Fears grow that Network Rail may be forced to bring Jarvis and Balfour Beatty’s work in house

Network Rail has made cost savings of 9.6% on track renewals halfway through itsfive-year plan, well below the target set by the Office of Rail Regulation.

Network Rail needs to have made savings of 31% by 2008/09. A failure to meet this target would increase the pressure on Network Rail to strip contracts from firms such as Jarvis and Balfour Beatty and take them in-house.

Network Rail will report the finding to the regulator in its annual review this month. Although there are no targets for individual elements, such as renewals and signalling, Network Rail believes that each ought to make similar savings.

Network Rail has acknowledged before that it is behind on track renewals but insisted that it will catch up after this year. As part of the process it set up a business improvement team about six months ago.

This has led to some success in helping to improve “switch and crossings” – essentially the parts where rail lines divide – where it is thought that renewal savings are as high as 20%. However, the bulk of the renewals work is “plain track”, where it is understood only small savings have been made.

Network Rail’s strategic business plan has proposed investment in the Thameslink line, which runs from Bedford to Brighton. This could include a new entrance to Blackfriars Station on London’s South Bank (see picture).

The new Black: Network Rail’s business plan could lead to a  revamp for Blackfriars Station in central London
The new Black: Network Rail’s business plan could lead to a revamp for Blackfriars Station in central London

The team at Network Rail has been revamped to improve communication between it and the private sector contractors. Peter Ansell now leads the team as head of business development, having joined from American contractor Bechtel late last month. Ansell was engineering manager at Bechtel.

If this fails to generate the necessary savings, Network Rail may refuse to renew the outsourced renewals contracts and do the work itself. This is not Network Rail’s preferred option, but a senior industry figure said: “Network Rail has always said that it does not want to in-source renewals, but if contractors do not provide the savings it will have to look at it. There is an increasing level of concern in terms of unit cost and track quality. Network Rail is pushing hard to just avoid having to answer the question.”

The source added that the new team would be “better structured, better co-ordinated”.

Any step to transfer in-house would be bad news for the rail contractors, but particularly Jarvis, as nearly half of its business is in track renewals.

Jarvis has remained publicly confident that the rail firms can hit the targets and will hold on to the contracts by the time the next five-year strategic plan starts in 2009.

A Network Rail spokesperson said: “There are no plans to take renewals in-house.” However, he added: “We have put our hands up and admitted that renewals are not moving as quickly as we’d like.”