I refer to your article "Jarvis under pressure to halve rail profits" (28 February, page 10). It was disappointing to read such a misinformed piece in what is otherwise an excellent and respected trade publication.
The article neglects to mention that all contractors to Network Rail are awarded exactly the same margin in their contracts – 7%. Efficient contractors that keep their costs under control are able to achieve this figure, whereas others, through penalties and inefficiencies, are unable to achieve it.

If the article was correct in its assumption that Network Rail desires to reduce margins, surely it would be targeting all contractors, not merely those whose efficiency and cost control enable them to achieve their contractual entitlement. Taking this assumption to its logical conclusion, if Network Rail aims to reduce margins from 7% to 3.5%, what happens to those contractors who currently manage to produce a sub-4% margin and, in some cases, a 2% margin? The clear consequence would be that these contractors would, in effect, end up paying Network Rail to work for them.

The truth of the matter is that, like all responsible clients, Network Rail intends to reduce its costs. Those companies, such as Jarvis, that are able through efficiency to reduce continuously their costs are more likely to maintain their margins and still pass on savings to the client. Those whose agreed margin of 7% is already under pressure because of lack of efficiency are not.

Postscript

Richard Emmott, group director of corporate communications, Jarvis, London W1.