Supplementary memorandum by Nederlandse
Spoorwegen (FOR 91A)
It was a great pleasure to host the visit by
yourself and Terry Gourvish to the Netherlands on 25 and 26 November.
I hope you found that it added to your knowledge of the Dutch
rail system and I look forward to reading the conclusions of the
Select Committee's inquiry next year.
In the meantime, please find attached a note
responding to the questions raised in your letter of
21 November and the additional queries raised during
1. Do you have any comparative figures on
the costs of maintaining a single use ( passenger or freight)
railway as opposed to a "mixed" railway?
Building as well as maintaining a dedicated
freight line is less expensive than one used by both freight and
passenger trains. Maintenance costs for the "Betuweroute",
a dedicated freight line in the Netherlands, are expected to be
10-20% lower than for the main track. This is mainly because more
maintenance can be done during daytime and the comfort requirements
The Betuweroute is connected to the main track,
and freight trains on this dedicated line also run on the main
track. Maintenance costs of this dedicated line could have been
even lower if the track did not have the facilities (catenary,
safety system) to enable freight trains to run on an international
In the US, maintaining dedicated freight lines
is some 80% less expensive than mixed lines in Europe. The characteristics
of US freight lines differ vastly from track in Europe eg longer
headways (7 kilometres), less points and switches etc.
2. The table on subsidy in Figure 4 of your
letter to the inquiry might have suggested (to me) that you do
not receive any subsidy but your evidence (Qq 863,872) cleared
this up and pointed to the sort of subsidies NS and Prorail receive.
It would be helpful to have a run of these figures over the past
five years together with any projections for future subsidy you
may feel able to share with us. I take it that the position is
that without subsidy you would make no profit?
That is correct: subsidies for the rail system
are required. The total system in the Netherlands is funded as
Government subsidies to operators:
Government subsidies to ProRail:
This implies that 60% of the costs of running
and maintaining the whole rail system in the Netherlands comes
from the farebox. As I explained earlier the tariffs/kilometre
in the UK are 60% higher than in the Netherlands. If the fares
in the Netherlands were set at the UK level, the Dutch system
would be self-supporting.
The table below gives an overview of the subsidy
to be received by NS for operating the secondary subsidised lines.
From 2006, NS can lose subsidised concessions in competition to
other operators and the listed subsidy accordingly. It is expected
that the subsidy received for operating the secondary lines will
remain at a constant level of
200 million (with a price correction). Subsidies
to ProRail decline as the operators pay more track access charges
|Subsidy to NS for secondary lines (
|Refund of track access payments from NS for secondary lines
|Total subsidy to NS||0||0
|Access charges from NS for the core network
|Total access charges from NS to Prorail
|Dividends from NS to government||9
|Government grants to Prorail for inframanagement*
*including Traffic Control & Capacity management, excluding
**this year's payment includes an amount of
227 million from the extraordinary results of 2000.
3. Dutch railways are regulated by a body attached to
the Ministry of Economic Affairs (Q874). One of the arguments
made by our own Rail Regulator is that being demonstrably separate
from the Government gives the private sector comfort that the
regulatory decisions are not politically motivated. What do you
think of that argument? Much of the private sector investment
in the UK railway is underwritten by public money.
The argument is correct. At present the Dutch Competition
AuthorityNederlandse Mededingingsautoriteit (NMa) and its
transport specific Chamber, the so called "Vervoerkamer",
are at present still part of the Ministry of Economic Affairs.
Shortly the NMa will become an independent administrative authority.
As a consequence the Minister of Economic Affairs can no longer
impose any instructions as to any decisions (to be) taken nor
determine any policy matters of the NMa and its Chambers.
If compared to the UK ORR, the role of NMas Transport Chamber
is far more limited. The Nma has to monitor equal access and fair
competition between operators. It has no role in setting track
access charges, evaluating the efficiency of Pro Rail or determining
the level of subsidy the government pays to Prorail. This is done
4. Could you confirm that what in the UK is called rail
maintenance and rail renewals are both out sourced on the Dutch
railway (Q 906). What work, if any, does Prorail do at its own
Both rail infrastructure maintenance and renewals are outsourced
in the Netherlands. Only Traffic Control, operating bridges and
the catenary are handled in-house. Engineering is done by certified
consultants; maintenance and renewals are done by certified contractors.
Daily maintenance is outsourced in service process contracts to
four certified contractors; renewals and heavy maintenance are
tendered in competition in between certified (Dutch and foreign)
5. The infrastructure provider here seems to believe that
taking day-to-day maintenance in-house will drive costs down (Q
1403). They appear therefore to have reached a different conclusion
from Prorail. Are they wrong?
Before 1995 all daily maintenance was done in house. After
maintenance was outsourced costs started rising. This was because
of the risk and profit margins of the contractors. However, over
the longer term the contractor is more efficient, which results
in lower costs. At the moment we have control mechanisms in place
to get the contracted services at appropriate cost levels. This
mechanism involves not only the specification of required RAMS
levels and related costs, but also provides tools to monitor the
maintenance activities. A penalty regime is not part of this mechanism.
The major benefit of outsourcing maintenance is not so much
a cost reduction but an increase in service quality levels at
the same costs. In addition, innovations are introduced at a far
higher rate than under an in-house regime.
6. We are very interested in "bench-marking"
and would appreciate further details of what you do in this area,
especially in arriving at cost control (Q 906).
There has been an extensive UIC benchmark on rail infrastructure
life cycle costs and cost drivers. Attached please find an overview
of the results.
7. How many people does Prorail employ? Prorail is two
years old. Is that long enough to be absolutely certain that the
model it embodies is the right one for the Dutch railway? There
were great hopes initially for Railtrack here which were not fulfilled.
ProRail has approximately 3,000 employees, of which 700 work
in the maintenance department. ProRail was established two years
ago from three companies: Capacity Management, Traffic Control
and Infrastructure Management. From 1995 these companies were
separate entities but up until 2001 they came under the control
of the NS holding company.
We believe that the model is fit for its purpose. This is
not just based on experience of the first two years of ProRail
in operation, but on the fact that the defined roles and responsibilities
are the result of an incremental joint process, prepared in the
early 90s and implemented from 1995.
8. You say that since 1995 you have managed to reduce
the workforce ( Q905). May we have details who, how much, what
priorities did you apply?
In 1993 a designated in-house organisation was established
to provide guidance and career coaching for the 4,800 employees,
who were to be made redundant from 1996. Staff reductions were
achieved by organising our core activities more efficiently and
by ceasing non-core activities like town and country planning.
Other smaller reorganisations of the companies within NS have
taken place over the years.
Besides these redundancies, our workforce was further reduced
by selling off non-core activities, such as telecommunications.
At the same time our workforce was increased as activities
like station (incl retail) and real estate development were given
more emphasis. The introduction of a 36-hour working week in 1996
led to a 1% full time equivalents (fte) rise. Last year, the number
of employees increased because we hired additional on-train staff
to improve security and service for our customers, and mechanics
to enhance the fleet availability.
Currently another major reduction is taking place. Approximately
7,000 indirect positions were evaluated on their contribution
to our core business. As a result, 1,300 jobs will be cut by 2005.
These reductions include current vacancies and temporary contracts,
so the social impact of the redundancies will be limited.
Overview of the NS workforce
|Year||Number of fte
9. Costs. Figures demonstrating how Prorail got these
under control would be informative (Q 1216).
In the first graph below you see (red line) the contracted
work with inflation correction. The one off renewals were the
main cause of the cost increase. The downward trend seen after
2001 is expected to continue.
On the second graph you will find the cost rise explained.
Most of the extra costs are in renewals (blue lines) (back to
a normal % renewal)
10. The names of the other passenger and freight operators
on the Dutch railway would be helpful
The following operators are active on the Dutch rail market:
Passenger : Connexxion, NS, Noordned, DB RegionalBahn,
Freight: ACTS, ERS, Railion, Shortlines, IMCs,
11. What proportion (%) of freight travels by rail in
Modal split freight transport in tonne-km (figures year 2000).
National freight transport
International freight transport over Dutch territory
12. What are your views of the benefits and disbenefits
of short and long rail franchises (Q 889)?
Opting for either long or short rail franchises, depends
on the role given to the operator. In a short-term contract the
government sets out the strategy and determines the service level
in detail and is more involved in operational issues like rolling
stock refurbishment. The operator becomes a carrier, with a limited
role in co-developing rail services as part of a transport system.
In a long-term contract on the other hand, there will be
a strategic partnership between government and operator. In this
way joint effort can be put into redevelopment of rail and more
innovations can be expected from the operator. At the same time
longer term contracts involve higher risks in terms of the working
relationship with the government because there is less flexibility
to change partners. In addition, long-term forecasts entail a
high level of insecurity. Contract frameworks, providing adequate
review periods must be used to overcome these disadvantages.
13. Could you say something about how the NS subsidiary
rolling stock leasing company works (Q 890)? What is its budget?
NS Financial Services offers its services in mainland Europe
in competition with other (European) leasing companies. Revenue
in 2002 was
75 million, balance sheet total
14. We would welcome further explanation about the PPM
(punctuality point) as it applies in the Netherlands(Q898)
All parties (NS and Prorail) have the obligation to improve
punctuality. Punctuality is measured from three minutes after
scheduled arrival time at the 34 most important stations on the
network. The registration of train delays takes place automatically
and is the responsibility of the Traffic Control Centre, which
is part of Prorail.
Every three months NS reports punctuality results to the
government. These results cover all delays, including those caused
by infrastructure or other operators. NS also reports results
on connections and cancelled trains.
NS has aims for a 89% punctuality (<3') in 2005 (equivalent
to 94% <5').
A punctuality penalty regime has been developed. Within this
regime, NS has to pay a
500,000 penalty for every 0.1% punctuality below the set target,
with a maximum of
12.5 million per annum. These funds are earmarked for reinvestment
in the railway system by the government. Should punctuality levels
fall below 3% of the set target in a year, NS has to deliver an
improvement plan to the government.
Due to the fact that the performance of Prorail is not yet
on target, the implementation of this penalty system has been
postponed. In order to help Prorail with infrastructure improvements,
NS has agreed to a "Green Route Strategy" enhancing
possessions during daytime.
Currently there are no contractual or financial arrangements
between NS and ProRail regarding delays and infrastructure availability.
From 2004 NS will get a reduction on Track Access charges, if
Prorail fails to meet their targets.
15. Do you think that the rail timetable should be the
responsibility of the train operating companies in the UK?
As a principle we do not comment on the UK approach.
At present it is quite difficult to pass these responsibilities
to the UK TOCs, as there is (partially) on-rail competition and
TOCs don't have equipment equivalent to that used by Network Rail
for timetabling. In a region with limited or no on-rail competition
a TOC could develop its own timetable, provided there are good
working relations with freight operators and NetworkRail, who
also have responsibility for co-developing and operating the timetable.
In this way a timetable could be developed more effectively. It
will be more closely connected to passenger demand. The TOC after
all, has most expertise on current and future passenger demand.
Efficiency gains could be made as less stakeholders are involved.
In the Netherlands we are pleased to have developed a joint
working group (TOCs, ProRail, government) which allows for major
structural changes in the timetable, based on (public) transport
demand, and efficient using available assets.
16. Could you just confirm that NS borrowing does not
count in the Dutch government accounts (Q 909).
17. Something on the business case for the dedicated rail
freight line would be helpful (Q 913). What estimates are there
for the increases in rail freight as a result of the European
Directive on freight operations?
The new Betuweroute in the Netherlands is not undisputed.
As a result, a considerable number of studies have been carried
out to underpin the benefits of this line. Rail freight transport
will rise in the coming years, independent studies claim a growth
of two to three times present situation.
18. Do you agree with the SRA's approach to Network Output
Planning (Q 914-919)
As a principle we do not comment on the UK approach. It appears
that adequate care has to be taken to ensure that the secondary
network is operated to a sufficiently high quality which meets
the demands that are expected of it.
19. Do you think that the separation that exists between
a Regulator who determines the track access charges of Network
Rail (and hence effectively the public subsidy to the company)
and the SRA which in charge of substantive rail policy is a flaw
in our system?
As a principle we do not comment on the UK approach, but
we are happy to exchange examples of best practice.
VISIT 25, 26 NOVEMBER:
20. Number of staff working employed by Railion
21. Number of staff employed by other passenger train
Approximately 265 employees. This is an estimate, as one
of the TOCs uses one workforce for both train and bus operations.
22. Board structure ProRail
In addition to the board structure below, ProRail has a Supervisory
Board, whose members are appointed by the shareholder, the Ministry
23. In what way could Electronic ticketing & gating
be interesting for the UK?
It could be interesting as it delivers:
A gated semi-open system comprising heavy rail.
Introduction of a national smart card for public
transport and other related services.
Introduction of a service level monitoring system
ie real time monitoring of all systems and all its interactions
with clients in and around stationsallowing for instant
repairs, crowd control, emergency handling, marketing information,
efficient staff deployment.
introducing an innovation in public transport,
based on proven technologies together with all stakeholders involved.
Improving service quality: increasing revenue.
Transport integration by ticket integration (including
bus, train, parking, bike rentals etc).
Adequate numbers of staff on stations.
Reliable systems in and around stations (ie escalators,
lighting etc) enhance security.
Reduce aggression -> improve securitystaff
Reduce costs -> less on train staff required,
effective number of trains deployed.
Reduce fare dodging -> increase revenue.
24. Number of tonne kilometres freight
40 billion tonne kilometres per annum.
25. Subcontractors ProRail
Daily infrastructure maintenance is outsourced to the following
four contractors: Strukton, Volker Stevin, BAM and Tribase. Daily
station maintenance is outsourced to an NS subsidiary (NS Stations).
Various engineering companies are hired for design activities;
most important are Holland Rail Consult en Arcadis.
Remark: ProRail only owns the operational part of the station
(platforms, tunnels, foot bridges), not the commercial part of
All other activities are being tendered. In the Netherlands,
over 60 companies are certified for various rail infrastructure
18 December 2003