Thameslink and the National Audit Office: Part 1
It is the same old story. We were planning on giving articles about Thameslink a break and then something else comes along. This time it is a report from the National Audit Office (NAO). This is surprisingly readable and offers a bit of an insight to issues not normally addressed as well as providing a different perspective of the project.
It has the feel of a half-term report on the subject of Thameslink and the progress or otherwise being made by the pupil, young master DfT. As a half term report it will not count towards his final end of term assessment, but raises issues and weaknesses as well as the good points. Master DfT would be wise to address the issues which are raising concern if he wants a good report at the end of term.
One of Thameslink peculiarities is that the precise objectives never seemed entirely clear as we mentioned in our article What’s it all about, Thameslink? One can be suspicious of objectives appearing after a project is in full swing as it is then generally the case that the objectives are written to match the project specification and not the other way around. Nevertheless the report does neatly define the supposed objective of Thameslink as:
reducing overcrowding on commuter services north and south of London and on London Underground.
The key components for this are given as:
- Longer trains can run on the route through central London, with improved reliability and frequency.
- Passengers have less need to change trains or use London Underground services to complete their journeys.
- Links with the wider transport network are improved, including Crossrail, the Channel Tunnel rail link at St Pancras, and Luton and Gatwick airports. The route already connects five central London mainline stations and ten Underground stations on nine Underground lines.
Components two and three don’t strictly contribute to the declared objective if you regard overcrowding as only applying to the trains and not to the stations. It does seem though that in future we will have to seriously consider and address the issue of overcrowding at stations. In this context the key components do appear to be the means of achieving the objective.
A Programme of two-halves or a Three Legged Stool?
We, and just about everyone else, have seen the Thameslink Programme as very much a project with two components. The larger portion is the infrastructure and the smaller portion is the new train fleet and new depots to service them. The NAO, and presumably the DfT, sees things differently and see the project as consisting of:
- Improving tracks and stations including extending platforms, reconstructing Blackfriars, Farringdon and London Bridge stations and introducing new signalling technology, expected to cost £3.55 billion (in 2006 prices).
- Buying a fleet of new trains and two new maintenance depots, with an estimated capital cost of £1.6 billion, which the Department is financing through a private finance initiative (PFI).
- New franchise arrangements for running the passenger service on the Thameslink route.
Of course when the Thameslink Programme was conceived as Thameslink 2000 in 1989 the complication of franchising just didn’t exist. It is also the case that if one looks at a project by analysing its capital cost then there is also no franchising element. In the past couple of years it has become apparent how addressing the franchising issue and getting it right is, in fact, a major and vital part of the scheme – and probably one that, if not exactly overlooked, was not appreciated as being absolutely critical.
A Worthwhile Scheme
One thing that comes across very strongly in the report is the endorsement of the Thameslink Programme as a worthwhile scheme. One important measurement for any project is the Benefit: Cost Ratio (BCR) which, put crudely, is an indicator of whether the costs justify the time savings that result. It’s used in projects that cannot be assessed on the basis of straightforward return on capital.
The NAO seem to be completely unfazed by the fact that the BCR is currently calculated at 1.4:1, which is not bad, but is considerably less than at the start of the programme when it was assessed as over 2:1. The reports reassuringly states that “It is normal for benefit-cost ratios to change during a project.”
The DfT is praised for consistently choosing options within the project that produce the best BCR. This does rather go along with the idea that BCR is very good for comparing similar proposals and choosing the best of them but less good for establishing whether the project was worthwhile in the first place.
Part of the reason for confidence in benefits of the scheme is that the BCR quoted is, for the most part, based on saving of time and does not take into account wider benefits – to businesses for example. On this wider investment case ratio the value still stands at well over 2:1 which is considered very satisfactory.
One peculiarity about the way the BCR is calculated is that it actually takes into account the loss of revenue to the treasury as a result of the reduction of receipts of fuel tax due to people changing mode of travel from car to train. This does seem quite extraordinary. Either fuel tax is a specific tax intended to discourage use of cars (or more accurately oil to power vehicles) or it is a general tax with the sole intention of raising revenue for the chancellor. If it is the former then it is quite absurd that rail projects that reduce oil use are penalised for achieving the objective laid down. If it is the latter then it is madness that the cost benefit analysis of a project depends on the arbitrary way that the chancellor chooses to apportion his revenue streams and not on the project itself. It is the modern equivalent of the 1960’s argument that smoking was a good thing because it provided tax revenue for the government.
Management of the Construction Side of the Project
The NAO praises the DfT for the way the construction aspect of the project has generally gone ahead on time and, as a whole, within budget. One of the common criticisms of the Thameslink project is that its proposed scope in terms of which routes would be Thameslink ones was not defined at the outset – and still isn’t finally decided. This does not even get a mention and, although we at London Reconnections may get worked up by this, it really does only have a small impact on construction as the major sites such as London Bridge are by and large unaffected by precise details of the final timetable.
Interestingly though, the report does provide a new DfT-sourced diagram of intended services with the usual warning that this may not be the final service pattern. The appearance of two lines symmetrically drawn off the Brighton Main Line that are labelled “Destinations off the Brighton Main Line” could be representative of a number of undecided options as well as encompassing Horsham and East Grinstead which are expected to be in the final scheme.
The symmetry of lines drawn off the Brighton Main Line could suggest that the lines in question are those to Tattenham Corner and Caterham. If this were the case then nothing has changed recently. One would have thought though that if these two destinations were still highly likely to be included then they would have explicitly have been put in. If they are no longer in the plan then Thameslink, on the London Bridge route anyway, is looking to be more and more of a long distance route which will do very little for the inhabitants of London.
An alternative interpretation is that this represents Redhill and the lines in question are those to Reigate and Tonbridge. Whilst Reigate makes some sense – it is effectively a convenient place to terminate Redhill trains – the Tonbridge branch is only lightly used. Peak hour trains to Tonbridge via Redhill would, arguably, be some compensation to the inhabitants of the Tonbridge area who were originally probably expecting a more direct Thameslink service.
If the symmetry is purely diagrammatic and not meant to accurately reflect the actual junction layout then it suggests that ideas about going to Eastbourne and possibly even Littlehampton may have been revived. Previously Eastbourne and Littlehampton were thought to be off-limits because it was decided that there would be too much opposition if Victoria services were diverted to London Bridge.
A problem with all these options, if taken as mutually exclusive, is that it is difficult to identify sufficient suitable route necessary to provide the 16 trains per hour needed to run through the Thameslink core via London Bridge. This has been a problem ever since the decision to abandon the “Kent via London Bridge” routes was made.
Most likely, given the deliberate vagueness of the description and lack of specific locations identified, Network Rail and the DfT are still trying to decide on the remaining destinations for Thameslink and they will be a combination of the options above. This indecisiveness would have had implications when looking at putting the Thameslink franchise out to tender if it were not for bigger issues that came along.
On the construction side the DfT even get praise for realising that the second half of the project (post Olympics and mainly concerning London Bridge) was unachievable in the original timescale so the decision to extend the project by three years from 2015 to 2018 was seen as sensible. The NAO clearly has different recollections from the rest of us or was badly briefed – or, maybe, well briefed with the truth as opposed to the story given to the rest of the world. It is true that the department put it back a year from 2015 to 2016 but the official version (until now) was that it was then put back to 2018 as part of the Chancellor’s Spending Review to spread the drain on the public purse over two more years.
It does seem, as many suspected at the time, that this was a bit of face-saving which ultimately benefited Network Rail and the DfT. The chancellor was probably more than happy to appear to be tough on spending without encountering the wrath of the department that he had supposedly got tough with.
Incidentally, the report points out that if phase 2 of Thameslink had not gone ahead then the BCR would have been only 0.4 : 1. Part of the reason that this figure would have been so low was that much of the work such as signalling works and station redevelopment at London Bridge would have had to have gone ahead anyway in some form. We may not have realised it at the time, but it does seem that once phase one was well under way the Thameslink Programme was pretty much unstoppable.
Whilst the report is generally happy with construction progress, it expresses great concern on how small the project management team is within the DfT. It is pleased that there has been continuity but is very concerned that a senior critical person is due to move off the project in 2013 to work on HS2. It seems that the concern is not that this person is moving to HS2, but that there is a lack of sufficiently experienced expertise to fill the vacancy that will be made.
It has always been understood that the Thameslink Programme was an extremely complex project. To reinforce that the NAO explains that the project has its own protocol with the DfT instead of the usual methodology which is that Network Rail delivers a project which is overseen by the Office of Rail Regulation. The normal methodology generally works fine even for big projects such as the proposed electrification schemes or Reading but only in the case of Thameslink and Crossrail is the bespoke regulatory protocol present.
Changes to the plan and the Budget
What the NAO report also does for the first time is itemise some of the issues that took place on phase one and how costs needed to be reduced in phase two.
One issue facing the project was the state of Blackfriars Bridge which was found to be in a worse state than expected. This, and scope changes for Blackfriars station alone, added £158m. Signalling being more expensive than anticipated and changes of scope at Farringdon increased this to £217m. Despite this, cost savings elsewhere meant that phase one actually came in at £147m under budget. Although many people will find this difficult to believe, part of the saving was made in reduced compensation payments compared to what had been budgeted for “as there was less disruption to train services than had been anticipated at the design stage”.
Phase two was going over budget but this was clawed back mainly due to simplifying the track layout at London Bridge. One hopes we don’t get into the same situation that has allegedly happened with the West Coast Main Line upgrade where all the cost savings made by taking items out of the project were more than offset when, over the following years, it was found to be essential to put the features back in – at much greater cost than if done originally as planned.
So far so good but what lies ahead?
Having got this far master DfT might start to feel quite confident that all is going well. Unfortunately for him the next two subjects in the report are train procurement and franchising. Not only are these subjects in which it is a case of “could do better”, the consequences of not doing well in these subjects is explained in great detail. In part two we will look at the issues related to the delays in ordering the new rolling stock.