£760m for 35 miles of new track?
Last week’s announcement of £760m to upgrade the Bicester to Bletchley rail line is, of course, great news.
But when you look at it a second time, isn’t £760m, well, rather a lot of money?
After all, we’re talking about £21m per mile to lay new track on an existing route.
But this is in the context of an entire system in which costs have entirely escaped out of all control.
After all, £21m per mile sounds almost cheap when compared to the jaw-dropping, mind-blowing cost of HS2; currently forecast to come in at £321m per mile.
To put this into context, the new NHS Children’s Hospital in Edinburgh (complete with helipad) cost £150m to build. Indeed, the hospital is in trouble in the media for its running costs: over the next 25 years, total costs could reach £420m (!).
Keep the change?
Currently the Government is using sleight-of-hand to allocate feasibility funding to generate headlines about reversing Beeching without doing much actual reversing of Beeching. If any of it is to get beyond feasibility, reopening railways has got to cost less than healing sick kids.
Why is the cost of the railway so out of control?
Well from my experience of rail, I would pitch that the problem is that the entire rail supply chain is absolutely broken.
When I worked at Chiltern Railways, I was constantly staggered by just how much things within the railway cost compared to things outside. Even bizarre things like paving the platform seemed to cost us more than the council relaying a pavement.
One of the most embarrassing moments in my career was when specifying the new Bicester Village station. A station that, incidentally, is now part of EWR.
Bicester Village station had two entrances: one onto the street (which Network Rail built, and which I specified) and one into the shopping centre (which Bicester Village built). Witnessing just how much more they got for so much less money was cringeworthy. I knew they were spending less than us, but when I first saw their station, I was overjoyed and horrified in equal measure. How could they get all that for the money?
Yes, this really IS a railway station
However, seeing the station wasn’t the truly embarrassing moment. That came when I had to tell Bicester Village how much they would need to spend on each gate (from Cubic) and ticket machine (from Atos). As the only bits of their station that had to be sourced from railway suppliers, their jaws dropped. I wanted the floor (marble) to swallow me up.
The reality is that the railway has developed a kind of ‘learned helplessness’ (a psychological term defined as “state that occurs after a person has experienced a stressful situation repeatedly. They come to believe that they are unable to control or change the situation”) when it comes to being overcharged by monopoly suppliers.
And that’s where organisations like EWR come in. One of the reasons why this happens is that the railway suffers from being a big enough market that everything needs to be (or is thought to need to be) bespoke - but a small enough market to have too few buyers.
Imagine you’re a potential new supplier for rail. Getting a contract with one of the big incumbents is almost impossible (as you’ve not got any proof) but you can’t get any proof without a contract. If you were a new supplier for retail, you’d start with one of the 2.2 million small shops in the UK, and work up. But there aren’t 2.2 million small infrastructure owners.
Now, Rob Brighouse, Chairman of EWR, can’t single-handedly create 2.2 million new railways. But organisations like EWR with a mandate to do things differently need to be supported and encouraged. When EWR starts work, they need to make it a specific goal to nurture new suppliers and to break out of the ‘learned helplessness’ of rail.
As it happens, I know Rob Brighouse rather well having previously worked for him at Chiltern Railways - where he brought a real focus on delivering for the customer whilst driving down cost. He will be doing exactly the same at EWR, in an environment almost uniquely designed to make it extremely difficult to achieve.
The newly upgraded line is coming out at €15m per km. Now the reason I’ve gone all metric on you is that looking at it through European eyes allows us to benchmark the costs with comparative projects elsewhere.
The scale of the problem can be seen by the fact that HS2, coming out at €227 per km, is 1400% higher than the European benchmark. The fact that EWR (and I’m not sure if it should benchmarked against a new line - €8.2m per km, a ‘rehabilitation’ - €4.4m or an upgrade - €6.1m) is “only” appx 100% above equivalent European projects is a triumph by comparison.
The reality is that when we put superhuman effort into controlling costs (as EWR will have done), we still manage to spend twice as much as benchmarks elsewhere.
Breaking the monopoly of Network Rail is essential, and EWR does that.
But we also need to keep acknowledging the problem. Because for as long as it costs more to upgrade a railway than to cure sick children for a quarter of a century, we won’t be upgrading many railways.
Later in the first season of The Freewheeling Podcast I hope to Rob Brighouse about why EWR is different and I will also be talking to the tech entrepreneur River Tamoor Baig, founder of Hack Partners, about the challenges of breaking into rail as an outside supplier. You can subscribe to The Freewheeling Podcast at Apple or Google Podcasts.
