Great Western electrification plans derailed? A National Audit Office report

23 November 2016

Article by Sean Evans, National Assembly for Wales Research Service

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

An image of Swansea train station frontage

Image from Wikimedia Commons by Ruth Sharville. Licenced under the Creative Commons

Background

Modernisation of the Great Western Main Line (PDF, 66.2KB) is seeking to increase capacity and provide faster and more reliable journeys for passengers, primarily by electrifying the lines through to Swansea and procuring new Intercity Express trains.

The modernisation work is made up of several important, interdependent elements known as the Great Western Route Modernisation ‘industry programme’. Route modernisation was first announced in July 2009, but the scope of the programme changed significantly in the years that followed with the addition of elements such as the electrification to Swansea. All elements were only brought together as an integrated programme in 2015.

Network Rail is responsible for delivery of rail infrastructure improvement and maintenance works within five-yearly ‘Control Periods’. The industry programme, planned for delivery between 2014-2019 (‘Control Period 5’), has seen significant delays.

The National Audit Office (NAO) published its report on Modernising the Great Western Railway on 9 November 2016. The report considers the causes of difficulties in delivery of the programme so far. This blog post discusses these, focusing on the implications for Wales.

Further information on the rail infrastructure planning process can be found in our quick guide.

Reviews of Network Rail outputs for Control Period 5

In June 2015, following concerns over escalating costs, affordability and deliverability of all commitments in the Control period 5 (CP5) enhancement portfolio, the Secretary of State for Transport asked Network Rail’s Chair to re-plan CP5 enhancements in a way that would be efficient, deliverable and affordable. Sir Peter Hendy’s review, detailed in Replanning Network Rail’s investment programme: a report from Sir Peter Hendy to the Transport Secretary (PDF, 2.3MB) published in November 2015, systematically examined every element of the enhancement programme.

The report highlighted how the cost and timescales on a small number of significant enhancement projects had increased beyond expectation due to over optimism on initial costs and timescales, inadequate planning processes both within and outside Network Rail, changes in scope during development and delivery and a fundamental change with the reclassification of Network Rail as a public body.

Re-planning resulted in a small number of programme elements being deferred to Control Period 6 (CP6) so that Network Rail could remain within its funding envelope. Electrification of a major section of the route between London and Cardiff is due to be completed by December 2018, however, the delivery of electrification between Cardiff and Swansea has been pushed back to Control Period 6 (2019 to 2024).

Alongside the Hendy review, the UK Government asked for a review of lessons learnt from the planning of the CP5 rail enhancement programme. The Bowe Review, also published in November 2015, concluded that there was no single cause which led to the increases against cost estimates and the delivery delays but instead identified a number of factors including:

  • A lack of clarity of roles and governance among the Department for Transport (the Department), Network Rail and the Office of Rail and Road (ORR);
  • An unusually complex portfolio of schemes, which were subject to poor initial scope definition and ongoing ‘scope creep’ resulting in cost increases; and
  • Costing errors, unanticipated interdependencies, a lack of consideration given to deliverability, engineering issues and poorly managed supply chains.

National Audit Office report

The NAO report further examined the Great Western railway industry programme planning and delivery.

Key areas the report covers are:

  • The Department’s management of Great Western Improvements (Part Two);
  • Network Rail’s management of infrastructure works (Part Three); and
  • The impact of works delays to the electrification (Part Four).

Key findings

The NAO found that the Department did not plan and manage all elements of the industry programme in a sufficiently joined up way and that a schedule prepared for the programme in 2012 was unrealistic. The report also states that cost increases arose due to failings in Network Rail’s approach to planning and delivery, unrealistic assumptions in Network Rails 2014 cost estimate and over optimism about the productivity of new technology. As a result, electrification between Maidenhead and Cardiff is now expected to cost £2.8 billion, an increase of £1.2 billion (70%) against the estimated cost of the programme in 2014.

The report contains a revised benefit–cost ratio of 1.6:1 which, while within the Department’s ‘medium’ value-for-money range (using the Department’s methodology), represents a reduction from the Departments initial ‘high’ value for money ratio of 2.4:1.

Following the Department’s decision in May 2016 to procure all the Intercity Express trains as ‘bi-modes’ (capable of either diesel or electric operation), the NAO report calls into question whether the full extent of electrification under the programme is still value for money.

The NAO report concludes:

The Department’s failure to plan and manage all the projects which now make up the Great Western Route Modernisation industry programme in a sufficiently joined up way, combined with weaknesses in Network Rail’s management of the infrastructure programme, has led to additional costs for the taxpayer. The way in which the programme was delivered before 2015 cannot be said to have best protected value for money.

The modernisation of the route has potential to deliver significant benefits for passengers, but the Department’s assessment of value for money does not reflect recent developments, particularly changes to the train specification, and needs to be revisited. The Department and Network Rail have begun to improve the management of the programme. They have more to do to protect value for money in the future.

Implications for Wales

The NAO report recommended that ‘the Department should assess whether the full extent of electrification, as currently planned, is still value for money’. The implication of this recommendation for electrification west of Cardiff to Swansea, where uncertainty around the exact delivery date remains, is not clear.

The 4th Assembly’s Enterprise and Business Committee held an Inquiry into the Priorities for the future of Welsh Rail Infrastructure earlier this year. In its report (PDF, 898KB), the Committee said it shared the concerns of Professor Stuart Cole and others about the lack of hard dates for completion of the Cardiff to Swansea electrification following the Hendy review which delayed this section into CP6. The report further stated the view of Professor Cole that the benefit cost ratio for electrifying the Great Western Line between Cardiff and Swansea is weak if considered in isolation and that further delays would increase capital costs and could jeopardise the project.

Despite the Department for Transport’s reassurance that the overall commitment (of electrification to Swansea) is undiminished, the Committee heard of the then Minister for Economy, Science and Transport’s disappointment at the delay in electrification west of Cardiff, and the Committee expressed its belief that a ‘firm commitment and delivery date is required urgently’.

In response to the publication of the Enterprise and Business Committee’s report, the Welsh Government confirmed that it has sought assurances ‘from the Chair of Network Rail, the Secretary of State for Transport, and Parliamentary Under Secretary of State for Transport, on the delivery of the electrification of the South Wales Main Line to Swansea’.