Why do most things done by Network rail cost so much?

[Barn]

There isn't a great deal of evidence that private sector leaders do much of any of that. They generally just keep turning up to the office and firing juniors who threaten them for as long as possible, and if the shareholders are lucky they don't completely destroy the company before they are pushed out.

I'm afraid that's just cynicism.

Mark Carne is responsible for negotiating the success criteria with a complex mix of the regulator, the DfT, operators and public opinion. Determining strategy for a large company in the public sector isn't any easier.

Not sure. You have a regulator which effectively constrains your pricing strategy for you, the DfT which is, in political terms, required to fund you to a level which is broadly adequate to meet the public's expectations, operators who are forced to be your customers and a public which is largely disengaged with the exception of those making tiresome rants on Twitter.

If you think Mark Carne has done a bad job of it then you've got to concede that they might have been able to find someone better if they were willing to pay the going rate, which is around 5x his salary.

I make no comment on Mark Carne specifically. I do think that being a public CEO is a skilled, specialist job. In some ways because of the specialism of the role, I'm not convinced that comparisons with very large private sector organisations are always the best way to find and remunerate candidates.

 

[GB]

Track & trains should never gave been split into separate empires. They should be reunited, with the operators in charge.

You really trust the operators to do the necessary if it means canceling or significantly disrupting their own services?

At present the railway is run by NR. It is like putting the man who looks after the freezers & ovens in a restaurant in charge of the whole business.

No, its like the restaurant doing its own health and hygiene inspections.

 

[EM2]

Another oft-quoted 'issue' is cost of parts.
I was once 'informed' by a customer that Network Rail buy bolts at a vastly-inflated price, when they could be bought at B&Q for 50p.
I said 'That's as maybe, but the train you'll shortly be boarding will be travelling at 125mph. Would you trust 50p bolts at that speed?'.
A look of realisation and silence followed.

 

[Domh245]

If the 50p B&Q Bolts (which I can't really imagine would be the sort of thing that would be used on the track, but anyway) were identical to those used by NR, then there is an issue. It is entirely possible that the 50p bolts may be slightly inferior in terms of QC or so on, but I would hope that wouldn't be an issue. The use of safety factors in the design should mean that unless those expensive bolts are being used to 99% of their capability 99% of the time, they should be able for the cheaper bolts.

That reminds me of the stories that you hear about the NHS being massively overcharged for basic items and medicines that can be bought at far lower prices outside of their "approved suppliers list"

 

[Bromley boy]

If the 50p B&Q Bolts (which I can't really imagine would be the sort of thing that would be used on the track, but anyway) were identical to those used by NR, then there is an issue. It is entirely possible that the 50p bolts may be slightly inferior in terms of QC or so on, but I would hope that wouldn't be an issue. The use of safety factors in the design should mean that unless those expensive bolts are being used to 99% of their capability 99% of the time, they should be able for the cheaper bolts.

That reminds me of the stories that you hear about the NHS being massively overcharged for basic items and medicines that can be bought at far lower prices outside of their "approved suppliers list"

Presumably with safety critical components they start with the design specification, required tolerances etc. and work backwards from that to find a supplier who can supply what they need?

 

[An_Engineer]

Long time lurker, but as it's something I know something about. I haven't worked in rail industry but done a fair amount of automotive, and can safely say all screws/bolts are not equal. Maybe the 50p B&Q bolt just isn't strong enough/durable enough.

Say the requirements for a railway bolt:
-Higher strength (probably higher strength than your average B&Q bolt)
-Cyclical loading (low&high cycle fatigue)
-Weather Resistant (water, salt, hot, cold etc)
-Long life (you really don't want to have to replace these too often).

All these probably mean a higher grade of steel, maybe a coating, maybe special heat treatment, higher quality inspection etc. So the cost is already adding up. And only a few customers in the uk will need these sort of requirements, so only low volumes of these will be made (so no economies of scale).

 

[t_star2001uk]

Interesting, in the current climate of debate over equal pay, that the highest paid woman on the list, Susan Cooklin, appears quite a way down the list...

But are the roles of chief executive and route services director the same. If Susan were also the chief exec with the same roles and responsibilities then by rights she would be paid equally, but as the two role are completely different......

 

[DarloRich]

Several of the people named on the helpful Tax Payers Alliance list have left their named roles in many cases with those roles being removed from the appropriate organisation or replaced by someone on a much reduced remuneration package. It is clear that the more recent entrants to the senior NR positions are paid substantially less than those in post for some time.

There also appears to be some gaps in the information provided. At least one job has no name against it. Hard to pay someone who doesn't exist!

There are also a couple of important caveats which suggest the information may not be quite as accurate or comprehensive as they suggest:

• The Cabinet Office list includes figures who also work in Whitehall departments. These entries were removed.
• The list is not exhaustive, and does not include salary details of every quango.
• included in the final list are those that work for a variety of public bodies, including nonministerial departments, advisory and tribunal non-departmental public bodies, executive agencies, trading funds and public corporations.
• Organisations that are wholly a part of a department, such as Defence Equipment and Support within the Ministry of Defence, have not been included.

one wonders why only these individuals have been subjected to this scrutiny. It couldn't be that the Tax Payers Alliance was making a pejorative decision about worth based on their own prejudice could it?

 

[Railwaysceptic]

Long time lurker, but as it's something I know something about. I haven't worked in rail industry but done a fair amount of automotive, and can safely say all screws/bolts are not equal. Maybe the 50p B&Q bolt just isn't strong enough/durable enough.

Say the requirements for a railway bolt:
-Higher strength (probably higher strength than your average B&Q bolt)
-Cyclical loading (low&high cycle fatigue)
-Weather Resistant (water, salt, hot, cold etc)
-Long life (you really don't want to have to replace these too often).

All these probably mean a higher grade of steel, maybe a coating, maybe special heat treatment, higher quality inspection etc. So the cost is already adding up. And only a few customers in the uk will need these sort of requirements, so only low volumes of these will be made (so no economies of scale).

Thank you for that. Ignorant people with suspicious minds - i.e. people like me! - need to be reminded of these sorts of issue every now and then.

 

[B&I]

That’s probably because many of those private companies aren’t monopoly providers supported by billions annually from the state (taxpayers)

Some of them are though

 

[bavvo]

Some of them are though

Look at something like Thames Water for instance, monopoly provider, largely funded by a levy on households for an essential product. Many of the privatized utilities are not much better...

Nevertheless, what should be remembered, is when recruiting at this level, you have to pay the market rate to get the appropriate talent. Same in any industry really. It can always be argued that an individual has not performed up to expectations, but if you do find someone better, they will probably cost more.

 

[EM2]

And only a few customers in the uk will need these sort of requirements, so only low volumes of these will be made (so no economies of scale).

This was the point that I was trying to make to the customer. A bolt suitable for this type of application is not likely to be found on the shelf of a chain DIY store.

 

[Tio Terry]

"Why do things done by Network Rail cost so much"?
Do they? Who measures these costs? Who compares the Engineering challenges? What are you comparing costs to? It's a rather strange assertion without giving any indication of what you are comparing costs with.

 

[Marklund]

This was the point that I was trying to make to the customer. A bolt suitable for this type of application is not likely to be found on the shelf of a chain DIY store.

NR force you to go down the approved suppliers route, despite the same spec item being cheaper elsewhere. That is a problem.

 

[mike57]

I worked at a place for many years which is government funded, but but operated at 'one step removed' and is heavily regulated, and we had similar issues where costs were escalated compared with similar installations outside our industry. It boiled down to the requirements for vast amounts of paperwork to support every installation and the internal procedures and standards which had been built up over the years. Instead of applying relevant IEC standards the local ones were applied. This meant that suppliers would load tenders to cover the hassle. In most cases these local standards did not result in better systems than those that would have resulted if applicable international standards had been applied. I suspect that the railway industry is similar.

 

[An_Engineer]

NR force you to go down the approved suppliers route, despite the same spec item being cheaper elsewhere. That is a problem.

This one depends on exact circumstances. When you work with a long supply chain and safety critical systems, you cannot just take a manufacturers word that their parts are to spec, you need an audit trail to prove it. An efficient way is to audit suppliers to make sure they are making parts to spec and that their quality procedures are adequate to stop any bad parts reaching you. When done right it allows for rapid turnaround of parts, as it is already known that supplier parts are good and minimizes the need for quality inspection (which is time consuming and expensive). When done wrong it can lead to silly situations where you blanket require an approved supplier (with audit trail) for trivial items that never required an audit trail in the first place (my example is: we were creating a visual mockup of a system to show off to sales and marketing, but still could only use "Medical ISO 13485 approved" suppliers. We ended up just making it out of cardboard)

So it is all about balance. Where NR lies in this, I don't know.

 

[t_star2001uk]

NR force you to go down the approved suppliers route, despite the same spec item being cheaper elsewhere. That is a problem.

But the approved supplier thing is not just Network Rail, it also applies to TOC's as well. One example i can remember was a set of fuel filters. Railpart, the approved supplier charge £70, the local Mercedes truck and bus garage charge £40, but you have to buy the Railpart ones as they are the approved supplier. Same filter, same manufacturer, different packaging.

 

[Peter Mugridge]

In most private businesses, an "approved supplier" set up on the purchasing system provides goods at a very good discount to the list price; this is in exchange for agreeing to be "tied" to them for those products.

Why should the railway ( or the NHS for that matter ) accept the opposite happening?

 

[bastien]

In most private businesses, an "approved supplier" set up on the purchasing system provides goods at a very good discount to the list price; this is in exchange for agreeing to be "tied" to them for those products.

Why should the railway ( or the NHS for that matter ) accept the opposite happening?

I imagine FOI requests and such don't help. What supplier is going to want to negotiate a rate that's then bandied about in public? "But you sell them to Network Rail for £30, why are you charging me £40?" and so on...

 

[furnessvale]

I imagine FOI requests and such don't help. What supplier is going to want to negotiate a rate that's then bandied about in public? "But you sell them to Network Rail for £30, why are you charging me £40?" and so on...

Without looking it up, I should imagine such information is exempt from FOI as commercially sensitive.

If not, it would be returning the railways to "common carrier" status where any road haulier could demand info about rates so they could pick and choose which to undercut.

 

[bastien]

Without looking it up, I should imagine such information is exempt from FOI as commercially sensitive.

If not, it would be returning the railways to "common carrier" status where any road haulier could demand info about rates so they could pick and choose which to undercut.

If that's the case - do we actually know railway stuff costs a lot, at all?

 

[Peter Mugridge]

I imagine FOI requests and such don't help. What supplier is going to want to negotiate a rate that's then bandied about in public? "But you sell them to Network Rail for £30, why are you charging me £40?" and so on...

Without looking it up, I should imagine such information is exempt from FOI as commercially sensitive.

If not, it would be returning the railways to "common carrier" status where any road haulier could demand info about rates so they could pick and choose which to undercut.

If that's the case - do we actually know railway stuff costs a lot, at all?

Yes, such details would be commercially sensitive - and are based on bulk purchasing, not necessarily all in one go but in the knowledge that there will be a steady stream of orders for the product.

While the exact rates would not be given, the vast majority of people would understand that bulk buying results in better prices.

So the question would stand as to why the railway, or the NHS, are buying the exact same goods at higher prices.

Obviously specialist products can't be compared directly as that would be an apples and oranges situation - as someone stated earlier in the thread the robustness is critical for the railway - but all this talk of paying much more for a basic product openly available elsewhere at a much lower price... that does need looking in to.


I'm not sure what the question of the old common carrier status has to do with the purchase of spare parts by the railway?

 

[coppercapped]

If that's the case - do we actually know railway stuff costs a lot, at all?

Which brings us neatly back to post #43 above...

 

[furnessvale]

I'm not sure what the question of the old common carrier status has to do with the purchase of spare parts by the railway?

Purely on the basis of being able to extract information on rates paid by NR for haulage work done for them, by using FOI, if that were possible.

It was the requirement that railways published their rates under common carrier status that enabled road hauliers to cherry pick the traffics they wanted.

 

[bastien]

Which brings us neatly back to post #43 above...

Yep, good old Railforums UK: Home of the Circular Argument™.

 

[Peter Mugridge]

Purely on the basis of being able to extract information on rates paid by NR for haulage work done for them, by using FOI, if that were possible.

It was the requirement that railways published their rates under common carrier status that enabled road hauliers to cherry pick the traffics they wanted.

I don't understand the connection? We are talking about the cost of buying spare parts like lightbulbs and things, not the haulage rates for carrying x number of containers y miles.

 

[furnessvale]

I don't understand the connection? We are talking about the cost of buying spare parts like lightbulbs and things, not the haulage rates for carrying x number of containers y miles.

Someone mentioned the possibility of extracting information from NR using FOI. I was saying there must be limitations on the use of FOI otherwise such commercial information would become available to competitors.

 

[Peter Mugridge]

Someone mentioned the possibility of extracting information from NR using FOI. I was saying there must be limitations on the use of FOI otherwise such commercial information would become available to competitors.

Ah... yes... looks like the two subjects have got merged a bit doesn't it?

 

[bastien]

Someone mentioned the possibility of extracting information from NR using FOI. I was saying there must be limitations on the use of FOI otherwise such commercial information would become available to competitors.

Freight companies are private, NR is public.

I was suggesting public companies might find it harder to negotiate a good price because they have to disclose what they're already paying.

Law of unintended consequences, innit.

 

[Barn]

I don't wish to overplay the point, but another thing to bear in mind is that NR has to contend with procurement law. Whilst not quite the millstone that it is sometimes demonised as, it is true to say the procurement law tends to reduce the scope to conduct private negotiations and to easily "shop around" for each purchase.