1. Rail Delivery Group Rail Delivery Group 2 nd Industry Forum 8 November 2012 2 nd Industry Forum

2. Rail Delivery Group Opening remarks 8 November 2012 2 nd Industry Forum Tim OToole Chairman, Rail Delivery Group Chief Executive, First Group

3. Rail Delivery Group Opening remarks The rail industry continues to experience significant growth but unwittingly finds itself on the front pages Despite commercial and financial uncertainties the Rail Delivery Group continues to bring together the train operators, freight operators and Network Rail The Group is evolving into the leadership body for the industry but recognises that this role comes from actions and deeds not words and structures The RDG continues to pursue a range of initiatives – some arising from the Rail Value for Money Study but an increasing number emerging from recent events The RDGs 2 nd Industry Forum will provide an update on the work being undertaken on franchising, focus on the industrys plans for the future, reflect on the initiatives being pursued by the RDG and conclude with a briefing on the formalisation of the Group

4. Rail Delivery Group Secretary of State for Transport 8 November 2012 2 nd Industry Forum Rt. Hon Patrick McLoughlin MP

5. Rail Delivery Group Timetable for the morning Franchising – the independent review – Richard Brown Franchising – the RDGs emerging views – Martin Griffiths Franchising – Taking the views of the Industry Forum Industry Strategic Business Plan – Paul Plummer Break The work of the Rail Delivery Group Case Study: Asset, Programme and Supply Chain Management working group Formalising the Rail Delivery Group – Graham Smith Concluding remarks – David Higgins

6. Rail Delivery Group Franchising – the independent review 8 November 2012 2 nd Industry Forum Richard Brown Chairman, Independent review of franchising Chairman, Eurostar

7. Rail Delivery Group Franchising – RDGs emerging views 8 November 2012 2 nd Industry Forum Martin Griffiths Member, Rail Delivery Group Finance Director, Stagecoach Group

8. Rail Delivery Group RDGs response to the review of franchising Passenger franchising has been at the heart of the growth of the railway Recent developments on passenger franchising have created uncertainty The Members of RDG involved in passenger franchising have come together to inform a unified input to Richard Browns review in the name of the Rail Delivery Group The group has met twice a week since the review was announced

9. Rail Delivery Group Passenger franchising – RDGs emerging views The Rail Delivery Group is looking at franchising issues under four headings Franchising authority and process Risk allocation, risk sharing and financial footprint Flexibility of specification Franchise length and investment The Rail Delivery Group is confident of producing a balanced submission that should be seen as a package of measures

10. Rail Delivery Group Franchising Taking the views of the Industry Forum 8 November 2012 2 nd Industry Forum

11. Rail Delivery Group Industry Strategic Business Plan 8 November 2012 2 nd Industry Forum Paul Plummer Member, Rail Delivery Group Group Strategy Director, Network Rail

12. Rail Delivery Group Why does the Strategic Business Plan matter? It is the industry response to: Government output specifications Challenges to improve value for money It builds on extensive cross-industry work including: Route Utilisation Strategies Planning Oversight Group Technical Strategy Leadership Group National Task Force Rolling stock plans RDG priority workstreams It leads to the establishment of: Network Rails funding and outputs for 2014-19 As part of a longer term strategy for the railway and for Network Rail Providing a baseline for further innovation for example through franchising This is therefore a key workstream for RDG

13. Rail Delivery Group 13 Periodic Review Milestones ORR Governments Industry 2011201220132014 Sep 2011 – Initial Industry Plan Mar 2012 – advice to Ministers Network Rail Jul 2012 – HLOSs/SOFAs 7 Jan 2013 – Strategic Business Plan 7 Jan 2013 – Industry Strategic Business Plan Jun 2013 - Draft Determination Oct 2013 – Final Determination Jan 2014 – Decision on acceptance of FDs Mar 2014 – CP5 Delivery Plan

14. Rail Delivery Group The Strategic Business Plan The Industry Strategic Business Plan will set out: Long term vision for rail How industry proposes to deliver the HLOS outputs Market sector strategies Industry affordability analysis The Network Rail Strategic Business Plan will set out: Vision, role & purpose for Network Rail Network Rails contribution to the achievement of the HLOS Detailed forecasts of activity, expenditure and efficiency Network Rails funding requirement Underpinning Route Plans

15. Rail Delivery Group A long term vision for rail Passenger satisfaction levels of at least 90 per cent Capacity for approx twice as many passengers, with reduced journey times, as well as better connectivity Improved product offer for freight resulting in higher satisfaction and rail modal share Levels of reliability and safety are among the best in Europe A financially sustainable railway through improved efficiency and revenue generation Reduced carbon dioxide emissions in support of national targets

16. Rail Delivery Group Outputs Safety Performance Capacity Availability Sustainable development Ring-fenced funds

17. Rail Delivery Group Funding The Initial Industry Plan (IIP) assumed savings for Network Rail and operators Network Rail savings were consistent with previous ORR assumptions and McNulty low savings ORR advice to Ministers took this as the low end of the range of savings Governments appear to have taken the mid- point in the range TOC savings in the IIP were stated to be dependent upon franchise reform

18. Rail Delivery Group SBP Expenditure Predictions Network Rails current expenditure plans and efficiency assumptions will generally be consistent with the Initial Industry Plan Network Rail will make the case for additional expenditure in relation to: Earthworks and structures Investment to drive further efficiencies Delivery of higher outputs including once in a lifetime opportunities and outputs funded by others There are risks in meeting the efficiency challenge and Network Rail is dependent on RDG and government to help it succeed Network Rail will continue to challenge itself to find further opportunities to reduce costs

19. Rail Delivery Group Passenger Traffic & Demand

20. Rail Delivery Group Freight Traffic & Demand

21. Rail Delivery Group Punctuality PPM Trains Passing PPM (1000s) CP3CP4CP5

22. Rail Delivery Group Network Rail efficiency CP3CP4CP5 27% 23% 16% %

23. Rail Delivery Group Network Rail opex and maintenance spend O&M expenditure (£m in 2011/12 prices) O&M per train million km (£ mi 2011/12 prices) CP3CP4CP5

24. Rail Delivery Group Network Rail renewals and enhancements spend £m in 2011/12 prices CP3CP4CP5 tbc

25. Rail Delivery Group Industry subsidy

26. Rail Delivery Group 26 Periodic Review Milestones ORR Governments Industry 2011201220132014 Sep 2011 – Initial Industry Plan Mar 2012 – advice to Ministers Network Rail Jul 2012 – HLOSs/SOFAs 7 Jan 2013 – Strategic Business Plan 7 Jan 2013 – Industry Strategic Business Plan Jun 2013 - Draft Determination Oct 2013 – Final Determination Jan 2014 – Decision on acceptance of FDs Mar 2014 – CP5 Delivery Plan

27. Rail Delivery Group 27 Longer term planning milestones Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 20122013201420152016 Market Studies commence - May 2012 Publication of Draft Market Studies for Consultation - by April 2013 Cross boundary analysis – ongoing from Q1, 2013 Publication of final Market Studies – by October 2013 ORR Establishment – December 2013 Route Studies (Tranche 1) commence - 18 month duration Route Studies (Tranche 2) commence - 18 month duration ORR has agreed that LTPP outputs should be completed in time to inform September 2016 Initial Industry Plan (IIP) for Control Period 6

28. Rail Delivery Group 2 nd Industry Forum Questions and Answers 8 November 2012 2 nd Industry Forum

29. Rail Delivery Group Break 8 November 2012 2 nd Industry Forum

30. Rail Delivery Group The work of the Rail Delivery Group 8 November 2012 2 nd Industry Forum

31. Rail Delivery Group RDGs initiatives The RDG is pursuing a range of initiatives through its subject- specific working groups Asset, programme and supply chain management Contractual and regulatory reform Train utilisation Technology, innovation and working practices Franchising Formalisation The RDG is giving guidance to existing cross-industry groups Planning oversight group Technical strategy leadership group National task force RDG is also involved in other industry initiatives Rolling stock planning, procurement and deployment Strategic Review of the RSSB

32. Rail Delivery Group Case Study: Asset, Programme and Supply Chain management 8 November 2012 2 nd Industry Forum The Asset, Programme and Supply Chain Management working group

33. Rail Delivery Group Asset, programme and supply chain management The management of assets, the management of investment programmes and the role of the supply-chain are all critical to the success of the GB rail industry Identifying efficiencies in these areas is a core role for Network Rail but the RDG identified that bringing together train and freight operators, the supply chain and Network Rail should allow cross-industry efficiencies to be realised The Rail Delivery Group set up the asset, programme and supply chain management (APSCM for short) to bring the industry together to identify new ways of working together that would create a more efficient industry The APSCM working group includes TOCs (Arriva and First), a FOC (DB Schenker), Network Rail, a supplier (Amey), the Railway Industry Association and the DfT

34. Rail Delivery Group APSCM workstream presentations Access planning – Steve Murphy Workbank planning – Simon Bunn Cost of contingency survey – Jeremy Candfield Network optimisation – Nigel Jones Major projects and conclusions – Tim OToole

35. Rail Delivery Group Access Planning 8 November 2012 2 nd Industry Forum Steve Murphy Team Leader, Industry Access Planning Improvement Programme Managing Director, LOROL

36. Rail Delivery Group Objectives Optimising access planning. Put simply, when is the most efficient time to maintain the network? Reducing costs across the industry Increasing revenues Improving performance and customer satisfaction Developing case studies to provide evidence for industry wide benefits

37. Rail Delivery Group Method Cross Industry Steering Group Paul Hebditch – Programme Manager, NR Richard Stuart – Director of Rail Policy, Go-Ahead Steve Murphy – MD London Overground, Arriva Supporting Project Team established in Network Rail led by Fiona Dolman, Interim Director, Operational Services All case studies are managed by a project board including the steering group, the Route MD & Directors representing each Passenger or Freight Company operating on the route Project updates at each RDG working group meeting

38. Rail Delivery Group Total industry cost of maintenance South of Bedford – MML / 4 nights/week The Product Industry Cost Total industry cost of maintenance North of Bedford – Midland Mainline

39. Rail Delivery Group Midland Mainline Case Study Key Findings Existing approach of variable length mid-week night possessions along with significant weekend possessions was not the industry optimum Moving to a recurring pattern of consistent 6.5 hour possessions at the north end of the route and 7 hour possessions at the south end of the route delivered the following benefits: Approximately 5% reduction in Network Rail costs for maintenance/renewals on the route Reduction in overall maintenance possession hours of 52% A 38% reduction in disruptive possessions at weekends A more reliable railway, that will attract more passengers

40. Rail Delivery Group Next Steps ActivityDate Implementation of savings identified by MML Case StudyUnderway Completion of Kent Case StudyDec 2012 Phased delivery on a national basisJan 2013 onwards

41. Rail Delivery Group Route based workbank planning 8 November 2012 2 nd Industry Forum Simon Bunn Leader, Route Based Work Bank Planning Business Director Track Renewals-Amey

42. Rail Delivery Group Route based workbank planning – scope and objectives The Rail Delivery Group set up this workstream to examine how industry costs could be used by encouraging Network Rail, TOCs, FOCs and the supply chain to work more closely together in order to achieve Clear visibility of planning process, providing smoothing of resource, through intelligent grouping of works – not just as a one off exercise An understanding of planned work and the appropriate time for the work Recognise the costs / risks of very peaked demand (smoother and predictable workbank) Identify the blockers and subsequently the levers for improvement Recognise the impact of the control periods and prevent this being a blocker to more efficient working

43. Rail Delivery Group Route based workbank planning – scope and objectives Further benefits from the workbank planning workstream are expected to be Ensuring that work delivered is fit for purpose, with pragmatic specifications Reducing overall access time (and costs) by delivering some of the maintenance and inspection work when appropriate – e.g. maintenance tamping and CEFA inspections Recognise the railway as a system Reducing industry costs and keeping the railway open Producing a model that can be used nationally to optimise the workbank in terms of cost and resource demand

44. Rail Delivery Group Route based workbank planning – model project North and West Route Improvements (Shrewsbury to Chester) Track renewals for track condition (remove jointed track / old fastenings) + S&C + S&T Cefn Viaduct waterproofing Currently developing piggyback and scope optimisation options: Additional civils Examinations (e.g. CEFA could use the time to carry out inspection limiting access demand) Maintenance (could use the time to deliver some of their work e.g. maintenance tamping) Earthworks Changing complete rail lengths / optimising performance

45. Rail Delivery Group Route Based workbank planning – next steps Sample is from a narrow baseline, but still has useful data Findings have been extended to reflect Territory Work Group Route category (Primary, secondary etc) Ramp up of savings impact Next steps are to extend the sample base by reviewing Combined study with access planning workstream Sample study of two- track section of northern WCML Project – GN / GE possible Track resource review – potentially Switches and Crossings

46. Rail Delivery Group Cost of Contingency 8 November 2012 2 nd Industry Forum Jeremy Candfield APSCM workstream Director General, RIA

47. Rail Delivery Group The Issue Much anecdotal evidence, plus Network Rails benchmarking work, suggests that contingency allowances are greater in rail than in other industries And that this is substantially to minimise the risk of possession over-run – when engineering works take longer than scheduled Most such works are undertaken by contractors, members of the Railway Industry Association (RIA) The RDGs APSCM working group set up a workstream to identify how the industry could work together to reduce the cost of contingency The APSCM working group asked RIA to conduct a survey on the Cost of Contingency

48. Rail Delivery Group The survey The survey was undertaken in August 2012 to seek to quantify the excess cost that could be involved 25 responses were received, spread across all main asset groups and turnover bands RIA analysed and anonymised the data

49. Rail Delivery Group Key Findings Rail-specific contingency measures absorb additional people, plant, possessions and materials Contractual reasons predominate, but reputational risk is also a major issue Rail-specific contingency measures are applied to 63% of railway projects, and used in 49% Accounting for 11% of GRIP6 costs on those projects Allowing one-hour overruns would avoid 15% of the cost, two hours 23%

50. Rail Delivery Group Comments Raised Possession work is over-resourced because the possibility of overrun is too great a risk to take. The current possession regime requires significant lost time. Need to factor-in client change or poor project definition planning. The explosive and bitter recrimination many of us have had when a possession does overrun for whatever reason! Where scope definition or programme information is limited we would add up to 20%. Contingency is usually factored in to cover for poor planning in either the specification or the tender.

51. Rail Delivery Group Next Steps Further analysis There may be scope to capture differences between rail and non-rail contingency more fully The survey undertaken was of contractors only, so excludes contingency taken by the infrastructure manager – contingency on contingency Although analysis costed impacts on labour, plant and materials, we have not yet properly quantified or costed the impact on possessions. Each of these would be expected to increase the cost estimate RIA is considering another survey on behalf of RDG We have yet to address how to balance overruns against service interruptions The Cost of Contingency workstream is bringing together operators, suppliers and Network Rail to identify further opportunities

52. Rail Delivery Group Network Optimisation 8 November 2012 2 nd Industry Forum Nigel Jones Leader, Network Optimisation workstream Planning & Strategy Director, DB Schenker

53. Rail Delivery Group 53 Background Even in an expanding railway there are points and connections that are rarely or never used. These are expensive to maintain and renew However, relatively little network rationalisation has occurred in recent years other than as part of a renewal or enhancement scheme On average 77 Switch & Crossing (S&C) units have been abandoned each year over Control Period 4 (CP4) – initial CP5 work suggested an abandonment rate of 64-69 S&C units pa Reasons for this include: Difficulty in making a positive business case for stand-alone schemes Perceived difficulty of securing operator agreement via the Network Change process Perceived impact of standards on What is possible

54. Rail Delivery Group 54 What is Network Optimisation? A RDG initiative where TOCs, FOCs and Network Rail are working together to eliminate a significant proportion of the unused, underused and problematic S&C units from the 23,276 point ends on the rail network, and replace them with plain line. Why? Avoid future capital expenditure and renewal costs Reduce maintenance costs Improve performance and reliability Improve staff safety Issues Up-front capital costs Savings generally realised in later Control Periods Would there be a reduction in operational flexibility – or would this be perception rather than reality?

55. Rail Delivery Group 55 Method and Progress Work has focused on Wessex and Sussex routes A combination of: High level analysis Cross-industry workshops focusing on discrete network segments to review current & future use and identify redundancy Development of a national business case based on averages, sampling and overseas experiences Using ORBIS criticality data to inform workshops. A revised Network Rail standard, known as ERORA, is currently on trial, allowing a risk-based and cost effective approach to removal

56. Rail Delivery Group Benefits from the initiative The long-life nature of S&C assets makes the initiative worthwhile Without ERORA, Do nothing is more attractive until after year 16 With ERORA, the proposal becomes positive after year 7 A midpoint between these would see a break even after year 11

57. Rail Delivery Group Major Projects 8 November 2012 2 nd Industry Forum Tim OToole Chairman, APSCM Working Group Chief Executive, First Group

58. Rail Delivery Group Major projects The APSCM working group believes that there could be significant benefits from a cross-industry approach to major projects The group needs to understand the incentives that will encourage earlier and closer engagement between operators, suppliers and infrastructure provider. This could lead to more efficient scoping, specification and implementation The working group will look at past, present and future major projects to identify how the outputs from these projects could be delivered for a lower cost

59. Rail Delivery Group APSCM conclusions 8 November 2012 2 nd Industry Forum Tim OToole Chairman, APSCM Working Group Chief Executive, First Group

60. Rail Delivery Group APSCM conclusions The APSCM working group has been a truly cross-industry effort to identify efficiencies from new ways of working together. The group has been putting values to the potential efficiencies by assessing the impact nationwide of a range of case studies There needs to be care to avoid double-counting savings between workstreams or between the working group and Network Rails own work for the Strategic Business Plan Work to date, excluding major projects where work is just beginning, suggests a range of savings of Between £100m and £300m in 2018/19 Between £430m and £1130m across CP5

61. Rail Delivery Group The work of the Rail Delivery Group 8 November 2012 2 nd Industry Forum

62. Rail Delivery Group Formalising the Rail Delivery Group 8 November 2012 2 nd Industry Forum Graham Smith Secretary, Rail Delivery Group

63. Rail Delivery Group Formalisation The Rail Delivery Group has operated on a voluntary basis for 18 months. To enable the RDG to fulfil its leadership role and to maintain involvement at a time of commercial and political change the RDG, with support from Government, decided to Formalise the Group as a company limited by guarantee Support the introduction of a licence condition requiring participation in the RDG Establish a better defined relationship with, and give guidance to, cross-industry groups such as Planning Oversight Group, National Task Force and Technical Strategy Leadership Group Develop relationships with other industry bodies such as RSSB Enhance its communications with the industry, funders and other stakeholders The ORR consulted on the proposal to formalise RDG during the summer

64. Rail Delivery Group ORR consultation and conclusions The ORR made a number of points in its conclusions document regarding structure and membership of the leadership group, communication and transparency of RDG and the rights of those who would fall into the licensed and associate membership groups The ORR stated that The leadership group is likely to be more effective as a relatively small body (comprising those who have the biggest influence to drive change across the industry) There are sufficient safeguards in place to ensure that the interests of operators, funders, suppliers, employees and others not directly represented on the board will be protected RDG Members will actively seek the views and involvement of those bodies to whom the specific matter being considered is directly relevant ORR is content to support the formalisation of RDG through the incorporation of a new membership condition into the licences of Network Rail and passenger and freight train operators that operate over the mainline network

65. Rail Delivery Group Membership There will be three membership categories Leadership Group Members Licensed members Associate members Leadership Group Members are Network Rail and Owning groups involved in passenger or rail freight operations and whose membership will be determined by the level of UK rail turnover and leadership of their group Licensed members are all passenger and freight train operators operating on Network Rails infrastructure Associate members will be bodies that are likely to be able to make a material contribution to the achievement of the RDGs objects

66. Rail Delivery Group Communication The RDG recognises that it can only be fully effective with the support and engagement of its customers, employees, suppliers and other stakeholders The RDG has to be transparent about its activities and to communicate with licensed members, associate members, funders and other industry stakeholders whilst recognising that that there are some issues of commercial confidentiality Formal communications activity will include continuing to produce a summary of its proceedings to post on the RDGs website producing an electronic written report on progress every six months that will be posted on its website publishing an annual report describing its achievements in the previous year and laying out its plans for the coming year and continuing to hold an annual forum But this only part of the RDGs communications activity

67. Rail Delivery Group Communication RDG will build on the existing involvement of the wider industry in the initiatives being pursued by the subject-specific working groups RDG will seek the views of licensed and associate members on particular topics. This may involve asking members for information and evidence to help RDG understand a particular issue or testing potential solutions in discussion with individual members or their representative bodies RDG will meet licensed and associate members either directly or through their trade associations or representative bodies This will allow the RDG to understand members views on the various initiatives being pursued by the RDG and will be an opportunity to brief members on progress

68. Rail Delivery Group Formalising the Rail Delivery Group 8 November 2012 2 nd Industry Forum Graham Smith Secretary, Rail Delivery Group

69. Rail Delivery Group Concluding remarks 8 December 2012 Industry Forum David Higgins Deputy Chairman, Rail Delivery Group Chief Executive, Network Rail