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28 April 2017 South East Route Digital Train Control Upgrade – Strategic Outline Business Case
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Executive Summary
Conclusions and recommendations
The case for delivering Traffic Management and Connected Driver Advisory System (C- DAS) to improve performance is very strong across the whole Sussex and Kent areas of the route. As a result, it is recommended that these technologies are developed to Outline Business Case (OBC);
Traffic Management options should be developed to include decision support tools which are central to providing the full benefits (Connected Driver Advisory Systems (C-DAS), Incident Management, interface with train operators Stock and Crew systems, interface to Customer Information Systems). The South Eastern refranchising offers an opportunity in this area;
The lessons learnt and evidence of benefits from the schemes currently deploying traffic management at Romford, Thameslink and Cardiff should be incorporated;
European Train Control System (ETCS) does not appear to offer value for money in Control Period 6. This is because the immediate capacity requirements are addressed by current programmes. However, ETCS should be considered as part of the wider strategy of the South East Route. In particular, the case to extend the ETCS and ATO from the Thameslink core onto the Sydenham Corridor to support TfL aspirations for a 24tph East London Line service;
The interfaces of the scope of this SOBC with the Brighton Main Line (BML) SOBC and the East London Line (ELL) SOBC need to be integrated with Traffic Management proposals at the OBC stage of development;
To develop the South East Route Digital Programme towards OBC will require £5 million. This does not represent a full commitment to deployment, but rather the start of the next stage of development;
Following the completion of the SOBC for the South East Route, the digital candidate projects across the network will be reviewed together to understand linkages and priorities. Elements of this business case may also be prioritised for earlier delivery (and therefore development) tranches.
Route context
The South East Route is a vital component of the local and national economy:
o Over 400 million passenger journeys per annum are made on the South East Route, more than any other Network Rail route1;
o 250,000 people arrive into London Bridge, Victoria and Blackfriars in the three hour peak every morning via the South East Route2;
o A train arrives into London Bridge from the South East Route at a rate of over one per
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minute in the three hour peak3;
o The route provides an artery for freight traffic to and from the Channel Tunnel and for construction materials to terminals across the Route.
Problem and Opportunity Statement
The South East Route is currently facing a significant performance challenge:
o The South East Route currently experiences the highest number of delay minutes of any route on the network – in part from the reactionary delays caused by the flat junctions in the region;
o The main operator on the South East Route – Govia Thameslink Railway – has a Passenger Performance Measure (PPM) Moving Annual Average (MMA)of 74.6% for Q3 of 2016, compared to the average of 84.5% across all London and South East Operators.
There are a number of capacity/performance programmes already planned for the South East Route, including Thameslink. However, these schemes are not capable of fully addressing the long term performance challenges on the South East Route due to:
o Disruption that will be experienced during the remodelling of Croydon Junction;
o Thameslink 2018 timetable placing additional pressure on the route, posing an additional performance risk;
o Enhanced performance challenges that will be faced as the number of services is increased to meet demand over the next 30 years.
Options
Three options have been identified to address these problems:
o Traffic Management only;
o Traffic Management and ETCS between London Bridge and East Croydon;
o Traffic Management and ETCS between London Bridge and Brighton.
Economic Analysis
Delivery of Traffic Management and C-DAS on the South East Route offers very high value for money:
o Net Present Value of c. £250 million4;
o Financially Positive, meaning that the costs are fully covered by the revenue generated by the option.
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These benefits are resilient to uncertainties around cost and benefits:
o A high Benefit-Cost Ratio (BCR) of c.2 even when benefits are halved5;
o A high BCR of c.2, even when costs are doubled6.
Benefits of Traffic Management need to be tested in light of actual operating experience once Cardiff, Romford and Thameslink are commissioned.
Extending ETCS Level 2 from London Bridge to Croydon or Brighton is not a financially viable option, as demonstrated by the cost assessment of Option 2 and Option 3.
Commercial Case:
There is high appetite for Digital Railway amongst the rail supply chain, and this has been formalised through Early Contractor Involvement. Close and collaborative work with the supply chain is essential to the success of the programme;
The programme will explore all commercial delivery models to OBC, and will engage with the supply chain to deliver examples and recommendations at this stage.
Financial Case:
There are opportunities, which need to be explored at the next stage of development, to introduce new private finance sources into the rail industry, to bring down the overall financial requirement.
Management Case
A delivery model (“thin client”) has been identified for the route to adopt and progress with the support of the Digital Railway team. This model will manage risks going forward – in particular the development of Digital Railway applications.
Areas highlighted for further development at the OBC stage: In the next stage of development the following have been highlighted to be investigated: o Test different scopes, in terms of both geography and capability;
o Integrate with incident management and stock & crew proposals;
o Customer information linkage should be explored.
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1. Strategic Case ...... 9
1.1 Business Strategy ...... 9 1.2 Drivers for Change...... 15 1.3 Stakeholder Engagement ...... 16 1.4 Baseline ...... 18 1.5 Business Need and Service Gaps – Problem and Opportunity Statement ...... 20 1.6 Options ...... 24 1.7 Option benefits ...... 27 1.8 Integration with other schemes on the South East Route ...... 31 1.9 Key Assumptions ...... 32 1.10 Risks ...... 33 1.11 Strategic Case summary ...... 34
2. Economic Case...... 36
2.1 Purpose ...... 36 2.2 Approach ...... 36 2.3 Appraisal Parameters ...... 37 2.4 Economic Options ...... 37 2.5 Assumptions ...... 38 2.6 Economic Options Analysis ...... 42 2.7 Key risks and uncertainty ...... 43 2.8 Summary of sensitivities ...... 44 2.9 The Adjusted BCR: Wider Economic Impacts ...... 46 2.10 Conclusions ...... 48 2.11 Detailed Appraisal Assumption tables ...... 49
3. Commercial Case ...... 52
3.1 Purpose ...... 52 3.2 Output Specification ...... 52 3.3 Procurement Strategy ...... 55 3.4 Sourcing Options ...... 55
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3.5 Pricing Framework and Charging Mechanisms ...... 59 3.6 Risk Allocation and Transfer ...... 59 3.7 Human Resource issues including TUPE ...... 61 3.8 Implementation (Contract) Timescales...... 61 3.9 Service Support ...... 61 3.10 Contract Management Approach ...... 62 3.11 Best Value ...... 62 3.12 Conclusion and Commercial Recommendations ...... 63
4. Financial Case ...... 65
4.1 Purpose ...... 65 4.2 Budget Profile ...... 65 4.3 Cost estimate ...... 66 4.4 Benchmarking ...... 66 4.5 Budget/Funding Arrangements ...... 67 4.6 Funding Arrangements ...... 67 4.7 Balance Sheet ...... 69 4.8 Recommendations ...... 70
5. Management Case ...... 71
5.1 Introduction and Objectives ...... 71 5.2 Programme/Project Dependencies ...... 72 5.3 Programme/Project Governance, Organisation Structure and Roles ...... 73 5.4 Programme/Project Plan ...... 76 5.5 Communications and Stakeholder Management ...... 77 5.6 Programme/Project Reporting ...... 78 5.7 Implementation of Work Streams ...... 78 5.8 Key Issues for Implementation ...... 78 5.9 Contract Management ...... 79 5.10 Risk Management Strategy ...... 79 5.11 Benefits Management and Evaluation Realisation Plan ...... 80
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5.12 Programme/Project Review and Evaluation ...... 85 5.13 Contingency Plan ...... 86 5.14 Recommendations ...... 86 Appendix A – Relationship between this SOBC and the wider Digital Railway Programme ...... 87
Appendix B – Costs ...... 89
Appendix C – Performance Methodology ...... 90
Appendix D – Early Contractor Involvement (ECI) ...... 94
Appendix E – Economic Appraisal Assurance Statement ...... 96
Appendix F – Digital Railway Technology ...... 98
Appendix G – Indicative deployment approach ...... 101
Appendix H – Stakeholder map ...... 102
Appendix I – Communications and Stakeholder team approach ...... 103
Appendix J – Problem Statement and Options ...... 105
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1. Strategic Case
1.1 Business Strategy
1.1.1 Introduction and context
This SOBC is intended to support the South East Route (and local stakeholders) in addressing their most important challenges over the Control Periods 6 and 7. It is drawn up as part of a wider programme of digital deployment.
The digital technologies assessed within this document are not considered an end of themselves, but rather as tools for Route-based management teams to use in response to the identified challenges.
This SOBC for South East Route Digital Train Control Upgrade Programme presents funders with an option to deliver additional performance benefits in the South East with digital technology. As this case will set out, this option has been formed via extensive consultation with stakeholders, offers the potential not only to deliver optimal value for money, but also to meet the requirements of passenger and freight operators.
1.1.1 Rail Industry Strategy
Over the past 20 years, rail has been at the core of enabling economic success. Annual passenger numbers have increased from 801 million (in 1997/98) to 1.6 billion7 (in 2014/15). This rise is mirrored in part by rail freight, with a 65% increase in freight volumes since the mid-1990s8. Freight growth for the different commodities has been mixed, while coal has declined, intermodal containers from deepsea ports (Southampton, London Gateway and Felixstowe to the Midlands, North, Wales and Bristol) and aggregates from Mendip quarries to London and the South East for construction, have grown steadily. This growth in demand has caused increased crowding on key routes and results in performance challenges. The Long Term Planning Process (LTPP) informs funders as to how the railway could support the UK economy over the next 30 years. The LTPP requires an Initial Industry Advice (IIA) plan to be developed. This plan is developed by the Rail Delivery Group (RDG) with contributions from Network Rail and is communicated to the Government. The IIA details national and localised Route priorities for investment, for the medium and long term future. The IIA highlights how the Secretary of State has made it clear that the priority of the railway must be to put passengers and freight operators at the heart of all decisions taken for rail. The DfT has indicated that it will look to use its funding and railway powers to deliver maximum benefits for transport users, as efficiently, effectively and economically as possible.
Prior to the publication of the High Level Output Statement, the Secretary of State has set out the following as priority areas for investment in CP6:
The cost of running the railway, comprising operations, maintenance and renewals (Hendy overhang);
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Committed schemes, including the Hendy re-plan investment programme, and major projects such as HS2;
Schemes needed to prevent significant deterioration of network/system capability or the passenger experience;
Unfunded schemes with wider economic benefits or which deliver other key aims.
The benefits expected from the Digital Railway Programme, and consequently this SOBC, (discussed in detail in section 1.7) directly correspond with the priorities of passengers and funders outlined above (such as improved performance, improved cost efficiency, greater consistency and network benefits and effective management of risks and delivery quality).
1.1.2 South East Route Strategy
The South East Route is one of the eight Network Rail Routes. This Route is made up of both the Sussex area and the Kent Area. The Kent area covers Kent, East Sussex and South East London, carrying commuters into Victoria, London Bridge, Cannon Street, Charing Cross and Blackfriars. The Sussex area includes a dense suburban network of metro services within South London, serving Victoria, London Bridge, Clapham Junction and East Croydon; mainline services to Brighton and the South coast as well as Gatwick Express; and coastal services.
Figure S1: South East Route
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The South East Route is a vital component of the local and national economy:
Over 400 million passenger journeys per annum, more than any other Route9;
250,000 people arrive into London Bridge, Victoria and Blackfriars in the 3 hour peak every morning10;
A train arrives into London Bridge at a rate of over one per minute in the three hour peak11.
The Route provides an artery for freight traffic to and from the Channel Tunnel and for construction materials to terminals across the Route.
Figure S2: Proportion of people commuting to Greater London by all transport modes
Data: Census 2011, Crown © Office for National Statistic and National Records of Scotland
Boundary data: UK Data Service, 2011 census boundary data England and Wales [2015]
The South East Route strategy currently aims to resolve a substantial performance challenge. Train performance on the South East Route is currently amongst the worst in the country, with the main operator Govia Thameslink Railway’s performance at around 74.6 per cent Passenger Performance Measure (PPM) Moving Annual Average (MAA) in 2016/2017 Q3 and 85.9 per cent for Southeastern. This compares to the average of 84.5 per cent across all London and South East operators.
There are a number of programmes currently aimed at improving performance. However, these are not sufficient to improve longer term performance, due to additional pressures on the Route (demand growth and the construction of Croydon Remodelling).This point is expanded on in the baseline and problem statement sections.
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1.1.3 Digital Railway Programme
The Digital Railway Programme purpose is to assess the ability of digital technology to address the challenges faced by specific sections of the network. Based on initial analysis carried out by the programme a targeted strategy has been adopted, focussed on alignment with demand, performance challenges, renewals and franchise opportunities.
The Digital Railway Vision is “A Digital Railway for a Modern Britain”. This will deliver a system and railway industry-wide approach to integrate the use of digital train control system technologies to best effect in meeting the needs of the passengers, freight customers, funders and benefit the wider economy.
An overview of the systems, technologies and business change contained within Digital Railway is set out in Figure S3 below.
Figure S3: Digital Railway Programme Scope
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1.1.4 Digital Railway technologies
The Digital Railway Programme is considering a number of technologies described in Figure S4.
Figure S4: Digital Railway Technologies
1.1.4.1 ETCS (European Train Control System)
ETCS is an automatic train protection system, based on cab signalling and track to train data transmission. It ensures trains operate safely at all times in providing safe movement authority directly to the driver through the in cab display, can apply the brakes in the event of a Signal Passed At Danger (i.e. Red) or over speed as it continuously monitor the driver’s actions. There are a number of different variants of ETCS described in Figure S4.
1.1.4.2 Traffic Management
Traffic Management is an operational control and management information system, capable of providing real-time information to passenger and freight customers. The system allows prediction of conflicts and enables real-time timetabling and re-planning as required. The Plan / Re-plan system is an integral part of the Traffic Management System and is the core functionality provided by TM. In full automatic mode, amendments to train services can be made by manipulating the train plan using the Plan and Re-plan system. Reference to Traffic Management in this document refers to the core Plan and Re-Plan system.
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There are three variations of Traffic Management:
Isolated: The system advises the operator of changes required to the existing timetable, alternative routing actions are implemented by the signaller.
Interfaced: Plan / Replan system interfaces to an existing control system. The system automatically request routes to be set following suggested conflict resolution by the planning system.
Integrated: The Plan / Re-plan system is directly interfaced to the Interlockings along the line and can set routes as required for each train. This allows functionality such as flexible areas of control, enabling ROCs to flex workload to current conditions.
The real time train information can be shared with a number of other applications / decision support tools. These systems can be standalone or interface to the Traffic Management System:
Figure S5: Decision support tools
Decision Support Description Tool
Stock and Crew Used in real time to ensure that the right resources are in the right place at the right time. It combines data from the train service and its actual running diagram and resource information and their associated rolling stock allocations and crew rosters
Incident Helps reduce the impact an incident has on the rail network across the Management whole incident lifecycle. The biggest delay minute saving that the IMS will have relates to the initial period of an incident and improving the time taken to get required resources to site. This is achieved by faster identification of incident location, faster access to supporting data and better communication.
Customer Uses operational information taken from other railway systems and Information System converts into a format that is easily understood by customers. CIS feeds information that is displayed on the electronic arrival and departure screens and displays that can be found on platforms.
C-DAS A Connected version of DAS (Driver Advisory System). DAS is an existing system which optimises driving techniques, helps manage capacity/performance, improves energy consumption and reduces carbon emissions.
The role of the Digital Railway Programme is to provide common interface specification for Traffic Management and the decision support tools.
1.1.4.3 Automatic Train Operation (ATO)
ATO is a system that performs automatic driving of the train to meet the (real time) operational timetable in the most energy efficient way. It has many of the same benefits as C-DAS but is able to
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provide significant performance improvements because the movement of the train is now automated. ATO must be deployed with ETCS.
1.2 Drivers for Change
Delivery of Digital Railway can support a number of industry wide initiatives:
Integration of renewals and enhancements planning: By assessing the potential for new technology to replace life expired assets, the Digital Railway Programme combines enhancement and renewal planning. This approach is significant, because it offers a potentially more economic and effective way to improve performance and meet demand compared to traditional industry planning, which views asset renewal as separate to network enhancements.
Opportunities arising from technological change:
Boosting train control and performance through connected systems: Adoption of digital support tools for signallers and controllers offers the opportunity to improve the performance of passengers and freight customers’ train journeys;
Potential to reduce cost: Conventional signalling systems require a great deal of expensive work to create a highly bespoke design for train drivers to sight signals and cater to the specific characteristics of a section of track. Once installed, these systems then require expensive renewals work, further increasing costs for the network into the future. Digital train signalling lowers cost and therefore is an opportunity to reduce these costs;
Improve skills: Developing the next generation of skills is essential to the continued success of the UK economy. The ongoing evolution of the skills, knowledge and expertise of Digital Railway will provide a benefit which can be transferred to other infrastructure sectors12. The DfT’s Transport Infrastructure Skills Strategy says that, “existing staff will need greater systems engineering, advanced telecoms, software programming and crucially business change skill sets to help fully realise the benefits of a digital railway”13. Successful development will build upon the industry’s existing capability, and give the opportunity to boost exports;
As well as building rail capability, Digital Railway can also enable skills to be realised across other industries – by bringing about agglomeration benefits that allow greater connections between skills and jobs, and goods with markets. Digital Railway has the potential to extend the catchment area of major cities. Accelerating these benefits could unlock additional productivity and economic growth for the UK economy;
Support national strategies: Three recent publications which demonstrate the strategic fit of the programme include those contained in:
. Transport Select Committee – Rail technology (signalling and Traffic Management Report (2016)): “Substantial benefits can be realised by the
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intelligent deployment of signalling and Traffic Management technology on the rail network through the Digital Railway programme”14;
. Rail Delivery Group – A Railway for a Digital Age (2016): “In today’s busy railway, a single problem can cause hours of disruption. A modernised railway with upgraded train control and signalling systems will deliver enhanced safety and more capacity and capability at lower cost.”15
. Autumn Statement 2016: “The Autumn Statement announces a new National Productivity Investment Fund (NPIF) which will be targeted at four areas that are critical for improving productivity: housing, transport, digital communications, and research and development (R&D)”16.
These drivers are directly aligned with the aims and proposed options in this SOBC.
1.3 Stakeholder Engagement
The formation of this SOBC has built upon the South East Route: Sussex Area Route Study17 (published in 2015), the South East Route Kent Area Route Study (draft for consultation published in March 2017), and the stakeholder engagement which took place to form these documents. In addition, extensive consultation has taken place to form key inputs.
Figure S6: Stakeholder engagement
Route Steering Board – full communication list for all Route Steering Board invites and circulated materials
Network Rail (Route representatives);
Network Rail (National Strategy and Capacity Planning);
Department for Transport;
Southeastern;
Freight industry representatives;
Rail Delivery Group (RDG);
Govia Thameslink Railway;
Office for Road and Rail.
14 http://www.publications.parliament.uk/pa/cm201617/cmselect/cmtrans/67/67.pdf 15 http://www.raildeliverygroup.com/about-us/publications/our-customers-our-people.html 16 UK Government (2016) link 17 Network Rail (2015) “South East Route: Sussex Route Study” link Version 1.0 Page 16 of 106 Issued: 28 April 2017 00SOBC-NWR-REP-MPM-000027
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Dates of specific engagement
Date SOBC Input Attendees / responses
12th January 2017 Problem Statement discussed Govia Thameslink Railway; and approved at Route Steering Board Southeastern Railway;
Office of Road and Rail (observer);
Department for Transport;
South East Route (Network Rail);
National Strategy and Capacity Planning (Network Rail).
3rd February 2017 Options confirmed at Route Southeastern Railway; Steering Board The Freight Industry;
South East Route (Network Rail);
National Strategy and Capacity Planning (Network Rail).
20th January 2017 Cost inputs and assumptions South East Route (Network Rail) discussed and agreed
27th February 2017 First draft SOBC circulated to all The Department for Transport; RSB members and comments received back Rail Delivery Group;
South East Route.
21st April 2017 Presentation of findings, and Govia Thameslink Railway; discussion of final document: Route Steering Board on 18th Southeastern Railway; April 2017. Office of Road and Rail (observer);
South East Route (Network Rail);
National Strategy and Capacity Planning (Network Rail).
Rail Delivery Group (RDG)
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1.4 Baseline
There are a number of programmes currently in progress on the South East Route.
1.4.1 Thameslink
The baseline for this SOBC is the completion of the Thameslink Programme works in 2018. These will provide an increase in the train service operating on the South East Route.
In order to make the 2018 timetable work, the Thameslink baseline scheme includes Digital Railway technology - ETCS and Automatic Train Operation (ATO) in the Thameslink core and Traffic Management on the South East Route. The scope of Thameslink and associated technologies is shown in Figure S7 below.
Figure S7: Scope of Digital Railway technology for Thameslink
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1.4.2 Committed performance improvement investments
The South East Route has developed an action plan, the Galaxy Performance Plan, to address performance issues in the short to long term. A number of work streams are reviewing areas that impact on performance such as industrial relations issues, asset condition, timetabling and operational management. £300 million has been committed by the industry to make the infrastructure on the South East Route more resilient outside of the core Thameslink area. This investment is primarily for heavy maintenance and renewal to prevent any further worsening of performance. Funding of Incident Management System is also proposed to help reduce the reactionary delays. GTR are purchasing a stock and crew system to help manage rolling stock and crew resourcing which will help to reduce delays in times of disruption.
Figure S8: Timescales and possible contribution of Digital Railway and how this relates to the Galaxy performance plan
The South East Route Digital Train Control Upgrade Programme will build on the baseline of the Galaxy Performance plan for CP6 and will contribute to addressing medium and long term performance challenges.
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1.4.3 Brighton Main Line Upgrade
The Brighton Main Line Upgrade Programme SOBC was endorsed by DfT in November 2016, and proposes a number of interventions to improve capacity in the short to medium term (including grade separation of the junctions in the Croydon area, and the redevelopment of East Croydon station).
Figure S9: Proposed capacity upgrade works on the Brighton Main Line
1.5 Business Need and Service Gaps – Problem and Opportunity Statement
1.5.1 Demand growth and complex train service leads to high reactionary delay – with economic consequences
Growing demand and high volume of services to different London terminals presents a unique challenge on the South East Route. On large section of track, the number of flat junctions (as opposed to grade separated junctions) limits flexibility. When combined with the high number of services required to transport passengers in and out of central London the infrastructure results in a high number of conflicting train movements. This means that any impacts or delays to services on the Route are quickly transferred across the network. Version 1.0 Page 20 of 106 Issued: 28 April 2017 00SOBC-NWR-REP-MPM-000027
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The South East Route suffers from the highest number of reactionary delays in the country (with 68% of delays on the South East Route being reactionary) – see Figure S10. These performance issues are particularly severe in the Sussex area of the South East Route, and in 2014/15, the PPM score in the Sussex Area of the Route was 83.1%18. This measure has never exceeded 90.7% annually – well short of national targets19.
Figure S10: Primary and reactionary delays per Route
Total delay minutes per route per annum
In addition, the cost of these delays in the South East is high compared with other areas of the network. This high cost is driven by a number of factors, including:
The greater number of passengers that are impacted by the crowded services;
The high value time of London commuters;
The higher transferral of delay minutes to the perceived lateness as a result of service and operating characteristics20.
The average annual delay minutes on this Route have a significant cost to the UK economy, due to the number of passengers affected and the high value of time for London commuters. As noted by key local stakeholders, this challenge is impacting on customer satisfaction, and is preventing any additional capacity from being added to the Route.
Reactionary delay is exacerbated by the limited information available for signallers to make real- time regulating decisions, and their overall high levels of workload. Digital Railway technology provides an opportunity to create data-driven recommendations and easier implementation by
18 Network Rail (2015) “South East Route – Sussex Area Route Study” p7. 19 Network Rail (2015) “Performance Planning” p2. 20 Different type of service, such as longer distance services, are able to “make-up” delay minutes on Route so that the service does not arrive late at future calling points, and the passengers do not perceive the service as “late”. Version 1.0 Page 21 of 106 Issued: 28 April 2017 00SOBC-NWR-REP-MPM-000027
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extending the range of Traffic Management implemented by Thameslink to the rest of the South East Route.
The Early Contractor Involvement (ECI) workstream has estimated the potential reduction of delay minutes related to the different varieties of Traffic Management, which are highest in the South East Route, see Figure S11. Further details on the estimation of performance benefits can be found in Appendix C.
Figure S11: Impact of Traffic Management
Impact of Traffic Management : Percentage delay minute reduction
7% 7% Isolated
6% 6% 6% 6% 6% 6% 5% 5% 5% 5% 5% 5% 5% 5% Interfaced 4% 4% 4% 4% 4% 4% 3% 3%
Integrated
DM_techImpact v3.0 - ECI adjusted February 2017 central assumtption Anglia South East LNE LNW Scotland Wales Wessex Western
The percentage of delay reduction of primary and reactionary delay for incidents on the South East Route is shown in Figure S12.
Figure S12: Impact of Traffic Management on reactionary and primary delay
Impact of Traffic Management: Reactionary compared to Primary 7.00%
6.00%
5.00%
4.00%
3.00% % total delay % delay total % delay minute reduction - Isolated TM
2.00% % delay minute reduction - Integrated TM
1.00%
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Increasing train services on the South East Route will add pressure
The 2018 Thameslink timetable will add additional trains to the South East Route with 24tph in the peaks between the Thameslink Core to the South East Route. There will be additional services between London Bridge and Croydon and new proposed services such as Rainham in Kent via Greenwich. The new services will greatly increase the interactions between train services in the Sussex and Kent Areas and those elsewhere (i.e. the East Coast, the Midland Main Line etc.). This will pose an additional performance risk, and will require better levels of on-time running to achieve paths through the Thameslink core and elsewhere. The planned Thameslink infrastructure and funding to improve the resilience of the London – Brighton main line and associated routes can partly address these challenges. However, these are not sufficient to improve longer term performance.
Demand on the South East Route is forecast to grow and there are plans to further increase the train service;
East London Line: TfL have aspirations to increase the East London Line service to 20tph and then 24tph, which would increase the number of trains on the South London Line and the Sydenham Corridor;
Brighton Main Line Upgrade: Proposes infrastructure to deliver capacity for up to eight additional peak trains per hour on the BML.
There is a need to stabilise performance and capacity before adding additional train paths. The South East Route will face the challenge of how best to manage the railway, including how to mitigate against disruption during the Croydon area remodelling between 2022 and 2028.
1.5.2 Signalling assets on the Brighton Main Line (BML) are due for renewal
Undertaking Digital Railway as part of this is likely to be more cost effective than as standalone projects. Signalling assets on the Brighton Main Line are due to reach notional life expiry in CP6 and CP7. Figure S13 below highlights when interlocking renewals are estimated to be required. It should be noted that while linking Traffic Management deployment to asset life expiry may be more cost efficient up front, deployment must be carried out strategically for operational benefits to be fully realised.
In addition, the need for signalling renewals in CP6 represents an opportunity for long term capacity to be accommodated through delivery of a more efficient signalling system.
Three Bridges Area Signalling Centre (ASC) is planned to be re-controlled to Three Bridges Rail Operating Centre (TBROC) during CP6.
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Figure S13: Years remaining for assets across the South East Route
1.5.3 Southeastern Franchise is due for renewal
The Southeastern Franchise is due for renewal in 2017. This presents the opportunity to align infrastructure with rolling stock and TOC requirements, for example the introduction of stock and crew, customer information, incident management and connected driver advisory systems that require changes for both Network Rail and the operator.
1.6 Options
1.6.1 Do Minimum
This SOBC does not include an option to “Do Nothing”, because without additional investment there will still be a requirement to maintain and renew assets and deliver the already committed enhancements in the Enhancement Delivery Plan. The baseline ‘Do Minimum’ compares options against the Command Control and Signalling (CCS) renewals included in the Network Rail Plan submission over 60 years, committed enhancements in the Enhancement Delivery Plan and service changes in franchise track access agreements. It also includes the proposed Brighton Main Line Upgrade Programme conventional infrastructure.
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1.6.2 Discounted options
As part of analysis conducted for the SOBC, a number of options were discounted. These include:
Figure S14: Discounted options
Problem Area Option Discounted Reason
Performance Non-digital train control options These are either not feasible or are (timetable changes, staffing or already being considered by the South targeted reliability investments) East Route and Train Operators
Performance and ETCS Level 2 signals away Thameslink units only account for 14% capacity of trains that would need to be fitted to remove signals. The number of trains that need to be fitted and the timescales for doing so mean that this option has not been considered
Performance and ETCS Level 3 It is assumed that this technology is capacity not available in CP6, however it may be a relevant long term option if it is developed
1.6.3 Options analysed
Option 1
Traffic Management Upgrade Only: Re-control of Three Bridges ASC to Three Bridges Rail Operating Centre (TBROC) and upgrade of Traffic Management integrated over this geography. Route-wide isolated Traffic Management over the remainder of the Route where this is not already provided by the Thameslink Programme. The extent of the Traffic Management option is highlighted in Figure S15; this includes the infrastructure provided by Thameslink.
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Figure S15: Traffic Management Scope
Option 2
ETCS deployment on the South East Route is being considered in Options 2 and 3 aligned to renewal dates as a cost comparator with conventional renewals, with the potential for ETCS deployment to support additional capacity in the long term (post 2028).
Traffic Management and ETCS Underlay21 London Bridge to East Croydon: this option combines the Traffic Management elements of Option 1 with ETCS underlay on the Brighton Main Line to provide active provision for long-term capacity. This option extends the Thameslink ETCS provision to East Croydon via Norwood Junction and New Cross Gate.
Option 3
Traffic Management and ETCS Underlay London Bridge to Brighton: As per Option 2 but with more extensive ETCS. This option extends the Thameslink ETCS provision to Brighton via Norwood Junction and New Cross Gate, aligning with interlocking renewals in CP7 and early CP8.
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1.7 Option benefits
1.7.1 Benefits quantified
1.7.1.1 Improving performance on the South East Route
The core plan and re-plan function of Traffic Management enables a much faster response to delays, to find alternative routes for trains in a fast and effective manner. In turn, this offers the potential to reduce reactionary delays (a substantial portion of overall delay minutes) and improve performance on the Route. As already identified, there are substantial benefits possible from improving performance across the South East Route, on top of the benefits already provided by Thameslink.
The estimated delay minute reduction for the Traffic Management scope in all the options has been calculated incrementally to the Thameslink Traffic Management base case. This is highlighted in Figure S16. The assumed impact of isolated and integrated Traffic Management within the South East area (up to 4% and 7% reduction in delay minutes respectively) is applied to service groups proportionally to their train kilometres within the scope area. It is assumed that trains must operate at least 50 per cent of their train kilometres within the traffic management area to benefit.
The percentage delay minute reduction is assumed equivalent to percentage reduction in lateness, experienced by passengers.
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Figure S16: The estimated delay minute reduction to services of Option 1 Traffic Management, incremental to Thameslink Traffic Management base case.
1.7.1.2 Improving performance for services travelling across Routes
There is an opportunity to link Traffic Management across the Routes. This would enable more effective management of cross-boundary interfaces, as a result of signallers and controllers having visibility of incidents across boundaries. This will enable more effective regulating decisions to be made thereby improving performance for services. This will be particularly relevant for freight and passenger open access operators, who will regularly cross Route boundaries.
The scope of Traffic Management includes the cross-London lines which mean that the Traffic Management can be linked to all five Routes which radiate from London, including better freight connections between the South East Route, and other parts of the national network. This would create a Traffic Management network increasing the scale effects of Traffic Management as the interfaces can be managed more effectively by giving signallers and controllers forward look ahead. This would be enhanced if freight trains are fitted with C-DAS but are not entirely dependent on this.
In addition, Traffic Management also represents an opportunity to improve resilience, as alternative routes can be used to run trains in times of disruption. Using the new technology to easily identify and run trains across alternative paths offers an opportunity to further reduce the reactionary delays on the network.
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1.7.2 Benefits for further investigation
1.7.2.1 Improving safety across the Route
Train Protection and Warning System (TPWS) meets regulatory requirements (RSR 99). However, ETCS is subject to the test of ‘reasonable practicability’; with the procurement of new trains and the relative costs of re-signalling with ETCS compared with conventional signalling. As ETCS meets these conditions it is now reasonably practical, as part of an integrated programme, to install ETCS as the primary Train Protection System.
Improved safety for trackside workers: Network Rail has made a key commitment of zero fatalities or major injuries to the workforce by the end of CP5. Digital Railway could contribute significant safety improvements for trackside workers by revolutionising the way track access is controlled and potentially reducing the number of trackside assets requiring maintenance.
Additionally, the Digital Railway technologies will transform the management of track possessions, facilitating a movement from manually controlled blockages and warning systems to automated warning systems and access controlled remotely from a trackside digital device. The safety benefits of this transformation are considered in the Track Worker Safe Access Strategy, written by Network Rail’s Chief Health, Safety & Quality (CH&SQ) Officer and approved by Network Rail’s Executive Committee in May 2016. This strategy identifies ways in which the risk profile of track workers being struck by a train can be reduced. It identified two systems that could be made possible by the package of Digital Railway technology (described below). As a result, Digital Railway will be a critical enabler of technology driven safety improvements across the network through delivery of the Track Worker Safe Access Strategy, helping to significantly reduce the risk of injury/fatalities to trackside workers:
Traffic Management Protection System: a new high integrity protection system that removes human error failure modes, reliance on signallers and safety critical communications. This relies on the Traffic Management system explored as part of this SOBC;
Strategic Signal Controlled Warning System (SCWS): a new high integrity, highly reliable warning system that can be deployed over whole lines of a Route. This relies on integration with the real time train position information enabled by Digital Railway.
Automatic Train Protection: The Railway Safety Regulations 1999 requires all trains to operate with a train protection system and sets out the definition of an acceptable train protection system. TPWS as a system does not provide the same safety levels as ETCS; however it has proven to be an effective and cost effective solution reducing the GB train collision risk considerably. Compared to ETCS, TPWS has the following limitations:
The system is not fail safe in design, (although the design simplicity, internal system monitoring and application design provides a high level of capability);
The system is fitted only to high risk signals, significant speed restrictions and approaches to terminal station buffer stops;
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In order not to impact driving styles aligned with the capability of passenger trains, the system is not optimised for freight.
The use of ETCS offers the opportunity to introduce new ways of working which take use the enhanced level of train protection to make faster and safer access to the infrastructure by workers on the track. The reduced time to take possession of the line for disruptive access could reduce the time workers are exposed to the track-side environment to carry out their activities.
1.7.2.2 Capacity
The case to extend the ETCS and ATO from the Thameslink core onto the Sydenham Corridor to support TfL aspirations for a 24tph East London Line (ELL) service and the Croydon area re- modelling should be explored to confirm if this is required to deliver the train service output, and that it is value for money. At this stage the capacity analysis has not shown a requirement for ETCS and or ATO to deliver the medium term capacity outputs, but this needs to be explored in detail by the BML Upgrade and any ELL proposals.
1.7.2.3 Areas for further investigation
There are a number of potential benefits of the digital technologies that should be further investigated to establish which can be realised in the initial deployment:
Planning Rules: There are opportunities from planning rules changes, for example ETCS removes the need for approach control, to reduce journey times;
Journey times: Reduced journey times are a potential benefit of improved management of train flows provided by Traffic Management;
More Granular and Dynamic Timetabling: Traffic Management and C-DAS will enable the train service to be dynamically re-planned during perturbation and the result communicated to the drivers;
Maintenance costs: At this stage command, control and signalling maintenance costs are assumed to be neutral as some costs will go up such as the need for specialist skills and the additional cost of maintaining signalling equipment on trains, whilst the reduced frequency of maintenance activities will reduce costs. However, there are opportunities to undertake faster and safer disruptive access. If realised this would result in greater productivity of all maintenance, enhancement and renewals activities and could result in substantial cost savings and a reduction in disruption to passengers and freight customers;
Speed restrictions: There are opportunities to eliminate speed restrictions that are demanded by signal sighting and introduce more sophisticated differential speed limits between different types of train. Emergency speed restrictions will be able to be applied automatically without having to caution each driver. Marker boards for temporary speed restrictions will not have to be placed. This avoids the need for staff to go lineside which has a safety and efficiency benefit;
Overspeeding: ETCS means that drivers will not be able to overspeed both during normal operations or when speed restrictions are applied. This is a benefit directly but also enables speed limits to be more closely defined in extent and impact on particular rolling stock.
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The Economic Case will value a subset of these benefits and the benefits management methodology can be found in the Management Case.
1.8 Integration with other schemes on the South East Route
There are a number of committed schemes which will affect the analysis in this case study. A list of the important schemes is as follows:
Thameslink Programme ETCS, ATO, Traffic Management and C-DAS: Provides an opportunity for further digital deployment on the South East Route.
Deployment of Traffic Management on the East London Line Core: A strategic outline business case is currently being drafted by the TfL to address the capacity challenge faced on Sydenham Corridor and South London Line (SLL) through the deployment of Traffic Management. A number of interfaces exist between this Traffic Management deployment and the deployment on the South East Route:
Commercial interface: There is potential for commercial benefits to be realised through a single Traffic Management procurement, although further analysis is required to understand if this is the most favourable option;
Operational interface: There is overlap in the geographic scope of the BML and SLL business cases generating the need for a system interface and operational coordination;
Control Centre: There could be a common control point for the two Traffic Management systems if both are centred on Three Bridges Rail Operating Centre, and operating efficiencies could be achieved;
Outputs: Further investigation is required to check that Traffic Management technology is able to deliver the required outputs over the SLL and Sydenham Corridor area.
There is a need to ensure that proposals considered in this SOBC interface with those for the East London Line, particularly regarding Traffic Management scope covering the South London Line and Sydenham Corridor. There is a particular need to ensure that operational effectiveness is not inhibited by a fringe between two Traffic Management systems.
Croydon Area Remodelling: There is a performance risk during the construction phase of this scheme (2022 to 2028);
Other Digital Railway schemes: The South East Route Digital Train Control System SOBC is being developed as one of five Route targeted business cases. Coordination across these Route deployments will be needed to maximise efficiencies.
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1.9 Key Assumptions
1.9.1 Components of Traffic Management
The core component of Traffic Management consists of a Plan / Re-plan function. The options include allowances for enabling infrastructure for Connected Driver Advisory System (C-DAS) and Stock and Crew. However, C-DAS fitment costs are not included in this SOBC. Opportunities for C- DAS fitment, Stock & Crew, need to be explored in light of the Southeastern re-franchising.
1.9.2 Passenger Rolling stock assumptions
The Thameslink rolling stock will be fitted with ETCS and ATO. Fitment of C-DAS on this rolling stock has been deferred until CP6. These trains represent a relatively small proportion (only 14 per cent) of the total fleet that operates over the South East Route and the Brighton Main Line specifically.
Figure S17: Rolling stock assumptions
TOC Manufacturer ROSCO Class # Entry ETCS Deadline to Deadline to trains into Specified equip with upgrade to service ETCS 3.6.0
Thameslink Siemens XLT 700 115 2016- 3.3.0 Cannot be Thameslink [12&8] 18 upgraded prior to enter to service
The logistical complexity and cost of fitting the remaining units would be substantial. A reasonable proportion would be likely to require fitment to derive benefit and all trains would need to be fitted to achieve a without signals railway. Many of these units are relatively new and have reached less than half of their notional asset life of 35 years.
Fitment for new franchises: It is DfT policy that in a new franchise, rolling stock will be required to be fitted with ETCS where this aligns with committed funded plans to deliver ETCS on the infrastructure. Therefore ETCS implementation would require future franchises to procure and lease ETCS fitted trains. As DfT let franchises do not cover all rolling stock, other rolling stock including Freight and Open Access Operators would require changes to Track Access Agreements between the operators and Network Rail to ensure that the rolling stock is fitted with ETCS, and that Network Rail would not be liable for the ETCS costs of these vehicles.
1.9.3 Constraints
Constraints for this programme include:
Skills, capability and resources: Success of the Programme is reliant upon availability of resources with the required skills in both the programme team and on the South East Route. Examples of key resources include those of the capability of the supply chain, driver and operator training and signalling testers. The Thameslink Programme has put the South East Route in a position of competitive advantage to access these resources, and there is a need to retain this experience (both in the Route and in Network Rail Infrastructure Projects).
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Supply chain: the maturity of the UK supply chain for digital rail technologies and availability of other partners required for technology delivery and deployment may constrain the progress of the programme. However, analysis to date indicates that there is sufficient capacity in the supply chain.22 This will need to be examined in more detail at the next stage of development.
Disruption: The need to maintain a functional railway and minimise disruption to passengers will restrict the speed at which digital technologies can be deployed. This includes both the infrastructure and also the disruption of releasing trains to be retro-fitted.
Affordability and funding: The progression of Digital Railway is dependent on the availability of programme funding and affordability of technologies.
These issues are addressed in the Commercial and Management Cases.
1.10 Risks
The key risks associated with the options identified:
Figure S18: Risks associated with each option
Risk Mitigation
Complex operation and commercial interface with ‘as Further assessment in next stage of deployed’ digital systems on Thameslink development
Lack of operational concept to enable detailed validation Further assessment in next stage of of the capacity outcomes development
The options do not align with the signalling renewals To be integrated and included in the plans and enhancement plans. Therefore disruptive Route’s Strategic Business Plan access is required which is not factored into the CP6 access plan
Conventional upgrades required to support increased capacity are not integrated with DR technologies
The full capability of DR technologies are not realised as Further assessment in next stage of planning systems cannot plan timetables to less than 30 development second increments
Key appraisal risk is that the train service performance This risk will be reduced once the 2018 improvement on the South East Route arising from timetable is in operation, with the Traffic Management has not been quantified, and it is not associated Traffic Management. clear what mechanism exists for an evidence-based quantification process to occur. The benefits are currently stated on the basis of a supplier’s views, with no evidence base yet validating this on the UK railway,
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or on one of similar complexity to the South East Route.
Risks resulting from uncertainty over costs and benefits. Cost uncertainty: the risk has been presented and it will need to be investigation in more detail before a final investment decision is made – this is as per the Memorandum of Understanding between Network Rail and the DfT
Benefits uncertainty: will be addressed by evaluating the actual performance of Thameslink, Crossrail and the Traffic Management First Deployments (Cardiff and Romford). This will provide evidence of the technology in a GB operating environment from 2018 onwards
Integration of Traffic Management Systems with decision Although benefits for Traffic support tools Management will be presented, the systems above do not yet exist in a single integrated format. As a result, further work beyond SOBC is likely to involve both further exploration of the benefits and additional technical development work to integrate the systems assessed here (and other potential systems such as ETCS). Digital Railway to develop and publish common interface specifications
The approach to mitigating these risks is addressed in the Management Case.
1.11 Strategic Case summary
To summarise the points made in the Strategic Case:
Performance on the South East Route is poor, with the highest number of delay minutes on the network. This poor performance has a high cost – both to customers and to the wider economy;
The South East Route already has a number of plans in place to improve performance. However, there are a number of changes on the Route (increase in services from
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Thameslink and the East London Line; and delivery of conventional enhancements at Croydon) which pose a performance challenge above and beyond current plans;
Traffic Management offers the potential to improve performance on the Route, by reducing reactionary delays. This SOBC also assesses ETCS options, to add additional capacity to the Route. Although this capacity is not required in the short to medium term, the need for signalling renewals in CP6 presents an opportunity to deliver digital signalling earlier than required;
In addition to performance, delivering digital technology on the South East Route offers a range of wider benefits – including safety, skills and customer information;
The Economic Case will assess the costs and benefits of these options in more detail.
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2. Economic Case
2.1 Purpose
The Strategic Case has established the approach to identify the preferred options to meet the business need.
The Economic Case has assessed the options, identifying their impacts and the resulting value for money. The evidence and assumptions available have been presented, alongside key risks to the conclusions drawn from the analysis. It is expected that at the OBC and FBC stages the evidence, assumptions and methodology will be updated and developed further. The SOBC Economic Case presents initial findings, and should be seen an indicative value for money.
The appraisal contains information relevant to the financial case, such as the financial benefits of the scheme (such as revenue and operating cost impact). The Economic Case does not address the Commercial or Management Cases.
2.2 Approach
The value for money case has been developed in accordance with the DfT’s appraisal guidance, and the web-based transport analysis guidance of WebTAG, available at www.gov.uk/guidance/transport-analysis-guidance-webtag.
To assess value for money, the monetised impacts are summed to establish an initial benefit-cost ratio (BCR), which implies an initial value for money band (poor, low, medium, high or very high), see Figure E1. This band can then be adjusted to account for impacts where qualitative or quantitative, but not monetised, information is available. The appraisal has been undertaken over a 30 from 2022. All costs and benefits have been discounted to 2010 values by applying HM Treasury’s the Green Book social discount rate.
The costs in the BCR are the net costs to public sector funders (e.g. DfT). This typically includes capital and operating expenditure, less any revenues generated. Most train operating costs and fares revenue are assumed to accrue to government, because they will be reflected in future franchise bids or changes.
The benefits in the “standard” BCR of a rail scheme are those that can be quantified and valued in monetary terms in line with WebTAG guidance. This typically includes:
Time savings (user benefits): For current and new passengers as a result of improvements in service, valued using WebTAG’s “values of time” for business, commuter and leisure passengers. Improvements in service quality (e.g. higher service frequency, or reduced crowding due to increased train capacity) are converted to equivalent time savings;
Benefits of reducing road congestion (non-user benefits): As people shift to rail, including road user travel time (valued similarly to time for rail passengers); safety benefits (measured as fatalities & injuries avoided, with values reflecting both “human” and economic costs); and some environmental benefits (e.g. tonnes of CO2 emissions avoided, valued using guidance from the Department of Energy & Climate Change);
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Revenue: From more rail journeys and passengers.
Figure E1: Value for money category for BCR (Benefit Cost Ratio) ranges
Value for money category BCR
Poor <1
Low 1-1.5
Medium 1.5-2
High 2-4
Very High >4
2.3 Appraisal Parameters
Figure E2: Appraisal parameters
Parameter Approach Source Data/guidance
Appraisal Period 30 years from 2022 WebTAG 3.5/Digital Rail Project Team
Price base 2010 Market Prices WebTAG 3.5
Discounting Discounted to 2010 based on HMT The Green Book/WebTAG the social discount rate of 3.5 3.5% for 30 years and 3.0% thereafter
The initial results of the appraisal of the options have been presented as a high level NPV of costs and benefits in Section 2.6.1 and at a more disaggregated level in a summary TEE (Transport Economic Efficiency) Table in Section 2.8.1.
2.4 Economic Options
The Strategic case has set out the detail of the options to be tested. In order to test the economic viability of these options, all costs and benefits are measured incremental to an assumed baseline, as described in detail in the Strategic Case. The base case and options relevant and assessed as part of the Economic Case are summarised as:
2.4.1 The base case
The Thameslink Programme, expected to be completed in 2018, which delivers Traffic Management within the scope area:
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Option 1 costs and benefits are measured incrementally over the Thameslink Programme Traffic Management deployment.
Command Control and Signalling (CCS) renewals included in the Network Rail Plan submission.
2.4.2 Option 1
Included costs:
Deployment of Integrated and Isolated Traffic Management Traffic Management.
Included benefits:
Incremental performance benefits associated with Traffic Management.
2.4.3 Option 2
Included costs:
Deployment of Traffic Management as per Option 1;
ETCS Underlay23 London Bridge to East Croydon.
2.4.4 Option 3
Included costs:
Traffic Management as per Option 1;
ETCS Underlay London Bridge to Brighton.
The base case and options are described in detail in the Strategic Case.
An economic appraisal of Option 2 and 3 is not presented. At this stage no benefits of extending ETCS Level 2 have been measured, and this SOBC presents the incremental cost only.
2.5 Assumptions
This section presents key assumptions made in the analysis. Further, more generic, appraisal assumptions are presented in Section 2.11.
2.5.1 Costs
The costs of the option are compared against the cost of the base case to give an incremental cost, against which the benefits are compared.
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2.5.1.1 Infrastructure costs
Figure E3 summarises the categories of cost within the infrastructure cost of the options.
Figure E3: Option infrastructure costs
Category Description Comment/Sensitivity
Digital Capex Railway control systems and associated works.
Train Fitment Rolling stock fitment/ retro Where conventional signals are fitment (passenger and retained as part of the option, only freight) of initial lifecycle. those passenger rolling stock associated with an enhanced service are required to be fitted.
Where the option assumes signals away (no conventional signals remain) then all rolling stock within the scope area is required to be fitted.
This is a fixed cost that could be shared across a wider program.
Additional enhancements Such as new platforms, junction layout enhancements etc that would be required to enable the benefits.
Digital Possessions Costs associated with If there is alignment with the possessions required for conventional renewals base case Digital Capex. then the net change in this cost category would be zero.
Digital Business change Business change costs The central appraisal assumes all associated. these fixed costs are incurred by the scheme. The programme case Digital Program costs Programme costs including explores sharing of these costs. items such as test tracks and programme management. Development costs of shared components only, for example standard reference designs.
Level Crossing Upgrades Level Crossing No Level Crossing upgrade costs in enhancements required to the South East option.
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deliver the output.
Renewal of Digital Capex Future renewal costs of the infrastructure within the 60 year appraisal period.
Train Fitment Renewal Future renewal costs of train These costs are not included in the fitment. economic appraisal as current DfT policy is that a new franchise will require new trains to be fitted with ETCS where it aligns with committed plans to deliver ETCS on the infrastructure.
Conventional Signalling There are conventional These cost saving is not applied to renewals signalling renewals in the options where conventional signals base case, and in some of remain. the options. Where there is less conventional signalling renewals required in the option; this is presented as a conventional renewals saving (costs avoided).
Level Crossing renewals
NR Ops and Maintenance CCS Maintenance included Ops not included because savings only, variable track access contained within baseline CCS charge used as a proxy for renewals work bank. increased costs of running more trains.
TOC Ops and Maintenance Not included as a result of ETCS but included for the cost of running extra trains.
FOC Ops and Maintenance Not included.
Traffic Management Costs associated with deployment of Traffic Management; isolated, interfaced or integrated.
Traffic Management renewals
Risk is removed and an Optimism bias of 66% is applied to the majority of the infrastructure costs. Maintenance and operating costs are the exception, to which 41% Optimism Bias applied, as recommended by DfT’s WebTAG 3.5.9.
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2.5.1.2 Efficiency
Early Contractor Involvement evidence (Appendix D) suggests that a committed programme of works can help drive fixed costs down. The costs presented has this efficiency (of approximately 30%) applied to the costs.
2.5.2 Benefits
2.5.2.1 Passenger growth
A weighted all-day passenger growth of 2.32% to 2023 and 1.14% to 2037 is used, after which growth is capped, as per DfT’s WebTAG guidance. A low growth scenario is presented as part of the sensitivity analysis, section 2.8.
Figure E4: Passenger growth forecasts
Period 2016-2023 2023-2037 2037-2077
All-day passenger growth 2.32% 1.14% 0.00%
Source: LSE Market Studies
2.5.2.2 Traffic Management
Isolated and Integrated Traffic Management are assumed deployed over the South East area in all options. The benefits are estimated incrementally over those estimated from the Thameslink deployment of Isolated and Interfaced, as part of the base case.
The analysis assumes that Isolated and Integrated Traffic Management would reduce the delay minutes within the South East area by up to 4% and 7% respectively. This is driven by the assumed impact Traffic Management has on the primary and reactionary delay in the area. The methodology in estimating these values are described in Appendix C.
The geographical scope of the deployment then determines which services will be impacted by the assumed delay minute reduction. The delay minute reduction corresponds to an improvement in service reliability felt by passengers. This is measured in terms of user benefits, increase in revenue and non-user benefits.
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2.6 Economic Options Analysis
Presentation of economic appraisal results for core options, a discussion of key risks to the results and sensitivity test results.
2.6.1 Summary of Option 1
Figure E5 summarises the results of the economic appraisal for Option 1. The performance benefits associated with Traffic Management deployment across the route demonstrates very high value for money, with current methodology and assumptions.
Figure E5: South East Option 1 (High Level appraisal results)
PV (Present Values) 2010 prices and values, 30 year appraisal period Option 1
Integrated and Isolated Description Traffic Management
PV Benefits (£m) 239
PV Revenue (£m) 153
PV Costs (£m) 133
NPV (Net Present Value) 259
financially BCR positive
Value for money category Very high
*BCR = Benefit Cost Ratio; Monetised benefits / (Costs-Revenue)
This benefits presented are missing those associated with the deployment of Traffic Management in Kent, so benefits are currently underrepresented. This will be updated at the next stage
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Figure E6: South East Option 1 (present value of costs and benefits)
2.7 Key risks and uncertainty
2.7.1 Costs
Early stage cost estimates of transport projects have inherent uncertainty. An optimism bias of 66% is intended to account for this. However, this is a standard application of optimism bias, which may not fully reflect the novelty, complexity or ambition of the project. A sensitivity that doubles the cost is presented to test the impact on the case should the costs significantly increase.
2.7.2 Traffic Management benefits
There has been stakeholder and contractor involvement in the potential benefits of Traffic Management. The benefits are still based on simulation models, theory and expert opinion. Pilot scheme’s such as Romford and Thameslink will strengthen the evidence for the benefits of this technology.
Estimating benefits over the base case deployment of Thameslink Traffic Management also adds more uncertainty to the benefit estimate. The baseline excludes the impact of service changes, infrastructure and rolling stock changes, completion of London Bridge and any disruption/ benefit impact of Croydon remodelling. These impacts have the potential to either diminish or enhance the impact of extending Traffic Management.
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This benefits calculated at this stage are currently missing those associated with the deployment of Traffic Management in Kent, so benefits are currently underrepresented. This will be updated at the next stage.
2.7.3 Appraisal period
The appraisal period is used to reflect the asset life and whole life costs. The central case has presented a 30 year appraisal period. Advances in software technology can often be fast paced. A shorter appraisal period is presented as a sensitivity to test the impact of a shorter asset life.
2.7.4 Passenger growth
As with all forecasts, there is uncertainty in the passenger demand growth. A lower growth sensitivity of 0.5% per annum is presented.
2.8 Summary of sensitivities
Figure E7: Option 1 (Sensitivity tests high level appraisal results) PV (Present Values) Option 1 Option 1 Sen Option 1 Option 1 Option 1 2010 prices and Sen 1 2 Sen 3 Sen 4 Sen 5 values Option 1 Option 1 Option 1 Option 1 half over a 15 with low Option 1 with Description with double benefits year passenger half benefits cost and double appraisal growth cost period PV Benefits (£m) 234 117 239 117 120 PV Revenue (£m) 150 75 153 75 86 PV Costs (£m) 133 133 265 265 130 NPV (Net Present 251 59 126 (73) 76 Value) financially BCR 2.0 2.1 0.6 2.8 positive Value for money Very high High High Poor High category *BCR = Benefit Cost Ratio; Monetised benefits / (Costs-Revenue)
This benefits presented are missing those associated with the deployment of Traffic Management in Kent, so benefits are currently underrepresented. This will be updated at the next stage Option 1 Sen 1 presents the low passenger growth scenario. The central case is not sensitive to this assumption; the case remains financially positive;
Option 1 Sen 2 presents a scenario where only half the estimated benefits are realised. The case is high value for money, but is not financially positive;
Option 1 Sen 3 doubles the cost. The case is high value for money under this scenario;
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Option 1 Sen 4 tests both halving the benefits and doubling the costs, in this scenario the option is poor value for money;
Option 1 Sen 5 tests the option over a 15 year appraisal period. The option would be high value for money if the assumed life of the technology was reduced by half.
2.8.1 Summary TEE table of Option 1 and sensitivity tests
Figure E8: Summary TEE table of Option 1 and sensitivity tests
Results of socio-economic appraisal 2010 prices and values Option 1 Option 1 Option 1 Option 1 Option 1 Option 1 Sen1 Sen2 Sen3 Sen4 Sen 5 South East Digital Rail SOBC April 2017
£m PV £m PV £m PV £m PV £m PV £m PV Net benefits to consumers and private sector (plus tax impacts) Rail user reliability benefits 201.5 197.4 98.7 201.5 98.7 103.4 Rail user journey time benefits 0.0 0.0 0.0 0.0 0.0 0.0 Reduced Crowding benefits 0.0 0.0 0.0 0.0 0.0 0.0 Non user benefits - road decongestion 51.4 50.2 25.1 51.4 25.1 25.1
Non user benefits - noise, air quality, greenhouse gases & 4.7 4.6 2.3 4.7 2.3 2.3 accident benefits
Rail user and non user disruption disbenefits during 0.0 0.0 0.0 0.0 0.0 0.0 possessions Current TOC revenue benefits* 0.0 0.0 0.0 0.0 0.0 0.0 Current TOC operating costs** 0.0 0.0 0.0 0.0 0.0 0.0 Indirect taxation impact on government -18.9 -18.6 -9.3 -18.9 -9.3 -11.2
sub-total (a) 238.6 233.6 116.8 238.6 116.8 119.5
Costs to government (broad transport budget)
01. Digital Capex (Railway control systems and associated 20.9 20.9 20.9 41.8 41.8 20.9 works) 08. Renewal of Digital Capex 0.6 0.6 0.6 1.3 1.3 0.3 09. Train Fitment Renewal 0.0 0.0 0.0 0.0 0.0 0.0 11. Level Crossing Renewals 0.0 0.0 0.0 0.0 0.0 0.0 12. NR Ops and Maintenance 0.0 0.0 0.0 0.0 0.0 0.0 15. Traffic management 84.2 84.2 84.2 168.4 168.4 84.2 16. Traffic management renewals 5.5 5.5 5.5 11.0 11.0 2.9 17. Victoria Signalling Upgrade 21.2 21.2 21.2 42.4 42.4 21.2 Total Capex 132.5 132.5 132.5 265.0 265.0 129.6
Non user benefits - road infrastructure cost changes 0 0 0 0 0 0
Revenue transfer* -153 -150 -75 -153 -75 -86 NR operating costs and TOC operating costs transfer** 0.0 0.0 0.0 0.0 0.0 0.0
sub-total (b) (20) (18) 57 112 190 43
Net Present Value (NPV) (a-b) 258.8 251.1 59.3 126.4 -73.2 76.1
Benefit Cost Ratio to Government (BCR) (a/b) financially financially 2.03 2.13 0.61 2.76 positive positive
Commercial Benefit Cost Ratio (CBCR) ((d-e)/c) 1.15 1.13 0.57 0.58 0.28 0.67
Notes: *Total revenue benefits = revenue benefits to private sector + 152.84 150.12 75.06 152.84 75.06 86.27 revenue transfer to government (d)
**Total change in operating costs = change in operating costs to private sector 0.00 0.00 0.00 0.00 0.00 0.00
sector + change in operating cost transfer to government (e)
Present Values (PVs) are in 2010 market prices and are discounted to 2010 using Social Time Preference discount rates: see Table A.1. The appraisal is in accordance with the DfT's WebTAG appraisal guidance. Results are shown for the relevant option/scenario etc relative to the Base Case. For net benefits etc, benefits are shown as positive. For costs to government etc, costs are shown as positive.
Commercial BCR is defined by Network Rail not by DfT/WebTAG. This is a summary version of the TEE tables. DR_SOBC_DCF_SE_v2_5
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2.8.2 Summary of Option 2 and 3
A full economic appraisal of Option 2 and 3 is not presented. At this stage no benefits of extending ETCS Level 2 have been measured. An assessment of the costs are presented to demonstrate the potential financial impacts.
Figure E9: Option 2 (ETCS Level 2 Underlay London Bridge to East Croydon). Option 3 (ETCS Level 2 Underlay London Bridge to Brighton). Present Value of costs, 60 year appraisal period,
£585 million
£355 million
Avoided conventional resignalling costs Avoided conventional resignalling costs
This early financial assessment indicates that deploying ETCS Level 2 would be more expensive than the base case to conventionally renew signals. At this stage no additional benefits have been measured from the capacity increase this option could provide. However, to include these benefits additional costs would also need to be included, such as relieving London terminal constraints and train fitment. Benefits would also only accrue after Croydon remodelling in 2028.
2.9 The Adjusted BCR: Wider Economic Impacts
Wider economic impacts describe some of the externalised effects of schemes on the wider economy that is otherwise unaccounted for under conventional WebTAG appraisals.
This section provides high-level estimates of the wider economic impacts (WEIs) of “static clustering” agglomeration effects as well as output changes resulting from firms engaged in imperfect competition. The agglomeration impacts include labour market productivity effects from better matches of employees to jobs, technology and knowledge spill-overs resulting from interactions between workers and firms, and input market effects from suppliers effectively being closer together and making shared use of infrastructure. The output changes from imperfect competition reflect the impact on market distortions that lead firms to charge higher prices than their marginal costs of production.
The approach used to calculate the agglomeration impacts is based on an uplift ratio of agglomeration benefits to other user benefits from London stations. The uplift is calculated using
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the benefits taken from the OXERA report “The Economic Impact of Increased Rail Capacity” (2016). In line with the approach used in the OXERA report, the WEIs included in the adjusted BCR (benefit-cost ratio) calculations exclude tax wedge effects resulting from potential increases in the size of the labour force. These labour force size impacts are not included in the adjusted BCR but they could be added to the agglomeration and output change in imperfect competition benefits.
In addition to the adjusted BCR, this section also reports some high level estimates of GVA (Gross Value Added) impacts and additional jobs created by the schemes by 2035. GVA estimates are calculated using the ratio of GVA to total conventional WebTAG benefits used by CrossRail 2. Job impacts are then derived based on the average GVA per job filled in the UK data for 2015 provided by the ONS (Office for National Statistics).
Figure E10: Adjusted BCRs and GVA and Job Impacts
Preferred Option TEE tables South East: Option 1
Option description Traffic Management in South East area enabling improved service performance
Units £m PV
Benefits: sub-total (a) 239
Net Present Value (NPV) (a-b) 259
Benefit Cost Ratio to Government (BCR) (a/b) financially positive
WEI Benefits - Output Change 22.8
WEI Benefits - Agglomeration 34.2
Adjusted BCR for WEIs (a+WEIs)/b financially positive
GVA impact (£m PV) * 500 to 1400
Employment impact in 2035 (# of jobs)** 200 to 700
*GVA range based on CrossRail 2 analysis showing 2 to 6 times WebTAG benefits, this may include some displaced economic activity. Other factors may also be required to trigger GVA increases
** Jobs impact based on UK average GVA per job filled for 2015. Figures may include some displaced jobs. Other factors may also be required to trigger job creation
These GVA and job impact figures are indicative only and are not used in the calculation of the initial or adjusted BCR presented. GVA and job impacts may also not fully account for displacement from other areas and hence may overstate the national impact of the schemes. Furthermore, other factors unrelated to rail may be required to generate the additional economic and employment activity.
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2.10 Conclusions
Option 1 has shown there is financially positive case to deploy Traffic Management incrementally over the Thameslink base case to the wider South East area. The value is driven by the relatively low cost of Traffic Management and benefits that have been valued over the Thameslink baseline. High level sensitivity analysis has shown that the costs would need to double, and the benefits half before the value for money dropped to poor value for money.
Option 2 and 3 analysis indicates there is not a case to deploy ETCS Level 2 from London Bridge to Croydon or Brighton unless the costs either match or drop below the cost of conventionally renewing signals over the life of the assets. The assessment has not taken into consideration any potential benefits.
2.10.1 Option conclusions:
Extending Traffic Management over the South East area is very high value for money.
Demonstrated by Option 1;
The expected revenue from the improved service performance in the area is greater than the cost; making it a financially positive case;
The benefits are dependent on the assumed impact on performance from the Thameslink programme and other work set to start/finish in the area.
Extending ETCS Level 2 from London Bridge to Croydon or Brighton is not a financially viable option.
Demonstrated by the cost assessment of Option 2 and Option 3;
Unless the costs of deploying ETCS can be shown to reduce Whole Life Costs compared to a conventional signalling renewal base case;
The need to extend ETCS in this area has not been sufficiently demonstrated to justify a benefit assessment.
2.10.2 Programme conclusions
As described in the Strategic case, the Programme Case considers a defined programme of work to help provide clarity, certainty, order, scale of deployment and a timeframe for implementation.
The South East SOBC, Option 1, demonstrates that the potential benefits of deploying Traffic Management in the area is high. The sensitivity has shown that this case is relatively robust to the uncertainty with both costs and benefits, and therefore can be considered a suitable option to develop and deploy in the shorter term.
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2.11 Detailed Appraisal Assumption tables
Figure E11: Further appraisal assumptions
Table A.1: Further appraisal assumptions Assumptions apply to central case unless stated. Further assumptions are in tables in main text. All years refer to financial years e.g. 2014 refers to 2014/15 F/Y. Assumption Value Source Comment General assumptions: Current year 2016 WebTAG Model base year 2016 WebTAG First year of benefits 2022 Project Team 100% of benefits realised from this year Benefits profile by year % of total 2022 100% Project Team 2051 100% Project Team Appraisal period (years) 30 Project Team The maximum is 60 years under WebTAG Price base year 2010 WebTAG (Unit A1.1, Values converted from Para 2.6.3) model base year to price base year using GDP deflator Base year for discounting 2010 WebTAG (Unit A1.1, Para 2.7.6) Discount rate (Social Time Preference 3.5% for 30 years from WebTAG (data-book- Rate) the current year and Summer-2016, Table 3.0% thereafter A1.1.1) & HM Treasury Green Book Unit of account Market prices WebTAG (Unit A1.1, 19% added to convert Para 2.5.2) factor prices to market prices Passenger benefit-related assumptions Passenger demand growth Passenger set or all services 2.3% p.a.from 2016 to Based on LSE Market 2018, 1.1% p.a.from Studies. Under the 2019 to 2025, 1.1% central scenario, growth p.a.from 2026 to 2036 is capped 20 years after and 0% thereafter. the current year, in accordance with WebTAG (Unit A5.3, Year in which underlying demand growth is 2036 WebTAG (Unit A5.3, This cap year also capped (20 years from current year) 3.3.1) applies to fare increases applied (see below) and any real terms cost increases applied (see above).
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Table A.1: Appraisal assumptions (continued) Values of time (VoT) by user type: All data are in market Business (work) users £16.21 per hour in 2010 WebTAG (data-book- prices prices November-2016 Commuters £9.95 per hour in 2010 forthcoming, Table prices A1.3.1) Others £4.54 per hour in 2010 prices "Rule of the half" 50% WebTAG (Unit A.1.3 Time savings applied to Para 2.1.6) new users at half the rate applied to existing users VoT growth (per annum) by user type:
Business (work) users GDP (real terms) per WebTAG (data-book- person Summer-2016 v1-6, Non-work GDP (real terms) per Annual Parameters) person (for 2010 onwards). Weighting for delays relative to in-vehicle Applied to economic i.e. journey time for economic benefits by user VoT benefits only - see type : below for weighting for Business (work) users 3.0 WebTAG (Unit A5.3, demand impacts Table 4) Non-work 3.0 WebTAG (Unit A5.3, Table 4) & PDFH (v5.0 Section B5.5) Weighting for walk time relative to in- Applied to economic i.e. vehicle journey time for economic benefits VoT benefits only - see Business (work) users 1.0 WebTAG below for weighting for Non-work 2.0 WebTAG (Unit A1.3, demand impacts Para 4.3.5) Weighting for delays relative to in-vehicle 3.0 PDFH v5.0 journey time for demand impacts:
Weighting for walk time relative to in- 2.0 PDFH vehicle journey time for demand impacts:
Average fare increases (% per annum 1.0% DfT advice above RPI) up to 2013 and from 2021. No increases applied after demand cap year (see above). Revenue growth also takes account of forecast increases in RPI relative to GDP deflator (until demand cap year), since appraisal uses GDP deflator to deflate prices to price base year. Reduction in car kms for 100% increase in 26% WebTAG (Unit A5.4, Same rate applied rail passenger kms (diversion rate), for Table 1) across GB external costs of car use
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Table A.1: Appraisal assumptions (continued) Values of time (VoT) by user type: All data are in market Business (work) users £16.21 per hour in 2010 WebTAG (data-book- prices prices November-2016 Commuters £9.95 per hour in 2010 forthcoming, Table prices A1.3.1) Others £4.54 per hour in 2010 prices "Rule of the half" 50% WebTAG (Unit A.1.3 Time savings applied to Para 2.1.6) new users at half the rate applied to existing users VoT growth (per annum) by user type:
Business (work) users GDP (real terms) per WebTAG (data-book- person Summer-2016 v1-6, Non-work GDP (real terms) per Annual Parameters) person (for 2010 onwards). Weighting for delays relative to in-vehicle Applied to economic i.e. journey time for economic benefits by user VoT benefits only - see type : below for weighting for Business (work) users 3.0 WebTAG (Unit A5.3, demand impacts Table 4) Non-work 3.0 WebTAG (Unit A5.3, Table 4) & PDFH (v5.0 Section B5.5) Weighting for walk time relative to in- Applied to economic i.e. vehicle journey time for economic benefits VoT benefits only - see Business (work) users 1.0 WebTAG below for weighting for Non-work 2.0 WebTAG (Unit A1.3, demand impacts Para 4.3.5) Weighting for delays relative to in-vehicle 3.0 PDFH v5.0 journey time for demand impacts:
Weighting for walk time relative to in- 2.0 PDFH vehicle journey time for demand impacts:
Average fare increases (% per annum 1.0% DfT advice above RPI) up to 2013 and from 2021. No increases applied after demand cap year (see above). Revenue growth also takes account of forecast increases in RPI relative to GDP deflator (until demand cap year), since appraisal uses GDP deflator to deflate prices to price base year. Reduction in car kms for 100% increase in 26% WebTAG (Unit A5.4, Same rate applied rail passenger kms (diversion rate), for Table 1) across GB external costs of car use Indirect tax costs Various including WebTAG (Unit A5.3, 4.7 As a simplifying current fuel duty rates, and data-book-Summer- assumption, the share of resource costs of fuel 2016) petrol and diesel in total and average fuel car miles is assumed to efficiency, and forecast be 50%/50% throughout changes in these the appraisal period. No parameters over the electric car mileage is appraisal period assumed.
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3. Commercial Case
3.1 Purpose
The purpose of the Commercial Case is to outline the commercial strategy to implement the South East Route Train Control Upgrade Programme and demonstrate its viability. It describes the required goods and services at a high level and the market’s ability to meet these requirements within the commercial strategy. It also references the procurement structure and considers risk allocation between parties and implementation timescales. It references the current market engagement and reports progress made in evaluating alternative delivery options and provides recommendations for a different approach to supplier relationship. For this SOBC stage, the commercial strategy has been developed to a relatively high level; the detailed commercial structures will be further developed at Outline Business Case (OBC) stage. 3.2 Output Specification
3.2.1 Key products required to deliver the South East Route Digital Train Control Upgrade The goods and services required to deliver the South East Route Digital Train Control Upgrade have been identified within the project’s Technical Options Report24. Initially the technologies delivered will focus on those currently available, with the option to develop into more advanced technologies as the Programme matures. The core goods and services required for the South East Route include the following supply chain offerings to detailed standards to be developed in conjunction with the supply chain to promote deliverability and affordability (described in Figure C1).
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Figure C1: Goods and Services Required
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3.2.2 Supply Chain Capability
The GB rail supply chain starts from a promising baseline to meet future demand. The growth in passenger and freight demand over the past decades has already built a strong and vibrant supply chain.
The Digital Railway Programme has commissioned external analysis on the current ability of the industry to deliver the goods and services required. Based on this analysis, it is possible to identify areas of strength and areas where additional intervention may be required. Figure C2: Areas where additional intervention may be required
Areas of Strength Areas for Development of Capabilities
Digital Railway represents a The UK market for ETCS Infrastructure marginal increase in planned Systems may not be seen as attractive Communication Systems work: for investment due to the market size Digital Railway will represent only a compared to foreseen demand across slight increase over the current Europe and may not elicit the required planned workbank. investment in capabilities by the existing supply chain in the UK: The UK has strong cyber security deployment of this capacity would be skills in parallel industries: whilst this affected by loyalty to customers in other is a new and expanding discipline, the countries and the perceived relative UK’s experience in safety critical attractiveness of the UK market. industries such as nuclear power, defence and aerospace means that the Few suppliers are able to provide Data supply chain is well positioned for Management Services across both future demand growth within rail information technology and operating technology: the Programme will have to The UK has a mature supply chain operate with a narrow supply base for System Integration Services: suggesting that the Programme will be well positioned to secure services
The UK has a mature supply chain for Programme Management Services: suggesting that the Programme will be well positioned to secure services
Despite mature capability and capacity in the supply chain, change management activity requires further development and maturity across the rail industry to enable the successful delivery of the Digital Railway Upgrade; the Digital Railway Programme has many different complex aspects relating to different types of change activities. Effective delivery of change management activities by strong capable change management professionals is critical to ensuring outcomes and benefits realisation.
Following engagement with the supply chain there is confidence that there is capacity in the market to deliver the projects. However the UK will be a smaller market than Europe, so creating an attractive market to compete for available resources will be important.
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With regards to data management, the Programme is engaging with the supplier base in an active way and will use contract strategy that gives long term commitment to ensure availability of resources in a narrow arena.
3.3 Procurement Strategy
3.3.1 Objectives Commercial structure
The commercial strategy for Digital Railway projects has the following objectives:
Safe: Does not impact the safe and reliable running of the railways;
Value for Money: (Delivery) Model achieves Value for Money through appropriate risk allocation and performance incentives;
Deliverable: Confidence that it can enable delivery of the required outcomes to required timelines and that adheres it to relevant policies and legislation (or provides a path to changed policies / legislation);
Affordable: Chosen deliverable model needs to be affordable to the Industry over time;
Risk Allocation: Model must not import risks into the Railway Industry for which it is not funded;
Align to RSG strategy: Model aligns RSG strategy and leads to UK skills development and improved export capabilities.
3.3.2 Procurement strategy approach
Industry has been heavily involved in developing a procurement strategy which meets the needs of Government, the South East Route and associated operators, the Digital Railway Programme and the supply chain. Value for money is at the heart of this strategy, and will be achieved through:
Collaborative engagement supported by transparent and effective risk identification, with risks jointly identified and valued and only transferred where appropriate;
Innovation incentives at all stages of the development and deployment process;
Reducing abortive activity and re-work, including ensuring compatibility with existing Route assets (such as Thameslink deployment);
Incorporating ‘ability to build’ throughout the development process rather than as an after- thought;
Early Contractor Involvement (ECI) and a collaborative approach, developing into a long- term commercial relationship.
3.4 Sourcing Options
3.4.1 Commercial Models Traditionally, the clearly defined role of the Infrastructure Manager (IM) for all asset types has been to perform design, specification, procurement and delivery tasks, which are outsourced to the supply chain where appropriate, but remain within the overall control of the IM.
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This is different to the provision of on-board equipment, which is typically outsourced by train operators as part of rolling stock provision.
The business case benefits have been derived in an as-is world and are not assuming changes to franchises.
The Programme has engaged extensively with the supply chain to investigate the appetite for an innovative and collaborative based approach via an Early Contractor Involvement work stream (ECI), Industry Roundtables, case studies and a series of supply chain workshops. Appetite exists in the supply chain for a more innovative delivery approach, especially where the potential exists for achieving better value for money. Some of the key observations from the supply chain, on how they could better support the design, implementation and operation of a Digital Railway, are detailed below:
Procurement of a whole life solution by a 3rd party, not just design and build, but also including planned and reactive maintenance ranging to potential operation over the life of the asset o Design, test and routine maintenance should be included with the main contract as design and test are fundamentally linked. This needs to be included to allow for innovation, effective risk transfer as part of VfM, and reduced interface risk. Planned maintenance should be included as the supplier is the expert on their technology and therefore can manage this better;
o Reactive maintenance should also be included in the contract. This allows effective transfer of WLC risk and would incentivise innovation to reduce maintenance requirements and therefore support VfM and innovation;
Appropriate allocation of risk where suppliers commit to a whole-life cost;
Output / outcome based specifications and contracts, allowing innovative solutions;
Longer term strategic partnerships with earlier contractor involvement, clearer pipelines of work of a sufficient volume to encourage market innovation and supply chain investment in R&D, skills and training;
Where the activity is ‘business as usual’ for Network Rail (i.e. the operation of the network, for which Network Rail is ultimately responsible as the license holder), Network Rail is best placed to continue to perform this activity, especially where there are safety or operational interface implications.
This would typically lead to contract lengths matching the life of the asset, ranging 25-30 years.
3.4.2 Financing The Programme also recognises that there are multiple options to fund or finance the design, implementation and operation of Digital Railway assets, and has identified the high level models in Figure C3. These will be studied in more detail, and recommendations will be made in the OBC.
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Figure C3: Evaluation of potential commercial models Type Strong Points Weak Points VfM through low finance costs, assets No new funds, potential loss of efficiency through no private Publicly Financed remain public, flexibility in operations, sector skills introduced, limited risk transfer legislation exists
Aligns design, construction and Approval required as novel/contentious, only limited risk Design - Build - operating risk, Introduction of private transfer, public ownership, so no reduction of funding burden, no Lease – (BOT) sector skills so more efficient delivery, revenue stream from outset; assets will need to be ringfenced no asset transfer and risks appropriately allocated
Increased risk transfer (design, Design – Build – construction, finance and operating) Novel/contentious, more complex and therefore time consuming Finance – Operate which promotes whole life cost to set up, contract management required (DBFO) approach, attracts private finance
Design – Build – Increased risk transfer (design, Novel/contentious, more complex and therefore time consuming Operate – construction, finance, operating and to set up, contract management required Transfer (DBOT) maintain) attracts private finance Design – Build – Maintain – Increased risk transfer; private finance, Novel/contentious, more complex and therefore time consuming Finance availability payment incentivises quality to set up, contract management required, no existing legislation (DBMF) Full risk transfer, reduced funding Novel/contentious, complex arrangement with many interfaces, burden to government, efficient delivery Full Concession assets no longer public, may not be politically acceptable, through private sector skills, potentially requires new legislation off-balance sheet The Programme will explore different funding models to OBC and has initiated a separate workstream that focuses on exploring third party financing options and models. This workstream will lead to worked up examples and recommendations at OBC stage. 3.4.3 Client Model The Programme has considered the approach to clienting, taking into account recent similar workshops held with the DfT. When considering who should be appointed as the procurement lead, the following observations can be made at this early stage - these will be developed further through the OBC:
Network Rail is the traditional procurement lead for rail projects; they therefore have the capability and skills;
Operators have limited experience and would likely require a longer lead time and would need to obtain capability, which would impact on scheme programme requirements;
DfT also has limited experience, but could second a team from Network Rail or build capability in another way;
A third party would also take longer as there will need to be a contractual arrangement in place. Additionally, there is very little precedent for procurement led by a third party;
The client model can vary based upon the chosen economic option and Route dynamics; ETCS has many more interfaces with the live railway, so Network Rail is the best procurement lead, whereas for Traffic Management, with a limited number of interfaces, a different approach could be considered. Procurement leads other than Network Rail will be likely to require more time to complete the projects and will have to depend on Network Rail resources to deal with the operational interfaces.
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3.4.4 Packaging Options The Programme has developed a proposed commercial & delivery model to support the OBC and SOBC documents. This has been developed in consultation with a wide range of internal & external stakeholders, including: suppliers; representatives from the TOC/FOC community and RDG; Infrastructure Projects (IP) and Route Services (RS) representatives; Railway Industry Association (RIA); and others, over a large number (between 10 and 20) engagement events. An example outlining a packaging approach is included below.
The Programme acknowledges the various packaging options that exist, and recognises that the mix and quantum of the required goods may vary depending on the packaging option selected as per the Economic Case. This will be further explored through the production lifecycle of the OBC. The developed model has the flexibility to cover all options.
There are varying packaging options ranging from a ‘single supplier turnkey’ solution to ‘hub and spoke’. The expected most viable option is included in Figure C4, however the optimum packaging will depend on the selected option. Proposed packaging for the selected option will be developed as part of the OBC.
Figure C4: Packaging approach
The proposed model balances existing commitments and constraints regarding existing commitments. For example: the ongoing First in Class (FiC) Cab-fitment Programme; the relationship between digital systems and other conventional Route programmes of work; benefits of making commitments to the supply chain to deliver best value; and the benefits of directly engaging with specialist suppliers in each market sector.
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The model includes the core digital elements, as well as the non-digital (turquoise bubble in the middle of Figure C4) for the Route specific requirements such as level crossing changes and track design, as well as the larger, enabling conventional enhancements such as station development in the green bubble. 3.5 Pricing Framework and Charging Mechanisms
Detailed commercial mechanisms are to be developed during development of the OBC. These will contain inclusion of early contractor engagement and a collaborative approach. An example of a likely 3 stage contracting model approach is included in Section 3.8.
A range of pricing frameworks have been identified and considered, ranging from “Cost Plus” to fixed price to target cost and output based. The latter two options incentivise the supply chain to deliver to agreed costs and the Programme is leaning towards a target cost mechanism. The exact mechanism will be developed for OBC.
3.6 Risk Allocation and Transfer
3.6.1 Key Commercial Risk, Allocation and Transfer Through workshops held with the DfT and industry representatives, the following commercial risks have been identified, summarised in Figure C5. Depending on the chosen commercial delivery model, where Network Rail is mentioned in the table, this can be read as Network Rail / TOC / Other, depending on who leads procurement.
Figure C5 also proposes an allocation for the risks, based on the principle that risks should be borne by the party best placed to do so, generally as they are in a position to manage and mitigate them. Risk transfer to other parties, such as Train Operators will be considered at OBC.
Early conclusions from these workshops are detailed below:
During early consultations and workshops, the supply chain indicated that they would be willing to take on key elements of the technology and performance risks.
A move to contracting on an outcome-based, whole asset life basis inevitably supports a transfer of construction, maintenance and delivery risk to the supply chain. The risk premium applied through doing this will need further analysing as the OBC is developed.
Construction and delivery risk during construction phase are best placed with the supply chain as they are best placed to manage these.
Other risks are best placed with Network Rail due to its position and ability to influence the risk.
It will be vital to build a collaborative, long-term relationship with joint incentivisation to achieve risk reduction or mitigation rather than merely transfer of risks.
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Figure C5: Commercial risks and proposed allocation
Risk Intended Allocation Rationale
Operational Supplier – Suppliers indicated that they Supplier can best understand and manage Performance are best placed as they understand their performance of their systems, and it will technology and its performance. Could incentivise them. consider a shared element to promote collaborative behaviour – especially where NR staff operate
Installation and Supplier – Envisaged that target price Supplier can best manage performance of their testing mechanism would be used. systems, and will incentivise them. costs/Delays in installation or testing
Maintenance Routine: Supplier – intended that Supplier can best manage this through design of costs supplier will give fixed price maintenance system and maintenance works within a based on specification. specification, and gives them whole life incentives. But NR can best manage specification change. Major: Network Rail if outside contract scope.
Finance costs Supplier (where privately financed) For privately financed schemes, private sector expected to fix the finance cost as part of pricing Network Rail (if publically financed) or (i.e. price would not change post contract award pre-contract award for potential movements in finance cost). However Network Rail would take risk on movements before the final price is agreed.
Integration risk Shared – contracts will set expectations Network Rail to manage the design, process and (trackside, in- of compatibility and testing requirements the specifications so that integration of existing cab systems, to ensure this. If the specifications are not assets, track and in-cab can take place. The existing correctly to achieve this integration, this suppliers then take the risk on delivering these systems) would be Network Rail’s responsibility. specifications and ensuring proper testing to achieve compatibility takes place.
Change in Network Rail The supplier is not able to manage changes in specifications specifications, risk transfer would therefore not provide VfM.
Demand risk DfT – the changes in revenues will have The supplier is not in a position to effectively to be taken into account in the franchise manage demand, as capacity increase will not just change process. There will be no direct be down to Digital Railway enhancements and link between revenue impact and timetabling, ticket prices, etc. will have an impact. payments to supplier. Therefore trying to force the supplier to take this risk is unlikely to deliver VfM.
Passenger Shared – Supplier penalties for greater Supplier can best manage performance of disruption (both disruption than anticipated due to their installation, and penalties will incentivise them. But during and after failure to deliver (e.g. Sch. 8 payments, they cannot manage increased disruption due to installation) economic impact) changes caused by Network Rail/TOC (e.g. because of change to telecoms, etc.). Also promotes collaborative behaviours.
Operating costs Network Rail – Network Rail will Operator is unable to manage these costs, and undertake operations and therefore costs therefore it is unlikely to be VfM to force them to it incurs will their risk (unless caused by a take significant risk on them. fault with supplied systems).
Technology Network Rail To be arranged contractually - what happens if the obsolescence contract is ended prematurely.
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3.7 Human Resource issues including TUPE
The roll-out of Digital Railway will require different skill-sets in future to operate and maintain the railway. This will affect people who work in the railway in different ways, partly depending on the chosen commercial delivery model. Resulting TUPE issues will be considered at OBC. Significant complexities exist within each of the stakeholder groups affected by the Programme, including the number of legacy employment contracts in effect. As a result, the effect on individuals within each of the groups is unlikely to be uniform. The Management Case outlines the development of a people strategy to address these issues, including training provision and a strategy for engagement with trades unions. 3.8 Implementation (Contract) Timescales
Figure C6 outlines an example contracting approach applicable to a structure where Network Rail is the lead procurer. It provides indicative timescales, but these will vary depending on the chosen commercial delivery model. Whilst this shows the 3 stage model for the core digital elements the same approach could be for the other elements omitting stage 3 where it is not intended that the supply chain has an ongoing maintenance input.
The model in Section 3.9 outlines which elements would be included. Figure C6: Example contracting approach
ANTICIPATED CONTRACT Supplier Selection Stage 1 Professional INPUTS: NATIONAL DR OJEU PQQ ITT ETCS/TM/CDAS SPECIFICATION Services DEFINED AND DEVELOPED Contract
OUTPUT INITIAL NEGOTIATION DEVELOPMENT TO ESTABLISH SCOPE, SCHEDULE & RISK
INPUTS: AREA & Stage 2 ROUTE ASSESSMENT Works Contract TO DETERMINE LOCAL RISK / SCOPE Appoint COST PLUS Suppliers ARRANGEMENTS OUTPUT: DETAILED DEVELOPMENT & Stage 3 DEPLOYMENT In-Life Service, Maintenance and Tech Development Contract
Agree Schedule of INCENTIVISED TARGET Cost Components Set Target Cost COST CONTRACT OUTPUT: IN-LIFE SUPPORT, MAINTENANCE & SYSTEM UPDATES
SCHEDULE OF RATES Agreed WITH PERFORMANCE Schedule of Rates BASED PROFIT INCENTIVE
3.9 Service Support
The Service Support Model will depend on the chosen economic option, delivery model as well as procurement model. Whilst a detailed support model is to be developed alongside the detailed procurement model during the OBC process, an example model where Network Rail leads the procurement is provided in Figure C7.
The figure shows the constituent parts of Digital Railway projects and the “In-Life Support Delivery” box outlines the proposed maintenance and support regimes. It is currently envisaged that the core
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For other elements, existing support and maintenance contracts are in place and the Digital Railway additions will only constitute a marginal element of the overall asset base. The Digital Railway elements will therefore be included in the existing maintenance and support contracts to achieve better commercial outcomes through economies of scale.
Figure C7: In-Life Support and Maintenance
3.10 Contract Management Approach
Whilst a detailed contract management approach is to be developed alongside the detailed procurement model during the OBC process, a likely example model is provided in Section 3.4.3.
3.11 Best Value
The question of how the commercial approach is intended to deliver value for money is intrinsically linked to the areas above. As outlined in Section 3.3.2, achieving the best value for money is at the heart of the selection process and guides procurement decisions.
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A programme wide ECI (Early Contractor Involvement) scenario has been undertaken with the aim of informing a preferred commercial delivery strategy that will drive down costs through teaming between the customer and supply chain.
The core output of the work identified key target areas that will have a significant impact on the cost of developing and deploying a Digital Railway solution, and where possible, quantify the potential saving and recommendations as to how the benefit can be realised.
ECI WS225 has identified eight opportunities relating to the causal factors that collectively could deliver a transformational reduction in the unit rate for Digital Railway deployment:
Economies of learning brought about by continuity of work;
Economies of scale delivering volume savings and efficiency gains;
Adoption of a ‘thin client’26 Digital Railway delivery model to put the supply chain close to the customer eliminating waste and leveraging the supplier’s return on experience;
Investing in development of Digital Railway skills and competencies by providing commitment that will provide the confidence to enable the supply chain to invest, and to reverse the industry skills drain to drive up performance and quality;
Leverage digital technologies to dramatically improve the quality of base infrastructure data which could avoid costly rework;
Collaborate with the supply chain to develop a clear and implementable Digital Railway system definition and reference design;
Provide the scale of opportunity to enable the supply chain to invest in Design and Test Automation alongside a modular design concept;
Appropriate delivery methodology, including incentivisation and whole life based procurement.
The ECI WS2 report indicates that with a joined up programme of procurement, these opportunities could significantly contribute to a unit rate cost reduction of between 23% and 42% by the end of a six-year period compared with prevailing CP5 tender prices. As this reduction can only be achieved by delivering the Digital Railway element as a programme, it highlights the significance of considering the Digital Railway Programme as a whole when procuring, rather than making incremental investment decisions.
A price reduction of 30% has been included in the SOBC estimates for the CP6 schemes. Further cost reductions for schemes delivered in CP7 and beyond are therefore possible, subject to achievement of the strategic objectives.
3.12 Conclusion and Commercial Recommendations
Based upon active engagement with the supply chain and benchmarking exercises, to obtain best Commercial Value, it is recommended that the South East Route Digital Train Control Upgrade Programme is:
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Aligned with the wider Route investment programmes to maximise the scheme’s benefits; Contains a system integration element to ensure all parts of the package are compatible with the rest of the Route’s assets and systems; Developed and delivered in close, early and collaborative relationship with the Supply Chain, which would benefit job and skills development, as well as allow the Programme to achieve the forecasted Unit Rate savings.
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4. Financial Case
4.1 Purpose
The Financial Case concentrates on the affordability of the proposal, its funding arrangements and technical accounting issues (value for money is scrutinised in the Economic Case). It presents the financial profile of the different options and the effect of the proposed deal on the Department’s budgets and accounts. In the South East Route Digital Train Control Upgrade SOBC the total option costs are included, but the focus is on acquiring funding to complete the Outline Business Case (OBC) stage.
For the South East Route, this will involve: a review of what costs are contained within the Digital Railway analysis; a year-by-year breakdown of the spending profiles of the options as well as the high-level breakdown in Appendix B:Costs, a review of multiple sources of funding for financing the main option and a description of possible sources.
4.2 Budget Profile
The Financial Case describes the Net Funding requirements of the preferred economic option. This is contained in Figure F2.
Figure F1: Digital Railway option description
Options Description
Option 1 Isolated TM Route Wide, with Integrated TM on the BML and re-control of Three Bridges ASC to TB-ROC (Preferred Economic Option)
Figure F2: Net Funding Requirement SE Route Options (2016-2064)
The table above shows the net funding requirement (net vs base) and total cost for the preferred economic option. The net funding amounts represent the additional funding required above that
which would be required to fund the base case as described in the Strategic Case. Please note that these figures are indicative point estimates and should be read in conjunction with the section on cost sensitivity in the Economic Case, which highlights the impact of actual costs not aligning with these point estimates.
The costs in the Net Funding requirements table are based upon traditional procurement and delivery. This means that the costs could vary, depending on the chosen delivery method. The implications of alternative delivery models and utilising third party financing will be explored in the OBC.
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Figure F3: Sensitivity of SE Route Digital Train Control Upgrade Cumulative funding requirement
The tables indicates the following
Option 1 is substantially completed in CP6 and requires only limited amounts of funding in subsequent Control Periods. Spend in future control periods is related to Traffic Management Renewals and these do not occur every control period.
Option 1 is incremental cost to the base case, but as highlighted in the Economic Case, provides revenue that outweighs the costs.
There is performance improvement requirement on SE Route, which helps to further strengthen the case for implementing Traffic Management on SE Route.
4.3 Cost estimate
The estimates are prepared on an industry level and therefore include not just Network Rail costs, but also include the TOCs, FOCs and ROSCO’s spend of deploying Digital Railway technology in the Route. The cost estimates have been prepared on a first deployment basis, assuming delivery of a programme of 3 projects in Control Period 6-7 (CP6-7) – 2019-2029. They therefore contain a cost premium which is anticipated to reduce over time due to a learning effect within the industry as well as a changed procurement approach. See the Commercial Case for more about anticipated future cost development.
See the assumptions log (available on request) for more detail on the cost estimates and what is included in the estimates. Significantly, the estimates exclude:
Opex benefits related to introduction of Traffic Management;
Risk and Contingency; Optimism Bias is applied instead to counter any optimism that may have materialised within the initial cost estimates for the programme;
Elements subject to a separate business case.
4.4 Benchmarking
Benchmarking has been undertaken with respect to GB central interlocking and ETCS level 2 control against current known costs incurred within Denmark and Norway. These Scandinavian programmes have been identified as the main source for comparison because they are the only national programmes with full replacement of central signalling systems and a full range of recently tendered prices. The benchmarking process has been extensive and includes Early Contractor Involvement (ECI) outcomes as well as specialist reports commissioned by the Digital Railway programme. The reports, which have been shared with the Department for Transport and IPA, contain the following key points;
Central signalling and Traffic Management systems are the main cost drivers, driving also the indirect costs which are derived as percentages;
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Prices have been derived from an “early deployment” project. Along the learning curve, lower prices can be expected;
The indirect costs in percent are comparable to Denmark and Norway. Via the percentages, the indirect cost estimate fluctuates with the direct cost estimate. Review of the contract / procurement strategy might reveal more opportunities for larger lots, better economies of scale, and sustained competition.
The above confirms that there is value in considering the Digital Railway roll-out as a programme of works, rather than incremental investment decisions. A programme will allow for better economies of scale and will ensure that items such as fixed programme costs are spread over a larger number of projects.
4.5 Budget/Funding Arrangements
The SOBC only requests funding to further develop the project to OBC stage. At OBC stage there will be a funding proposal which will consider the full investment and answer the wider funding questions and methods. The OBC will also explore the potential for third party funding and/or public/private financing.
The Digital Railway Programme is working with the Routes to decide how they include the forecasted expenditure in their Route plans. The December 2016 Programme Level OBC was used to provide input into the Initial Industry Advice (IIA) and the programme was included in the IIA at £3-5 billion, but this was not split out per project/Route. The ultimate CP6 funding requirement will depend on how many schemes are taken forward for development and delivery in CP6.
The Digital Railway Programme anticipates that planned conventional re-signalling spend will be change controlled to fund renewal via digital means in the areas where these will be delivered in CP6/7. The programme will work with the planning community to mitigate abortive costs and rework by planning the change from conventional to digital renewal in a timely manner.
4.6 Funding Arrangements
Funding arrangements will depend on the chosen commercial delivery model. The funding arrangement will therefore be developed at OBC. Although at this early stage traditional funding sources have been assumed for costing purposes, the potential for third party financing (contributions) is highlighted.
There is a separate workstream exploring third party financing and this will deliver recommendations for the OBC.
In the National Outline Business Case for Digital Railway27 the various ways of sourcing funding have been described; the pros and cons of these are summarised in Figure F4.
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Figure F4: Evaluation of possible funding sources
4.6.1 Budget Mitigating Actions
The required funding for rolling out the South East Route Digital Train Control Upgrade plans could potentially be reduced as elements could be included in schemes that are already funded. Due to the 5 year cyclical funding cycle, this would only be applicable for those schemes already planned for delivery in CP5 & 6.
The conventional signalling renewal spend is considered funded and would simply be repurposed (change controlled) for digital resignalling schemes once that decision is made. The Digital Railway Programme is working with the Route planning community to limit or avoid abortive costs and re- work.
Additionally, the Traffic Management element of the SE Route business case is considered for funding via the recently announced National Productivity Improvement Fund (NPIF). If this is funded via the NPIF, the required funding for the SE Route upgrade will exclude the parts funded elsewhere and reduce by that amount. The Digital Railway Programme is working with DfT to develop the SOBC for the NPIF options.
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4.6.2 Third Party Contributions
Once the Route plans have been developed further, Third Party financing contributions will be considered. Whilst this is an avenue the programme is exploring through a variety of consultations and working groups, at this early stage there have only been discussions which would need to be further developed before the contributions could be considered.
The potential for private (Third Party) funding contributions will also depend on the chosen commercial delivery model and scheme characteristics; this topic will be further explored for OBC.
4.6.3 Financial authority points
As part of the next phase of the programme, the next tranche of funding is needed to get the programme towards an Outline Business Case – a stage which would indicate a preferred detailed option and method of procurement which broadly corresponds to GRIP stage three of eight. For more detail on GRIP please refer to the Management Case.
The recent DR ECI work has identified benefits from adopting a ‘thin client’ approach and engaging the supply chain early in the lifecycle under an outcome-based contract. The Route are supportive of such a strategy, but it is recognise it will cause the project development phase to look quite different to what the industry is used to, requiring initial investment authority for just the early development phase (GRIP1/2) covering outcome definition and procurement activities. Therefore the first authority request will progress towards completing to OBC to identify the most efficiency and economical strategy to develop and then procure the scheme. With respect to the Memorandum of Understanding between the DfT and NR, this Commit to Develop request will be aligned to the NR investment authority request.
4.6.4 Funding to next authority point
This SOBC focusses on acquiring the required development funding to reach OBC stage. As per the paragraph above this equates to approximately GRIP 3. Based on analysis of completed projects, the required development is commonly between 10 and 15% of the total project costs. Sufficient development funding will be essential for delivery per plan in future control periods.
However, to achieve the Thin Client aspirations, early development funding of £5 million will be required. This number will need to be further refined post-SOBC. The programme will therefore work with the Route to put a development plan in place post-SOBC and will provide an updated number in the summer.
4.7 Balance Sheet
The impact on Network Rail’s balance sheet will depend on the funding and financing mechanism that is eventually selected. It is anticipated that even if Digital Railway is delivered via for example a Public Private Partnership (PPP) that it will remain on the government’s balance sheet due to the required control over critical assets such as the railway.
The high level accounting implications for Network Rail and Public Accounts have been established, both for the status quo as well as in a situation where there may be private investment. The accounting implications are only subject to change when Digital Railway, or an element of it, is to be funded or financed privately. The remainder of funding provided, along with the recognition of expenditure and asset investment, will be accounted in accordance with current practices. These are based on International Financial Reporting Standards (IFRS) and Whole of Government accounting.
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4.8 Recommendations
The analysis on the South East Route Digital Train Control Upgrade supports the following indicative conclusions
The investigated Traffic Management only option could represent a viable financial investment for the South East Route, but this will require further investigation;
Continue work with DfT to develop the NPIF option for the Traffic Management element of the SE Route case;
Private Funding and Financing solutions should be further investigated for OBC.
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5. Management Case
5.1 Introduction and Objectives
The rail industry has experience of delivering large and complicated programmes, but there have been few truly industry wide change programmes on the scale of the digital railway.
The Digital Railway Programme is therefore preparing for safe, timely and efficient delivery of the preferred option, through:
Understanding its purpose, what is required to deliver that purpose, and the benefits delivery will provide;
Following an approved and tested project management methodology, including planning for incorporation of lessons learned from the National Audit Office’s review of Great Western Route Modernisation28, ‘Lessons from major rail infrastructure programmes’29 and from early deployments during CP5;
Allocating responsibilities to accountable parties within an industry-wide operating structure;
Considering the full range of industry expertise available, and involving it at an early stage. (as discussed in the Commercial Case);
Preparing to deliver using an incremental “phased” approach.
The Economic Case has set out the benefits that are anticipated through delivery of the preferred option at the route’s programme-level as well as strategically, for the wider rail network and for GB plc. This management case describes the methodology for ensuring these benefits are realised.
5.1.1 Project management objectives The principal objective of project management is that the Route delivers the recommended upgrade with industry-wide input (Section 5.4.3 below).
Project management objectives for reaching OBC phase will be to:
Develop the overall programme of work for the preferred option, developing increased clarity and certainty whilst reducing risk;
Prepare a proposal for the funder which outlines the whole programme with a plan, protocol and cost for the next stage of work.
After the OBC, for the Final Business Case phase (FBC), the project management goals will be to:
Design all elements of the rail service change proposed;
Plan, cost and undertake all pre-contract activities to deliver the service change.
At project delivery, project management should implement the integrated project as per the contract and closing down the project should be done in agreement with all clients, having confirmed delivery as agreed and recording any lessons learned to share with the rest of the Digital Railway Programme.
28 https://www.nao.org.uk/report/modernising-the-great-western-railway/ ‘Modernising the Great Western railway’, National Audit Office, 9 November 2016. 29 https://www.nao.org.uk/report/lessons-from-major-rail-infrastructure-programmes/ ‘Lessons from major rail infrastructure programmes’, National Audit Office, 24 October 2014.
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5.1.2 Project management methodologies The Digital Railway Programme team is setting the vision and providing oversight and support for South East Route’s delivery of the project, including business case development.
The use of a project lifecycle and governance framework, GRIP, will enable management and control of the project to meet project management objectives. This framework is designed to be applicable both at an individual project level e.g. for each new technology being introduced and for the overall programme to deploy a digital railway in the route. GRIP has been developed to provide a tailored version of PRINCE2 suitable for the rail industry.
Previous large investment programmes have been limited in at least one of the following factors:
Impact on operating principles and model;
Multiple route deployment;
Deployment over multiple control periods;
Stakeholders from all parts of the industry.
Thus it has been more effective to plan and deliver these investments via a single body with little need for industry–wide change programmes. This approach is not possible for Digital Railway - which will require a new level of cross-industry collaboration to deliver successfully. To manage the expected level of business change effectively, the project is being developed in line with the MSP4NR (Managing Successful Programmes for Network Rail) framework, which is a recognised industry best practice approach to managing business change programmes. MSP4NR processes are being used to identify the necessary roles, responsibilities and accountabilities for this programme, as set out below. The roles for the development of the business cases have been shared between the South East Route and the Digital Railway Programme team, which includes industry stakeholders. Broader stakeholder engagement, including with the people most directly impacted by expected changes to operating principles and models, is also discussed in more detail below. For a programme as large and complex as Digital Rail it should be noted that there is no template approach to applying HMT’s ‘Green Book’ decision point framework. Indeed, putting together a plan to move through these decision points is a key ongoing activity for the Digital Railway Programme. GRIP is a tool for delivering projects and programmes, and so will not precisely align to the decision point framework for government (which focuses on giving funders confidence to invest in a programme which delivers the outputs they may wish to buy). The Digital Railway Programme contains many projects which will be at different GRIP stages as key programme-level decision points are reached. 5.2 Programme/Project Dependencies
Key dependencies concern the competition for the South East franchise, rolling stock considerations, other digital deployments, other upgrades such as Thameslink, including conventional enabling enhancements and conventional resignalling plans, as described in the Strategic and Economic Cases. As a cross-industry programme, the range of dependencies for the digital railway is broad and complex, including funding, franchising and supply chain capability. A full dependencies log for this project will be developed in the next phase.
Interdependencies will be managed principally through (i) development in the OBC phase of workstreams to assess digital railway’s potential requirements of other projects and business areas
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The Periodic Review for Control Period 6 (PR18) will, for the first time, exclude enhancement funding, to allow for funding decisions to be made for each project when its development has reached an appropriate level of maturity. Since digital deployment is so dependent on enabling conventional enhancements and on signalling renewal plans (where conventional works’ funding is recommended to be repurposed to digital), existing scheme governance and change controls will need to be revised to ensure overall planning and funding remains compatible with recommended digital options.
As set out in the Finance Case, estimates covering both Network Rail’s route-specific and programme-wide (e.g. technology testing and strategy development) digital deployment costs have been held in the Digital Railway Programme’s element of Network Rail’s overall business plan during development of this SOBC and have thus been excluded from the route’s business plan. However, beyond the SOBC, it is intended that Network Rail’s direct deployment and associated scheme development costs will be included in the route’s Strategic Business Plan which will form part of Network Rail’s submission for PR18. The Digital Railway programme has been working with the relevant planning communities to effect this transition post-SOBC.
5.3 Programme/Project Governance, Organisation Structure and Roles
5.3.1 Digital Railway Programme Structure The programme is being structured on a “thin Client” basis, providing expertise and coordination only where it is appropriate and value-generating to do so.
The programme is operating three central elements:
Strategy and Business Case Development – analysing the issues that the railway currently faces, what capabilities Digital Railway could deploy to remedy the issues, and developing business cases to justify the cost of change; all in conjunction with the Routes and broader industry;
Programme Management Office – managing the plan, risks, interdependencies and national interfaces at an enterprise level. Monitor benefit realisation across multiple locations;
Technical Authority - ensuring that the technologies developed are compatible, safe and of a standard that will generate benefits.
5.3.2 Programme governance The programme is applying governance in three key ways:
In line with the Memorandum of Understanding process between the DfT and Network Rail;
Through utilisation of an Advisory Group;
At a project level, through the Route Steering Board (governance currently under consideration).
The relationship between these governing bodies is illustrated below.
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Figure M1: Digital Railway governance charts
Notes: Digital Railway Steering Board is a Network Rail internal body The London North East & East Midlands Operations Working Group is a legacy working group from the ETCS East Coast Programme
No Capacity Working Group for the Western Route took place as the SOBC problem statement is primarily focused on performance issues
This governance structure is intended to enable shared learning to make sure that benefits can be achieved across the various routes planning digital deployments in CP6 and other routes that may deploy these technologies in the future. In this way, the Digital Railway Programme can be used as a source of common information and specialist knowledge for devolved routes to deliver the infrastructure capabilities their customers need.
We are also aware of ongoing discussions with the DfT which may lead to further development of their governance of digital railway outcomes in the coming months.
5.3.3 The Memorandum of Understanding Network Rail and the Department for Transport agreed the governance that applies to Network Rail initiatives within a memorandum of understanding, signed on 23 March 2016.
The process for governance and the various stages of approval, including review of this SOBC, are outlined in the chart below alongside the MSP4NR and GRIP methodologies for programme management.
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Figure M2: Governance and approvals process for the Digital Railway Programme
5.3.4 The Advisory Group The Digital Railway has established an Advisory Group, which meets monthly to provide leadership to support and challenge the direction and performance of the programme both internally and externally. It is chaired by Mark Carne and attended by Digital Railway leadership, Managing Director of London Underground and London Rail, and representatives from TOCs, FOCs, RDG, DfT, ORR and Crossrail.
The Advisory Group uses cross industry expertise to make decisions on behalf of industry and NR, and it has the authority to resolve critical programme actions/issues that are escalated by the NR Steering Group.
5.3.5 The Route Steering Board The Route Steering Board was established for strategic decision making in the Route to bring together a range of stakeholders, including train operators, the Department for Transport and senior planners to review technical outputs of the Digital Railway Programme.
The Route Steering Board represents a cross industry view:
, Route Managing Director, Network Rail (South East Route);
, Route Asset System & Integration Manager, Network Rail (South East Route);
Director, Route Asset Management, Network Operations (South East Route);
, Network Rail (Network Strategy and Capacity Planning);
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Department for Transport;
Southeastern Railway;
Digital Railway Technical Specialists.
To date, the RSB has signed off and endorsed:
Remit;
Problem Statement;
Route Options;
Assumptions.
In the next phase, the Route, the Digital Railway Programme team, and other key stakeholders will agree their more detailed roles, responsibilities and working relationships reflecting the number of projects likely to be progressed in CP6. They will also decide the best balance of local ownership versus central co-ordination and oversight, clarifying how the ‘thin client’ approach should work in practice.
5.3.6 Interface with other programmes
It is proposed that governance in relation to other programmes will be undertaken as follows:
The strategic overview of all major works on the SE Route will be managed by South East Programme Board. This will consider issues such as this SOBC, and how the works interface with other activities;
The proposed use of the Digital Railway Fund on the SE Route will be managed through the Digital Rail Client;
Where Digital Railway affects other projects then the relevant decisions will be undertaken in conjunction with the relevant governance for those schemes. For example any interaction between Digital Rail and the BML Capacity Upgrade will be agreed by the Client Board for the BML Capacity programme.
5.4 Programme/Project Plan
A high level plan has been developed for the preferred option (see Appendix G), working backwards from project delivery by the end of CP6, facilitating an initial assessment of the impact of dependencies and constraints on delivery in the timeframe and allowing alignment with the programme deployment strategy. This plan has been developed for costing purposes only, and does not take fully into account the time needed for decision making following the completion of this SOBC and the development up to the GRIP 3 option selection. As a result, the programme plan will be revised as part of the package of activities to reach OBC, when the programme will have a more detailed understanding of the timeframe for delivery in CP6 or 7.
5.4.1 Deployment at a programme level The deployment strategy of the Digital Railway programme will be phased between the present day and the end of CP6/mid-CP7. Initially, digital technologies will be deployed on selected candidates in CP6 and 7 as set out in the diagram in Appendix A. Since Traffic Management has highest value for money on the South East of any route evaluated, it is therefore recommended that it should be targeted for first deployment. Version 1.0 Page 76 of 106 Issued: 28 April 2017 Template Version: 1.0
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5.4.2 Industry is working together to deliver this project Delivery of Digital Railway, and generation of realisable benefits, requires the industry to work together; using individual accountabilities and expertise to deliver the best value for money solution. The chart below outlines a sample of participant groups.
Figure M3: A sample of participants of the Digital Railway programme
The roles of these participants are explored in more detail in Appendix H.
Supplier development activities are discussed in more detail in the Commercial case.
5.4.3 Project planning beyond this SOBC The South East Route will form a project team to take this project forward following approval of this SOBC and the outcome of proposals for use of the £450m allocated from the National Productivity Improvement Fund at the 2016 Autumn Statement. The project will draw on technical experience and advice from the Digital Railway programme and wider stakeholders, including in relation to the Digital Railway Programmes’s detailed strategies for safety and for cyber security.
The project team will reflect on lessons learned (see benefits management methodology below) and examine existing processes, including within the well proven GRIP framework, to assess how they may best be evolved to meet the challenges of the proposed changes.
5.5 Communications and Stakeholder Management
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A people strategy is under development that looks to include a national level trade union engagement strategy.
Stakeholder engagement and the people strategy will be developed beyond this SOBC with the balance between project- and programme-level responsibilities agreed according to the ‘thin client’ framework described above.
This will include an emphasis on high quality communications with the DfT passenger services team to maintain alignment over the coming years, during a potential period of great change in operation of train services on the South East Route.
5.5.1 Trade Union Engagement In October 2016 a Joint Working Group was established for Network Rail operations that includes Network Rail Routes and the central team, as well as TSSA and RMT. In December 2016 a similar strategy for Network Rail Maintenance with RMT, TSSA and Unite was agreed with the National Maintenance Council. Rail Delivery Group lead on Digital Railway briefings to the Trade Unions, recognised by TOCs and FOCs. Personal updates to Union Executive Groups have also been offered by Digital Railway, and the first discussion with the RMT executives will go ahead in April 2017. These discussions will include all of the products, training and possible changes to working for people working with these new tools.
5.5.2 Training A training strategy for all products is currently being developed jointly with Rail Delivery Group. Key papers on a simulator strategy and an academic industry development strategy will be presented to the Programme Control Board by May 2017.
The overall strategy covering all these areas will be finalised by the end of June 2017. 5.6 Programme/Project Reporting
As set out above, working relationships, roles, accountabilities and project management processes for South East Route, the Digital Railway Programme team, and other key stakeholders will be developed and agreed in detail following the outcome of this SOBC. This will also need to reflect allocation of the £450m proposed for testing signalling technology from the NPIF, since TM deployment on the BML is a key proposal in the NPIF SOBC.
5.7 Implementation of Work Streams
In the next phase, the project team described in XX above will lead the development of workstreams for execution of the project. The indicative deployment approach shown in Appendix G sets out potential work streams.
A key innovation for the project will be to seek a more collaborative approach with suppliers, moving from a traditional client/supplier relationship to a more service based framework. The workstreams will also need to take account of interdependent enhancement and renewal activities that currently run in parallel, where some revisions to governance may be necessary to manage coherency and dependency more effectively and efficiently.
5.8 Key Issues for Implementation
The Digital Railway is part of a cross-industry change programme, facing significant challenges, issues and constraints, of which the key elements are described in the Strategic Case.
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5.9 Contract Management
Contract management is addressed in the Commercial Case.
5.10 Risk Management Strategy
5.10.1 Programme and project approach The discipline of risk management forms part of the Digital Railway Programme Management Office (PMO) and will be part of South East Route’s project team responsibilities with the balance of responsibilities to be agreed as set out above.
The Digital Railway PMO has developed a suite of documents to communicate the approach adopted to implement the discipline of risk management across the programme. The risk management remit in particular (following the guidance contained within ISO 31000) sets out for instance the process, tools, vocabulary and reporting requirements to be implemented by each of the projects which form the programme.
The PMO central risk management team sets the minimum standard for risk management, provides resources to support the implementation of risk management by individual projects including reporting and the escalation of risks for decision making and assurance processes.
The major Digital Railway Programme risks are outlined in the Strategic Case.
5.10.2 Portfolio management Following the assessment of each of the five SOBCs being prepared by the Digital Railway Programme, consideration will be given to the balance of contributions each SOBC makes to the overall portfolio on three measures:
Value;
Strategic alignment;
Constraints / risk.
This is described further in the portfolio management diagram below. Exploration of the best strategic fit between the SOBCs can then feed into the development of an integrated programme to take account of the constraints to delivery across the network.
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Figure M4: managing the portfolio
Exploration of the best strategic fit between the SOBCs can then feed into the development of an integrated programme to take account of the constraints to delivery across the network.
5.11 Benefits Management and Evaluation Realisation Plan
5.11.1 The blueprint – defining how the programme will deliver to enable benefits The programme’s blueprint document is provided within the supplementary documents. The purpose of this blueprint document is to provide a single source that explains how the vision and objectives of the Digital Railway Programme will be achieved to realise benefits for passenger and freight users of the railway.
The blueprint sets out the current state and targeted digital railway states of the railway expected from the transformation of digital train control systems and operations, and defines the high level capabilities and associated maturity levels that are required to achieve each of these states/outcomes. Each state represents a ‘step-change’ in the digitisation of the railway, and the benefits realised in return for the investment committed.
This blueprint document is a high level articulation of the required capabilities to achieve the proposed transformation of digital train control systems, and should not be used as a replacement for more detailed analysis of capability maturity requirements. These are set out in the enterprise architecture documentation (available on request) which underpins the programme’s approach to develop a ‘systems of systems’ view that ensures coherence across the multiple industry partners.
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5.11.2 The benefits management strategy – how the project will realise benefits
For each case robust evidence will need to be available in the Final Business Case and is recommended for the Outline Business Case.
Specifically, for each of the 3 identified schemes:
A methodology will need to be developed to demonstrate the cause-and-effect relationship between new Traffic Management (at specific geographies on the BML) and train service improvements on the Route. Given the limited evidence available to date it will be important to validate the performance benefits of TM against real events with the TM element alone being the only variable. This is likely to be difficult in 2018, due to the large number of other changes;
A methodology will need to be developed to appraise options for potential integration of Digital Rail elements into the BML Capacity Scheme, with the impacts both without and with the Digital Rail element assessed. This will need to be considered during the option identification and selection process for detailed components (principally signalling);
For the ELL service growth option a proof of concept timetable will require creation and validation, with evidence validated as to why the digital component is necessary. Such analysis can then be integrated with ELL SOBC proposals at the next stage of development.
The project’s draft Benefits Management Strategy has been drawn up by the programme, and is available on request.
This benefits management strategy sets out how benefits are managed and the framework within which realisation will be achieved for this project, including roles and responsibilities within a MSP4NR-aligned RACI. The strategy ensures that a risk based approach to benefits realisation is being followed. This is part of the benefits management lifecycle shown over the page.
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Figure M5: MSP4NR phases
This document will be revised following consideration and approval of this Strategic Outline
1.0 2.0 3.0 4.1 5.1 6.1 7.0 DESIGN DELIVER DEMONSTRATE Tranche 1 Projects in Tranche 1 Benefits of Tranche 1 HIGH LEVEL DETAILED IDENTIFY CLOSE
DEFINITION DEFINITION 4.2 5.2 6.2 MSP4NR DESIGN DELIVER DEMONSTRATE Tranche 2 Projects in Tranche 2 Benefits of Tranche 2
Identify & Quantify The benefits and dis-benefits required
Value & Appraise All benefits should be stated in measureable terms and where possible quantified in financial terms
Plan Realise The work required to both deliver the Projects deliver the outputs and capability, capability and review benefits realisation which once transitioned into operational must be carefully planned use, will achieve the benefits required
Review BenefitsManagement Framework The level of benefits realisation should be continually assessed both during the programme and possibly for considerable time, after the programme has closed. These reviews need to be planned and cost of review accounted for. Business Case, and therefore reflects the project’s thinking at this identify stage.
5.11.3 Applying lessons learned The Digital Railway Programme, as part of its thin Client role, is identifying lessons learned from a number of sources so that they can be reflected in its support to the routes during and post-SOBC. These sources include the National Audit Office’s review of Great Western Route Modernisation30 and its ‘Lessons from major rail infrastructure programmes’31 which focus particularly on recommendations concerning economic analysis and programme governance. Digital railway is also testing implementation before delivery to learn lessons by allowing systems to be introduced, tested and refined on targeted sections of the network before rolling out the technologies on a larger scale across the network. This testing covers both individual Digital Railway systems, and integrated packages of systems. Traffic Management (TM) on GB railway comes in three forms: an operation decision support tool and as interfaced or integrated TM, with each being a more advanced version of the previous one. Each of these versions is being deployed on the railway and will inform an assessment of the costs, benefits and application of each version.
Cardiff Rail Operating Centre – deploys operation decision support tool within current operating practices and adapts roles and ways of working to the new system;
Romford Rail Operating Centre – deploys integrated TM and tests the roles and ways of working to complement the new system;
Thameslink – deploys interfaced and integrated TM versions as well as ATO over ETCS level 2 to facilitate an enhanced timetable of cross-London services from 2018 by delivering
30 https://www.nao.org.uk/report/modernising-the-great-western-railway/ ‘Modernising the Great Western railway’, National Audit Office, 9 November 2016 31 https://www.nao.org.uk/report/lessons-from-major-rail-infrastructure-programmes/ ‘Lessons from major rail infrastructure programmes’, National Audit Office, 24 October 2014 Version 1.0 Page 82 of 106 Issued: 28 April 2017 Template Version: 1.0
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infrastructure capable of 24 train paths per hour (tph) through its ‘core’ at peak times. This represents an increase of 8 tph from the current infrastructure capability. ETCS level 2 functionality has been demonstrated at Cambrian and on test track at ENIF, the ERTMS National Integration Facility. ETCS Level 2 v.360 is the latest version mandated by the EU for use on European Railways and has been enshrined in UK law by the Rail Regulations, specifically Interoperability Regulations. It will therefore be the version deployed by Digital Railway. Prior to deployment, the element of the system to be housed on the train is to be tested by connecting the system at ENIF with an ETCS fitted train on the Melton test track at Network Rail’s Rail Innovation and Development Centre (RIDC) and conduct 1,000 miles of testing. These early deployment sites are providing valuable lessons learned across the nine levers of change identified by Digital Railway (see below for further details). For example:
Cost estimations of systems and their implementation;
How to avoid interoperability issues when procuring Traffic Management;
Running of trains using ETCS including detailed learning on specific features such as the settings required trains run in a low track adhesion environment;
Training required to provide staff with the knowledge needed for operation of TM to the expected levels of reliability;
Criticality of leadership and business readiness activity to support deployment including current constraints on implementation in the Routes. 5.11.4 Developing new capabilities will require effective business change, supported by an industry readiness toolkit The installation of digital train control and signalling will result in the alteration of many operating processes and procedures. These changes represent one of the biggest opportunities and, at the same time, if not properly addressed, give rise to significant risks to delivering the benefits of a digital railway. Using technical solutions, enabled by business change, to achieve the identified outcomes will require the rail network to expand and enhance its capabilities beyond their current state. The scale and breadth of the industry means that current capabilities vary from organisation to organisation across the country. This breadth also means that different stakeholders face a range of different challenges on their section of the network, and have a number of different aspirations for their businesses or business units. Balancing these current capabilities will require an agile approach – both to technology and to associated business and process change. To enable effective business change across the industry, nine levers have been developed based on industry consultation – setting out the changes that must be made to achieve the level of capabilities required.
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Figure M6: Nine levers of change
A toolkit is being developed by the Digital Railway Programme to enable consistent and efficient deployment of integrated and interoperable digital railway solutions, whilst allowing for Route- specific configurations.
The toolkit will support the industry, including with:
Developing, Designing and Delivering of the Digital Railway Business Change:
o Scheme Management – project management, engineering and system management, procurement, Safety & Assurance etc;
o For the Digital Railway System (including people change), template and standard Digital Railway requirements and designs.
o Guidance and instruction for:
. Installation/Build/Deployment of the Business Change;
. Testing and Commissioning of the Business Change;
. Placing in to Operational Use.
o Guidance and instruction on built infrastructure:
. Operational and inspection interventions;
. Introduction of ‘Smart Technologies’;
. Renewal and maintenance interventions
. Major enhancements and/or new infrastructure;
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. Asset management related competencies, capabilities and/or business processes.
Manuals and instructions supporting the operation of a Digital Railway
The toolkit is currently under development and will encompass both specific products aligned to each of the levers such as design specifications and standards and also traditional change management tools such as change assessments and benefits realisation plans. After the toolkit has been informed by the early deployment schemes, it can be customised by The South East Route to balance delivery of Digital Railway with other considerations such as planned conventional schemes, funding availability and their local change agenda. This approach is designed to allow a degree of consistency across different regions, whilst allowing the programme to be agile based on the specific challenges and aspirations of different organisations. Once the Route team has customised the toolkit to meet its intended outputs, they will also be responsible for producing the necessary change impact assessment – and delivering the change via their Change Management Office. 5.12 Programme/Project Review and Evaluation
5.12.1 The Digital Railway Approach Digital Railway Business Case activity has been reviewed and assessed regularly, both at a high level by the Route Steering Board and at a working level through working groups and third party review (e.g. Network Rail Infrastructure Projects), and complies with the Network Rail approach to business assurance. The programme has implemented the three lines of defence approach, which provides multiple levels of business intervention. The quality of documentation and analysis is fundamental for the success of the business case development and the measures listed below are in place to make sure there is both transparency and rigour in all associated undertakings.
In the first instance, the Business Case team is required to undertake self-assessment (‘first line defence’), establishing the review of activities and outputs against pre-defined requirements. The most critical of these requirements are captured as milestones and are reported against within the period management report.
The second line of defence provides the opportunity for review of the business unit by external peer organisations. The programme can establish peers from other similar groups within Network Rail and industry partners, or organisations with specialist expertise e.g. IUK, who may be retained to conduct expert reviews, of part or all of the business case activity.
The third line of defence is undertaken by the Network Rail internal audit team, or if requested by the DfT sponsoring group. The OGC Gateway Review process, is one of the established frameworks in place which may deliver review and assessment, however review remits may be bespoke to requirements.
All programme-level assurance review activities are captured within the Digital Railway assurance plan, which is reviewed on a quarterly basis by the leadership team. Any deficiencies or improvement requirements identified are captured and tracked to close-out, within the Digital Railway combined improvement plan.
5.12.2 Project review and evaluation The project team described above will work with the programme business case team to undertake the first line defence described above.
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5.12.3 The Integrated Assurance and Approvals Plan (IAAP) The programme has completed an IAAP for submission of this SOBC (available on request).
This IAAP outlines the assurance and approval stages that this document is subject to, and has been agreed through ongoing dialogue with DfT. Subject to approval of this SOBC, the programme will develop a revised IAAP as the first step of preparing for an Outline Business Case at GRIP 3.
5.13 Contingency Plan
The programme has developed programme-wide contingencies. At this stage, the Route’s contingency plan would be to revert to the ‘do minimum’ option from the Economic Case.
At later stages of project development more detailed strategies will be developed by the project team to cater for issues arising during deployment, such as late deployment of technologies or commissioning.
5.14 Recommendations
The management case recommends the following next steps are taken:
5.14.1 Making a ‘thin client’ approach a reality The South East Route and the Digital Railway Programme should adopt a “thin client” approach moving forward, to agree in detail the roles, responsibilities and working relationships required to balance local ownership with central co-ordination and oversight.
5.14.2 Inform scheme development through lessons learned capture
The Digital Railway Programme should continue to deploy TM on Romford and Cardiff to inform all future deployments of this technology. The team should continue to liaise with the Thameslink Programme to capture learning on ATO over ETCS Level 2 and TM. The programme should also progress the testing of ATO and ETCS Level 2 at RIDC. 5.14.3 Project management process innovation The project team should examine existing processes, with the GRIP framework, to assess how they may best be adapted to changes to signalling and control technology and the way industry operates. Innovative funding arrangements, as discussed in the Financial Case above, would also be likely to require process change and potentially, impact on workstream arrangements. This evolution and innovation will be developed and consulted in collaboration with key stakeholders through project- and programme-level governance in the next phase of the project. 5.14.4 Evolution of existing change controls
Enhancement and resignalling scheme governance and change controls will need to be revised to ensure overall planning and funding remains compatible with recommended digital options.
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Appendix A – Relationship between this SOBC and the wider Digital Railway Programme
The Digital Railway Programme has formed a deployment strategy which was devised to align to demand, performance challenges32, renewals and franchise opportunities. It consists of three main groups of projects which span over the short, medium and long term. These are set out in Figure A1 below. Figure A1: Digital Railway deployment strategy
NOW : Independent DR system MID TERM : Integrated DR System LONG TERM : Integrated Next application on committed Deployment Generation DR System projects Deployment Select candidates (5 x SOBCs & • Thameslink TPU, ELL…) for digital railway Longer term strategy based largely • Crossrail technology with the best value on asset condition to complete the • Romford and Cardiff 1st Traffic business case aligning: network (asset renewal whole life Management deployments • Asset condition cost saving business case) within • National enabling projects – • Safety the notional asset life of command, ETCS in-cab fitment project, • Demand control and signalling Telecoms, FICs & Test • Performance facilities • Rolling stock and franchise This will not attempt to align all • Specific TOC franchise alignment factors as beyond the early 2030s commitments to fit ETCS, • Constraints of resources, and HS2 there are no firm CDAS and ATO affordability, risk etc… timescales with which to integrate • A clear deployment plan linked but gives a long-term direction of to renewals and This will : travel, sequence and commitment Enhancements Pipeline for • Deliver best value Long term (Integrated Next • Detailed and fully integrate plan Assumed therefore that in The timing of Generation System) to give supply chain and subsequent funding cycles end point will deployment. stakeholder confidence candidates would again be depend on many • Endorsement and Funding for • Invest and undertake changes to prioritised by value factors and deployment of new realise cost savings constraints – the technologies. • Build Local and National Flexible longer term strategy could aim is to • Identification of system capability & skills in DR to also take advantage of new express a integrator become BAU technologies as they are developed sequence to but with change control CP5 (to 2019) CP6 to mid-CP7 (2019 to c.2027) give long-term confidence NPIF £450m helps in closing the gap from today to the mid-term End CP6 (2024) to the long term
Fleet Fit for both Passenger and Freight
Development of new technologies may change the deployment strategy
As part of the DR programme, this SOBC for the South East Route Digital Train Control Upgrade Programme is focused on meeting the performance challenges on the South East Route. It is one of five candidate schemes exploring best value for money for integrated deployment in the medium term (2019 to 2027). It was selected for further analysis for two reasons:
Performance challenges: the scale of the performance challenges faced by the route, and their high relative cost compared to other routes;
Franchise opportunity: the franchise for South Eastern is due for renewal by 2018. This presents the opportunity to embed the introduction of Digital Railway technologies into this renewal process. The South East Route Digital Train Control Upgrade Programme will be considered as a standalone investment and as part of a wider Digital Railway Programme to understand the impact of scale on
32 Performance is measured (and assessed) by the rail industry in a number of ways (see Economic Case). In general, the term refers to the how late services are compared to the expected timetable. Version 1.0 Page 87 of 106 Issued: 28 April 2017 Template Version: 1.0
Subject to assurance South East Route Digital Train Control Upgrade (SOBC) value. Two scenarios will be tested, assuming that the South East Digital Train Control Upgrade Programme is the first project:
Scenario 1 - A programme of one: All fixed costs (e.g. system design and development) and development cost applied to the South East Digital Train Control Upgrade Programme;
Scenario 2 - A national programme: Fixed and development costs shared over a national programme with full economies of scale. The strength of the value for money recommendation will be greatest if there is a value for money case for this SOBC under scenario 1, where this proposed scheme stands on its own merits – rather than as dependant on a wider programme of work being procured.
While it may be the case that this SOBC may be the only scheme progressed, it is recognised that the value for money will be greater as a greater number of schemes are taken forward.
Benefits of a Digital Railway Programme
The programme level involvement presents real benefits across the business cases and future projects to:
Significantly contribute to improvements to cost efficiency of command, control and signalling by 23% to 42%33 (see Commercial Case);
Drive consistency in the application and operation of digital technology and actively building knowledge and expertise in order to maximise the network benefit;
Select and deliver (or support delivery of) the right schemes at the right times;
Undertake enabling activities and national projects supporting deployments;
Manage dependencies across the schemes;
Enable the underpinning network-wide changes such as telecoms upgrades;
Realise maximum benefits across the schemes;
Effectively manage risks and delivery quality;
Supports the development of resources required as part of the Digital Railway Programme;
Develop Great Britain’s expertise, to support Britain’s industrial strategy and export opportunities.
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Appendix B – Costs
Figure A2: Total incremental cost across all years (CP5- CP19)
OPTIONS ANALYSIS Route Wide TM , Integrated on BML with re-control of Three Bridges ASC to TB-ROC
OPTION 1
£’m
Capital 315
Running costs- main - headings
Maintenance -
VTAC -
Leasing -
Others -
Total Opex -
TOTAL 315
Figure A3: Funding breakdown per option (CP5-CP14)
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Appendix C – Performance Methodology
Introduction
In this section we describe the methodology and assumptions used in determining the delay minute benefits appraisal of Traffic Management to the rail network. These percentage reductions are being fed into the Digital Rail performance model.
Primary and Secondary Research
Previous estimates and evidence bases for the performance impact of Traffic Management have been detailed in;
SSL Model Office Reactionary Delay study findings – November 2013;
Traffic Management Systems Business Case - August 2015;
TM Business Case, Early Contractor Involvement (ECI), Findings Report – December 2016.
These vary widely and have been questioned as to their accuracy, and consequently an updated approach has been implemented. A key outcome of this updated approach is that it provides an enhancement from previous work and a platform upon which the upcoming Traffic Management trials can be assessed as to delivering realistic performance benefits.
It was found that the current performance percentage reductions in the ECI report haven’t been developed since the August 2015 business case and therefore we attempted to consult further from the following subject matter experts on their appropriateness:
Network Rail, Route Performance Managers;
Senior Performance Analyst, National Performance Team;
Romford ROC Programme Management;
Traffic Management Programme Team, Digital Rail;
Traffic Management Demonstration.
Background
Primary delays are caused by a range of events that occur with varying degrees of predictability. Network Rail responds accordingly with established procedures. Whatever the reason for primary delay, when a line becomes blocked or speed restrictions are enforced, ramifications are soon felt on an increasing number of train paths and eventually on a far wider geographical area. This knock- on effect, known as reactionary delay, is responsible for an ever growing percentage of total delay.
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Figure A4: Delay affecting Passenger Trains
The chain of events caused by a blocked line is currently mitigated by the existing arrangement of signallers and controllers which remains very much a manual process, prone to inefficiency. Automating this is at the heart of Traffic Management Systems hence step changes in reactionary delay performance are expected. Reactionary delay is the core benefit that Traffic Management Systems aim to capitalise on but it is also expected to reduce primary delay in timetable planning errors. TMS has the ability to forecast many hours ahead of time to identify errors in the timetable plan.
The SSL Model Office Reactionary Delay study used an across the board estimated reduction in reactionary delay of 20%. This was since used as a working assumption and something which could be varied. It did have a basis in benchmarking and scenario testing work.
Performance Impact Estimation
This analysis involved utilisation of a large amount of data assessed at an appropriate level of detail. A more detailed appraisal would be difficult to implement in order to appraise the success of the technology.
Please note, these delay reduction do not include performance benefits associated with integration of Stock and Crew systems or CDAS and therefore are a prudent estimation of the total performance benefits of TM.
Key updates to the benefit percentages include;
A. Utilise a bottom-up approach propagated from the Romford and Anglia deployment teams with most benefit reductions in reactionary delay;
B. Reduce the level of performance benefit due to timetable planning errors;
C. Remove all primary delay benefits;
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D. Maintain the method defined during the National Deployment TM Scoping in a cleaner format.
A. Utilise the bottom-up approach propagated from the Romford and Anglia deployment teams.
Anglia Route and the Romford Programme Team have propagated a ‘bottom up’ approach with a reduction in reactionary delay only. The benefits were based on interim isolated deployment at Upminster in lieu of a fully integrated and staff migration to Romford ROC in 2018.
The bottom up approach gave a reactionary delay benefit reduction of 6% per year, very similar to the ECI findings in reactionary delay benefits, National Deployment (ND) code group A-C. The ND Code groups were defined during the National Deployment TM scoping with the three framework TM suppliers Hitachi, SSL and Thales, see table below for description. We believe TM will not affect some incidents more than others and therefore applied the reductions in ND Code Group A-C to the other groups, apart from Group F.
Figure A5: National Deployment Delay Attribution Code Grouping
ND Code Description Delay Categories Group
A Delays Many Trains at a location 100s (except for 110A & B), 200s, 300s, 400s, 503, 504, 505, 506
B Delays 1 Train (mostly fleet faults) All 700s except for 701G, 501C
C Delays Many Trains at across a wide area (weather events) 110A & B
D Network Rail Ops Signalling Delay 501A
E Network Rail Ops Control Delay 501B
F Timetable Planning 502A
G Sub-Threshold 601
H Freight Terminal/Yard Delay 701G
I No Significant Affect 501 D, 502 C, 602, 902
B. Reduce the anticipated performance benefit due to timetable planning errors.
ND Code Group F is Timetable Planning. The ECI report states TM will eliminate errors in the Working Timetable due to better information being fed back to timetable planners on clashes in the plan. However, nearly all the services in the timetable are now “locked in” through rights and SLCs in the franchises. The majority of the conflicts can only be removed by taking trains out, which Network Rail cannot do and the TOCs are reluctant to do due to a baseline of existing services.
We accept a certain level of reduction due to planner mistakes but we do not believe we will attain the high level of performance benefits in the original scoping work.
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C. Remove all primary delay benefits
Traffic management will not prevent incidents occurring but will help manage the incident when it occurs. Therefore the performance benefit will be on Reactionary Delay.
A certain level of 502A Primary Delay will be removed due to timetable planning error before the day starts but the majority of delay will be Reactionary Delay, with the capability to managing the incident.
Figure A6: Primary Delay Reduction
Primary Delay Reduction (%) ND Code Isol. I/face Intg’d Group Low Medium High Low Medium High Low Medium High A 0 0 0 0 0 0 0 0 0 B 0 0 0 0 0 0 0 0 0 C 0 0 0 0 0 0 0 0 0 D 0 0 0 0 0 0 0 0 0 E 0 0 0 0 0 0 0 0 0 F 20 20 20 30 30 30 30 30 30 G 0 0 0 0 0 0 0 0 0 H 0 0 0 0 0 0 0 0 0 I 0 0 0 0 0 0 0 0 0
Reactionary Delay Reduction (%) ND Code Isol. I/face Intg’d Group Low Medium High Low Medium High Low Medium High A 2.5 5 7.5 3.5 7 10.5 4 8 12 B 2.5 5 7.5 3.5 7 10.5 4 8 12 C 2.5 5 7.5 3.5 7 10.5 4 8 12 D 2.5 5 7.5 3.5 7 10.5 4 8 12 E 2.5 5 7.5 3.5 7 10.5 4 8 12 F 20 20 20 30 30 30 30 30 30 G 2.5 5 7.5 3.5 7 10.5 4 8 12 H 2.5 5 7.5 3.5 7 10.5 4 8 12 I 2.5 5 7.5 3.5 7 10.5 4 8 12
Next Steps
The forthcoming 1st deployment of Traffic Management in 2017 and into 2018 will provide the opportunity to solidify these performance benefits against actual empirical evidence rather than opinion. Therefore we recommend the following next steps:
Work with Anglia, South East and Wales Route performance teams to develop a structured before and after data capture;
Continue to investigate the possibility of using data from the training simulator in Romford;
Modify delay minute appraisal following 1st deployment.
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Appendix D – Early Contractor Involvement (ECI)
As part of the Digital Railway ECI (Digital Railway Early Contractor Involvement) Programme the Digital Railway Team and some selected suppliers were asked to consider: ‘What can we do as a team (‘good customer’ and supply chain) to reduce costs, within a future Digital Railway Programme?’ [ECI WS2]34 International market analysis was used to identify three interdependent causal factors that explain the variances between the UK and overseas Digital Railway value chains:
Scale of commitment;
The UK rail industry environment;
Technical innovation.
The work also identified key target areas that will have a significant impact on the cost of developing and deploying a Digital Railway solution, and where possible quantified the potential saving and recommendations as to how the benefit can be realised. ECI WS235 has identified eight opportunities relating to the above causal factors: Economies of learning brought about by continuity of work;
Economies of scale delivering volume savings and efficiency gains;
Adoption of a ‘thin client’ Digital Railway delivery model to put the supply chain close to the customer eliminating waste and leveraging the suppliers’ return on experience;
Investing in development of Digital Railway skills and competencies by providing commitment, giving the supply chain confidence to invest and reverse the industry skills drain to drive up performance and quality;
Leverage digital technologies to dramatically improve the quality of base infrastructure data;
Collaborate with the supply chain to develop a clear and implementable Digital Railway system definition and reference design;
Provide the scale of opportunity to enable the supply chain to invest in Design and Test Automation alongside a modular design concept;
Deployment methodology.
Collectively these opportunities could deliver a transformational reduction in the unit rate for Digital Railway deployment of between 23% and 42% within a six-year period.36
34 Network Rail (2016) “Early Contractor Involvement Cost Reduction Findings Report” Version 0.20 p3 35 Ibid p3 36 Network Rail (2016) “Early Contractor Involvement Cost Reduction Findings Report” Version 0.20 p3 Version 1.0 Page 94 of 106 Issued: 28 April 2017 Template Version: 1.0
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Scale of Commitment
A key finding from the ECI work to date includes a comment on the opportunity to create an environment in which the industry can have a transformational impact on the value chain to drive down Digital Railway costs. This could be achieved in part by creating a standalone committed programme of work extending beyond the conventional renewals 5-year funding cycle. The supply chain has identified that across Europe the cost of ETCS L2 signalling reduces significantly as the scale of commitment from the Infrastructure Manager to the supply industry increases. There is a point, the minimum efficient scale, after which additional savings from increasing scale start to diminish. The ECI WS2 analysis has highlighted current UK ETCS deployments to be an order of magnitude under the minimum efficient scale as highlighted in Figure A7.37 Please see the ‘ECI Cost Reduction Report’,38 available from the Digital Railway Programme team, for a continued discussion.
Figure A7: Economies of scale for UK ETCS deployment
Efficient scale
E - Maturity C I - Competition R
P Market - Contracts Factors - Client org - Track access - Approvals Market Price
Reduces with volume & scale
Typical UK Minimum η SCALE Signalling Signalling Procurement Procurement
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Appendix E – Economic Appraisal Assurance Statement
Introduction
This document is a reflection on the assurance of the April 2017 Digital Rail SOBCs. The economic case has identified key risks to the analysis, communicating the impact of these risks with sensitivity tests. This report re-iterates these issues at a more general level, and considers sources of uncertainty and risk at a project and governance level. Further work should be prioritised to where the most risk and uncertainty has been identified and this should inform an analysis assurance strategy going forward.
At the SOBC stage the analysis is supporting a decision to continue development of the options. The quality assurance of the analysis has not followed a formal, bespoke process but has incorporated aspects of the Network Rail Economic Analysis Team’s approach. Given the early stage of analysis this is considered an appropriate level, providing enough confidence that there are no significant errors in the process that would alter the conclusions or recommendations. The analysis has communicated risks and uncertainty clearly, highlighting key areas that require greater focus at the next stage to ensure a robust analytical assurance strategy. In summary:
What worked well
Stakeholder engagement with NR Routes and DfT;
Knowledge sharing and learning;
Risk and uncertainty identified and communicated.
Where there is uncertainty
Assumptions made on costs of new technology both in and of itself and relative to the baseline of conventional signalling operations, maintenance and renewals;
Benefits of new technology;
Transparency of cost estimation and consistency across options.
The biggest risks
The comparative cost analysis: base case costs (renewals) versus option costs;
Quantum of analysis required simultaneously;
Insufficient time for appropriate sense-checking of costs;
Insufficient time for thorough independent review.
Figure A8: Key risks and actions Key risk Action
Cost comparison against the baseline Baseline renewals costs to be reviewed once the Statement of Funds Available is published and reflected in Route signalling
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workbanks
Further work to understand the cost drivers of conventional signalling
Cost uncertainty within digital options Focus on understanding whole life cycle costs (opex, capex, maintenance and renewals) and important variables such as the retention of signalling – greater level of engineering development, work with supply chain and use international examples to benchmark
Options tested to align with renewals Sensitivities present a crude alignment with cycle renewals – this needs to be developed in detail by the Route asset management teams
Benefits uncertainty Test benefits at the earliest opportunity following commencement of operation of first deployments – Thameslink, Romford and Cardiff
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6. Appendix F – Digital Railway Technology
What is in scope? 1ETCS Infrastructure Systems ► Outline design, detailed design and implementation of works for ETCS lineside
systems; ► This includes ETCS control systems, Radio Block Centres, signalling inter-lockings, balises and the management of interfaces between the component parts.
What is in scope? 2 ETCS On-board systems & retro- ► Design, installation and commissioning works for fitment services both ‘First in Class’ (FiC) and production fitment to each distinct train class for both passenger and freight vehicles; ► Includes on-board supply and fitment of ETCS and associated equipment (tachographs, radar, European Vital Computer units, Driver Machine Interfaces for both passenger and freight).
What is in scope?
3 Communications Systems ► Outline design, detailed design and implementation of works for both new Global System for Mobile Communications-Railway (GSM-R) base-stations (infills) and upgrades to existing GSM-R base-stations; ► Outline design, detailed design and implementation of works for both new Fixed Telecommunication Network (FTNx) infrastructure and modifications to existing.
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What is in scope? 4 Traffic Management Systems ► Traffic Management Systems (TMS) and the interface to the Connected Driver Advisory Systems (C-DAS); ► Traffic Management is a system which supports signallers to manage the flow of trains across the network. It maximises network performance by allowing trains to run together as effectively
as possible; ► C-DAS is an in-cab decisions support tool that provides drivers with the information they need at the right time.
What is in scope? 5 Data Management Services ► Data acquisition, validation, storage, processing, management, change control, analysis and provision to all system requirements to support the implementation and operation of the Digital Railway.
What is in scope? Cybersecurity Systems and 6 ► Protection of data and the overall Digital Services Railway system from unauthorised access or modification.
What is in scope? 7 Systems Integration Services ► Specialist services in support of Network Rail operating as the Systems Integrator during the deployment of the Digital Railway plan; ► Specialist services include design of overall system, requirements management, technical integration and analysis and planning of the various systems within the Digital Railway.
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What is in scope? 8 Programme Management ► specialist services in support of Network Rail operating as the Programme Manager during the deployment of the Digital Railway plan; ► services include programme, commercial, risk and planning support of the overall works and services and systems required.
What is in scope? Business Change and Readiness ► business engagement with key stakeholders 9 and leaders at various levels on the Digital Railway capability requirements; ► business readiness; identifying the effort required to be ready for the Digital Railway solution; ► business adoption; sustaining the improved performance of the railway system through business adoption strategies.
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Business Change Lifecycle Project Strategic Outline Business Case
Appendix G – Indicative deployment approach
This plan has been developed for costing purposes only, and does not take fully into account the time needed for decision making following the completion of this SOBC and the development up to the GRIP 3 option selection. As a result, the programme plan will be revised as part of the package of activities to reach OBC, when the programme will have a more detailed understanding of the timeframe for delivery in CP6 or 7.
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Appendix H – Stakeholder map
Digital Railway Programme Government & Regions • Industry sponsorship to ensure business cases for deployment of digital • Provide challenge to the programme’s proposals via Governance train control systems are identified, funded, prioritised and deliver whole life structure benefits; • Provide direct funding to Network Rail and facilitate potential 3rd • Industry change strategies to ensure that an industry operating model is in party revenue sources place to optimise the use and extract the full benefits of new technology and • Providing the systems leadership through an enterprise architecture and • Set the strategy and vision for GB’s railway national systems authority for digital train control and operations. • Provide ultimate accountability for the passenger experience
Routes (Network Rail) Rail Safety and Standards Board • Engage key stakeholders at programme-level and continue their involvement at Candidate Scheme level • Work alongside industry partners to deliver early digital schemes (e.g., Thameslink upgrades and Traffic Management improvements at Romford and Cardiff • Act as industry facilitator for rail upgrades • Bring expertise from leading rail infrastructure renewals Rail Franchisees and • Provide funding (with an arms-length governance arrangement) • Carry out development and maintenance work on Digital Railway infrastructure assets Owning Groups • Develop and test technologies including ETCS Level 3, COMPASS and ATO • Bring together its members to ensure cross-industry buy-in and support for the Digital Railway programme • Provide support to the industry in developing the case for digital Transport for London railway • Provide insight into urban infrastructure demand, supply • Represent the operators that will deliver new services to and development strategies customers deployed under the Digital Railway programme • Provide input on passenger flow through existing networks • Understand railway operations, constraints and incentives under franchising programme • Provide devolution input GB Railway • Invest in technologies to harness future opportunities • Protecting commercial and economic interests for industry Supply Chain • Provide operational data for analysis future programme projects • Engage with the programme through the Digital Railway’s Early Contractor Involvement (ECI) programme • Devise innovative and cost-effective solutions to the Digital Railway programme Trades Unions • Workforce engagement to support the development of the railway for • Help demonstrate the case for the Digital Railway programme the future • Bring together the relevant parts of the supply chain through the Rail Supply Group • Facilitate a fundamental change to the way industry works with the supply chain to bring down the forecasted costs of digital technologies including the cost of maintaining and operating train control systems on the railway Office of Rail and Road Freight Industry • Provide industry regulation input • Protect interest of freight operators and therefore private sector revenue streams through • Provide infrastructure usage data for demand analysis access charges • Protecting commercial and economic interests for industry and freight forwarding • Provide operational data for analysis future programme projects N.BNB: This This is is onlyonly a sample of of those those involved involved in inthe the digital digital railway railway programme programme
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Appendix I – Communications and Stakeholder team approach
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Appendix J – Problem Statement and Options
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