Memorandum by the Light Rapid Transit
Forum (LR 61)
INTEGRATED TRANSPORT: THE FUTURE OF LIGHT
RAIL AND MODERN TRAMS IN BRITAIN
The Light Rapid Transit Forum ("LRTF")
was launched in February 2004 to represent the views of the private
sector involved in Light Rapid Transit schemes in the UK. The
Light Rapid Transit Forum is a representative body drawn from
operators, contractors, suppliers, funders, programme managers,
equity providers and consultants to the Light Rapid Transit industry.
The main purpose of the LRTF is to enable private
sector organisations involved in Light Rapid Transit schemes to
discuss, study and research the issues which affect them and to
communicate effectively with the public sector both at local and
national government level. Membership exceeds 46 organisations
and individuals. The Forum (together with CPT, the PTE Group and
Transport for London) is one of the four sponsors of UK Tram,
the proposed umbrella organisation for the tram industry.
1. THE COSTS
AND BENEFITS
OF LIGHT
RAIL
Increase in costs
Light rail costs were examined in the House
of Commons ETRA Committee Report on Light Rapid Transit Systems
[HC 153 of 24 May 2000], Prof Hass-Klau has given comparative
data on light rail costs in "Bus or Light Rail; Making the
right choice" [1998]. The NAO Report [HC 518 23 April 2004]
commented that "new schemes are on average more than £3
million/km more expensive...than those that have already been
built". Members of the LRTF keep databases on light rail
costs and can confirm that all-inclusive costs for a light rail
scheme are now averaging around £13 million/km. This is worrying
and can be attributed to: the higher risk premiums being applied,
the lack of standardisation of all elements of schemes, high utility
diversion costs and some element of cost recovery from the perceived
excessive costs of tendering. It should be noted that cost-creep
does not seem to be as prevalent in schemes in other parts of
the EU and that recent North American schemes are coming in on,
or under, budget.
Comparison of LRT and bus costs
In comparing light rail and busway costs it
is important to ensure a like for like comparison. The CPT(UK)
in their submission to the ETRA Inquiry said that "For a
complete new system on reserved track . . . the capital cost [of
a busway] could be similar to that of a light rail line".
Buses have a role in short journey, lower volume applications
and trams are more economic where passenger demand requires at
least a 10 minute tram service. This takes into account that:
— in terms of capacity two buses are
needed for one tram;
— in terms of speed two buses are needed
for one tram;
— in terms of life span between three
and five buses are needed for one tram; and
— the higher staff/passenger ratio
on tramway systems will result in broadly similar operational
costs per passenger at higher traffic volumes.
Benefits of Light Rail
The costs of LRT systems must be set against
their proven benefits;
— tramways are successful in attracting
people out of motor cars. A modal shift of 15%-20% is achieved
on UK tramways—something never achieved with buses;
— rail systems are capable of supporting
regeneration; the DLR is the most outstanding example of this.
Research in Manchester and Croydon has demonstrated similar effects;
— LRT can benefit the environment—not
only do trams not emit pollution at the point of use, but they
can also use electricity from renewable resources;
— LRT can be used to serve and encourage
new developments without disfiguring the landscape with congested
roads—it is noticeable that new housing schemes in the Thames
Gateway are predicated on rail services (DLR to Barking etc).
Future developments will need to be based around heavy and light
rail services if they are not to generate "M4" congestion
phenomena.
Given the lower benefits of a bus-based scheme
a tramway will frequently offer better value for money.
2. WHAT LIGHT
RAIL SYSTEMS
NEED TO
BE SUCCESSFUL
The LRT Forum consider that the success of a
light rail system should be gauged by:
Capacity
Greater efficiency in transporting between 1,500
and 8,000 passengers per hour than other public transport modes,
such as bus, metro or heavy rail and the private car.
Modal shift
Achievement of modal shift from the private
car to public transport.
LRT schemes provide an acceptable alternative
to use of the car in terms of quality, security, frequency, reliability
and image. Modern LRT schemes have demonstrated modal shift of
between 17-20% based on research by Centro/GMPTE. Both Croydon
and Nottingham have been positively welcomed by the residents
and businesses which has contributed to passenger usage. While
upgrading of bus services produces increased passenger flows these
are generally attributable to changes in travel patterns by existing
public transport users rather than to shift from car to bus.
Optimised highway use
Light rail provides the highest level of passenger
carrying capacity per metre of road width compared with bus and
car usage.
Reliability
Light rail is more reliable in terms of frequency
and waiting time than bus, given fixed track and junction priority,
contributing to higher economic productivity, and less stress
suffered by individuals.
Environmental benefit
Light rail is capable of delivering improvements
to the cityscape urban fabric: the integration of walking and
cycling, reduction in air/noise pollution, reduction in road traffic
accidents. It also has a role in encouraging social inclusion.
DLR and Croydon have demonstrated regeneration effects.
Safety and accessibility
Safety and accessibility are major integral
elements of modern light rail schemes. Level floor boarding, passenger
help points, CCTV, lighting, and the use of conductors, contribute
to a safe, and accessible secure environment.
Integration
Integration of transport modes and networks
is fundamental to the success of public transport including light
rail. Integration requires planning of convenient multi modal
interchanges, use of multi-modal ticketing schemes and consistent
fares structures, provision of passenger information on a modal
basis, and compatible passenger treatment (eg consistent passengers'
charters). Planning of park and ride facilities and encouragement
of feeder bus services assist the public to make use of light
rail.
3. HOW EFFECTIVELY
IS LIGHT
RAIL USED
AS PART
OF AN
INTEGRATED TRANSPORT
SYSTEM
Role of Integration
Policy needs to set light rail systems in the
context of an overall network of public transport which provides
buses for low volume short trips, heavy rail for high volume longer
trips, and trams and light rail for intermediate volume. There
is a need for a public transport strategy to link key population
centres, health and education establishments, leisure centres
and business communities with appropriate public transport solutions
driven by passenger requirements and volume. In practice the extent
to which UK light rail systems are integrated within a local public
transport system varies widely and is largely dependent on whether
or not the system operates in a regulated public transport environment.
Local Integration
Below the policy and strategy level integration
operates in two principal ways:
— with other services and modes as
part of an integrated transport network; and
— use of fares and ticketing schemes.
Sheffield, Manchester and West Midlands have
both achieved limited network and service integration extending
to fares and ticketing. These systems interchange at major rail
heads. Integration with buses is much more limited mainly due
to the deregulated nature of bus services in these cities.
Later systems such as in Croydon and Nottingham
are more integrated. Rail services (and in Croydon the Underground
at Wimbledon) were well integrated with the original designs.
Nottingham has good park and ride and bus services have been reshaped
to support the tram system.
The bus services in Croydon do not integrate
so well largely due to the Mayor's London-wide policy to improve
and increase bus services. This has resulted in a significant
increase in bus mileage run since Tramlink opened with minimal
bus route re-organisation.
Ticketing integration in Nottingham works reasonably
well and since 2004 Croydon Tramlink users have benefited from
a common fares structure for buses and trams. This recent change
has boosted tram passenger numbers by 12% as well as making interchange
much easier for passengers.
Bus Regulation
Further stages of integration are challenging
to achieve, given bus deregulation outside London. Encouragement
should be given by the Department for Transport to use Bus Quality
Contracts regulation to ensure feeder bus services to light rail
stops and consistent fares between bus and tram (and other modes).
4. BARRIERS TO
DEVELOPMENT OF
LIGHT RAIL
Length of Gestation Period
The process for developing and approving Light
Rail schemes needs to be streamlined so that the gestation period
is minimised and bid costs reduced. Schemes can take from 5-13
years to deliver which is costly for both the public and private
sector.
This may well require further devolution of
power away from Central Government to local bodies/authorities
with power to raise funding and financing for their priority schemes.
Reducing the time for development also mitigates political change
which may otherwise occur two or three times during the life of
a scheme.
Improvements to the planning process for major
projects as well as alignment of the roles of the highway authority
with the public sector procurer are required.
Economic Appraisal Process
This needs to be aligned so that it captures
environmental and social benefits without expecting the private
sector to fund these.
The public sector currently captures all of
such benefits in its submission for government approval, but in
the tender process not all of these benefits attract a monetary
value and cannot therefore be funded by the private sector.
Procurement Process
Government needs to show commitment to light
rail. Early contractor/operator involvement and the use of standardised
procurement procedures and documentation will assist in the production
of schemes that are attractive and financially viable to the private
sector. In addition the time taken to select and award a contract
needs to be reduced.
Costs associated with bidding for light rail
schemes are prohibitive and restrict competition. Bidders typical
bid costs (to financial close) can be in excess of £1 million
with no guarantee of return. Standardisation coupled with a pipeline
of schemes to bid for, would reduce cost and increase the chances
of success.
Risk
The risk profile needs to be reconsidered so
that appropriate risk is placed with those most suited to manage
it. This may mean the public sector taking responsibility for
the delivery of key elements such as utilities and third party
accommodation works. Risks associated with obtaining planning
permission following the Transport and Works Act Order and the
associated conditions contribute to increased driving.
Light rail needs to be seen as carrying a similar
risk compared to other PFI/PPP projects. Private sector bidders
can choose to put time and resources into bidding for less risky
PFI/PPP schemes such as health, education, roads and defence.
Utilities
In the UK 92.5% of the costs associated with
diverting utilities has to be covered by the project with the
remaining contribution from the utilities. This is a major departure
between European and UK practice as noted in the NAO report.
In addition to increasing project capital costs,
utilities risk incurs very high risk premiums as often the scope,
timing and access implications will change during the construction
phase. The UK system would benefit from reassessing the need for
utilities diversions and to the extent that they are necessary
whether responsibility would be better managed in the public than
the private sector.
5. THE EFFECT
OF DIFFERENT
FINANCING ARRANGEMENTS
(PUBLIC/PRIVATE)
ON THE
OVERALL COST
OF LIGHT
RAIL SYSTEMS
Light Rail Schemes are complex, resource intensive
projects, primarily due to multiple interfaces and decision makers
(including planning authorities, highways authorities, land owners,
utilities, Network Rail, PTEs). Accordingly they are very expensive
to bid and, currently, there is a high risk of no decision being
made. The PFI/PPP approach makes matters more difficult since
this implies bidders being given an output specification—this
may give whole life casting certainty to the public sector but
can lead to greater overall cost.
Requiring funders to take full revenue risk
does not achieve good value for money: lenders in particular require
heavy discounts (30 to 40%) to be applied to unproven revenues
to establish the level of debt a project can support. In many
cases, this will mean no debt. Light rail should be able to adopt
a similar revenue support approach to that used for heavy rail
and (as for heavy rail) this should not be unfairly scored against
the project cost.
Alternatively, the private sector will be strongly
attracted to structures where they have no exposure to revenue
risk and provide facility but not service operation; in other
words a procurement model closer to the PFI approach in other
sectors (such as hospitals, roads, schools). Operation can be
carried out under an entirely separate concession.
The most successful example of financing a scheme
is the Docklands Light Railway (DLR) which has used different
arrangements during stages of development:
— the initial DLR and the Beckton extension
were publicly financed using a design, build procurement;
— the Lewisham extension was financed
under a PPP procurement using public and private (mainly bond)
funds on an availability and part revenue risk concession basis.
The risk of rolling stock, operations, signalling, planning and
most of the revenue risk was with the public sector;
— the extensions to City Airport and
Woolwich have used PFI procurement with the public sector paying
an infrastructure availability fee for a concession period and
taking revenue, patronage and operational risk. The private sector
has the financing, design, build and alignment availability risk;
— under these arrangements the public
sector needs to manage integration risk.
Other on street schemes which do not have the
closed alignment of DLR carry different risks and pricing. Use
of Early Operator Involvement as currently in Edinburgh and Liverpool
is a welcome change in procurement. It has the potential to deliver
better value for money by improving patronage and putting the
operator into a better position to take operating risk.
Much of the cost increase seen in Manchester,
Leeds and South Hants is a reaction to experience on recent light
rail projects where the private sector has lost money on the construction.
This suggests that costs are becoming more realistic rather than
out of control.
Costs may appear to have become more expensive
but this is the essence of the PFI process. Costs are apparent
at an early stage and risks are appropriately apportioned and
costed. This may be contrasted with a purely public sector procurement
process (such as the Jubilee Line) where costs and risks only
became apparent during construction. There is some evidence that
fixing costs at pre-design stage leads inevitably to the pricing
of contingent risk.
6. THE PRACTICALITY
OF ALTERNATIVES
TO LIGHT
RAIL, SUCH
AS INCREASED
INVESTMENT IN
BUSES
The LRTF considers that an efficient public
transport system requires integration of modes, bus, light rail,
heavy rail and the private car, each of which has a role to play
depending on passenger numbers, geographic considerations, emissions
policy and user preferences.
The LRTF has set out in answer to the preceding
questions, particularly questions 1, 2 and 3, its position on
— where light rail is more economic
and efficient as a transport mode than bus;
— the need to compare like with like
when comparing capital and operating costs; and
— the benefits of light rail compared
with bus.
Any comparison of increased investment or alternatives
needs to recognise that under current procurement arrangements
LRT is expected to bear the capital cost of infrastructure as
well as the provision of vehicles and take an informed view of
the infrastructure and congestion cost associated with eg bus
and guided bus.
Mary Bonar
LRTF Secretariat
February 2005
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