RIA Manifesto Deep Dive 4 - Support a sustainable supply chain

4

Support a sustainable supply chain

The railway needs a robust and sustainable supply chain to operate efficiently and safely. Over half of all rail expenditure in the UK or tens of billions of pounds is spent through companies in the supply chain, so it is vital to ensure that suppliers work in an environment which delivers the optimum value from this public investment.

Historically, ‘boom and bust’ cycles of investment, and a lack of information and certainty about future work plans have often limited the supply chain’s ability to plan ahead to deliver efficiencies and invest in skilled jobs and innovation. This affects all aspects of the industry from rolling stock to the provision of plant.

Without clarity over future rail investment plans the UK may lose the supply chain capacity it needs. A survey carried out by Savanta on behalf of RIA in autumn 20231 showed that confidence in the future of the rail market was at its lowest in five years. It showed that in response to an expected hiatus in the year ahead, many rail businesses would look at freezing/slowing recruitment (44%), prioritising work outside the UK (42%), and pausing or slowing plans to expand in the UK (35%).

It has now been over four years since the Rail Network Enhancements Pipeline was last published, a work pipeline that was due to set out plans for over £10bn of investment. A clear forward pipeline sends a clear signal to the market, which can help attract private sector capital. It would also allow local authorities to co-invest around rail improvements to support local economic regeneration, delivering an even greater return on the investment.

There are opportunities on the horizon. Rail reform is a chance to formalise the periodic publication of a long-term strategy and an associated pipeline of projects. Procurement reform gives an opportunity for greater clarity for greater clarity over public procurement strategies.

Building a workforce for the future Rail sustains highly skilled jobs across all regions of the country. There are a diverse range of excellent career opportunities, from data and mechanical engineering to retail and customer service roles. Such jobs support a significant level of economic and social value to communities and local and regional economies.

The rail industry has a demographic challenge with many employees due to retire by the end of the decade. Up to 75,000 people could leave the industry by 20302 which would result in a significant loss of experience and knowledge.

As a safety-critical industry, rail must be able to retain sector-specific knowledge and have a transition plan to replace key roles in areas such as operations or signalling. These jobs, and many others, are central to the future success of the industry, and without clarity of upcoming investment, it will be difficult for the industry to replace this knowledge and institutional memory efficiently.

A constrained workforce also risks future wage inflation. If highly-skilled individuals become scarcer, the law of supply and demand means that clients and suppliers may need to pay increased wages to attract and retain those workers. It is a reminder that we need to plan today to attract new recruits into rail and train them for the high-skilled roles for the future. A strong workforce of the future is essential to lowering the cost of delivering rail infrastructure going forward.

‘Boom and bust’ vs rolling programmes Rolling programmes of investment (see definition) mean that skills can be retained, and expertise grown over a long period. Currently, across multiple assets including electrification and rolling stock, many rail suppliers are facing cycles of intense investment requiring sharp escalation of workforce and expertise, followed by periods with little or no investment, where companies then must downsize. This cycle, when repeated, leads to chronic knowledge loss and increases industry costs.

We have significant evidence of the harm that a boom-and-bust investment profile does to the cost of work and employment. For example, Germany had a steadier, rolling programme of railway electrification between the 50 years over 1968 - 2018, with costs around a third lower than in the UK. Establishing rolling programmes of investment will support: • Efficient delivery of railway upgrades – saving money for taxpayers.

• Sustainable, well-paid, productive, and highly skilled jobs.

• The UK’s reputation as an attractive market for inward investment. Suppliers will continue to invest in their UK operations.

• Greater incentives for companies to innovate, supporting UK-led technological advances.

What is the industry already doing to grow a skilled workforce?

• • • • • •

Routes into Rail, run by NSAR The RIA & Women in Rail EDI Charter for Rail Industry networks such as Young Rail Professionals Leadership training for future leaders by many organisations Initiatives such as the Governors for Schools STEM Programme Schools outreach and careers activity

What is a rolling programme?

A rolling programme is a programme of work which allows resources to be continuously employed over a long period of time at a steady rate. The delivery stays continuously active – continuously learning, improving skills and productivity, and delivering efficiencies. A rolling programme also fosters long-term collaborative and strategic relationships between suppliers and clients. In rail, these are particularly appropriate for renewals, electrification, and signalling.

Procurement and commercial practices Procurement has a hugely important role to play in encouraging innovation and efficiency. An uncoordinated approach to procurement can add unnecessary costs to projects. We see different procurement strategies across major clients in the rail sector, which can add further complexity to an already complicated process.

Public sector clients need to apply well-established good practice in public procurement such as the Construction Playbook and Project 13 principles, which reflect experience across different sectors. Early supplier engagement, outcome-based specifications, longer-term contracting will all help get the best value from the supply chain.

The implementation of the Procurement Act 2023 is a crucial opportunity for Government to deliver on the aspirations it has set out to simplify public procurement and improve the system for both suppliers and clients. Suppliers will want to see commitments honoured, in particular: • Contracting Authorities to publish 18-month pipelines twice a year.

• A streamlined, centralised, online procurement system for supplier registration that saves time when responding.

• 30-day payment terms improving cash flow for organisations of all sizes.

• Increased transparency throughout the procurement process, including assessment summaries for unsuccessful bidders, helping them to put together better responses in the future.

• The Procurement Review Service strengthened, providing greater protections for suppliers.

If well implemented, the reforms present a great opportunity for clients in the public sector to embrace new processes and embed best practice across their procurement activities. Government and Contracting Authorities (clients) need to be working closely with suppliers up until and after the reform comes into effect to ensure a smooth transition, and to maximise the benefits of the new regime.

What is RIA doing?

RIA has been actively campaigning for Government to publish a clear pipeline of work and we have given evidence at the House of Commons Transport Select Committee to highlight the impact and show how the present situation can be improved.

We have set out a pragmatic strategy for rolling stock and electrification showing how these can be delivered more efficiently at lower cost through a rolling programme and sustain strategic capability in the UK – see ‘Delivering a lower cost, higher performing net zero railway by 2050’ and our Manifesto Deep Dive Number 3.

RIA is engaging with the UK government and major clients to work towards smoother profiles of work and greater clarity around what is expected of suppliers. Recent work includes looking at how greater collaboration between suppliers and their clients can help unlock cost efficiencies through CP7.

What needs to happen next - Practical steps for success 1.

Provide the foundations for long-term certainty and investment: a. b.

c. d.

Sustain the control period approach to funding.

Publish the indicative rail enhancements pipeline, which was last publicly updated in 2019, clarifying the status of schemes’ business case development and funding approval. A rolling stock pipeline, similar to that one published by the Australian Government6, should also be published.

Set out institutional reforms so that major infrastructure schemes do not face frequent or short notice changes in scope, which are always costly.

Promote longer frameworks when possible and as appropriate under procurement reforms.

2.

Introduce a requirement to publish the pipeline of rail projects at least annually. This would ideally be included as a legal requirement within the Rail Reform Bill, and - at a minimum - as a requirement within the Great British Railways licence.

3.

Implement rolling programmes of work to deliver productivity, value for money, and retention of skills. Bring work to market in a smooth profile for all rail assets that minimises costly peaks and troughs.

4.

Follow best practice whilst designing and running procurement exercises to promote and support a sustainable supply chain. In particular, procurements should: a. b. c. d.

5.

Prioritise Early Contractor Involvement at all levels of the supply chain, as will be required by the Procurement Act when implemented.

Evaluate tender responses based on long-term value and sustainability, rather than just short-term cost.

Make provisions for SME involvement and set targets for spend with smaller businesses, in line with the DfT SME Action Plan.

Adhere to best practice in the Construction Playbook, including contracting arrangements that incentivise better social, economic and environmental outcomes.

Promote skills in rail and transport by celebrating the career opportunities the sector provides. The Government should promote a positive image of transport as a sector which offers local, national, and global career opportunities to work on some of the most exciting agendas of our time, helping to attract and retain talent in the sector.

Footnotes 1.

https://www.riagb.org.uk/RIA/RIA/Newsroom/Press_Releases/Confidence_in_sector_five_year_low.aspx

2.

https://www.nsar.co.uk/annual-workforce-survey-report/

3.

See for example our recent rolling stock report and our electrification cost-challenge review

4.

From the RIA Electrification Cost Challenge Report, 2019. “The costs of electrification in Germany are much lower than the UK. Germany is able to deliver electrification at £450,000/STK compared to the UK where, for example, the Great Western Electrification Project cost between £2m and £2.5m/STK.”

5.

See also RIA Manifesto Deep Dive number 3

6.

https://www.industry.gov.au/publications/national-rolling-stock-procurement-pipeline