Regulator takes action against Network Rail following New Year overruns

28 February 2008
ORR/07/08

The Office of Rail Regulation (ORR) today ordered Network Rail to remedy systemic weaknesses in its planning and management of engineering projects and in its communication with train operators about progress with such projects.

This follows ORR’s conclusion that the problems experienced over the New Year were part of a continuing breach by the company of its licence. 

ORR also announced that it proposed to fine Network Rail £14 million to reflect the serious nature of this breach, the impact it had already had on passengers and rail freight users and the need for the company to take urgent action to improve its approach.

In addition, ORR also ordered Network Rail to provide a clear plan of how it intends to complete the upgrade of the West Coast Main Line, currently due to be completed by December 2008.

This action follows publication today of ORR’s report on its investigation into Network Rail’s management of engineering projects including the overruns at Rugby, Liverpool Street Station and Shields Junction.   

Bill Emery, ORR Chief Executive said:

“What happened over the New Year was totally unacceptable for passengers and freight customers, and to train operating companies. The weakness in Network Rail’s management of these projects had a serious impact on all of them and on the reputation of the railway.

“It is quite clear from our thorough investigation that Network Rail is failing to manage major engineering work as consistently well as it should.  This is due particularly to weaknesses in the company’s planning, risk assessment and site management of projects as well as to failures of communication within the company and with train operators. We have published a draft Order directing them to address these failings and thus reduce the risk of similar events in the future.

“It is right that we should also impose a fine to mark the seriousness of this breach of Network Rail’s licence and to send a clear message to the company’s Board and senior management that it needs to address the weaknesses we have identified as a matter of urgency.  Given the scale of the investment programme on the rail network, improved project planning and management will bring real benefits to Network Rail’s customers in terms of improved capacity, performance and value for money.

 “In addition, the company has accepted that it does not currently have a robust plan, agreed with operators, to deliver the upgrade work to the West Coast Main Line needed for the December 2008 service improvements. We have therefore ordered it to produce quickly a plan on how it will do this.”

Notes to editors

1. A copy of the ORR investigation report: “Report of ORR’s investigation into Network Rail’s management of engineering projects” is available at http://www.rail-reg.gov.uk/upload/pdf/352.pdf
2. The main findings of the investigation are that:
   · At Rugby, while Network Rail had good planning and project management processes in place, it failed to ensure that site management was adequate. This meant that at key times it was unaware of the extent of the problems on the ground, unable to minimise their impact and unable to provide reliable information to passengers and train operators.
   · At Liverpool Street it failed to conduct effective assessment of the risks involved before beginning work and failed to ensure that site management was adequate, leading to the same consequences as Rugby.
   · At Shields Junction it failed to conduct effective assessment of the risks involved before beginning work, which meant it failed to design and install the signalling equipment effectively and efficiently.
3. Condition 7 of the network licence defines a duty for Network Rail to take such steps as are necessary or expedient so as to achieve the purpose to the greatest extent reasonably practicable having regard to all relevant circumstances including the ability of Network Rail to finance its licensed activities.  The purpose is:
   to secure:
   (a) the operation and maintenance of the network;
   (b) the renewal and replacement of the network; and
   (c) the improvement, enhancement and development of the network,
   in each case in accordance with best practice and in a timely, efficient and economical manner so as to satisfy the reasonable requirements of persons providing services relating to railways and funders in respect of:
   (i) the quality and capability of the network; and
   (ii)   the facilitation of railway service performance in respect of services for the carriage of passengers and goods by railway operating on the network.”
4. If ORR considers Network Rail is in breach of its licence, or is likely to be in breach of its licence, it can issue a final order to secure compliance.  Such an order is subject to a consultation process of at least 21 days before ORR can confirm it.  In the event that urgent action is required, ORR can issue a provisional order which has immediate effect but is subject to confirmation.  If ORR finds Network Rail in breach of its licence, or it has committed such a breach, it may levy a penalty on the company of such an amount as is reasonable.
5. Also published today was the ORR’s National Rail Review and Network Rail Monitor for the third quarter of 2007-8.  They report:
   · Last autumn, passenger satisfaction with the overall journey was equal to the highest recorded level of 81%. The main reason for this is continuing improvements in punctuality.
   · The public performance measure (PPM) is at its highest point since being introduced in 2000 and NR's total delay minutes for the year to date were lower than at the same point last year.
   · Despite this, Western performance remains poor, although NR delay has fallen. FGW recorded the lowest level of passenger satisfaction, at 74%, in the most recent passenger survey.
   · Asset failures are continuing to fall, with improvements evident across a number of areas.
   · We have challenged NR's expenditure forecasts for the year, as we have doubts about their ability to achieve them - deferral of renewal and enhancement work is continuing.
   · Following visits to a number of countries last year, it is clear Network Rail can learn from good practice from other railway infrastructure operators. Examples include, reducing the impact of engineering work on train services, methods of track construction and condition monitoring. 
6. We have issued three notices as part of our enforcement action.
   For the continuing licence breach in relation to the planning of projects requiring possessions, we have issued –
   · a notice under section 56 of the Railways Act enclosing a draft final order. Representations on this may be made by 31 March 2008.
   · a notice under section 57C of the Railways Act proposing a financial penalty of £14m in relation to this breach. Representations on this may be made by 31 March 2008.
   For the likely licence breach in relation to the West Coast route modernisation programme, we have issued –
   · a provisional order under section 55 of the Railways Act. Network Rail must comply with this by 31 March 2008

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