Network Rail to open up 'pipeline' of infrastructure projects to private investment

The publicly-owned railway infrastructure manager will begin publishing regular 'pipelines' of third party project opportunities, starting with the Anglia route and extending to its other routes by the end of the year. It also intends to standardise its approach to asset protection (ASPRO) across the nine routes, and to appoint a number of 'project champions' to work side by side with third party developers and investors to ensure that their projects are successful.

"We know that there is a common perception that Network Rail is difficult to work with," the company said, in its response to a major independent review of third party investment in the railways. "The Hansford Review identified one of the barriers to third parties entering the rail market is Network Rail's own behaviours."

"The Hansford Review identifies … that 'the perception is that Network Rail's approach is excessively risk-averse, and not incentivised to help third parties'. This needs to change," it said.

In December 2016, Network Rail commissioned former government chief construction adviser Professor Peter Hansford to report on how to encourage competition into railway projects and attract more private sector finance into the UK's railways. His report, which has now been published, made 12 recommendations to Network Rail, including that it provide third parties with a "clear forward view" of investment opportunities and that it develop clear service level agreements for third party partners.

Under the current structure, third party partners often have to engage with "a number of different Network Rail departments", which may offer conflicting advice, according to the report. It identified the ASPRO agreements required to prevent disruption and damage during works on or adjacent to the railway as a particular barrier to third party involvement.

By standardising its approach to ASPRO, Network Rail intends to ensure the requirements and expectations it imposes on third parties are "consistent and transparent". It will also assign greater accountability for ASPRO to Network Rail project champions, who will be responsible for agreeing what is required with the third party and putting the necessary commercial arrangements in place.

Network Rail also intends to develop a service level agreement (SLA) for its third party partners, which will set out what they can expect from Network Rail as well as processes, timescales and dispute resolution procedures. Once the SLA is in place, it will publish its performance against it along with examples of best practice and areas for improvement on a route by route basis.

It will also consider where it can introduce flexibility to railway standards in a way that encourages innovation and reduces costs without compromising contractor or passenger safety, in response to concerns raised by the review that standards are being used "inappropriately" to drive up costs. It will do so through its ongoing review of policies and standards, which is due for completion by March 2018, as well as by allowing suppliers to "proactively challenge" standards that appear to drive increased costs without comparable benefits, particularly in the early stages of a project.

Finally, it will introduce a new 'rewards scheme', where any money saved by as a result of introducing a new idea or innovation will be shared between Network Rail and the company or individual involved.

Third party opportunities made available under the new regime are likely to be "at the smaller end of the spectrum, such as new stations, depots and car parks", at least in the early stages, according to Network Rail chief executive Mark Carne. Over time, Network Rail hopes to develop best practice criteria for when to adopt this approach, as well as to investigate ways to allow the private sector to invest directly into railway projects, he said.

"As a government owned business, this has some challenges, but by unlocking private finance we can potentially deliver railway improvements that would otherwise not be possible," he said.

Construction law expert Nigel Blundell of Pinsent Masons, the law firm behind Out-Law.com, said that the reforms announced by Network Rail would help to create "additional sources of funding" for the railways, in circumstances where the company had been constrained by public funding cuts.

"Alternative sources of investment mean that Network Rail can unlock other schemes that might not necessarily have been given the go-ahead or have recently been shelved such as the electrification programmes benefitting the Midlands and Trans-Pennine routes," he said. "Redevelopment around station areas is already of interest to the private sector, so moves to formalise third party involvement can only be a good thing."