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Network Rail and ORR plan to drive up competition and cut costs in signalling

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Network Rail is on board with ORR’s ambitions to make it easier to compete in the world of signalling and cut costs.

The shared approach was made clear after Network Rail responded to a market analysis released by ORR.

ORR put together an initial report on this analysis, with an interim outline in May 2021, and then it set out more complete conclusions in November that year. It made clear a series of remedies it believed would help signalling experts compete. They were:

Remedy 1 – Increased regulatory oversight: recommendations aimed at enhancing monitoring of the market and increasing transparency over costs, delivery, volumes and market shares.

Remedy 2 – A pro-competitive approach to procurement: recommendations aimed at rewarding pro-competitive behaviour, widening the pool of suppliers, and reducing Network Rail’s dependency on incumbent suppliers.

Remedy 3 – Interfacing: recommendations aimed at ensuring interfaces are opened up and mechanisms for addressing concerns and complaints about interfacing and access to technology are effective.

Remedy 4 – Balancing: recommendations aimed at ensuring Network Rail’s procurement processes are run on genuinely competitive terms and do not unduly favour existing suppliers or penalise first movers in new technology.

Remedy 5 – Funding: recommendations aimed at providing suppliers with greater certainty in the volumes of work awarded to them and reducing the risk when developing new technologies.

In its now-published letter of response, Network Rail says it welcomes and supports ORR’s study, saying it was carried out through an open and transparent collaboration. “Many of the conclusions reached align with Network Rail’s existing views and as noted in the report several activities are either already underway or planned which are intended to address many of the points highlighted in the report.”

The infrastructure owner addressed each remedy in turn, setting out what it was doing to assist.

Remedy 1 – Network Rail will work with ORR to develop, agree, and provide additional reporting information to improve transparency and inform decision-making about signalling renewal market performance.

Remedy 2 – Network Rail’s forthcoming supplier contracts to deliver the roll-out of ETCS infrastructure are expected to be materially different from the approach used over recent control periods and intend to create several long-term, national collaborative relationships with suppliers which will improve the attractiveness of GB signalling works to suppliers by lowering barriers and investment required to enter the market and providing a more certain visibility of supplier return on investment.

Remedy 3 – Network Rail will maintain, reinforce further, and improve the commercial and technical obligations and incentives around interfacing to encourage a more open approach and to realise the opportunities that European Initiative to Linking Interlocking Systems (EULYNX) in particular provides.

Remedy 4 – Network Rail will implement additional activities and incentives to encourage, review and manage the achievement of an appropriate balancing of works.

Remedy 5 – Network Rail will strengthen the linkage between supplier tendering success and volumes of work delivered by suppliers in forthcoming ETCS delivery relationships. To encourage further innovation and reduce the dependency on supplier innovation investment Network Rail will require signalling innovation funding in its CP7 research and development funding.

In the letter of response, Network Rail makes mention of two major players in rail, Alstom and Siemens. It says: “We note the current material role Siemens and Alstom play in the majority of major signalling renewal activity. We believe this situation has developed as the result of several incremental factors including technological transition to Solid State Interlocking (SSI) and significant consolidation within the signalling supplier market. Improvements to this situation will not happen immediately and the activities proposed by both ORR and Network Rail will deliver change over the medium to longer term horizon of CP7, CP8 and beyond.”

ORR Chief Executive John Larkinson, said: “We are pleased that Network Rail’s assessment of the challenges in the signalling systems market are aligned with ours and it is progressing with plans to remedy them. These initiatives can play a key role in reducing the cost of signalling, meaning Network Rail’s funds can go further.

“The transformation to a digital railway presents an opportunity to reinvigorate the signalling market with improved value for money. This can play an important role in helping Network Rail meet the fiscal challenges of the post-pandemic world.

“We will continue to work closely with Network Rail to ensure the benefits of its proposals are realised as fully as possible in both conventional and digital markets.”

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