Cost Control

[VauxhallNova]

Under the current regimes, there's been a lot of talk that DfT "control every penny spent".

Does anyone know how operator business plans fit into this? Do they have the freedom to decide on what they spend the allocation, if they are within the business plan budget?

 

[Elecman]

Under the current regimes, there's been a lot of talk that DfT "control every penny spent".

Does anyone know how operator business plans fit into this? Do they have the freedom to decide on what they spend the allocation, if they are within the business plan budget?

Afaik they have to clear all spending with the DfT

 

[Pretendolino]

Train Operators receive Annual Business Plan (ABP) instructions which set out some of the key assumptions for the submission (e.g. indexation).

The Train Operator submits their ABP, which should fulfill the Business Plan Commitments (BPCs), which are similar to the old Committed Obligations (COs).

In addition, the cost base may be split between allowable and disallowable costs. That is, there are particular cost categories which DfT shall not fund regardless of the situation. This could relate to some legal fees, for example. Another area of disclosure is around Affiliate Trading and the amount spend with related parties.

Once the ABP is submitted, it still needs to be negotiated and agreed. DfT may not like the figure popping out the end and so may require further savings, for example.

 

[Brush 4]

How is that better than BR being financially controlled by Gov?

 

[JonathanH]

How is that better than BR being financially controlled by Gov?

It is not on the government's books and the private companies can take some of the ire for the outcome of bad decisions.

 

[Nicholas Lewis]

How is that better than BR being financially controlled by Gov?

Its worse as BR agreed the budget with govt and just got on and delivered to it with only significant capital investment needing to be authorised by DofT.

 

[Dr Hoo]

Its worse as BR agreed the budget with govt and just got on and delivered to it with only significant capital investment needing to be authorised by DofT.

Although the 'delivery' often seemed to involve service cuts, reduced train lengths, real terms fares increases, etc. with relatively little accountability.

 

[Nicholas Lewis]

Although the 'delivery' often seemed to involve service cuts, reduced train lengths, real terms fares increases, etc. with relatively little accountability.

Maybe but where is the accountability now with DofT at least with franchises they had to deliver the specification as well as have the financial discipline of a private company. We need to get the concessions in pronto to get some cost discipline back into delivery.

 

[Peter Fox]

Bad news.
See the p20 of Christmas edition of Private Eye.
eg. DfT has to give authorisation for any item over £1000 by depot managers. All 'discretionary costs' eg staff training and recruitment,

 

[lunlen45]

Is it just a temporary situation due to covid? It sounds ridiculous.

 

[Nicholas Lewis]

Bad news.
See the p20 of Christmas edition of Private Eye.
eg. DfT has to give authorisation for any item over £1000 by depot managers. All 'discretionary costs' eg staff training and recruitment,

I can get that the DofT are likely in a pickle and resorting to such tactics as they were only given 2.1B extra to support the railways this FY and this was already going to be exceeded before the latest WFH policy came in so they will be rapidly burning through cash currently again. In 20/21 this additional support was around C£9B but at least for this year they've had about 6mths of reasonable income but if the HMT are telling them there ain't anymore cash I can see stupid measures like this being a response.

Ive seen this in NR when there was budget crunches that initially there is a futile attempt to try and control anything but snr mgt soon realised the operation would implode so they would back off and set reasonable levels of delegated authority and respond with more medium term action to resolve the issue. Even when Railtrack was in teh hands of the administrators they was no change at grass roots about procurement and spend within local delegated authority limits as they knew full well they consequences of trying to micro manage it like they would in a normal business failure situation.

The industry seems to lack any cohesive response currently with the TOC's just sitting back and collecting the mgt fee and doing whatever DofT want so I can see this leading to stock being left in sidings because they are waiting for someone from DofT to authorise a 1000quid spend on spare part. Of course NR aren't living under such constraints and if anything see reduced services as an opportunity to spend more as they see extra access appearing. We really need big hitters to be employed into some sort of informal GBR team (it certaintly aint RDG) to help teh govt and the industry manage through this period of uncertainty to find the right balance in keeping costs under control without totally undermining the industries capabilities for the medium to long term.

 

[geoffk]

A usually reliable source in the north-west has told me that Northern Community Managers are having to go through DfT to sign off even £50 for community planters.

 

[Surreytraveller]

A usually reliable source in the north-west has told me that Northern Community Managers are having to go through DfT to sign off even £50 for community planters.

I don't think community planters in the current climate are a priority. I hope the DfT say 'no', then charge them for such a silly request

 

[Dr Hoo]

A usually reliable source in the north-west has told me that Northern Community Managers are having to go through DfT to sign off even £50 for community planters.

Bearing in mind that nationalised Northern is already being managed by Directly Operated Railways it does make you wonder why the DfT feels that it is necessary to micromanage its own subsidiary.

 

[24Grange]

At one end of the spectrum, the full electrification of the GWR route is abandoned, as its cost has risen so much it must be made out of solid gold and unobtainium. At the other you have Okehampton branch opened early and under budget! - Go figure.

 

[Nicholas Lewis]

At one end of the spectrum, the full electrification of the GWR route is abandoned, as its cost has risen so much it must be made out of solid gold and unobtainium. At the other you have Okehampton branch opened early and under budget! - Go figure.

Okehampton was set up to succeed and look good to help get the railways credibility restored. Nothing wrong with that as long as the money saved isn't lost and gets reallocated to fund the next opening.

 

[Parham Wood]

I don't think community planters in the current climate are a priority. I hope the DfT say 'no', then charge them for such a silly request

I hope the DfT are not just seeing one price for things, there should be at least three prices provided for everything unless framework type agreements are already in place where prices are already agreed. It is not just cutting down on wasteful unnecessary spending but ensuring best value for money is obtained. The railway industry seems to be at the mercy of a few companies many of which are not UK based. We see enormous sums quoted for infrastructure works and as a pure layman and tax payer I do not have confidence that the projects are satisfactorily controlled regarding scope, solutions, decisions made and cost.

 

[SuperNova]

Is it just a temporary situation due to covid? It sounds ridiculous.

No, welcome to the world of National Rail Contracts.

 

[XAM2175]

At one end of the spectrum, the full electrification of the GWR route is abandoned, as its cost has risen so much it must be made out of solid gold and unobtainium. At the other you have Okehampton branch opened early and under budget! - Go figure.

You will, I hope, acknowledge that there's a bit of a difference in both the scale and the nature of the works involved.

The railway industry seems to be at the mercy of a few companies many of which are not UK based.

Whereas British companies would obviously be outright charitable in their dealings with the DfT

 

[DanNCL]

If they were that bothered about cost control they’d do something about LNER’s “innovations” that keep popping up at Newcastle station. In 2021 we’ve had an air filtration device that only worked for a week or two and has since quietly disappeared, an attempt at an E ticket TVM which also didn’t last long, and now talking info screens, one of which I tried using today simply to see how they were and it was utterly useless. The “innovations” won’t have been free, and LNER will also have had to pay people to work on them, no doubt at the taxpayer’s expense. If less money went on LNER’s “innovations” I reckon that’d be a good amount of the target figure saved, reducing the number of cuts that would be needed elsewhere on the UK network to meet the financial targets.

 

[XAM2175]

If less money went on LNER’s “innovations” I reckon that’d be a good amount of the target figure saved, reducing the number of cuts that would be needed elsewhere on the UK network to meet the financial targets.

If the target figure was on the order of a hundred grand or thereabouts, maybe.

 

[24Grange]

One example, I've often read about is a bus shelter designed to fit on the pavement beside the bus stop on the road ( steel, Glass, Vandal proof seats) is 3 or 4 times cheaper than a similar design "bus" shelter on a railway platform. I've always wondered if competitive tendering is ever used on the railway with examples like this.

 

[Nym]

If anything, the competative tendering leads to inflated costs like this.

And the 'three prices' also includes trivial items like pencil sharpeners, and anyone on a framework for that will have bid hard for a framework and now be overcharging anyway.

Welcome to the world of public procurement.

 

[philthetube]

If the DFT are micro managing and presumably working 9/5 I dread to think what happens when a few taxis are needed.

 

[VauxhallNova]

It's interesting that some companies have gone from cost cutting under private control straight into the post COVID financial arrangements