framework of the SFN Fund and introduces the SFN Steering Group (SFNSG). This cross-industry group oversees the development of the SFN and consists of representatives from DfT, the Welsh Assembly Government, Transport Scotland, Freightliner, DB Schenker, GB Railfreight, Network Rail, DRS, the Freight Transport Association, Rail Freight Group and ATOC, Transport for London, the PTE Group and the ORR (as observers). The SFNSG is remitted to oversee the prioritisation of schemes and allocation of funding for scheme development and delivery. NR s obligation is to work with stakeholders to identify the best use of available funds and to deliver schemes that are funded by the SFN programme.

4 Authorisation of draw down and spend is as set out in Network Rail s Investment Regulations but schemes are required to have been supported by the SFNSG. irresistible creativity to inspire and change the world 3 PORTFOLIO LEVELPROJECT LEVELG auge infill FundFelixstowe - NuneatonSouthampton BasingstokeTrain lengtheningFundCP5 Development FundingCP4 Additional Outputs Doncaster-Water Orton ECML South Gauge Infill Dagenham-Barking GB1 Ipswich Chord Ely LoopsSouthampton-WCML Diversionary Peak Forest- London Peak Forest (Buxton) W10 Train lengthening Felixstowe-NuneatonChannel Tunnel` ECML N Gauge loop Gauge enhancement Scotland Swimton-South Kirkby Kennett Signalling Tees Port -ECML NEP NW ph4 SFN FUNDF igure 1 SFN Fund showing portfolios and sub-projects Scope and Approach The review was conducted in three parts.

5 Part one considered project deliverability where we focussed on an agreed, representative sample of projects from each portfolio area, where a detailed review was conducted: Southampton to Basingstoke (all sub-projects in portfolio) Doncaster to Water Orton (gauge infill portfolio) Peak Forest to London (train lengthening portfolio) Ipswich Chord (Felixstowe to Nuneaton) we were subsequently advised to discontinue this part of the review We also conducted a high-level review of the other projects to allow us to draw a wider conclusion about portfolio-level deliverability . irresistible creativity to inspire and change the world 4 Part two was an assessment of Governance , where we considered the operation of the SFNSG as well as Network Rail s internal Governance of the Fund.

6 It also considers Governance at overall Fund-level, but necessarily relates that to Governance done at project- and programme-level. For part three - the efficient costs review of the gauge infill portfolio - we looked in detail at the costs of the Doncaster to Water-Orton project from which we then drew conclusions about the overall portfolio. The figure below is an illustration of the scope of the CN019 review . EFFICIENT COSTS review deliverability OVERVIEWGOVERNANCE REVIEWSFN FundGauge infill FundFelixstowe - NuneatonSouthampton BasingstokeTrain lengtheningFundCP5 Development FundingCP4 Additional OutputsSAMPLE PROJECTS deliverability ASSESSMENTD oncaster-Water OrtonIpswich ChordAll projectsPeak Forest- LondonASSESSMENT DISCONTINUED Figure 2 Scope of CN019 review irresistible creativity to inspire and change the world 5 PART ONE deliverability deliverability - Key findings A number of systemic deliverability issues were identified: 1.

7 The main deliverability risk is due to the back-end loading of project delivery in the Control Period. This is a function of the cyclical nature of industry funding and the cold start for the SFN projects in CP4. This should be much less of an issue going into CP5, where projects are already under development and potential threats are more apparent. 2. As a function of the need to complete by the end of CP4, schedules are driven by possession availability, rather than, say, smoothing activities or including float to improve deliverability . 3. Project decisions are heavily driven by the need to complete by the end of CP4, for example to maintain programme, the D2WO team are running a process of producing detailed designs (GRIP 5) in parallel with the more advanced structures actually being on site under construction (GRIP 6).

8 Without this imposed restriction, different project decisions might be taken, for example spreading the work over a longer period of time may achieve a cheaper price. 4. Lack of time-related risk assessment; instead risks are cost impact related. 5. Project documentation varied in scope and quality not kept up to date; nomenclature was inconsistent and mostly unhelpful no dates in filenames; schedule structures varied widely, with no consistent work breakdown structure (WBS). There is not a consistent document set / set of formal deliverables expected across the portfolio making the audit and traceability of adherence to protocols challenging.

9 deliverability - Recommendations We recommend that the project team undertake a comprehensive update of the D2WO schedule. Take decisions on Ipswich Yard and Ely Loops cognisant of any changes to Ipswich Chord. With CP5 funding for SFN now secured, consider whether CP4 project activities can be rescheduled and smoothed-out (into CP5) in order to make the programmes more achievable and ensure a better construction price. Obviously, this would not apply to all projects, where re-opening target price discussions may be counter-productive. There would need to be a corresponding Governance action to ensure that: any changes to output milestones are agreed with stakeholders; maximum benefit of CP4 funds are realised; momentum to deliver was maintained; funds were spent efficiently whilst any re-irresistible creativity to inspire and change the world 6 planning occurred; and that large underspends didn t occur in CP4.

10 This might also facilitate an early (in CP4) start on some new CP5 projects GWML projects could capitalise on synergies with other works on that line. Project teams should include a more comprehensive assessment of time-related risks in project risk registers and production of a p50-/p80-schedule to mirror the way that project contingency allowance is calculated. Project documentation could be improved by: a. establishing a consistent, de minimus set of project deliverables/documents that each SFN project should provide centrally to Fund level which should be formally reviewed and maintained IR02 compliant whole life business cases. This will strengthen the intelligent client function at the Fund management level; particularly important if NR move to outsource IP.