Pretty much every business operates with debt, in fact for large Companies it is the only way they can operate.
Managed properly debt can be an efficient way to operate, the problem starts however when the level of debt becomes of concern to lenders (creditors).
Jarvis Rail collapsed not because it was not good at what it did but because Network Rail deliberately witheld payments due, forcing Jarvis to continually go to the market for more money. In view of Network Rail's bill paying practices and the fact that they try to avoid paying for extra work carried out, the "value" of the Network Rail debt was devalued, ultimately some of the lenders took the view that some of these debts would be irrecoverable and refused to allow Jarvis enough credit to continue to pay their creditors.
As a result suppliers stopped supplying and that was that.
Other Infrastructure Contractors have already taken note and costs to Network Rail are going up. Most Contractors are now reviewing whether they wish to remain in Rail in the UK, and many are looking abroad.
Network Rail's shortsighted and vindictive destruction of Jarvis Rail will be coming back to haunt them long term, as Insurers now rate Network Rail contracts as high risk and are thus walloping up the premuims.
Fortunately I now have absolutely nothing to do with that organisation. The Railways that I work with pay their bills and work WITH not against us. It is a breadth of fresh air and we are now jointly developing some very exciting renewals processes which make NR look like the amateurs they truly are.
It really is SO refreshing to have a client Railway whose engineers and managers actively WANT the Contractor's input and involve us in so much. Indeed only today I was with the Ops guys who gave a presentation of what they needed to achieve. We then told them what we needed. There is a gap but they are looking at how they can move to help us by giving us extra time and we are looking to see how we can work with trains running. One option is for us to run trains whilst we are on the track (a big NO NO under the present regime but one that is being explored) rather than stopping all lines. Because of this dialogue we are now looking at how we can modify our processes to fit around the gaps in their train service, and they are looking at how they can widen the gaps.
We are also looking at how we can run trains over partially installed (completed) track.
The mutual respect that has already grown up between us is incredible, and what is noticable by its absence is the Blame Culture, and the nitpicking Cost Culture. They now trust us to be reasonable and we are bending over backwards to give them value for money. Both parties are happy and indeed we are already advising them on long term plant investment. Because of this mutual trust we do not have to allow risk money, which makes our costs that much cheaper. There is also a positive impact on the rates of interest we pay for our money because the client has a reputation for playing a straight bat and thus their is no perceived risk. Our money rate is therefore base plus minimum market interest.
