Supplementary memorandum submitted by
NedRailways Ltd
As I indicated to your committee, I would like
to submit a limited amount of extra information which I feel is
relevant to your deliberations but which we were unable to cover
due to time constraints. Therefore, I have provided a concise
note relating to the features of both the Dutch core and regional
contracts.
CORE NETWORK
This section covers four broad areas relating
to the way in which the core network, currently operated by Nederlandse
Spoorwegen (NS), works in the Netherlands. These are:
1. the public service ethos;
2. the degree of flexibility;
3. the level of control which the Dutch state
exerts on the railways; and
4. the nature of risk and investment under
the concession.
1. Serving the public interest
NS has a 10-year concession for passenger services
on the core network, granted by the Dutch Government, since 1
January 2005. Government policy is oriented towards facilitating
and promoting rail transport, particularly in areas where rail
provides the most efficient modal solution, such as urban and
inter-city commuting routes during peak periods. The Dutch core
network is in this respect regarded as key to the Dutch national
economy as is freight by rail.
In addition the Government believes in providing
a basic level of transport provision as a social necessity in
sparsely populated rural areas, where providing such a public
service promotes economic development and enhances people's social
and cultural life. The responsibility for these services has been
passed to the regional authorities. Regional rail services are
tendered as an integral multimodal package which includes rail,
bus and hire vehicle provision. (see "Regional Tenders")
The Dutch legislation envisages an institutional
framework for transport, including the railways, in which precedence
is given to providing services that run well and meet these economic
and social goals. The basic principle underlying the legislation
is that the quality of rail transport, as experienced by the passenger,
is the end result of the efforts of the rail sector as a whole.
In the institutional arrangement, the relationship between the
controller (ProRail—the organisation responsible for managing
the national rail infrastructure) and the train operator is key:
together they promote the railway. This is not dissimilar to the
UK situation in principle. However there are two essential differences
to be noted:
1. For the core network close and full cooperation
between the rail infrastructure provider and the major passenger
operator (NS) and freight operator (Railion) is fostered through
governmental policy (as an example jointly owned tools and systems).
In addition NS can draw from a wider breadth of expertise than
the UK TOC's (as an example stations and station development)
resulting in less fragmentation.
2. The regional networks benefit from enhanced
understanding of local service requirements which includes multimodal
transport solutions. For city operations which will currently
go through a process of tendering the same will apply.
2. A flexible approach to managing and operating
the concession
The Government's is keen to ensure a properly
operating railway system, judged on results. This requires a stable
operating environment in which all the parties involved can maintain
a focus on delivery. The relationship between the Minister and
the operator has to be clear and stable, which can best be guaranteed
by a concession that is future-proof—ie one where there
is a clear understanding of what is required over the duration
of the concession.
There is, however, a tension between long-term
stability and meeting short-term performance goals. The Minister
wants the operator to meet its annual performance targets, whilst
the operator wants as much certainty as possible about the duration
and conditions of the concession—all this takes place against
a background of an operating environment which is still relatively
new to everyone involved, and a developing relationship between
Government and the operator. These conflicting aspirations are
resolved through the balance of a long-term (10-year) concession
and a transport plan which contains performance indicators which
are monitored and reviewed on an annual basis. Also, there is
specific guidance within the concession which aims to foster a
professional understanding of the appropriate boundaries between
Government and the operator.
3. State involvement in the railway
The Government exercises broad strategic direction
over operators and judges it according to results, rather than
becoming involved in micromanagement and the underlying business
processes.
Although NS is judged by annual performance
indicators which are set out by ministers in the transport plan,
there is an acceptance that much of NS performance in output terms
can be affected by third parties (including ProRail) and external
factors; so NS's performance is also judged on inputs, which demonstrate
commitment in improving performance on essential parameters. A
practical example of this is a project to improvethe closing mechanism
on train doors, which has a positive effect on service reliability
and punctuality, both key parameters in the annual plan.
The Government's "hands-off" approach
also can be seen in the way close working amongst the different
organisations in the industry is encouraged. As a result, NS,
Railion, ProRail and all the operators have all equally committed
to establishing an agreed improvement plan. Whilst the objectives
for this process have been set out in a long-term plan, there
is a focus on setting and achieving short-term results.
Underlying the improvement plan is a partnership
approach where knowledge, information and support systems are
widely shared as well as a management ethos which promotes understanding
of the business processes. This is cascaded throughout each organisation,
indeed the whole industry. One aspect of this is building up the
professional skills of staff in the operating companies to gain
a better understanding of the relationship between financial resources
and performance. Through this experience NS and ProRail have deepened
their mutual understanding of the relationship between operational
goals, activities and results.
4. Risk and investment
NS runs the concession at its own risk and at
its own expense. Therefore good business practice is key to NS'
continued improvement. Often this is about getting the basics
right: for example, ensuring that the assets retain their Value,
that sufficient rolling stock is well maintained, that the workforce
is well-trained and motivated.
The Minister imposes a duty of care on the train
operator for running the concession—this translates into
an obligation for NS to design and implement a transport plan
to provide the levels of service the Government requires. The
concession also contains a number of specific obligations, including:
— the quantum and frequency of services
provided;
— range of tickets/passes and conditions
of carriage;
— through ticketing and the availability
of tickets;
— consultation with regional and local
tiers of government, passenger organisations and other community
stakeholders; and
— carrying out a customer satisfaction
survey, an evaluation and an international benchmarking exercise.
Along with taking the revenue risk without direct
subsidy, NS is responsible for investment in its assets—a
major part of this commitment is the rolling stock, but there
has also been significant investment in other areas, including
station improvements, expanding parking facilities, passenger
information systems and smartcard ticketing and gating technology.
Some of these investments are undertaken on a commercial basis.
In this respect, the larger-scale investment, particularly the
rolling stock, represents a challenge, as NS would find it impossible
to recoup the cost given the length of its concession. The Dutch
government has given clear assurances that at the end of the concession
there will be a financial settlement which adequately compensates
the company for its risk. The precise nature of this solution
has yet to be established, but NS and the Government are in constructive
discussions on the issue.
REGIONAL TENDERS
The authority for railway lines that are not
part of the main rail network has been transferred from the national
government to the various levels of regional government which
have had responsibility for transport provision devolved down
to them, namely: cities, provinces and the "framework act
areas" (in parts of some provinces and cities there has been
a further stage of devolution, where one of the devolved responsibilities
is public transport).
These devolved tiers of government have the
authority to put these lines out to tender. They often choose
to put them out to tender by means of an intermodal concession,
including bus transport and contracted taxi services. They have
responsibility for negotiating with ProRail over the number of
services they want and their desired timetable. ProRail has to
abide by specific guidelines to ensure this is done in an even-handed
and non-discriminatory manner.
As the main carrier, NS often holds discussions
with regional carriers and/or local authorities in order to match
up preferences and possibilities. However, ProRail makes the final
decision as to the allocation of service provision, although effective
communication between the core network operator and the regional
carriers and/or local authorities ensure that regional preferences
and priorities are met.
9 September 2006
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