Named Investiagtors: Prof Chris Nash, Leeds; Prof Rod Smith, ICL; Dr Clive Roberts (B’ham)
Researchers: Kat Lovell, ICL; Dr Andrew Smith, Leeds; Phill Wheat, Leeds; Chris Bouch (B’ham)
Industry Collaboration and Mentors: ATOC; CER; DfT; Network Rail; ORR; RSSB; UIC
Background:
In the light of recent very sharp rises in rail industry costs, it is crucial for the rail industry and policy makers to maintain pressure to improve the efficiency of the system. The introduction of new technologies has an important role to play in this respect. However, there are concerns that the fragmented structure may be inhibiting the industry's ability to take a system-wide view in making investment decisions. In addition, it is important that the evidence from other countries is brought to bear in assessing the relative efficiency of Britain's rail industry and, in turn, that the industry learns from and implements best practice from overseas where appropriate.
Original Project Scope and Objectives:
This project will build on the outputs from project B4 (which include a detailed analysis of rail industry cost trends; and the development of a methodology for testing techno-economic trade-offs in the rail industry) and B5 (international benchmarking).
The project has three key objectives, which are:
- System cost model - to build on the methodology developed in project B4 to develop a methodology to test the whole system cost impact of selected proposed technological developments in the industry;
- Institutional arrangement - to investigate the institutional arrangements in the fragmented rail industry, assess the extent to which these arrangements provide appropriate incentives for whole system cost minimisation, and develop alternative options for improving the current arrangements;
- Benchmarking - to compare the efficiency of Britain’s rail industry and constituent parts using national and/or international benchmarks
Summary of Methods:
Data sources/collection methods; workshops, interviews/work with industry bodies; information contained in company annual reports and other published information; overseas railway specific data from our academic and railway company contacts overseas. Interviews will also be used to investigate the impact of the current, fragmented structure of incentives on investment decisions. Econometric methods (including frontier techniques) will be used to compare productivity/efficiency measures across countries and overtime, combined with discussions (meetings/workshops) with overseas railways/academic partners with regard to both the econometric work and engineering-based approaches to benchmarking.
Work done:
- System cost model:
The model/methodology produced by this project is intended to support the process of understanding the impact of a technology change in technology selection/decision making.
So far, work has focused on:
- Agreement on a statement of the operational concept of the model;
- Modelling of the high-level rail operations architecture using entity-relationship methods;
- Obtaining an understanding of the rail technological innovation process as the basis for identifying those technologies ready to migrate into the railway, and;
- Identification of cost categories and unit costs for inputs.
A decision has been made to use a system modelling tool called CORE to provide a framework for the model, and to act as a repository for systems information. As a result Chris Bouch has attended a CORE training session to gain experience in the use of the tool. Birmingham has also obtained a free academic licence and has begun work on developing the model in this environment. Work to date has concentrated on modelling standards (requirements), stakeholders and process flows through the use of constrained examples.
To verify and demonstrate the model a series of technology case studies will be used. To aid the selection of appropriate technology case studies Imperial is investigating the current innovation activities of the rail industry. This research uses interviews with industry members, which also provide an opportunity to discuss technology projects underway that might be appropriate cases for the model development.
- Institutional arrangements:
The work at Imperial work will later contribute to a study on industry incentives to use technology introduction to reduce whole system costs. In investigating innovation in this industry, which is constrained by national boundaries and which has had innovation practices and technology trajectories disrupted by an externally imposed restructuring, this work can make a contribution to innovation studies in addition to that made to railway industry research.
- Benchmarking:
Most of the work done to-date by Leeds has been in the area of benchmarking. Since Leeds is now undertaking an international benchmarking exercise for rail infrastructure for ORR, the RRUK funded work has instead focused on train operating costs. In this area, international data is inadequate for the purpose, so we have concentrated on analysis of the 25 or so British TOCs over the period since privatisation (1996-2006), using top down econometric techniques. This work is the first of its kind to study passenger train operating costs over the critical period since around 2000 when costs in the industry have started to rise considerably. Key findings include:
- between 2000 and 2006, passenger train operating costs (per train km) in Britain increased by 35%. Whilst some of the increases in cost can be explained (for example, by higher wages, the introduction of the 35 hour week, and changes in the characteristics of rolling stock), a large part of the increase (around 19%) remains unexplained in the model;
- those TOCs that ended up with re-negotiated franchise agreements or on management contracts saw much faster cost growth than other TOCs, possibly indicating that these arrangements weakened incentives for cost control at a critical time for the industry;
- the model also produces new results on the elasticities of cost with respect to variables such as passenger km, train km, and train length.
The TOC econometric work feeds into area 3 in the objectives, but also provides important information on efficiency performance and on some of the elasticities required to feed into the overall system cost modeling.
Work remaining:
Leeds will focus the remainder of its resources on supporting Birmingham and Imperial on the technology cost modeling element of work, and also on investigating further the institutional arrangements and their impact on cost. The latter work will be taken forward via an interview programme, which will shed light on issues such as the way in which new technologies are introduced into the industry and the incentives for doing so. It will build on the work already completed by Imperial in this area.
Birmingham will continue work the development of the system modeling activity. A meeting has been arranged with the Department for Transport in mid-March. It is intended that after this meeting the scope and remit of the modeling work can be set.
Imperial will work with Birmingham on the development of the model through the investigation of a series of technologies, how they might be implemented and the anticipated effects of their introduction into the UK rail system.
Outputs:
- Poster from RRUK Workshop 2008
- Presentation from RRUK Workshop 2008
- Nash, C.A. and Smith, A.S.J. (2007), ‘Passenger Rail Franchising - British Experience’, in Competitive Tendering for Rail Services, OECD / ECMT, Paris.
- Smith, A.S.J. and Wheat, P.E. (2007), ‘A Quantitative Study of Train Operating Companies Cost and Efficiency Trends 1996 to 2006: Lessons for Future Franchising Policy, Paper presented to European Transport Conference, AET.
- The work has also been / will be disseminated elsewhere (CILT, Oxford University Transport Studies Unit Seminar, and a seminar for members of the TOC community) during 2007 and 2008.