Network Rail is going through its biggest investment phase since Victorian times - and it’s got itself a new boss. Building talks to David Higgins, ex-Olympics chief, about leaving one big project for another

The UK’s rail network is, by David Higgins’ own admission, overstretched and outdated. One fact is particularly instructive. Somehow, despite the fact that every day is mission-critical for a network that transports four million Britons and works at full capacity, the average working life of its 900 signal boxes is 80 years. Yes, that’s the average life - some date from the Victorian period. All in all, it’s a far cry from the Olympics.

“When I applied for the job,” says the new chief executive of Network Rail, former boss of the Olympic Delivery Authority, “my predecessor, Ian Coucher, said: ’I’ve no doubt you’re capable of doing this job but I want to know - why in the hell did you decide to leave the Olympics?’” Higgins laughs. “It was a good question and I found it difficult to answer.”

But he did make his mind up, leading to a career change just when he was about to take the plaudits for safely and successfully overseeing the construction of the 2012 Games site. It may be a decision the construction industry lives to be grateful for. Because Network Rail is in the middle of the biggest investment in the UK network since the Victorian period - and one that is set to more than double from £1.5bn to £3.5bn a year, despite the drastic public sector cuts elsewhere. In the five years to 2014 it will have spent £24bn in maintaining and upgrading the network and stations. Negotiations for the next five years - or “control period five”, as it is known - are just about to kick off.

And for Higgins it is an unprecedented opportunity. With the publication of the McNulty report last week, and the backing of transport secretary Philip Hammond, he has a mandate to institute the kind of radical change not seen since privatisation. Passengers may see fares rise, but it’s clear that Network Rail’s suppliers and contractors will also feel the winds of change. So what is he going to do?

Higgins is a man who, for Building readers, needs little introduction. Yet after so many roles, starting his career at Sir Robert McAlpine, then on to the Australian Olympics with Lend Lease, regeneration agency English Partnerships and the ODA, it’s amazing to see that once again he’s in learning mode. And despite a late night sharing a couple of bottles of wine with colleagues on the sleeper back from Glasgow, he seems more relaxed and at home than in any of his previous incarnations. “I can’t teach the guys here a damn thing about railways. Fortunately I don’t need to do everything myself - it’s about getting the right people, giving them autonomy and the space to succeed.” The first thing he has to do, though, is keep the trains running on time. Well, at least 92.6% of the time by 2013/4, as per the body’s funding agreement with the government. “The thing that hits you every day is you’re running a big safety-critical operational business where things can and do go wrong. There’s letters every day from politicians and members of the public.”

Longer term the challenge is bigger still. Sir Roy McNulty, Higgins’ one-time boss at the ODA, last week issued his long-awaited tome on getting value for money on the UK’s railways. And the scale of the task is frightening: a 30% reduction in rail costs, a radical devolution and decentralisation within Network Rail and up to £1bn of savings each year above and beyond those already identified. Sources say Higgins and McNulty are firm friends, and it’s difficult to get a cigarette paper between their visions of rail’s future. It’s the future that Higgins is now looking at: “It’s a huge investment programme. McNulty will say we’re less efficient. Yes, that’s right,” he admits, before reeling off a list of reasons why costs in the UK are higher than elsewhere - which come down to ageing infrastructure working at capacity. “But from our point of view, these challenges are just investment programmes. What I have to work out is how we do things.”

His answer - as has been widely predicted - is to split Network Rail into regions, with managing directors running routes as virtually separate businesses. Some, like the West Coast Railway, will be as large as the network of a small country - turning over up to £850m a year - and will in most cases be the new clients for maintenance and renewal work. The change is designed to speed up decision-making within Network Rail, which had become choked up by the need for everything to get the most senior sign-off.

But it’s clear this doesn’t necessarily mean a return to the vertically integrated model under British Rail, and he will not tolerate the use of the system to build up personal fiefdoms. “If we let people go off and become the barons of old, that’ll be a disaster. People who don’t share ideas, work on best practice, work with their colleagues in other regions or with head office, aren’t going to stay.”

Even more interesting is Higgins’ plans for the major projects division, which controls the likes of the £800m Birmingham New Street project, or the £600m London Bridge upgrade. As predicted by Building, it will become almost a separate company within Network Rail. Run by Simon Kirby, the organisation will project manage its £6.1bn pipeline of the biggest projects, but will have to prove itself as never before - competing against private sector providers and selling its wares elsewhere in the world. For Higgins, allowing in competition means that it will not only have to get more efficient, but it’ll be recognised for what it can do. “We need some external clients. If all we are is a supplier to ourselves, then how will anyone be able to judge whether we can be competitive? It doesn’t mean we’re going to race off and work in the Middle East as a contractor, but if we were engaged to work on a limited scale that doesn’t distract us, we’d start to benchmark the organisation.”

His ambition doesn’t stop there. “We didn’t build HS1, and we’re not doing HS2. But in future, when parts of HS2 come out, I’d like the industry, the international design and contracting world to say: ’We’d like Network Rail as a partner as we bid, because they’re seen as a highly respected organisation that is easy to work with and has some unique skills, which the rest of the world value’.”

Higgins knows this plan will only succeed if Network Rail can transform its relationship with the construction industry. At the heart of it is a decision to bring the industry in earlier in the process, use it to help define the project - and end the confrontational client/contractor approach. London Bridge will be the first big example - here Network Rail has advertised for a delivery partner, not a contractor. “It’s a move to more partnering and alliances,” Higgins explains. “From a process-led organisation with functional areas, to one that is more integrated. One that takes a brief and is able to work with suppliers and designers at an earlier stage and come back with more competitive solutions.”

However, Higgins is under no illusions as to how hard that is going to be, in an organisation not exactly known for its flexible, can-do mentality. He is on the brink of appointing an external adviser to help transform Network Rail into the integrated business he wants. “We’re realistic about the scale of the change. We’ve had feedback from our suppliers and contractor base. I want to get to a stage where the supplier network respects us and would vouch for us to other clients and the government.”

Is the organisation there at the moment? “No. Of course not. We’ve got a long way to go. There’s a lot of skills in the organisation, but I think we’re still seen as very defensive. We don’t need to be defensive. In the end this is all about making a more efficient railway.”

These changes aren’t to say that it won’t use frameworks. But they will have to either be re-let with a more collaborative approach, or they will be used less. Kirby has been talking to contractors about eight potential modes of partnering on major projects, and has been clear that this review will see the bespoke contracts Network Rail has imposed on suppliers ripped up.

So has Higgins found a way to answer his predecessor’s question? “I guess it’s just me.

I like a challenge. How many times do you get to work with an organisation that does what Network Rail does? It’s a fantastic place, a great group of people, complex issues and a lot of fun.” And he swears he won’t be feeling a twinge of envy he’s not there in the centre when the Olympic torch is lit next year. From the sound of his plans, contractors will believe he’s made the right decision.

Network rail in numbers

Annual spend budget (2010) £5.7bn
Annual capital investment (2010) £3.9bn
How many miles of track? 20,000
How many miles of track replaced each year? 600-700
Number of signal boxes? 800
Number of stations under its control? 18 owned and managed, 2,500 owned
Number of employees? 35,000
David Higgins’ salary? £560k
Number of passenger journeys per year? 1.347bn (up from 750m in 1994)