Memorandum from Tube Lines (PPP 04)
OVERVIEW
Tube Lines' achievements, in the years since
the PPP contracts commenced, show clear and demonstrable progress
in the improvement of the underground network, reliable and consistent
improvement in day to day performance, completion of upgrade projects
on time and on budget, clear benefits for passengers and value
for money for taxpayers whilst maintaining high standards of safety.
1. About Tube Lines
1.1 Tube Lines is the infrastructure and
asset management company responsible for maintaining and upgrading
the Jubilee, Northern and Piccadilly lines, under a 30 year partnership
with London Underground, which commenced on 31 December 2002.
1.2 Tube Lines is responsible for the following:
|
| Asset | Actual
| Percentage of total
|
|
| Track | 320 km
| 30% |
| Trains | 255
| 42% |
| Stations | 100
| 39% |
| Escalators | 227
| 55% |
| Lifts | 79
| 73% |
| OTHER | |
|
| Employees | 3,500
| |
| Passengers (per weekday) | 1,941,000
| 39% |
|
2. Progress to date and benefits to passengers
2.1 Tube Lines has delivered real benefits to passengers
over the last five years.
2.2 Availability, cited by the Committee during its previous
inquiry as the most important factor for Tube travellers, has
improved significantly over the last five years. Lost customer
hours, the main measure of delay, has halved since transfer. On
the Piccadilly line, delays have been cut by up to 70% and on
the Jubilee line, the figure is 30%. Both are performing ahead
of internal targets and ahead of the commitments we made to London
Underground (LU). The Northern line remains our most complex set
of assets and at transfer, was in a worse state than anticipated.
Performance deteriorated over our first year, but we have more
than recovered this, although it still falls short of the target
we set ourselves. Through increased investment, we are tackling
the problems of the Northern line. 80% of these are currently
fleet-related but we are close to signing an amendment to the
PFI contract we inherited with Alstom, the fleet maintainer, aimed
at improving maintenance and performance.
2.3 The PPP has brought about much greater monitoring
and scrutiny of performance than was ever the case before transfer.
However, it is clear that current performance levels are better
than the period pre-transfer.
2.4 All of our major capital investment projects have
been completed on schedule, bringing significant benefits to passengers.
Some projects have cost more than anticipated (see 2.6) but overall,
we have been able to remain within our planned budget.
2.5 In early 2006, we completed a major project to add
an additional car to every Jubilee line train and introduce four
new trains. This project, which increased passenger capacity on
the line by 17%, was completed, ahead of budget, two days early.
2.6 We have modernised or refurbished all 47 of the stations
required to be upgraded to date under our contract and are halfway
through our station modernisation programme. Each upgrade brings
enhanced security and information for passengers and a cleaner,
brighter environment: this is done through the installation of
additional CCTV cameras and passenger help points, new indicator
boards, upgraded facilities and a comprehensive redecoration.
However, this programme has been significantly more complex and
costly than anticipated at transfer, principally resulting from
the interpretation of scope. We had to manage the balance between
the ambitions of London Underground and the specification we had
committed to deliver (see 5.4).
2.7 We have refurbished 52 escalators to date. We have
also replaced or refurbished over 90 km of track (out of 320 km),
which allows passengers to experience a smoother ride, helped
to reduce incidents of track failure by 44% and also reduced noise
from the railway for residents living in the vicinity of the track.
A programme of 10 km of track replacement and refurbishment carried
out intensively over 40 weekends on the Northern line has resulted
in a large body of work completed 2-3 years early. This programme
has also resulted in a reduction in track and signal failures
on the Northern line by approximately 15%.
2.8 We have taken a number of initiatives to improve
the travelling environment for passengers on the trains. We never
knowingly put a train into service with graffiti on and we have
made significant improvements to the cleaning regimes. Our ambience
scores, the contractual figures used for measuring the quality
of the travelling environment, have risen significantly since
transfer and are ahead of internal targets and the LU benchmark.
2.9 We completed an upgrade to Wembley Park in 2006,
to expand the station in order to accommodate the demands of the
new stadium. The upgrade was completed on time for the scheduled
opening of the stadium in spring 2006, although the stadium itself
opened a year late. Other achievements have been signalling work
to support the Piccadilly line extension to Heathrow Terminal
5 and the installation of lifts at a number of stations to provide
step free access. This additional work is currently valued at
approximately £300 million.
2.10 More significant improvements for passengers will
come with the line upgrades, which will deliver further improvements
to reliability, increased capacity and a reduction in journey
times. Upgrades to all three lines are running on schedule; the
Jubilee line will be completed in 2009, the Northern in 2011 and
the Piccadilly in 2014. A new fleet of trains will also be introduced
on the Piccadilly line in 2014.
2.11 The Committee's previous inquiry expressed a concern
that some work might have to be delayed until the second review
period. Tube Lines' progress to date means that there will be
no such delays.
3. Innovation and change
3.1 A key factor behind Tube Lines' success is the importance
attached within the company to innovation, change and new ways
of working.
3.2 We have made significant investment in training and
development. £10 million has been invested in a state-of-the-art
training centre in Stratford to allow all of our training programmes
to be provided under one roof. We have introduced a suite of leadership
development programmes and other competency schemes for employees
at all levels throughout the business. We have also enlarged the
size of our graduate and apprentice schemes. All of this is underpinned
by informal coaching and mentoring opportunities for employees.
The aim of these initiatives is partly to ensure that we have
the skills and competencies required in the business and can ensure
that we are not adversely affected by skills shortages in the
industry. Just as importantly, these initiatives are designed
to provide motivation and encouragement to employees to come up
with ideas themselves for innovations and changes. A number of
the initiatives later in this section have been developed by employees
on the frontline.
3.3 We have also been innovative in our employment relations
policies. We concluded the first ever two year pay deal on the
Underground in 2004—previously there had only been one year
deals—and reached a further two year deal in 2006. We have
launched a profit share scheme from which all employees benefit
and we have also put in place various schemes to recognise individual
contributions made by employees.
3.4 We have been able to monitor the positive effect
which these changes have had on our employees through our biennial
survey. The last one, carried out in 2005, showed increases in
employee motivation of 13% and employee satisfaction of 19%, to
levels above the UK norm. These levels of improvement in satisfaction
and motivation are almost unprecedented within UK industry. The
next survey is taking place in autumn 2007.
3.5 By employing new methods of planning, innovative
shift patterns and improved welfare facilities for site operatives,
we have been able to reduce the time taken to reduce escalator
refurbishments from 26 weeks to as little as eight weeks. This
has a clear passenger benefit in that escalators are out of passenger
service for less time.
3.6 By applying best industry practice we have been able
to make the process of station modernisations more efficient.
Where before and at transfer, each upgrade could take over two
years, we are now able to complete this type of work in as little
as four months. This also has passenger benefits in that the amount
of time they have to travel through a half-refurbished station
is now reduced. In addition, we are now able to work on 15 stations
at a time, whereas before, only two or three could be worked on
at any one time. We have also reduced the cost of each upgrade
by 40% since we began our programme. This improvement was critical
as we needed to bring rigorous cost control to the work on stations
where this had been lacking in the past.
3.7 We have invested in a number of processes and equipment
to make maintenance more efficient. We have, for example, introduced
a new "Tubevac" machine, which is like a giant vacuum
cleaning machine and is used to replace compacted ballast which
causes trains to bump, increasing rail and wheel wear. The machine
enables us to increase productivity by 300%. In the past, the
same work was done by people shovelling ballast by hand; teams
of 12 typically completed a third of the work which the machine
can achieve each night. Another device which is being rolled out
across the network is allowing our teams to get on site almost
immediately after the current is turned off rather than having
to wait for valuable minutes for clearance to access the track
as in the past. This will mean that more work can be completed
each night, during engineering hours. We believe this has the
potential of saving tens of millions of pounds per annum.
3.8 We have also taken a number of steps to put more
emphasis on preventative maintenance rather than simply waiting
for infrastructure to fail, as happened in the past. We have introduced
a new "smart step" which can be used to gauge, in advance,
when an escalator is in danger of breaking down. We have also
introduced a new computerised enterprise system to record the
history and geography of our assets, to make it easier to anticipate
when a repair will be needed.
4. Safety
4.1 Safety is at the heart of Tube Lines' business and
in everything we do, we seek to ensure the highest standards of
safety for the travelling public. We operate under London Underground's
safety case, which has been accepted by the Health and Safety
Executive, and it is our policy to comply with not just the letter,
but the spirit of all health and safety and railway legislation
and codes of practice. All safety training is approved by London
Underground and is consistent with the training provided to all
others who work on the underground, regardless of their employer.
4.2 Since transfer, we have improved our regime to detect
potential incidents. This means that potential issues are identified
at a much earlier stage and that there is a much better preventative
safety mechanism in place than ever before. The lost time injury
rate has fallen by 80% over the last four years.[10]
4.3 Tube Lines is committed to the safety and welfare
of our own employees and contractors. We believe that all accidents
are preventable and are committed to continuous improvement and
learning from past events to identify and mitigate potential risks.
We are a member of CIRAS, which operates the industry's nationwide
confidential helpline on safety issues, and any employee who has
any safety concerns about his or her work is encouraged to ring
the helpline.
4.4 We have introduced a number of initiatives to enhance
safety. We operate a "beacon site scheme" where individual
work sites can gain accreditation for operating the highest standards
of health and safety and act as a beacon of good practice for
other sites to follow. The idea is to incentivise individual site
teams to aim for excellence and set the standards for others to
follow. We have also devised a new track gauge which is able to
detect track wear and tear much more effectively and comprehensively
than in the past.
4.5 We are very proud of our safety record to date and
are confident that we can and will continue to improve even further.
5. Risk transfer
5.1 Tube Lines believes that risk has effectively been
transferred to the private sector under the PPP.
5.2 Our performance regime incentivises good performance
and penalises poor performance. On availability, cited by the
Committee during its previous inquiry as the most important factor
for Tube travellers, the abatements for poor performance are greater
than the bonuses received for good performance. In addition, the
financial penalties for late completion of station and line upgrades
are significant.
5.3 The contract is structured so that we suffer the
financial consequences for all asset problems, not just those
caused by our own maintenance, but those resulting from inherited
problems and other factors. For example, we incurred a financial
impact of £7 million in relation to the Camden Town derailment
in late 2003, even though the cause was a historic design failure
and Tube Lines was completely exonerated; we invested £20
million on a refurbishment of part of the Piccadilly line fleet,
to make good years of make-do-and-mend prior to transfer; and
we have spent an extra £20 million on the Northern line to
rectify inherited conditions.
5.4 This is a fixed price contract. We bid for the work
on the basis of what we believed the cost of the maintenance and
upgrade programme would be. Where we have found projects to be
more complex than expected, we have had to take on the additional
cost ourselves. For example, at Arsenal station, we had, unexpectedly,
to replace the existing roof with a new one. This was done at
Tube Lines' own cost; that is to say, the risk lay with the private
sector. We have only received supplementary funds from London
Underground a) when we have been instructed to carry out additional
work, such as the expansion of Wembley Park, referred to above;
and b) when LU have widened the scope of projects or changed the
standards by which we are expected to perform and deliver our
programme of work. There have been occasions on which we and LU
have disagreed over the cost of scope extension, but the PPP dispute
process has worked effectively on these occasions to resolve these
issues.
5.5 Most of our contract is output-based. This means
that we have a set of broad, passenger-facing targets, which are
principally around reducing journey times and improving the condition
of the infrastructure and it is down to us to design the programme
appropriate to delivering this. This means that the risk is transferred
to us for the whole lifespan of the assets. The exception to this
is the stations programme, where the nature of the upgrade was
much more closely defined in the contract by LU and consequently
is largely input specified.
5.6 In recent years, there has been an increasing tendency
to offer work to alternative providers through conventional contracts.
The disadvantage to the taxpayer of this approach, particularly
if it results in the descoping of work from the PPP contract,
is that the risk is transferred away from us and back into the
public sector.
6. Value for money
6.1 Tube Lines believes that the PPP model for upgrading
the Underground does constitute value for money.
6.2 Without the PPP, the current, unprecedented levels
of investment would not be sustainable. Investment levels are
running at about 3-4 times that seen at the time of transfer.
Prior to that, there had been decades of under-investment.
6.3 The PPP is enabling upgrades which had been put off
for years to be completed. The addition of the extra car to the
Jubilee line fleet, completed in late 2005, and the current Jubilee
line signal upgrade are being carried out now only because they
had to be descoped from the original extension project in the
late 1990s. The problem was that annualised budgets meant that
upgrade programmes were cut back when funding streams ran out
and what upgrades were completed were usually over budget and
heavily descoped.
6.4 Underpinning the PPP is an approach known as whole
life asset management. This means that we design, build, maintain
and manage the entire infrastructure—we are responsible
for everything that happens to our assets, throughout the entirety
of their lifespan. This, combined with the security of long term
funding, means that:
— we can take a long term and holistic approach
to planning and strike the right balance in terms of funding and
personnel towards maintenance and upgrade activities; and
— our projects can be delivered much quicker as
we can go through the scoping, design and construction phase without
having to lose time to secure new money or tender for new suppliers
as might have happened in the past.
The relationship between projects and maintenance, and achieving
the right whole life balance between them, is at the heart of
this approach.
6.5 The output-based components of our contract are able
to be delivered much more efficiently than the input-based components,
where our programme is subject to significant outside intervention.
Should there be a move towards a more input-based structure, the
capital investment programme would become more complex to deliver,
and there would be more unhelpful intervention, leading to additional
costs. The fact that the risk would be transferred back to the
public sector means that these additional costs would have to
be met by the taxpayer.
6.6 The PPP has led to the recruitment of world class
project management and engineering expertise, with strong track
records of delivering programmes on schedule and to budget.
6.7 The innovations detailed above can be linked both
to the influx of talent and to the long term and output-based
nature of our contract: we had to make changes to create a viable,
efficient business, fit to look after the infrastructure for 30
years. A conventional contractor would not have had to do this.
These innovations have in turn generated cost savings which could
be shared with the public purse through the periodic review process
in 2010. Should part of the work undertaken under the PPP be returned
in-house, there would be a risk of a return to the resistance
to change and entrenched attitudes which militated against innovation
before transfer.
6.8 Tube Lines' business model is based on a competitive
supply chain. All sub-contracted work goes out to the best value
provider, offering the best quality. This ensures efficient, value
for money work.
6.9 At the heart of Tube Lines' business model has been
a drive to reduce dependency on consultants and sub-contractors
throughout the business. Prior to transfer, numerous consultants
were engaged to undertake specialist roles, at significant cost
to the taxpayer. Tube Lines embarked on a process of in-sourcing
these roles. A further drive has been to cut out principal contractors
on station and track upgrade work and to engage sub-contractors
directly. This model is similar to Network Rail's drive to bring
work in-house. It also provides significant value for money benefits.
7. Summary and conclusions
7.1 Tube Lines has achieved significant progress to date.
7.2 This has been underpinned by significant business
and technical innovations.
7.4 Tube Lines is proud of its improving safety record.
7.5 Tube Lines believes that the PPP does offer value
for money to the taxpayer and effective risk transfer to the private
sector.
7.6 We would be delighted to give oral evidence to the
Committee or organise a visit for Members to see at first hand
the work undertaken by Tube Lines.
October 2007
10
The lost time injury rate is one of the standard measures used
to measure our safety performance. It is a normalised rate based
upon the number of employees absent from work for more than three
days. Back
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