Transport Committee The ppp: Two Years In



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3. Engineering Overruns

3.1 Major engineering work takes place predominantly either overnight (to avoid disruption of service) or at weekends (on the back of line or branch closure to avoid impact on peak weekday services). These slots are far from ideal for those planning the engineering work but were designed to minimise impact on the passenger and their inconvenience and logistical difficulties were reflected in the high payments LU make to the Infracos.


3.2 For overnight engineering work the timetable is tight. Typically, an overnight engineering slot allows for four hours of work, either side of which power has to be switched off and back on, engineers have to get access to and from the site bringing and removing all their equipment from the site. Weekend slots may work to longer hours but also undertake work on a proportionate scale and have also been vulnerable to overruns.
3.3 Overruns are an obvious risk and can have massive impact on the service - especially if the overrun’s consequences bleed into the rush hour and either delay or entirely close a section of a line. The 278 engineering overruns12 reported up to January 2005 have between them cost Tube Lines and Metronet in excess of £1.2m worth of penalty payments. London Underground point out that there has been ‘a marked increase in the number of engineering overruns’ since the start of the PPP. London Underground measure performance on overruns in absolutes and unquestionably the number of overruns has increased (see below).

3.4 For the Infracos their performance is measured in rates; there may be more overruns taking place but that is simply because the number of projects has increased dramatically. Per 1,000 jobs the rate of engineering overrun is dropping. Evidence provided by Tube Lines to the Committee highlighted the downward trend with regard to the proportion of overruns per 1,000 slots occupied (see below)

3.5 The Committee was told that overruns occur for two reasons. Firstly, there is an emergency situation detected very late in the evening, which for safety reasons, must be addressed. These overruns are an unavoidable necessity. The second reason for overruns is when work is not completed in time for services to be resumed because there has been ‘simply bad planning and bad execution.’13
3.6 John Weight accepts that overruns have been a problem for Metronet. ‘We have actually operated in this last 11 months something like 39 weekends of work, and we have overrun 14 times. That is unacceptable’.14 Overruns are dealt with in two ways; either a closure of the line on that section or the introduction of a temporary speed restriction. Both can be massively disruptive to Tube passengers.
3.7 The failure to manage engineering work effectively is a cause of much frustration. Tim O’Toole cited an example of how this failure obscures the progress being made on improving the service on the Tube. He said, ‘we continue to struggle against ourselves, and we are not seeing performance at the level we require.’15

We had some very, very rough weather for the Underground [during February]. We had a lot of snow out in the Amersham area [and] precipitation every night and freezing temperatures in the middle of the night. Anyone who understands this system knows this is the most difficult environment for us to operate in.


You will recall last year, a very little bit of precipitation shut down the system. This year, as a result of the enormous amount of work on my side, as well as on the Infracos, with numerous phone calls through the day planning how to deal with this weather – calls in the morning, in the afternoon, late in the evening – constantly changing operating plans so we could deal with it, we had absolutely zero service interruption as a result of this weather, when there was on the rail side. This should have been a week where [the Infracos] were able to stand up and say, ‘Look, we cracked this problem. Okay, we had a problem last year, but this is an example of how we have been able to make improvements.’
Yet, in that exact same week, the whole headline gets buried, because we had a completely unnecessary temporary speed restriction extended in East Ham that completely destroyed service on the District Line through the peak and an engineering overrun at Acton Town that should never have occurred, because that work should not have occurred in engineering hours on a weekday’.

3.8 There have been accusations that the Infracos ‘made financial judgments to keep overnight engineering works running into the rush-hour’16 as the fines levied by the contract do not provide enough of an incentive to finish work on time. It is an accusation that both London Underground and the infracos refute. John Weight told the Committee ‘that I know that even the few number of minutes [of overruns into peak service] can have a devastating effect into the peak. That is not where I want to be.’17


3.9 The calculation that the Infraco makes when faced with a potential overrun is not based on not wishing to bring a ‘crew down the next night.’18 Rather the infracos weigh up whether the fines incurred through reduced service, brought about by a temporary fix and speed restriction, would prove more expensive than those for an engineering overrun by completing the work late.
3.10 John Weight elaborated on the dilemma. ‘It may well be that in certain parts of the network, a speed restriction of 20 miles an hour can be coped with. It may cause some disruption in the peak. It may be something that the [London Underground] can live with. If it is five miles an hour you cannot. Five miles an hour over, say, 100 or 200 yards is not acceptable. It devastates the service.’19
3.11 Are the fines imposed on either service availability (affected by speed restrictions) or engineering overruns enough? Not surprisingly the Infracos think they are. John Weight cited an example where the total mismanagement of a four hour engineering slot had cost Metronet £250,000 in fines. However, Tim O’Toole while keen to stress how hard the Infracos were working to eradicate the overrun problem, admitted to the Committee that if overruns ‘keep happening, one would fairly conclude the penalties are not sufficient.’20
3.12 So what is being done so that the overrun problem can absolutely be sorted and addressed? There is a great deal of joint working between London Underground and the Infracos. Neither is satisfied with persistent failure; London Underground does not want to remain as ‘scorekeepers’ merely collecting fines and the Infracos are keen to improve on performance. To this end, London Underground informed the Committee that extensive work has been done on streamlining the processes that London Underground’s Track Access Office operate under. It has had some effect with the late turn-off of current on the track down from 30 per cent to 10 per cent of engineering slots.


Full line closures

3.14 The most dramatic option available to London Underground and the Infracos for accelerating track and signal renewal is full line or branch closures. This would navigate the problem of limited access and should allow works to be completed at a faster rate than if the system of evening and weekend slots were to continue. This would represent a radical departure from the PPP contracts and would potentially provide Tube Lines with substantial savings.


3.15 For London Underground to entertain the idea, Tim O’Toole outlined the three conditions that would need to be addressed:

  1. The Infracos must be able to resource the work – it has to be delivered on time.

  2. London Underground has to be able to put back some of the savings the infracos make from the line or branch closure into the system.

  3. London Underground and TfL have to be able to handle it.

3.16 It is the second condition over which there will be most haggling. The PPP deal was priced on the assumption that engineering hours would be limited and, by necessity, difficult. Tim O’Toole argues ‘if we are going to bring forward this more efficient way of working for them, they have to share those proceeds with London.’21


3.17 Terry Morgan, on whose Tube Lines contracts it is most likely that full branch closure could occur, is happy to accept ‘benefits will be reinvested back into the Underground.’ However, he was also keen to stress to the Committee that this did not somehow make his ‘life easier’ and that an accelerated programme that delivered two years ahead of schedule was a tangible benefit in itself.
3.18 Plans are afoot. Tim O’Toole has proposed that the Waterloo and City Line would be used as a pilot for a full line closure. As a discrete component of the Tube network, the Waterloo and City Line is considered an excellent and relatively undisruptive place to establish whether full line closures can be effectively resourced to accelerate renewal. As Tim O’Toole said, ‘if we cannot repair that all in one fell swoop, I am not sure where we can do it’.
3.19 This would then provide the basis on which to proceed with full line and branch closures on London Underground’s biggest problem – the Northern Line.

4. Case Study: The Northern Line
The Northern Line.. is our most complex line; it is our heaviest ridership; it is the most intensive service we offer, and it is our biggest problem.’

Tim O’Toole, 10March 2005.


4.1 The Northern Line has been the poorest performing line since the PPP started two years ago. Of all nine underground lines, the Northern Line has by the far most signal and point related failures and track delays and the number of trains available for service on the line have been 39 per cent below the agreed benchmark . The trains and the track aren’t working.
4.2 Why the Northern Line? One of the major reasons for the poor service can be attributed to a problem that both Tim O’Toole and the Infracos inherited at PPP start up. A previously agreed Public Finance Initiative (PFI) called Connect was established to provide the Northern Line with a new a radio system. The project due for completion at the end of this year will not be commissioned now until June 200722. As a consequence of this delay the number of trains available for service has been consistently below adequate performance levels.
4.3 The interaction of pervious PFIs with the PPP is by their own analysis ‘one of the greatest risk areas’ for London Underground. The long-term solution is a new system, provided by Connect, but as Tim O’Toole highlighted to the Committee, ‘Connect cannot come in until we are able to get access to all of those rail cars out there and put the radio in the drivers’ cabs. That is a very difficult coordination exercise [for London Underground] to go into, and it is a management task that really is on the critical path.’23
4.4 The signals and track have also been problematic. A persistent failure in the Angel/Old Street area was causing at least two signal failures a week and was ‘driving [LU and Tube Lines] nuts.’24 Consequently, at very short notice, the Bank branch on the Northern Line was closed for an unscheduled three weekends in a row. Since the work has been carried out, failures along that stretch of the line have been stopped.
4.5 The problem is wider than one particular signal and lies with the track structure itself. Hence, London Underground is considering proposals from Tube Lines to accelerate work on the line via branch and partial line closures along the whole line.
4.6 The proposal to reorganise the renewal of the Northern Line is laid out in seven stages. Tube Lines hopes to gain access to one particular stretch of the line for a two-month period to pilot their project management and engineering work to establish whether wider closures could be contemplated along the Northern Line. There is a lot to consider. The southern stretch of the line between Morden and Kennington is very important to London Underground and carries a large ridership. The central section of the line is also inherently complicated with the City and Charing Cross branches.


    1. It remains to be seen whether the proposals are feasible and the acceleration achievable. If implemented, the proposals would represent the greatest departure from the PPP contracts as well as the greatest test to date as to how flexible and responsive the contracts are to the needs of both engineers and passengers.




    1. The Transport Committee offers its conditional support for the proposed line and branch closures along the southern sections of the Northern Line. The closures appear to represent a necessary intervention.

    2. This support is conditional. The Committee seeks, from both Tube Lines and London Underground, reassurances that the timetabling of the Northern Line closures will be planned with careful consideration given to the commissioning and implementation of a new radio system on the Northern Line so that the inconvenience to passengers of both pieces of work can be kept to within the same timeframe.

    3. In addition, these closures should not come to represent a template for clawing back of any future failures of the PPP. The PPP was designed with the specific intention that whole chunks of London would not be left isolated by line closures because such closures have obvious far reaching impacts for the communities affected – not least the daily inconvenience of using alternatives.

    4. Any changes to the contract must not provide potential incentives for future line closures. And perhaps most importantly, the benefits enjoyed by Tube Lines from the improved engineering conditions should be felt across all of their three lines. The Committee would expect an accelerated renewal of the Northern Line but it would also expect to see tangible improvements to other aspects of Northern, Jubilee and Piccadilly Line performance.

5. Future Solutions & Risks


    1. Apart from the proposed line closures there were other risks to the success and public perception of the PPP disclosed to the Committee. Not least of which is the power supply PFI that has the potential significantly to hold up the renewal of the Tube and cost London Underground money at the same time.

5.2 If the power PFI is not delivered to the tube system, not only would work on renewal be held up but also London Underground would still have to pay the Infracos for engineering work, because ultimately the power failure could be attributed to London Underground’s management of this PFI. There is also a resource risk inherent in the management of these relationships. For example, there is limited signalling expertise available across the system and this resource could be pulled in two directions between previous PFI arrangements and current PPP contracts.


Service Changes

5.3 London Underground is also consulting on proposed changes to the late night running of their weekend service. The changes if implemented would see the last trains on London Underground departing central London at 1.30am but the first trains on Saturday and Sunday not arriving in Central London until 7am and 8.30am respectively.


5.4 These changes will affect the Infracos access to the lines over the weekend and as they are changes to the service parameters in the original PPP contracts, alterations to the contract will have to be agreed prior to any service changes being made. Not surprisingly, there is a negotiation to be had between the Infraco and London Underground to establish the value of the lost and gained hour over the weekend. Here too is another potential test to the durability of the PPP contracts.
Infrastructure Improvements outside of the PPP

5.5 London Underground has recently been given an additional £1bn to carry additional infrastructure work on the Tube. None of the Infracos were invited to tender. Such a development was hardly surprising. London Underground had become frustrated, describing negotiations around additional work beyond the PPP contract as a ‘very constrained, single source environment’.25 Extra work needed at Wembley Park was eventually given to Tube Lines but the time pressures of the wider stadium project left London Underground with little option but to give the work to Tube Lines.


5.6 The decision to offer additional infrastructure work to companies outside of the PPP does have its risks. As seen with the PFI arrangements on the Northern Line and the power supply, a further fracturing of delivery mechanisms does expose London Underground to greater risk in managing the interaction between non-PPP and PPP work.
5.7 However, as the House of Commons Transport Select Committee concluded in its investigation on the PPP, it also offers the PPP Arbiter, who will re-price PPP work in 2010, with an alternative template by which to set a new and presumably better informed price for the PPP work to be carried out beyond 2010. The development also potentially further motivates the Infracos to improve on their own performance should further non-PPP work become available.
The Cavalry’ - Could PPP deliver more?

5.8 An article in the Guardian in February made public for the first time the dissatisfaction felt by London Underground by the slow rate of progress being made on renewing the Tube and improving service. Tim O’Toole complained that ‘the programmes [need] to be much more aggressive - and that is all about resources. They [the infracos] know what they are doing; they could accelerate these programmes, it is just a question of resources. These guys are supposed to be the cavalry, but so far they're the same world-weary infantry we saw under London Underground.’26


5.9 Speaking to the Committee, Tim O’Toole and the then Metronet Executive Chairman, John Weight and Tubeline’s Chief Executive Terry Morgan, insisted that the article did not represent a breakdown in the relationship between London Underground and the Infracos. Nothing said in the article hadn’t already been said in regular meetings between client and supplier.
5.10 London Underground’s concern is that the Infracos will be tempted to take assets up to renewal date in 2010 rather than risk overspending on maintenance in the short term. The case put forward is not just, according to Tim O’Toole, the familiar lament of a frustrated customer who wants more money. There is a case to be made for accelerated investment. The Infracos and, more importantly their partner companies such as Ferrovial, Bechtel, Balfour Beatty, and Bombardier, need more aggressively to make the case for the business model by investing more now, to prove critics wrong and ultimately to secure the confidence of the government and get more money for further improvements of the Underground.
5.12 Major track renewals are primarily back ended until the latter stages of the 7.5 year period. Rather than simply maintain the lines until then, more money spent now bringing forward the line upgrades and track renewals will create a change in service that the ‘public can truly embrace.’27 London Underground want ‘more block joint replacements, so we do not have signal failures, if they do more relay replacements, if they do more track wire replacements – all things they are doing – but if they do them at a greater rate, the performance will improve.’28
5.13 To this end, London Underground have submitted a total of 33 requests for additional heavy maintenance works on track, signalling and rolling stock which the Infracos are currently considering. London Underground explained that by the very nature of the contract, LU is ‘not in a strong position’ to demand more from the Infracos29. Ultimately, the responsibility for work actually assigned within the contracts rests with the Infraco and their shareholders. It is they who decide how and when they meet or exceed performance benchmarks.
5.16 Tim O’Toole cited the Piccadilly Line as an example of where extra investment pays dividends in improved performance. An extensive overhaul of the fleet, way beyond the expectations of the PPP contract, has seen the Line become the ‘workhorse of the fleet…shooting the lights out on its [performance] numbers.’30 And Tube Lines highlighted to the Committee investment that should accelerate improvement in the mid-term. A new £10 million training centre at Stratford is due to be complete this summer, which amongst a wide range of courses, provides training for signalling engineers for which there has been a shortage of expertise to cover the extensive renewal programme.
5.17 However, the National Audit Office (NAO) found that the incentives to improve performance operate ‘only at the margins of their profitability and it is therefore difficult to determine the extent to which they impact shareholder behaviour.’31 Although the NAO add that poor Infraco performance could damage their reputation with potential lenders, the PPP contract appears weighted to militate against failing to hit targets rather actually encouraging exceeding targets.
5.18 For example, in monitoring train availability which is measured in lost hours for the customer, the contract rewards an extra £3 for every customer hour gained above the contract benchmark; however it punishes the Infraco £6 for every lost customer hour beneath the benchmark and a further £9 an hour when performance reaches an unacceptable level. The performance benchmarks have been set a relatively modest level, which explains the discrepancy between bonuses and fines. Whilst the consequence of this pricing structure may not be to actually discourage exceeding benchmarks the PPP doesn’t appear to actually encourage the Infracos sufficiently to ‘shoot the lights out’.32
Beyond the Contract

5.19 For work beyond actual contractual specifications, London Underground described the Infracos as ‘slow’ to address work requested on Accessibility and Step-Free issues, though both have shown a willingness to respond to these requests recently, with Tube Lines highlighting to the Committee that an additional 25 feasibility studies were being carried out at stations. London Underground also pointed out that requests for additional work to assist with the Northern Line’s Connect PFI (see paragraphs 4.2-4.3) and improvement works to operational accommodation have also met with slow responses.


5.20 Tube Lines however highlighted to the Committee that additional, extra-contractual work has also been carried out on the construction around Wembley Park and Heathrow Terminal 5 as well as extra work also being undertaken at Waterloo East and North Greenwich.
5.21 Metronet too provided the Committee with a snapshot of 20 projects, valued at approximately £70 million, which were examples of where the Infraco responded to requests for work London Underground for work not specified in the contract.

Should the Infraco’s invest more?

5.22 As much as passengers and London Underground might reasonably expect an accelerated rate of renewal on the Tube, unfortunately, they are not entitled to it. The contract is as clear as a contract with 181 performance targets can be. It is after 7.5 years when the performance of the infracos has to be judged and a slow start was built into the projections over the first 7.5 year period.


5.23 However, this is a narrow view. The Transport Committee offers its conditional support for Tim O’Toole’s call for an accelerated rate of investment from the Infracos in renewing the Tube. The PPP appears to be set up so as to militate against failure and minimise risk, but there is scope for a more aggressive pursuit of excellence. An acceleration in investment, if correctly managed, would be in the long term interests of everyone concerned – the Tube would be improved for its operating company London Underground; the Infracos would not only secure greater bonuses and dividends for its shareholders, but also make a stronger case for further government investment; and passengers would enjoy the benefit of a modernised underground sooner.
5.24 But for the Transport Committee it is not ‘just a question of resources.’33 Any greater investment needs to be properly managed. Metronet’s management of its two PPP contracts has been acknowledged, even by Metronet’s own shareholders, to have been inadequate. Until there is a greater demonstration of being able to manage the renewal of the Tube within the current projections, it cannot be reasonably expected that shareholders will license an even greater level of investment and exposure to risk. It is a frustrating Catch 22 for London Underground. Until infraco performance is improved, greater investment may not be forthcoming. However, performance may only improve if there is greater investment. It is vital that the new management at Metronet quickly demonstrate its ability to improve performance and meet targets within current levels of investment.
The Transport Committee therefore demands that by the end of 2005 that Metronet’s station refurbishment programme is back on schedule.
5.25 In addition it is essential that both Metronet and Tube Lines tackle the issue of engineering overruns successfully. Overruns have an almost daily impact on the Tube service and are perhaps more than any other aspect of performance the most indicative of the Infracos’ ability to manage the task of renewing the Tube. The Committee understands that the rate of overruns per job has declined for Tube Lines and this is to be applauded. However, absolute numbers measures the passengers’ inconvenience and these continue to increase.
The Transport Committee concludes that absolute numbers of engineering overruns must be reduced by the end of 2006.
5.26 The Transport Committee looks forward to monitoring the progress of the PPP and will question the new Chair and Chief Executive of Metronet, Keith Clarke and Andrew Lezala, on 21 July 2005, about their immediate plans for Metronet. The Transport Committee will also check on the progress on the PPP in March 2006.


Appendix A – Peak Train Cancellations 2003 & 2004


Year 2003 (6 January 2003 to 2 January 2004)

 

Cause of Cancellation

 

 

 

 

Operator Not Available

Rolling Stock Defect

Signal Failure

Track Defect

Other

Industrial Action

Non LUL

Total

Schedule

per centrun

 

 
















 







 

Bakerloo

78

270

34

34

283




22

721

15,821

95.4per cent

Central

12

1,809

145

4

7,854




46

9,870

35,317

72.1per cent

Victoria

192

77

44

37

92




13

455

18,528

97.5per cent

W & C

1

54

20

0

136




0

211

2,008

89.5per cent

District

153

518

200

71

97




83

1,122

38,641

97.1per cent

Met

36

356

247

69

130




112

950

22,061

95.7per cent

Circle

194

571

124

36

54

28

21

1,028

7,054

85.4per cent

H& C

129

316

81

21

45

18

41

651

7,791

91.6per cent

E L

17

16

3

1

0




1

38

3,014

98.7per cent

Jubilee

24

89

269

36

105




44

567

23,589

97.6per cent

Northern

104

280

162

24

2,155




120

2,845

45,381

93.7per cent

Piccadilly

45

777

197

34

539




100

1,692

38,156

95.6per cent

All lines

985

5,133

1,526

367

11,490

46

603

20,150

257,361

92.2per cent



Year 2004 (5 January 2004 to 7 January 2005)

 


 

Cause of Cancellation

 

 

 

 

Operator Not Available

Rolling Stock Defect

Signal Failure

Track Defect

Other

Industrial Action

Non LUL

Total

Schedule

per cent

 

 



















 




 

Bakerloo

32

182

56

45

309

46

49

719

16,030

95.5per cent

Central

4

849

147

5

253

125

133

1,516

36,559

95.9per cent

Victoria

10

54

60

34

65

45

31

299

18,934

98.4per cent

W & C

1

19

12

0

18

3

8

61

2,048

97.0per cent

District

31

147

188

91

68

130

119

774

39,441

98.0per cent

Met

17

311

194

21

98

53

69

763

22,916

96.7per cent

Circle

12

104

97

38

36

28

23

338

7,194

95.3per cent

H& C

16

81

65

20

39

20

55

296

8,106

96.3per cent

E L

18

14

2

0

0

0

1

35

3,080

98.9per cent

Jubilee

42

105

136

0

45

97

49

474

24,794

98.1per cent

Northern

83

300

172

90

389

126

49

1,209

46,395

97.4per cent

Piccadilly

68

173

246

32

480

237

206

1,442

38,943

96.3per cent

All lines

334

2,339

1,375

376

1,800

910

792

7,926

264,440

97.0per cent

Appendix B – Guardian Interview with Tim O’Toole
Tube chief: private firms not up to the job
The Guardian, Andrew Clark and Ed Vulliamy, Monday February 21, 2005

It is the cacophonic start to a Londoner's day: loudspeaker announcements about signal failures, delays, defective trains and faulty escalators - the perennial ordeal of the tube. Everything was supposed to change under a unique partnership between the private and public sectors, central to the New Labour project, introduced in 2003. But the turnaround is running late and its estimated time of arrival remains in doubt.

In his strongest critique to date, the man whose charge it is to ensure the day-to-day running of the tube has attacked his partners in the private sector for parsimony, an aversion to risk and a failure to deliver.

Tim O'Toole, the American millionaire freight train executive brought in by Ken Livingstone to head London Underground, says in an interview with the Guardian: ‘The improvements are not happening fast enough. No one wants to live this way.’

Millions of passengers - paying the highest underground rail fares in Europe or America - would agree. On one day last week, delays were reported on eight of the tube's 12 lines because of a combination of signal failures, a late finish to overnight engineering work and the disintegration of a concrete footbridge.

‘If we're not delivering change, we could well see people ask: 'Why are we continuing to pour money into this arrangement?',’ Mr O'Toole warns.

The private public partnership, or PPP, under which Mr O'Toole runs the underground was masterminded by the deputy prime minister, John Prescott, with backing from the Treasury. Under the scheme, two engineering consortiums, known as the ‘infracos’ - Metronet and Tube Lines - won 30-year contracts worth £15.7bn to modernise the tracks, stations and tunnels, thereby splitting the tube's infrastructure from its operation, by London Underground. The private sector was to pay 25 per cent towards the work, government grants 60 per cent and fares 15per cent. From the companies' point of view, the deal was almost risk-free and guaranteed them 30 years' work with reviews every seven and a half years.

The contract was so complex that it cost the taxpayer £455m in lawyers' and consultants' expenses just to draw it up. The deals are unique, untried and unproven in the world of transport; they are performance- related, so the companies are recompensed according to their success in reducing service delays.

Mr O'Toole admits that progress is being made - but far too slowly. ‘The fact that things are better than two years ago is damning with faint praise, because we are dealing with a system which was well below standard. I don't want to be judged by the old London Underground performance. We have got to get a lot better.

‘I am asking for the programmes to be much more aggressive - and that is all about resources. They [the infracos] know what they are doing; they could accelerate these programmes, it is just a question of resources. These guys are supposed to be the cavalry, but so far they're the same world-weary infantry we saw under London Underground.’

Metronet is made up of contractors WS Atkins, Balfour Beatty, Bombardier, Seeboard and Thames Water; Tube Lines comprises Amey, US construction group Bechtel and troubled logistics firm Jarvis.

Public and private partners offer very different accounts of progress. Tube Lines says instances of asset (equipment) failures have fallen by 32 per cent on its three lines - the Jubilee, Northern and Piccadilly - since the PPP began. Metronet says reliability on the Circle line is up 140per cent, with improvements of between 22 per cent and 54 per cent on its other lines.

But LU, which uses different benchmarks, says the infracos have frequently fallen short. In particular it cites the Northern line, which has been bedevilled by signal failures and track obstructions.

Mr O'Toole lists the shortcomings. The contractors, he says, have failed to spend enough on plant and equipment, such as machines to grind the track and tampers to deal with ballast. He adds that under the Kafkaesque contracts it can be cheaper for the infrastructure companies to keep the tube shut when night engineering work overruns than to pay penalties for imposing temporary speed limits.

In an aside about the infracos' headline grabbing tactics, Mr O'Toole refers to Metronet's trumpeted purchase of a specially adaptable Land Rover able to run on tracks with ultrasonic equipment. ‘That's great, but we need more than just a one-car show.

‘They are making a level of progress in rolling stock and track structure, but they are not making that level of progress in signals. They are worse, and could get still worse unless something is done about it.’

Metronet's and Tube Lines' profits are healthy. Last autumn, Londoners were told that during their first full year of operation the consortiums earned profits of almost £2m a week between them while losses on the tube network soared.

Metronet reported profits of more than £50m, while Tube Lines announced an annual profit of £41m. Metronet chairman John Weight was paid a salary of £325,000, while Terry Morgan of Tube Lines hauled in £552,000. Losses on the tube had climbed 15-fold from their 1998 figure, from £50m to £756m in 2004.

Tube Lines makes no apologies for its surplus. Mr Morgan says: ‘We're a business. I don't know of any successful business which doesn't have an objective of achieving a profit.’ Insisting that overnight engineering work had quadrupled over two years, he says: ‘Like Tim, I always want to do more than we're already doing - I don't think that's unreasonable. But, on this whole question of being like the old London Underground, you would not believe how untrue that is.’

Mr O'Toole is unrepentant, insisting that the profit motive leads to cost-cutting: ‘The standard practice is to cut costs. But I'm saying that this is not the way to do things now.

‘We see all the press releases from these companies about how well they are doing ... I think the public reacts very differently to these announcements depending on the improvements they see. If they can find a way to measure the improvements, they will react one way to the profit announcements. If they cannot, they will react another way.’

As Mr O'Toole speaks out, there is increasing restlessness among members of the board of Transport for London, the body that supervises the underground. Susan Kramer, a Liberal Democrat banker who challenged Ken Livingstone in the mayoral election of 2000, says the system was the result of ‘a Labour government enchanted by the private sector’.

She adds: ‘It was an absolute lack of understanding of how transport networks function: that they are integrated systems, and that you fragment at your peril. So, while Paris and New York are very well integrated systems, we have fragmentation.’

The negotiation of the contract itself, says Ms Kramer, was one ‘between amateurs on the government side against top professionals who really understand how negotiating works’, as the infrastructure consortiums brought in crack corporate negotiating teams against what she calls the government's naivety.

‘The ethos was: 'We trust the private companies. We forge a partnership with the private companies' - it was so naive. If someone offers a company a really stupid contract to make lots of easy money, are they going to walk away from it?’

In 1999, three academics at the London School of Economics posited an alternative plan for funding the impoverished underground which argued for a bond issue, like that used to fund the subway in New York. The notion was rejected at the time but since then London Underground has been urged to issue bonds to fund future projects.

One of the authors, now at Imperial College, is Stephen Glaister, who sits on the TfL board and says of the PPP: ‘The idea was for a partnership in which we were all going to be best friends, to which we said at the time: 'You've got to be joking.' It was completely naive to talk in terms of partnership.’

The infrastructure firms, says Prof Glaister, ‘were able to do what they did because the government was so committed to the PPP, and therefore over a barrel. You have got to be prepared to walk away from a negotiation to make it work - but they were clear to the infracos that they were not going to walk away from it.’

At the end of this month, the Commons transport select committee is expected to make robust criticisms of the consortiums, and their profits. A Labour member of the committee, Brian Donohoe, who is a part-time transport police officer on the underground, says the consortiums are ‘milking it for all they are worth, for no significant improvement. It is now blatantly obvious that we were right and the government was wrong.’

Metronet, the bigger of the two PPP contractors, roundly rejected such criticisms. Its chief executive, John Weight, said: ‘I do understand why every customer wants things better, quicker, faster and cheaper. But there is a lack of recognition of what this contract is.’

He insisted that the ambience, cleanliness and reliability of trains had improved over the last two years. He added that it was ‘crap, quite frankly’ to suggest that private firms made financial judgments to keep overnight engineering works running into the rush-hour.

But criticism persists. The PPP scheme cost the taxpayer £1.1bn during its first year. ‘And the result,’ says Christian Wolmar, historian of the underground, ‘is that while Londoners will eventually get a better tube, it will have come much slower and at a much greater cost than if it had been done in the conventional way.



‘The result is an expensive mess, a reduction in accountability, an apparent black hole for taxpayers' money and few benefits for passengers.’

Appendix C - Engineering Overruns on the London Underground


Operating Period

No of Overruns

Engineering Overruns – Service Points

1(4 weeks from April 1st 2003)

8

4

2

7

2

3

8

11

4

9

5

5

6

6

6

8

6

7

8

4

8

18

21

9

10

6

10

16

12

11

8

6

12

23

18

13

18

15

14

17

10

15

5

2

16

11

21

17

5

4

18

14

12

19

15

20

20

20

15

21

15

13

22

19

14

23

10

9

Total

278

236



Appendix D – Tube Lines Memo on Engineering Overruns
Tube Lines’ memorandum to the London Assembly Transport Committee on engineering overruns


  1. Tube Lines does not have a significant problem in relation to engineering overruns.




  1. While investment has increased since transfer, and the number of bookings – individual slots of time in which engineering work is carried out – has risen, the number of overruns has remained relatively stable.




  1. The table below shows the number of incidents of overruns in the past year, set against the number of bookings. On average, less than 0.3 per cent- 3 in every 1000 – bookings has resulted in an overrun.




4 week period

Count of Incidents

No of bookings

Incidents per 1000 bookings

2003-P12

10

2298

4.352

2003-P13

8

2471

3.238

2004-P01

5

2335

2.141

2004-P02

2

2302

0.869

2004-P03

5

2353

2.125

2004-P04

2

2500

0.800

2004-P05

6

2371

2.531

2004-P06

11

2434

4.519

2004-P07

8

2637

3.034

2004-P08

7

2906

2.409

2004-P09

13

2942

4.419

2004-P10

5

1968

2.541

2004-P11

7

2661

2.631



  1. The graph below shows the underlying trends in relation to overruns. The black line shows that the number of overruns relative to bookings is declining.


  1. The Committee might like to note that there have not been any overruns associated with recent weekend line closures. There have been 18 weekend closures since autumn 2004 of the Jubilee Line associated with work to enlarge Wembley Park station and three weekend closures of the Bank branch of the Northern Line for track work in February and March 2005: not a single one of these has suffered an overrun.




  1. We would be happy to provide further information if this would be helpful.

Appendix E – Metronet evidence to the London Assembly
Review of Metronet performance during its second year, 2004/5 to date

Introduction

Metronet is responsible for the multi-billion upgrade and renewal of two thirds of the London Tube. As part of a Public Private Partnership with London Underground, Metronet is upgrading nine of the 12 lines, and is investing some £17 billion in the project. This review of Metronet's performance covers the eleven four-weekly ‘periods’ from 1 April – 5 February, 2005, during the second year of its 30-year programme.

Metronet Rail BCV Ltd., (MRBCV), has responsibility for the Bakerloo, Central, Victoria, and Waterloo & City lines, and Metronet Rail SSL Ltd., (MRSSL), has responsibility for all the sub-surface lines, consisting of the District, Circle, Hammersmith & City, Metropolitan, and East London lines.

Performance overview

Overall, Metronet's performance has developed a positive trend during the year to date of 2004/5 and whilst there is much progress still to be made, a more reliable service to passengers is now becoming evident.

In the case of MRBCV, this business made satisfactory progress on its key PPP commitments despite a challenging period during the first part of the year, both in terms of operational issues and mobilising and fully utilising its supply chain. For MRSSL, performance was positive with the number of adverse incidents reducing across the majority of all its assets. Train performance was 45 per cent better in terms of Availability year on year with the ‘mean distance between failures’ rate improving. Since acquiring responsibility in April 2003, the total number of Lost Customer Hours attributed to MRSSL as a result of delays, breakdowns and other incidents, has been halved.

The Bakerloo line continued to deliver strong asset performance building on the successes achieved during 2003/4. The total number of incidents related to the Central line continued to fall during the period and the overall Availability score improved on the line. To date train reliability on this fleet is almost 140 per cent better than when Metronet acquired responsibility in April 2003. However, Availability was affected by three individual incidents, including the slow speed derailment at White City, the root causes of which are being addressed. Generally, Availability on the Victoria line has been steadily improving and in the last two periods the rolling average was 16 per cent better than at Transfer in April 2003.

The loss of two engineering possessions during 2004 for the repair of a collapsed section of drain at Victoria hindered the track renewal plan, but taken overall, and with a consistently good delivery from MRBCV, the track programme to date during 2004/5 is ahead by 0.5 km.

Good asset performance earns Metronet bonus payments and reflects successful delivery of its PPP contractual obligations. Poor performance incurs penalty payments, reduces customer satisfaction and has an adverse effect on Metronet's reputation. An increasingly strong asset performance, exceeding contract benchmarks, is therefore a critical element of Metronet's strategy.




Highlights in the year to date


  • Number of fleet incidents reduced by 29 per centin MRSSL and 22 per centin MRBCV – resulting in less passenger disruption

  • Reliability of Bakerloo line trains improved by 13 per cent(since April 2003)

  • Reliability of Central line trains improved by 140 per cent(since April 2003)

  • Reliability of Victoria line trains improved by 72 per cent(since April 2003)

  • Reliability of Waterloo & City line trains improved by 23 per cent(since April 2003)

  • Reliability of Circle line trains improved by 145 per cent(since April 2003)

  • Delivered three additional Central line trains for peak service

  • Delivered two extra Victoria line trains for off-peak service

  • Delivered three additional Metropolitan line trains for service

  • Continued to deliver all train fleets graffiti-free, each day

  • 13 station modernisation/refurbishments started

  • More than 13 kilometres of track renewed (23 km since April 2003)

  • Robust measures in place, and continuing, for the cold weather season – Metropolitan line trains have been modified to improve the effectiveness of track de-icing


Maintenance of the Tube

Metronet has committed investment of approximately £295 million during 2004/5 to maintain and keep safe the assets under its stewardship. Typically, maintenance activities only ensure that the asset keeps working in a safe and efficient manner before capital investment replaces that asset with more reliable, more efficient and safer products.

Considerable resource has been diverted by MRBCV to ensure track remains in good condition – through enhanced lubrication, track and tunnel cleaning, and rail grinding. The main focus of MRBCV's station maintenance is around lifts and escalators – and it is seeking better performance from contractors to improve ‘down-time'.

For MRSSL, 80 per cent of all signal failures occur in just three locations: King's Cross to Farringdon, Baker Street to Finchley Road and Wimbledon to East Putney. Metronet's ‘Operation Sponge' is targeting these areas to ensure leaking water mains and sewers are resolved (Metronet works closely with Thames Water, one of its shareholders), and that drainage is improved along with track insulation.

Very good progress is being made by MRSSL in replacing signalling track wires to reduce service delays caused by signalling faults. Half the track wire failures took place between Aldgate and Barking. These have all been replaced.

Passenger delays on the north side of the Circle line are being reduced through the trial introduction of specially-coated electrical switches which resist failure. Studies are also analysing and addressing the loss of train conductor rail shoes and 600V AC signal main link boxes are being replaced.

Recent improvements in the ‘mean distance between failure’ rates has been striking – with a direct resulting benefit in the reduction of passenger delays and disruption.

MRSSL continues to keep its promise of removing all internal train graffiti within 24 hours and all external graffiti within 48 hours. It is also pioneering the use of a sacrificial film applied to train windows to frustrate vandals. Traditionally the only way to remove scratch graffiti was to replace the window. The new film is scratch-resistant and can be replaced with relative ease.



Investment for renewal of the Tube

Refurbishment and modernisation work is now underway at 13 stations. Construction work at two of the first stations, Chigwell and Bow Road, will be completed within the next few weeks. There has been some slippage in the overall programme, partly due to the time taken in attaining design approvals and agreeing the full scope of stations works with London Underground. Metronet is confident that the slippage can be attributed to mobilisation and ‘learning-curve' issues. It has a recovery programme in place which will eliminate the current slippage by the end of 2005. In all, improvement works to 45 stations are expected to have either been completed or commenced by the end of 2005. Modernisation work to one of the largest stations, Oxford Circus, was started in November 2004 with the £55 million project due for completion in 2008.

Towards the end of 2004, a Strategic Programme Director, reporting directly to the Chairman, was appointed for assuring the delivery of the capital programme.

To further strengthen this programme, three senior managers were also appointed in the areas of track, stations and civils, and rolling stock and signals – with a revised accompanying organisation that bridges the formerly separate MRBCV and MRSSL capital programme directorates.

Overall, more than 13 km of new track has been laid in the year to date, which is 0.5 km ahead of schedule. In all, more than 23 km of new track has been renewed since transfer of two-thirds of the Tube to Metronet in April 2003 – which is more than 10 per cent of the 200 km track renewal programme scheduled for completion during the first 7.5 years.

A £70 million engineering upgrade and refurbishment programme on the Central line fleet, together with the close-out of all Chancery Lane inquiry recommendations, has enabled MRBCV to increase the reliability of that fleet by 140per cent. Planning and development for the major Victoria line upgrade continues to gather pace with a number of milestones achieved during the period. Production of the prototype of the new fleet of Victoria line trains began in January 2005 – and these constitute the first part of a £3.4 billion investment by Metronet in 237 new trains together with accompanying signalling systems.

Production for the first fully refurbished and re-styled District line trains continued during the period. Metronet is extremely disappointed that this programme is running approximately 12 months late. However, Metronet’s contractor, Bombardier, is confident that there is still sufficient scope within the overall programme to finish the complete order to time. The first of these refurbished trains is scheduled to re-enter service within the next few weeks, subject to testing, and when production reaches its optimum cycle, a newly refurbished District line train will re-enter service approximately every 30 days. The refurbishment programme will extend the life of this 26-year-old fleet by eight years, before a brand new fleet enters service.

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