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Framework Outline Business Case

Executive SummaryNovember 2015

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1.ExecutiveSummary

Thisdocumentsupportsarecommendationthattheaccelerationofdigitalmodernisationontherailwayshouldbethebasisofrail’sInitialIndustryPlan(IIP).

Analysisidentifiesthattheexistingplanistooslowandpiecemealtomaximisereturnoninvestment. A c.25 year digital strategy that spans technology, business change andcommercial innovation offers a more cost-effective and higher-performing railway thatdeliversabiggereconomicbenefitforBritain.Theproposal:

Supports Government policies for facilitating economic growth and reducing thecostsofrunningtherailway;

MaximisesdeliveryconfidencebyrelyingonproventechnologyandlearningfrommajorinfrastructureinitiativesacrossEurope;

Releases the capacity and connectivity Britain’s economyneeds from the railwayinfrastructurethenationalreadyhas–providingstrongsupporttotheprioritiessetfortheNationalInfrastructureCommission;

Delivers benefits on every type of route that are tailored to local priorities – bethey formoretrains,better connectionsor greater reliability–eachdeliveredatlowercostthanpurelyconventionalalternatives;

Willbestrengthenedwithanadditionaloption toupgradetothenextgenerationof technology and allow further acceleration that delivers greater benefits overc.15-20years;

Facilitates commercial innovation that enables access to 3rd party sources offinance,toincreaseaffordabilityandsustainablerisk-transfer;

Is a catalyst to growengineering talentwith thedigital skillsand knowledge thatBritish suppliers need to succeed in the strategic growth market for digitalinfrastructureathomeandabroad.

Digital Railwaywill now develop this analysis and the plan for implementationwith IIPpartners,enablinganOutlineBusinessCasetobefinalisedin2016thatconfirmsanationaldeploymentsequenceandtheplantosupportrapidprogress.ThiswillformacriticalpartoftheIIPinSeptember2016.

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1.1 Thestrategiccaseforchange

The government is funding and supporting a package of major upgrades to the railway to boost

productivityandgrowth(includingthroughitsbackingofinitiativessuchasCrossrailandHS2)aspart

ofaNationalInfrastructurePlan.

But beyond these critical upgrades, a national capacity strategy that is rooted in conventional

construction-basedenhancements(suchasbuildingnewtracks)alonewillnotmaximisethebenefits

of this investmentordeliver thecapacity thatBritainneedsover the longer term. Ultimately,we

canonlydeliver and fund the capacityweneedby complementing targetedupgradeswithdigital

innovationthatmakestheinfrastructurewealreadyhavesignificantlymoreeffective.

Ifwedonotactnow,passengersandfreightcustomerswillfacelongerwaitsfortrainsthatareless

reliableandevenmorecrowded,with fewerchoicesaboutwhereandwhen theystop. Important

contributionstowidergovernmentobjectives–fromalowercarboneconomyto‘digitalfirst’public

serviceswillalsobemissed.

Butbytakingconcertedactiontotackleconstraintstorailwaycapacity,therailindustrycanmakea

powerful contribution to the priorities of the National Infrastructure Commission, recently

established to sustain London’s global economic success by keeping the city moving and to

transformconnectivityintheNorth.

DigitalRailway isavitalenablerfor long-termgrowthbecause itreleases latentcapacity intheGB

rail infrastructuretosupporttheeconomy.Oneverytypeofroute,newoptionscanbecreatedto

meetthelocalprioritiesthatmattermost–betheyfor:

Makingthe rightchoicesabout infrastructureisoneofthemostpowerfulwaysanycountrycan

secureitslong-termeconomicsuccess.

For Britain today, a vital task for the railway is to help our great cities in the regions become

engines of national growth, and to sustain London’s global economic leadership. This needs a

railwaythatconnectsmorepeople,skillsandgoodstomoreplaces,withreducedoverallend-to-

endjourneytimesatlowercost.

With the railway already full in important growthmarkets, andwith passenger numbers set to

increasesubstantiallyinthedecadesahead,Britain’sresponseneedstounlockcapacityfromthe

infrastructureitalreadyhasinamorecost-effectiveway.

Byfacilitatingthis,fasterdigitalmodernisationaddressesprioritiesoftheNational Infrastructure

Commission,helpingBritainmeetthetransportchallengetosupportgrowthin jobs,housingand

theeconomy.

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► More trains where they are needed most, for example, to rapidly growing metropolitan

regionssuchasLondonandManchester;

► Betterconnections,enabledthroughmorechoiceabouttrainpaths-forexample,between

oursystemofcitiesintheNorthorforprimefreightroutes;

► Greaterreliabilityandareductionintheimpactofdelayswhenproblemsdooccur.

Astheseprioritiesaremet,afutureplanbasedonDigitalRailwayprovidesBritainwith:

► Apowerfuldriver forproductivityandgrowth,clearlyalignedtoprioritiesof theNationalInfrastructureCommission,includingtofosteradynamicNortherneconomyandtosupport

London’sglobalsuccessforthelongterm;

► A railwaybuilt,maintained and run at lower cost. A digitally-enablednetwork has fewercentralisedoperationscentresandhasthepotentialtodelivermaintenancecostadvantages

achievedbytheremovalofheavyassetsandareducedcostofdisruption.Withmorespace

inthenetwork,newoptionsarecreatedtoundertakemaintenanceandnormalserviceside

bysideresultinginalowercostrailway;

► Better customer experience frommore reliable services supported by better, up-to-date

information.

In achieving these benefits, Digital Railway facilitates the wider transformation of the railway

industry, for example, through new investment models that harness private investment, new

customerservices,andnewoptionsforfreightservices.

Therealisationofthesebenefitsisenabledthroughconfigurationphasesthatfacilitateabuild-upof

skillsandknowledgealongsidethedevelopment,testinganddeploymentofdigitaltechnology:

► Phase1configuration-StrategicPilots;

► Phase2configuration-Technologyintegrationandcorebusinesschange;

► Phase3configuration-Optionalenhancement.

PleaserefertoFigure5onpage14foradescriptionofthephaseconfigurations.

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1.2 Theeconomiccaseforchange

1.2.1FasterdigitalmodernisationisavalueformoneyresponsetothechallengesofGB’sbusiestroute

Analysis has examined the case for faster digital modernisation on a key commuter route – the

SouthWestMainLine.Thisindicatesthat:

► DigitaltechnologyavailablenowwoulddeliversignificantreliabilityandcapacitybenefitsfromthePhase2configuration,whichcomprisesTrafficManagement(TM)andETCSLevel2

(L2)1;

► As part of a package ofmeasures, accelerating the deployment of this digital technology

wouldreducethecostofmeetingdemandforcapacity;

► Accelerating digitalmodernisation avoids the need for amajor and costly intervention to

builda5thtrackbetweenSurbitonandLondonWaterloo;

► Upto11moretrainsinthemorninghighpeakhour-30,000newseatsaday,deliveredfouryearsearlierwithDigitalRailway;

► A£60millionlowerinitialcapitalcostinpresentvaluetermsthantheconventionalupgrade

plan;

► 5percentfewerpassengertraindelayminutesasaresultofTM,evenwithanincreasein

trainsonthenetwork.

A furtherupgrade to thePhase3 configuration,which includes thenextgenerationof technology

(ETCSLevel3orL3)2,whenavailable,willextendthesebenefitsformorereliabilityandcapacitywith

lessinfrastructure:

► Resultinginafurthercapitalcostsavingof£70millioninpresentvaluetermscomparedto

thePhase2configuration.

1Pleaserefertosection3.5.2foradescriptionofthesetechnologies.2Pleaserefertosection3.5.2foradescriptionofthesetechnologies.

Analysis ofdemands and constraints on the SouthWestMain Line shows a value formoneycaseforacceleratingdigitalmodernisationalongsideapackageofconventionalmeasures.

Additional routeassessment reinforces this findinganddemonstratesthepotentialfordigitalmodernisationtodeliverbenefitsoneverytypeofroutethatcanbetailoredtolocalpriorities.

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► 9 per cent fewer passenger train delay minutes, even with an increase in trains on thenetwork

3.

Overall, the benefit to cost ratios (BCR) are comparable to other major programmes and justify

further investigation of the benefits on offer. This analysis includes transport benefits (webTAG4

compliant);widereconomicbenefitswillbecapturedinthenextstageofanalysis.

Moredetailedtimetableanalysiswillbecarriedoutatthenextstagetotestthefeasibilityofrunning

11additional trainsata reasonable levelofperformance.To test thesensitivityof theBCRto the

numberoftrains,ascenariowhere6additionaltrainsarerunhasbeenincludedundereachofthe

differenteconomicoptions:

► Option1-Legacyplanandfullconventionalupgradesby2032;

► Option2-DigitalRailwayPhase2configurationplussomeconventionalupgradesby2028;

► Option3-DigitalRailwayPhase3configurationplussomeconventionalupgradesby2028.

Figurei:BenefittocostratiosfortheSouthWestMainLineCasestudy

AdditionaltrainsintoLondonWaterlooinAMhigh-peakhourfromcurrentservice

Option1 Option2 Option3

11(CentralCase) 0.9* 1.3 1.5

6(Sensitivity) 0.4 0.5 0.6

*only10moretrainsarepossible

1.2.2Anetworkwideaccelerationofdigitalmodernisationdeliversbenefitsoneverykindofroute

In addition to the South West Main Line, a further 8 routes have been assessed that are

representative of the constraints and characteristics of the network as a whole. The high level

conclusionsofthatanalysisarethat:

► Digitalbenefitsareacrossthenetworkbuttheydifferdependingonthecharacteristicsoftheroute;

► A system-based deployment of Digital Railway, with a Phase 2 configuration deliverscompellingbenefitswhichcouldbebuiltupon furtherbya futureupgradeto thePhase3configurationoncedeveloped;

3Coreinfrastructurereliabilityimprovedby35percent-moredetailprovidedintheEconomicCase.4WebTAG–webbasedTransportAnalysisGuidance,whichistheDepartmentforTransport’sinterpretationoftheGreenBook

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► Faster digital deploymentmaximises the benefits from investment to passengers, freight

usersandtherailindustry,aswellasthewidereconomy;

► Networkwidereliabilitycanbeimprovedbyupto7percentforthePhase2configurationand11percentforthePhase3configuration.

Figure2providesmoredetail anddemonstrates thepotential forDigital Railway tohave ahighly

beneficialimpactonawiderangeofroutes.

This demonstrates that a digital railway can create options for each line of route to meet local

prioritiesformoretrains,betterconnectionsandgreaterreliability.Italsohighlightstheadditional

capacitybenefitsthatanupgradetothePhase3configurationcanoffer,atalowercost.

DigitalRailwaycanalsooffersynergieswithotherprogrammestogeneratemorereturnfromfuture

investmentininfrastructure,forexamplepotentiallyreducingthecostofelectrificationasaresultof

therebeingnoneedforimmunisationandsignalsightingworks.

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Figureii:AssessmentofDigitalRailwayonsamplelinesofroute

Lineofroutecharacteristics Capacity Reliability Betterconnections LowerCost

SouthWestMainLine–LondonCommuter,freightandinterregional ��� �� � ���

NorthernPowerhouseRail–transformationalprogrammelinkingtheNortherncities ��� ��� ��� ���

MidlandMainLine–longdistancehigh-speed,interregionalfreightandLondoncommuter5 � �� ��� ��

BrightonMainLine–Londoncommuter � ��� � �

Leicester–Ely–FreightFelixstowetonorthandmidlandsandinterregional ��� � �� ���

CardiffValleys–non-Londoncommuter ��� � � �

AberdeentoCentralBelt–interregionalandfreight � � ��� �

Grantham–Skegness–rural - � � �

EssexThameside–Londoncommuterandfreight6 - � �� �

����–OpportunitytoachievegreatercapacitybenefitsandcostsavingswithfutureimplementationofETCSL3aspartofPhase3configuration

5NorthernPowerhouseandMidlandMainLine–DigitalRailwayhasthepotentialtoreducethecostofelectrification6EssexThameside–RouteStudyanalysisbasedonthegrowthforecastsfromtheMarketStudiesshowsthatlengtheningofservicesontheroutewillsupportcapacityontherouteto2043

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1.3 Acaseforsupply-chainstewardshipandcommercialinnovation

1.3.1Aneffectivesupply-chainpartnership

TheProgrammehasconductedan initialreviewoftheskillsandservicesrequiredfromthesupplychaintodeliveranaccelerateddigitalmodernisation.

A gap analysis confirms that the industry capabilities required broadly exist and a procurementstrategy will be created to bridge outstanding gaps which heavily emphasises engagement,informationsharingandcollaborationwiththeindustry.

Theachievabilityof thisstrategy is increasedbytheopportunities for the industry tobenefit fromthelong-termdriversforchangebroughtaboutbyDigitalRailway,whichinclude:

► Marketgrowth,notjustforoperatorswhocanservemorepassengerandfreightcustomersontheexistingnetwork,butthroughouttherailsupply-chain;

► Skills development, catalysed by Digital Railway creating a ‘pull’ for the rail industry andrelatedindustries,suchaspowerandprocess,tofuture-proofitsskillsbase,growthetalentand develop the skills needed to succeed in the growing global market for digitalinfrastructure;

► Presentinganopportunityfortherailindustrytoinnovatethroughthepursuitofnewkindsofcommercialpartnershipsandapplicationofskillstonewareasofbusiness;

► Creating new markets, made possible by the process changes necessitated by DigitalRailway, such as new timetabling planning tools that creates new opportunities foroperatorsandfreight;

► Providing a catalyst to develop the skills and knowledge to position the supply chain asgloballeadersindigitalinfrastructureandgiveitacompetitiveedge.

1.3.2Increasedperformancethroughcommercialinnovation

DigitalRailwayhas identifiedhowandwherethecurrentfundingandcommercial landscapemightbe affected by faster digital modernisation. This confirms that commercial innovation will berequired,butwillalsobeenabled,bytheProgramme–makingitanimportantdriverforincreasedaffordability,efficiency,performanceandsustainablerisk-transfer.

Contractingoptionshavebeenidentifiedtoachievethisandwillnowbetestedthroughconsultationagainstcleartestsofsuccess:

► Valueformoney;

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► Accesstofinance,includingprivatefinance;

► Effectivetransferandmanagementofrisk;

► Strongaccountabilityfordeliveryandperformance;

► Incentivesthatpromotehighperformanceandpartnership;

► Increasedfocusandclarityofpurpose.

Casestudy:howDigitaltechnologyandindustryfundingstructuresaffecteachother

Changing thesignallingsystemrequiresclose integrationbetweentrack-basedequipment,telecoms,train-borneequipmentanddriver skills.Asa result, change inthisareamustbeimplemented in a joined-up way that allows risks and dependencies to be managedeffectively – for example, using a single programme of work under one supplier or acollaborative partnership that allows several stakeholders to integrate their activitiesclosely.

In either case, delivery and funding vehicles must help to allocate commercial risksappropriately between those involved. Thismay require new kinds ofcommercialmodelsthatpromotebehavioursandincentivesthatincreasevalueformoney.

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1.4 Meetingtherequirementsforsuccessfuldigitalmodernisation

1.4.1Deliveryrequirements

Historically,therailindustryendorsedastrategytoreplacetraditionalsignalswithETCSnationallyasexisting signaling systems reach life-expiry. This proposed transition is scheduled to take over 50years,eventhoughtherequiredtechnologiesarebeingdeliveredonnetworksworld-widenowandareadvancingrapidly.

Thislegacyplanlacksthepaceandprioritisationneededtomaximisethebenefitsofdigitalcapacity(to thenationaleconomyand to railpassengersand freight customers)or the strategyneeded toaddress risks in respect to technology integration, business change, supply chain capability andprogrammedelivery.

Having reviewed lessons from other major infrastructure initiatives, Digital Railway has beendesignedtomeetthesuccessfactorswhicharenotaddressedeffectivelyundercurrentplans.

► Thecoreproposalisforadeploymentstrategyrootedinproventechnologyandaphasedbuild-upofskillsandknowledge.Thiswilldeliverfasteraccesstobenefitsfromtechnologythatis:

o Compliantwithinternationaltechnicalstandardstoensureinteroperability;

o CompliantwithUKGovernmentsandEUpolicy;

o Availablenowandinusearoundtheworld;

o Knownandtestedonthegroundthroughanumberofacceleratorprojectsalreadydeliveredorinprogress,includingTM(inRomfordandWalesRailOperatingCentres),ETCSL2ontheCambrianLine,thePaddingtonapproachtoHeathrowandontheEastCoastmainLine.

► The deployment strategy includes the creation of options to upgrade to the Phase 3configuration, including ETCS L3 – subject to the pace of development in technology and(international)standards.Developmentactivitywillbecriticaltoenablingthis,supportedbythekeycriteriaforanareabyarearoll-out.

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DigitalRailwaywillnowdevelopitsdeploymentplanaspartoffurtherdiscussionandresearchwithstakeholders.AnindicativesequenceisshownatFigureiv.Fortheavoidanceofdoubt,thesequencepresentedwillbesubjecttochangeastheDigitalRailwayProgrammeengageswiththeindustrytorefineand finalise the sequence.This includes the routeswhowillbeconsideringhow tomanageother assets alongside digital signalling and train control to give full access to theDigital Railwaybenefits.DeliveryofDigitalRailwayisbasedonthefollowing:

► AnimplementationplanforDigitalRailwaythatistechnology-enabledbutledbybusiness-change-prioritisingdeliveryinareaswherebenefitsandreadinessaregreatest;

► A geographically focused deployment plan that allows resources to be concentrated onspecific areas of the network to provide the required delivery capability, whilstimplementationoverashortertimeframeismorelikelytomaintainimpetusforchange;

► Abusiness case that has tested options against criteria to identify an initial sequence fordeployingDigitalRailwayonanareabyareabasis;

► AprocurementstrategythatkeepsthesupplychaincapabilitycloselyalignedtotheneedsoftheProgramme;

► Asystemsarchitectureapproachthatgiveseveryonebuildingthefuturerailwayacommonand comprehensive understanding of the total framework of change – spanning services,people,processes,andtechnology;

► An established programme governance and assurance plan, which incorporatesindependenttestingbygovernmentbodies.

Keycriteriaforareabyarearoll-out► Southerncapacityimprovement

(passenger);

► Support‘NorthernPowerhouse’objectives;

► Improvefreightjourneytimes&paths;

► Improvedtimetableadherence(Performance);

► KeyLineofRoutecompletion;

► Levelofexistinginvestment.

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Figureiii:Strategysummary

7HerMajesty’sTreasury(2015),“FixingtheFoundations:CreatingaMoreProsperousNation”8UKGovernment(2015)“ChancellorannouncesmajorplantogetBritainbuilding”https://www.gov.uk/government/news/chancellor-announces-major-plan-to-get-britain-building

Govts.Strategy7 Challenge Impactofnotchanging

Usedigitaltechnologytoachieveefficiency;

► Updaterailwaystothecurrentgenerationofproventechnology;

► Meettheneedsofincreasinglydemandingdigitallyenabledusers;

► Enablerailuserstoaccessaccurateappropriateandtimelyinformation.

► Missedopportunityforincreasingcapacityoftherailway;makingGBlesscompetitive;

► Userschoosealternativemodesofincreasinglycongestedtravel;

► Railfallsbehindintheprovisionofcustomerservicescomparedtootherformsoftransport.

Useassetsinamoreeffectivemanner;

► Reducethecostsofoperating,maintaining,renewingandenhancingtherailway.

► IncreasedcoststoGovernments,taxpayersandpassengers,asmoreexpensiveconventionalinterventionsarerequired.

Environment; ► Conformtointernationaltreatyobligationstoreducecarbonemissions.

► Environmentalconsequencesofmoreroadtravel–increasedC02;globalwarming;noise;visualintrusion;airqualityandhealthissues.

ImprovetransportinScotlandandWales.

► Improvejourneytimes,connections,quality,accessibilityandaffordabilityoftransport,whilstreducingemissions;

► Connectregionsinternally,withtherestoftheUK,andglobally.

► Missedopportunityforshorterjourneytimesandimprovedconnectionsleadstouserschoosingalternativemodesoftransport;

► Missedopportunitytomakebetterconnectionswithglobalmarketsandboosttheeconomy;

► Environmentalconsequenceofmoreroadtravel.

Infra.Strategy8 Challenge Impactofnotchanging

KeepLondonMoving;

► MaintainingandexpandingthenumberofpeoplewhoareabletoconnectwiththemarketsandplacesofworkwithinLondon.

► Londonlosesitspositionasaglobalcentrefortradeandindustry;

► UKproductivepotentialandeconomicgrowthislimited.

TransformtheconnectivityoftheNorthofEngland,andacrosstheUK;

► Operatemoretrains–bringingtogetherthedifferentregionsoftheUKandfacilitatingeconomicdevelopmentthrough:freight,businesstravel,tourism,andagglomeration;

► Betterconnectionsthroughflexibleservicestomeetneedsoffreightandpassengers.

► Northerncitiesfailtocapitaliseontheireconomiesofscale;

► Scottishregionsremainpoorlyconnected,andservicesfailtounlockeconomicgrowthandtackleinequality;

► WalesremainspoorlyconnectedwiththerestoftheUK.

HelptheUKtotackleitsenergyneedsandobligations.

► Betterproductofferfromrail,attractingincreasingnumbersofroaduserstorail;

► IncreasecapacityontherailnetworkwhilstlimitingtheC02impactfromconventionalinterventionsandmaterialssuchasconcreteandsteel.

► Environmentalconsequencesofmoreroadtravel;

► Maximumconventionalinterventionsareneeded,increasingtheCO2footprint.

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Figureiv:Initialrollouttranches

ROCLocation YorkThreeBridges Romford Rugby Manch. Derby B.stoke Glasgow Cardiff Didcot Edinb.

Southerncapacityimprovement(passenger) High High High High Low High High Low Low High Low

Support‘NorthernPowerhouse’ High Low Low High High High Low Low Low Low Low

Improvefreightjourneytimes&paths

High Low High High High High High High High High High

Improvedtimetableadherence(Performance)

High High High High High High High Low Low Med. Low

KeyLineofRoutecompletion High High High High High Med. Low Med. Low Low Med.

LevelofPhase2investment High Low High Low Low Low Low Low Low Low Low

Tranche T1 T1T1andT2

T2 T2 T3 T3 T3 T4 T4 T4

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DigitalRailwayisbeingdevelopedinphasestoreducethedeploymentriskswhilstprovidingtimetodeveloptechnologywhichcanmaximisetheeconomicvalueofadigitalrailway.Responsibilityandriskmanagement of developing the component parts of Digital Railway (ETCS, TM, ATO)will restwithNetworkRail,toenableastandardspecificationforthetechnologyinvolved.

Phase1configuration–Strategicpilots

This phase is intended tomaintaincurrent deliverymomentumon strategic projects, featuringthecomponentpartsofDigitalRailway(ETCS,TM,ATO)invarioustargetedinterventions.ThisisintendedtobecompletedbytheendofCP5–someexampleprojectsare:

► TMdeploymentatRomford&WalesRailOperatingCentres(ROCs);

► ETCSL2deploymentonthePaddingtonapproachtoHeathrow;

► ETCSL2deploymentontheEastCoastMainLine.

Phase2configuration–Technologyintegrationandcorebusinesschange

ThisphaseisintendedtocoverthemajorityofthebusinesschangerequiredforDigitalRailway.Thisincludes(butisnotlimitedto):

► RollingstockfitmentwiththetrainbasedcomponentsofDigitalRailway;

► Drivertrainingtousethenewsystems;

► MovementofsignallingstaffintonewROCs.

Once these are delivered, the baseline plan contained within Phase 2 will be to deliver a railnetworkfeaturingETCSL2overatimeperiodatroughlytwicetherateofthelegacyplan(whichsetsouta50yeardeploymentschedule).ThisplancanbeadapteddependingonthesuccessfuldevelopmentofETCSL3(seebelow);

Phase3configuration–Optionalenhancement

This represents an option for further digital acceleration to release additional capacity andimproveperformanceoverPhase2configurationthroughacombinationof:

► Thedevelopmentanddeploymentof ETCS L3. Through the early part of CP6, ETCS L3willbedevelopedinpartnershipwithotherinfrastructureoperatorsacrossEurope.Onceapproved,Phase3willpresenttheoptionforthedeploymentofETCSL3insteadofL2;

► Openarchitecturetoconvertthebespokesignallingsystemstosoftwarebasedopensystems;

► AutomatedDesignthatstandardisesthelayoutdesigntoasmallnumberofpre-approvedrepeatable“buildingblocks”whichallowsmuchfasterdesignanddeployment.

Figurev:Phaseconfigurations.