1. Simon Kirby Director, Infrastructure Investment

2. Our inheritance Network Rail took over the railway infrastructure in 2002Network Rail took over the railway infrastructure in 2002 A maintenance contract structure with little incentive for efficiencyA maintenance contract structure with little incentive for efficiency 4,000 mile backlog in renewals4,000 mile backlog in renewals Regional structure, no central controlRegional structure, no central control An explosion in costs from £3.3bn per year in 1999 to £6bn a year in 2002An explosion in costs from £3.3bn per year in 1999 to £6bn a year in 2002

3. Track replacement volumes (miles)

4. Key challenges SafetySafety –Reduce incidents of broken rails, SPADs, Accidents, etc… PerformancePerformance –Reduce delays by around 33% over next 5 years CostCost –Improve efficiency by around 31% over next 5 years Work volumesWork volumes –Massively increase volume of work being delivered

5. And on a growing railway… 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 Passenger Journeys (m) 940 980 1020 1060 1100 1140 Passenger Journeys

6. Growth in Renewals – 07/08 £m 0 500 1,000 1,500 2,000 2,500 04/05 actual05/06 actual06/07 actual +23% +22%

7. 0 100 200 300 400 500 600 700 800 TrackCivilsSignallingEstatesE&PTelecoms £m 05/06 actual 06/07 actual +5% +17% +54% +30% +59% +55% Increased spend by asset in 06/07

8. Growth in Renewals – 07/08 £m 0 500 1,000 1,500 2,000 2,500 04/05 actual05/06 actual06/07 actual +23% +22% 07/08 budget +10%

9. Enhancement spend Millions (£) past spend future spend

10. Track renewals

11. Improvement in efficiencies 26% 24% 10% 20% 0% 5% 10% 15% 20% 25% 30% Controllable Opex MaintenancePlain LineS&C 22% Projects

12. Our response National functional structureNational functional structure Maintenance in-houseMaintenance in-house GRIPGRIP Reorganising Track Renewals internallyReorganising Track Renewals internally Focus on costs, quality and timelinessFocus on costs, quality and timeliness Improving programme managementImproving programme management

13. Track renewals: current position Consistent improvement Track QualityConsistent improvement Track Quality Delay minutes reduced year on yearDelay minutes reduced year on year Good S&C performanceGood S&C performance Improving Plain Line DeliveryImproving Plain Line Delivery Plain Line costs improving but still not fast enoughPlain Line costs improving but still not fast enough

14. Track renewals: 2007 activities Fundamentally overhaul the whole renewals end to end processFundamentally overhaul the whole renewals end to end process Reward best 4 of 6 performing contractors through competitionReward best 4 of 6 performing contractors through competition Create efficient delivery methods for short duration possessionsCreate efficient delivery methods for short duration possessions

15. Supplier rationalisation By the autumn we plan to down select the best 4 contractors (from 6) 4 Territory based renewals Contractors and 1 National high output contractor We will review the allocation of work to optimise delivery method and agent We will manage against key indicators and drive for collaborative and integrated working

16. End-to-end process improvement Accelerating engineering specifications Plan is to create a 3 year rolling renewal programme Whole process from maintenance through track engineering, planning and track renewals is being mapped & optimised Behavioural change and training programme being developed

17. Target Improvement Circa 22% to 25% 31% Target Current position Post-changes

18. Conventional Renewals

19. Conventional renewals Structured reviews of: – –engineering specifications to deliver optimised worksite packaging – –resource planning to increase efficiency – –mapping resource availability to demand Greater involvement in contractor management using performance indicators Higher-level cross industry cooperation

20. High Output Machinery

21. Continued development of High Output systems (e.g. SLW) Potential acquisitions of additional plant Deployment of medium output solutions being progressed (e.g. MOBCs and Slinger)

22. Modular turnouts

23. Developing a systems solution to delivering S&C Standard products, factory built and modular delivered on bespoke wagons Lean manufacturing techniques in manufacturing and installation Through life benefits – quality, reduced maintenance, installed monitoring Will progressively replace conventional techniques – up to 75%

24. Modular turnouts Controlled build Delivered in-gauge Modular installation (on flat bed)

25. Conventional Renewals 54 hours Today! 37 hours Basic process changes & disciplines: incentivised, templated, site presence 27 hours Bearer Splice – road delivery / out of gauge 21 hours, or 2 x 12 hours Modular assembly, tilting wagon delivery, improved excavation, ballast laying 8 hours Consistent mid-week possessions 7 Day Railway 6 Day Railway

26. Conventional Renewals Money / time 27 hrs 54hrs 12 hrs 8 hrs 37 hrs Core possession time Process Splice Wagons & Assembly Manufacture +? £477k/ point end £443k £406k Sub £350k Best ‘UK’ Class Equivalent Best European Class (today) World Leader GB (today)

27. 8 hour plain line

28. Concept study completed to explore principles and prove and clarify the remit Key objectives include: – –Standard unit of delivery – –Installation less than 8 hrs – –Single line working – –High line speed opening (85mph+) Full programme by mid-2007 Progressive introduction from 2009 anticipated Will moderate, or reverse, efficiency aspirations

29. Simon Kirby Director, Infrastructure Investment