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Preparing for the Tube’s periodic review

Posted: 30 April 2009 | Andrew Cleaves, Commercial Director, Tube Lines | No comments yet

Tube Lines is responsible for maintaining and modernising the infrastructure on three of the busiest lines on the London Underground – the Jubilee, Northern and Piccadilly lines. We are spending nearly £5 billion up until 2010 to improve them as part of the public private partnership (PPP) with London Underground (LU), introduced in 2003.

Built into the 30-year PPP with LU are periodic reviews, the first of which is coming up in mid-2010. The four review periods, each seven-and-a-half years long, allow LU to change its requirements, the scope of work, or Tube Lines’ performance targets. It is also an opportunity to review costing so that savings we have introduced are shared with the public sector but where costs have unavoidably escalated, despite efficient working practices, we get paid fairly going forward.

Tube Lines is responsible for maintaining and modernising the infrastructure on three of the busiest lines on the London Underground - the Jubilee, Northern and Piccadilly lines. We are spending nearly £5 billion up until 2010 to improve them as part of the public private partnership (PPP) with London Underground (LU), introduced in 2003. Built into the 30-year PPP with LU are periodic reviews, the first of which is coming up in mid-2010. The four review periods, each seven-and-a-half years long, allow LU to change its requirements, the scope of work, or Tube Lines' performance targets. It is also an opportunity to review costing so that savings we have introduced are shared with the public sector but where costs have unavoidably escalated, despite efficient working practices, we get paid fairly going forward.

Tube Lines is responsible for maintaining and modernising the infrastructure on three of the busiest lines on the London Underground – the Jubilee, Northern and Piccadilly lines. We are spending nearly £5 billion up until 2010 to improve them as part of the public private partnership (PPP) with London Underground (LU), introduced in 2003.

Built into the 30-year PPP with LU are periodic reviews, the first of which is coming up in mid-2010. The four review periods, each seven-and-a-half years long, allow LU to change its requirements, the scope of work, or Tube Lines’ performance targets. It is also an opportunity to review costing so that savings we have introduced are shared with the public sector but where costs have unavoidably escalated, despite efficient working practices, we get paid fairly going forward.

The first periodic review has now officially kicked off; LU has issued its new requirements, known as restated terms, for the next review period (2010-2017). We are currently reviewing those requirements and will respond by the end of June 2009 with our plans and estimated costs. Following our submission, we will negotiate with LU to iron out any issues that may arise. The second review period officially starts on 1 July 2010 and if agreement between both parties can’t be reached then either party can request that the PPP Arbiter, Chris Bolt, decides the appropriate costs before the second review starts.

A strong track record of delivery

Over the past six years, we have invested over £4 billion in major upgrade work and day-to-day maintenance of our lines to enhance capacity, bring the infrastructure up-to-date and substantially improve asset condition. The return on that investment is significant; day-to-day performance across the three lines has improved with reliability 57% better today compared with our first year of operation. We have also finished all our major projects on time and to date a total of 66 stations have been upgraded, 100km of track replaced and 52 escalators refurbished. Jubilee line trains are one carriage longer than when we inherited them and the line upgrade, which involves installing a completely new signalling system, is now just months away from being delivered. When this project is completed at the end of 2009, it will be the most significant improvement on the London Underground since 1999, enabling the line’s 600,000 daily users to benefit from shorter waiting times for trains and an average journey time reduction of 22%. Capacity will increase by 25% – potentially space for an additional 5,000 passengers an hour.

Delivering work on time, however, is only half the story. Under the PPP contract, we are required to find more efficient ways of working. The periodic review process is a time when economy and efficiency are judged by an independent arbiter, the needs of London are reconsidered and work is re-priced to ensure the taxpayer gets maximum value.

Delivering value for money

One of our key focuses over the past six years, therefore, has been to find ever more efficient ways to deliver the work and demonstrate value for money. Headline figures give us some confidence that we will meet this requirement. For example, since we took over we have cut the costs of refurbishing stations by 50% and of repairing track by 40%. We achieved these cost reductions primarily by changing the project delivery mechanism. With both the track and the stations programme we moved to the construction managed approach, using our own project managers to replace principal contractors and employing direct hire labour to carry out the work. This method of delivery has proved to be more cost effective than the traditional contracting approach as our detailed knowledge and understanding of the challenging Tube environment means we have been better able to direct the resource on site and adjust for any inevitable unforeseen events that had previously driven project costs up.

Our escalator renewals programme also provides strong evidence that we are delivering economically and efficiently. Here we have moved away from a maintenance management model to a whole life asset management (WLAM) approach which offers the best available combination of capital and maintenance work and ensures long-term, cost-effective asset performance and condition.

The escalator team is responsible for 224 escalators and two passenger conveyors. Together these assets travel the equivalent distance from London to New York and back again daily (11,000km), carrying approximately 1.5 million passengers in 20 operational hours.

Back in 2005, the team transformed its escalator renewal approach from the half life refurbishment/full life replacement approach to carrying out a series of intermediate and major refurbishment intervals. The team undertook extensive analysis to identify the optimal renewal programme, using component life cycle, labour and material costs, possession time, costs for planned and unplanned works and condition. The result? Escalator reliability has improved dramatically with the mean time between escalator failures increasing by 18% since 2005. There has also been a 43% reduction in the number of faults and by 2017 it is forecast that there will be 77% fewer faults. The maintenance costs over the life of an escalator have been reduced by 17% and passengers now benefit from having escalators out of service for much shorter lengths of time. The length of time taken to refurbish an escalator has been dramatically reduced from 26 weeks to as little as nine weeks.

A similar phased component refurbishment plan has been adopted for lifts. The original plan saw a huge amount of work activity at the beginning and end of the contract period, with little work in between. The revised plan ensures overall asset condition is maintained and that components are replaced when required; this ensures smoother spend, better performance and a reduced risk of major component failure. Coupled with an improved maintenance regime, the revised plan has significantly improved the reliability of the lift fleet. Component works, carried out on a number of lifts, have halved the number of faults.

Preparing for future Tube improvements

As we gather information from across the business to inform our periodic review submissions and negotiations, this is a busy time for my team. We are reviewing our costs, evaluating how we have worked and confirming everything has been done economically and efficiently. In addition, looking forward, we are calculating how and where we can make further savings during the next review period. By looking at what we have spent over the past six years and comparing Tube Lines with relevant companies and metro systems around the world, we can get an indication of what sort of extra efficiency savings can be made. We are carefully examining each asset group, from stations, track and earth structures to signalling assets, to try and spot long-term improvements that will enable us to become even more efficient in the future.

Estimating costs for the future is a vital part of this process. Understanding how costs will change going forward is one of our key challenges. The PPP contract is adjusted for inflation using the retail price index (RPIX). However, the type of inflation we experience is quite different with costs affected by commodity prices, wages and material costs which historically outpace RPIX. We are therefore working with London Underground to calculate an economic forecast which takes into consideration the inflation experienced in each cost area to make sure that neither we nor LU lose out because of the pace of rising prices.

When looking to the future, it is not only costs that change – so does the public agenda. Since signing the contract in 2002 there has been a much greater focus on saving the environment. One thing we are looking to introduce in the next review period is trading carbon to make sure that we remain an environmentally friendly form of transport. We’ve already saved 5,000 tonnes of carbon emissions but want imperatives built into our contract to provide an even greater incentive to reduce the overall carbon impact of the Tube.

Conclusion

2009 is a key year for us at Tube Lines as we embark on the periodic review process which will set the programme of work and the funding for the seven-and-a-half years from July 2010.

Our track record on delivery over the past six years and the efficiencies we have introduced demonstrate we are value for money. Delivery and efficiency are approaches we are committed to so every penny given to us in the future will be spent wisely. It is vital that a package is agreed that will allow us to continue to invest at levels seen over the first review period to continue to meet the growing needs of London.

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