Network Rail overruns highlight underlying flaws

It would be easy to dismiss the rail chaos caused by the engineering overrun at Rugby in the post Xmas holiday period as a one-off. Network Rail has been quick to point out that there was an unprecedented amount of work going on over Xmas and New Year. The company issued a press release backed with glossy documentation showing that over £100m was spent on 35 major worksites involving,000 people working on the track at any one time.

Sure, lots of work such as replacing worn out bridges, renewing track and replacing switches and crossings was done. But that is not the point. Network Rail is a £5bn per year company whose day job is looking after the 13,000 route miles of Britain’s railway, as well as the rest of the infrastructure. There are, of course, bound to be mishaps given such a mammoth task but the scale of the blunders over Xmas at the three places where there were overruns, Rugby, Liverpool Street station and Glasgow and the apparent causes suggest there is something more seriously wrong with the company..

The incidents were not isolated. There have been misgivings about Network Rail performance over the past year, as its rate of improvement has slowed down and there have been several other serious incidents, notably serious delays over the Portsmouth resignalling last year which resulted in a fine from the regulator of £2.4m and the Grayrigg derailment of a Virgin train in which one person was killed. There have been several other less publicised episodes, such as the derailment of a train at Epsom in September 2006. The Rail Accident Investigation Branch’s report into that accident, which occurred on a train carrying over 300 people, published In September last year, highlights a series of very basic failings such as lack of staff, procedures that allowed known faults to be reprioritised time and time again without anyone realising this was happening and crucially an emphasis on meeting Key Performance Indicators that were not necessarily properly aligned with safety requirements.

All of these incidents have in common serious and apparently systemic failings of management, particularly at the lower and middle rungs of the ladder. While Network Rail is a big beast and there are bound to be mishaps such as these, many of the railway insiders I talk to are seriously worried that there is a pattern that could lead to a major incident through a combination of factors such as warnings that are ignored, inadequate middle management and pressure from the need to reduce costs, as required by the regulator.

That last point is crucial. The railway has become far too expensive to operate after the Hatfield accident and rightly the regulator is pushing for costs to go down. However, that takes good skilled and experienced management and one problem is that Network Rail is not a particularly good payer, which means the best railway managers are choosing to work for the train and freight operators.

This is a legacy of the break up of British Rail. Many of the present generation of top managers, particularly in the train operators, come from the British Rail tradition which involved working all around the system in a variety of tasks. That no longer happens and the new generation of managers tend to have a much more limited focus on their job. Talking to one insider after the Rugby incident, he said that there had been repeated warnings that the work programme set out for the Xmas break was simply unworkable. It depended on more resources for overhead line equipment work than existed in the whole of the UK. Yet, repeated warnings to managers were ignored.

Network Rail senior staff were quick to point the blame, albeit privately, at Bechtel, the large American firm famous for getting jobs done on time, though its involvement never comes cheap. Indeed, there is a case for saying that Network Rail is still suffering from the Railtrack concept of outsourcing absolutely everything, leaving the central core without sufficient skills or resources to manage the projects.

However, my friend, who is further down the management scale, said that it was not good enough to put all the responsibility on Bechtel. He cites the employment of lots of ‘wet behind the ears’ graduates as junior managers who were unwilling to listen to the warnings of older hands. This is serious for an organisation where one mistake can lead to a catastrophe. Running a railway is a job that requires consistency and a wide understanding of the industry.

The damage to the railway is considerable. Much of the hard work of rebuilding public confidence following the post Hatfield breakdown has been undone. Indeed, public perception was not helped by an article in the Daily Mail in which the newly knighted Network Rail chairman, Ian McAllister, said he was better staying out of the office during the crisis because otherwise he would only get in the way.

Such laxity at the top highlights the most fundamental problem about Network Rail which is its governance. There is no doubt that neither the regulator nor Network Rail’s 100 or so stakeholders – who are in lieu of shareholders in the bizarre structure of the company – have a sufficient handle on the organisation. The regulator is simply too remote, as witnessed the fact that the Office of Rail Regulation refuse to intervene in the Rugby situation, although there will undoubtedly be a post facto fine. But what on earth is the point of that when Network Rail is essentially a publicly funded organisation? Fines may have been a sanction for Railtrack, which had shareholders, but not for Network Rail.

As for the stakeholders, they are a toothless bunch whose meetings consist of little more than listening to the senior management explaining how well they are doing. My prediction for 2008 is that Network Rail’s unsatisfactory governance arrangements will attract rather more attention than its bosses would like and may, indeed, lead to some overall review.

Shares