3 LESSONS LEARNED
16. Network Rail considered that those originally
responsible for the West Coast Mainline project had not fully
thought through the best way to deliver the upgrade. Thorough
testing of the business case, risk assessment and project management
proposals prior to approval was important. More sophisticated
modelling would have allowed project managers and funders to gauge
the likely impact of cost increases and delay on delivery of the
project, to identify key assumptions and the risks to project
delivery, and to devise mitigating strategies and contingency
plans.[21]
17. When approving business cases, the Department
and the Office of Rail Regulation needed to remain alert to the
possibility that the Government might be called upon to step in
as 'funder of last resort' should the venture fail. The Office
of Rail Regulation acknowledged that it had not discharged this
function as thoroughly as it might have done in the case of the
modernisation of the West Coast Main Line because the scheme was
a privately funded arrangement which had the Office of Passenger
Rail Franchising's franchising director's strong support. Most
of the increase in costs on the modernisation of the West Coast
Main Line had, nevertheless, been met by the taxpayer. Funding
sources included Railtrack-in-Administration and Network Rail
loans, serviced by receipts of network grant (from the Strategic
Rail Authority and/or the Department) together with track access
charges paid for by the train operating companies from their passenger
fare revenues and government subsidies (Figure 4).[22]
Some Train Operating Companies receive a subsidy from the Department
to run train services, while others pay a premium.[23]
Virgin West Coast were in receipt of a subsidy and between 2002-03
and 2005-06 the Strategic Rail Authority and Department paid £590
million in additional subsidy to Virgin West Coast in large part
because of Railtrack's failure to deliver the infrastructure upgrade
as agreed in 1998.[24]
There were conditions under which the Department could terminate
a franchise, but these were not applicable in this case and the
additional subsidy was needed to keep the service running.[25]
Under the terms of the new franchise agreed in December 2006,
the Department will pay nearly £1.3 billion in further subsidy
to Virgin West Coast up to 2011-2012.[26]
Figure 4 - Taxpayers and passengers provided
the majority of the funding to meet cost overruns on the modernisation
of the West Coast Main Line
Source: National Audit Office analysis
18. Under Railtrack, the West Coast Main Line modernisation
project had not included structured reviews at key stages in the
project to measure progress, and reconfirm appropriate risk and
project management. In 2003, Network Rail introduced a process
known as GRIP (Guide to Railway Investment Projects) based on
reviews similar to those used in the oil industry to improve its
management of enhancement and renewals projects. Network Rail
had applied GRIP to many of the projects that made up the West
Coast Main Line modernisation programme.[27]
19. Assumptions made by Railtrack and its contractors
in respect of signalling equipment technology proved overly optimistic.
Project managers should have remained more alert to the possibility
that a more conventional solution might have been needed, taking
greater account of the experience of other organisations using
similar technology. The same type of signalling had initially
been planned for installation on the Jubilee Line project on the
London Underground, but the decision had been reversed during
the construction of the Jubilee Line when it was realised that
the technology could not be delivered. Railtrack had, nevertheless,
chosen to press on with plans to install the technology on the
West Coast Main Line.[28]
20. The 2004 business case appraisal for the West
Coast Main Line project looked narrowly at its environmental impact
in terms of the pollution arising from the extra power needed
to meet the electricity requirements for additional trains. It
did not consider the positive environmental benefits that might
arise from road and air users switching to rail. The Department
believes that taking these effects into account would give the
West Coast Main Line project a positive impact. Its appraisals
now take full account of road and air users switching to rail,
to give a balanced assessment of the effects of rail projects.[29]
The Department had not monitored some of the non-financial benefits
identified in the business case, such as decongestion and accident
benefits where people switched from cars to trains. The Department
was developing the capability to monitor the delivery of anticipated
benefits following completion of the project.[30]
21 C&AG's Report, para 3.4 Back
22
C&AG's Report, Appendix 1 Back
23
Ev 24 Back
24
Qq 27-28 Back
25
Ev 22 Back
26
Ev 24 Back
27
Qq 74-76 Back
28
Qq 50-51 Back
29
Ev 22 Back
30
Q 5 Back
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