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Friday 24 Oct 2003

NETWORK RAIL TO BRING RAIL MAINTENANCE BACK IN-HOUSE

Region & Route:

| Southern

Network Rail today announces that it is to bring rail maintenance activity back in-house.   The contracts currently held by the seven Infrastructure Maintenance Contractors will be transferred to the ‘not for dividend’ company, unifying the operation and maintenance of rail infrastructure. This far-reaching decision has been taken following careful consideration of the conclusions of a fundamental review of rail maintenance that has been carried out over the last six months.  Network Rail’s detailed analysis of the maintenance function has shown that creating a single integrated rail maintenance operation will deliver three key benefits:-

• Consistent application of high standards of rail maintenance across the rail network 
• Significant efficiency savings to be delivered from the annual maintenance budget (£1.2 billion in 2002/3)
• Continued improvement in track-side safety standards

The final process and exact timing of taking each individual rail maintenance contract in-house is subject to detailed commercial negotiations and safety case approvals.  The speed of progress will be dictated by the need to ensure a smooth transition.  Today’s announcement represents the most fundamental restructuring of Britain’s railway since British Rail was reorganised in 1994, two years before privatisation.  The transfer of some 18,500 people from infrastructure maintenance contractors (IMCs) to Network Rail will be aided by the experience gained from the successful transfer, from Amey plc, of the Reading area maintenance operation in June 2003 and the planning and preparation of the transfers of Wessex from Balfour Beatty and East Midlands from Serco.  - more - Maintenance - 2 The current structure of outsourced rail maintenance involves seven IMCs - Amec, Amey, Balfour Beatty, Carillion, Jarvis, First Engineering and Serco - twenty contract areas, considerable management duplication and complex reporting, hand-back and inspection procedures. Network Rail’s in-depth audit of rail maintenance has included the development of a very detailed transition plan that fully addresses the issues of management structure and capability.  In future, there will be a single management structure with clear lines of accountability and a simplified relationship between operations and maintenance.  Network Rail will ensure that maintenance is carried out by a permanent workforce of well-trained individuals committed to a strong safety culture. Ian McAllister, Chairman of Network Rail, said: “Rail maintenance is a central part of Network Rail’s operation.  We have completed a detailed assessment of railway maintenance and obtained a clear understanding of the reasons why costs have risen in recent years.  Bringing maintenance contracts in-house will ensure greater consistency of maintenance standards and help deliver efficiency savings far more quickly than would otherwise have been possible.   “We have thought long and hard before taking this decision.  We have studied its implications in great detail and concluded that it is the right thing to do.  “We will now work closely with the maintenance contractors to ensure a smooth transition.” Rail renewals contracts to remain unaffected Network Rail remains fully committed to the ongoing use of third-party suppliers for rail renewals contracts.  These are specialist functions where there is a competitive supply market and it is entirely appropriate that contractors undertake such work.  The creation of an in-house maintenance operation will help to maximise the efficiency and effectiveness of renewals expenditure and activity. - more - Maintenance - 3 Network Rail is currently pursuing positive negotiations with its suppliers and recently signed a range of preferred bidder agreements.  These will form the basis for continued involvement by third party rail contractors in the vital task of renewing Britain’s rail network.  Network Rail remains committed to completing rail renewal contract negotiations and looks forward to the ongoing constructive participation of our contractors. Employee benefits protected It is anticipated that most employees who are currently engaged in rail maintenance activity and employed by one of the IMCs will be transferred to Network Rail.  All terms and conditions of employment fall within TUPE legislation.  In total, some 18,500 people will join Network Rail as part of this programme.  Safety benefits The railway is already a safe place to work.  Network Rail is determined to continue to improve safety standards.  The ability to reinforce a consistent track-side safety culture and a balanced approach to risk will be greatly assisted by the formation of a unified maintenance operation with common systems, technology and processes.  Network Rail’s decision to in-source railway maintenance will bring an end to casualisation and ensure that a full-time, permanent work-force is created to complement its existing operations and signalling staff.  Today’s announcement will unify the core functions of Britain’s rail infrastructure provider. Background to today’s announcement Network Rail has previously announced its decision to take direct control of all rail maintenance activities in three out of twenty maintenance areas – Reading, Wessex and East Midlands.  The Reading area maintenance contract (previously held by Amey)  was successfully transferred in-house ahead of schedule on 22 June, 2003.  More recently, it was announced that Serco’s maintenance contract for the East Midlands area, which had been due to run until March 2005, will now be taken in-house in January 2004.  In August, the decision to terminate the Wessex area maintenance contract, currently held by Balfour Beatty, five months ahead of plan was announced, meaning that this contract will come in-house next month. - more - Maintenance - 4 On 10 October, Network Rail announced that it was pleased to have reached agreement with Jarvis to bring all of Jarvis’ rail infrastructure maintenance contracts (Central, East Coast Main Line and Liverpool, North Wales and Merseyrail) back in-house.  Today’s announcement is entirely unrelated to this earlier announcement. The current tendering process for the combined Bristol, Gloucester and Exeter (West Country) maintenance area will now cease, as will discussions to convert existing contracts to the New Maintenance Programme. The timetable for the transfer of maintenance activities will be dictated by safety considerations and negotiations with the existing maintenance activities.  However it is expected that the transfers will be complete by the end of Summer 2004.