Twinning project, activity 4, Maintenance assessmentTuesday 4th October 2005, session 2b

The concession model; the instruments in the relationship

By Jan Swier, ProRail, The Netherlands

Tel. +31 30 235 5315. e-mail: jan.swier@prorail.nl

© ProRail. All rights reserved File: g:\Js05\0406.Slovenia.Oct.3.Concession model.ppt

2

Presentation contents

*Business relationships in the concession model*The instruments in the relationship between Government and ProRail:

*Management plan*Financial model*Dashboard*Track Access Charge

3

enGovernment

Train Operators

Transport concession (Passengers only ) Performance contract

ForwarderPassengers

Forwarders

Payment Repayment scheme

Network statement Access agreement Track Access Charge Performance regime

Contractors Engineers

Process contractsProject specifications

RIBVLProRail

•Management concession•Management plan•Budget: financial model •Performance: KPIs •Track Access Charge

Business relationships in the institutional triangle

4

Dashboard

Legal context

Instruments

Essential instruments in the relationship between Government and ProRail

*(New) Railways Act*Management concession: the contract

*Management plan*Budget: financial model*Budget: Track Access Charge

*Dashboard: KPIs

5

Contents Management Plan*

1. Mission and strategy of ProRail2. Assessment by stakeholders: duty of

care and key performance3. Ensuring sufficient, reliable and safe

infrastructure4. Supplying sufficient, reliable and safe

capacity5. Safety and the Environment6. Continuous improvement: migration

to output-based management7. Financial parameters8. Operators view of management plan

* Management plan = strategic policy plan ProRail with objectives for costs, performance and organisation for the next five years.

6

Financial model Government - ProRail

PerformancePerformance ActivitiesActivities CostsCosts

Departure points

Departure points

7

In the management concession (art. 20), the Minister imposes four conditions on ProRail

for heading towards output:

Transparency in the relationship between

activities, costs, performance and departure points.

A

Awareness of the interaction

between performance by

manager and operators.

B

Awareness of the long-term

effects of maintenance

(LCM).

C

Structures and systems for

effectively using the insights

referred to in A, B and C.

D

Audit 2008

8

The financial model should establish a relationship between costs, performance and departure points in a

transparent manner

Focus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sector

Given the departure points… - the operational model:

e.g. existing or corridor- the accompanying infrastructure:

quantity, quality- intensity of use- Environmental and Safety legislation

…for the required performance…- availability- TAOs and FHT

…the cost level is fixed- at given efficiency

Given the departure points… - the operational model:

e.g. existing or corridor- the accompanying infrastructure:

quantity, quality- intensity of use- Environmental and Safety legislation

…for the required performance…- availability- TAOs and FHT

…the cost level is fixed- at given efficiency

‘Trade off’

‘Trade off’

Financial modelFinancial modelPerfor-mancePerfor-mance

•Setting level

CostsCosts

•Efforts• Indexing

Departure points

Departure points

• Infrastructure• Intensity•Legislation•Operational model

9

- Production plan- OPC 2004

- IHC- RVL- CM- …

- Production plan- OPC 2004

- IHC- RVL- CM- …

ActivityActivity

ProRail activitiesProRail activities

The financial model is directly related to the ProRail activities and the efficiency with which they are implemented

Feedback loop keeps model

up to date

‘Trade off’‘Trade off’

CostsCosts

Financial modelFinancial model

Departure points

Departure points

• Setting level• Efforts• Indexing

Task setting organisation

Perfor-mancePerfor-mance

Focus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sectorFocus: ‘Trade off’ within the sector

• Departure points are jointly determined by agreements within the institutional triangle (Government-Operators-ProRail)

• Insight into mutual influence of alterations to budget, performance and departure points

• Departure points are jointly determined by agreements within the institutional triangle (Government-Operators-ProRail)

• Insight into mutual influence of alterations to budget, performance and departure points

Focus: Efficient operation of Focus: Efficient operation of ProRailProRail

Focus: Efficient operation of Focus: Efficient operation of ProRailProRail

• How is the required performance translated into activities within ProRail

• How do efficiency moves influence the ‘trade off’ within the financial model

• How is the required performance translated into activities within ProRail

• How do efficiency moves influence the ‘trade off’ within the financial model

10

Example relationships between maintenance costs, intensity of use and disruptions

Relationship between intensity and Relationship between intensity and maintenance costsmaintenance costs

Relationship between intensity and Relationship between intensity and maintenance costsmaintenance costs

€ 0€ 1.000€ 2.000€ 3.000€ 4.000€ 5.000€ 6.000€ 7.000€ 8.000€ 9.000

€ 10.000

0

5000

1000

0

1500

0

2000

0

2500

0

3000

0

3500

0

4000

0

4500

0

5000

0

5500

0

6000

0

# Treinen per wissel per jaar

KG

O /

wis

sel

/

Engels Normaal Hoge snelheid

€ 0€ 1.000€ 2.000€ 3.000€ 4.000€ 5.000€ 6.000€ 7.000€ 8.000€ 9.000

€ 10.000

0

5000

1000

0

1500

0

2000

0

2500

0

3000

0

3500

0

4000

0

4500

0

5000

0

5500

0

6000

0

# Treinen per wissel per jaar

KG

O /

wis

sel

/

Engels Normaal Hoge snelheid

Trains/year

Eu

ro/p

oin

t

Relationship between intensity and Relationship between intensity and performanceperformance

Relationship between intensity and Relationship between intensity and performanceperformance

0

1

2

3

4

5

6

0

5000

1000

0

1500

0

2000

0

2500

0

3000

0

3500

0

4000

0

4500

0

5000

0

5500

0

6000

0

Aantal treinen#

On

reg

elm

atig

hed

en

Engels Normaal Hoge snelheid Gemiddeld

0

1

2

3

4

5

6

0

5000

1000

0

1500

0

2000

0

2500

0

3000

0

3500

0

4000

0

4500

0

5000

0

5500

0

6000

0

Aantal treinen#

On

reg

elm

atig

hed

en

Engels Normaal Hoge snelheid Gemiddeld

Trains/year F

ailu

res/

yea

r

EXAMPLE for

points

11

The model must provide an insight into the effect of changes in expenditure, performance and/or departure points.

Relationship between costs and performance if Relationship between costs and performance if departure points remain the samedeparture points remain the same

Relationship between costs and performance if Relationship between costs and performance if departure points remain the samedeparture points remain the same

prestatie

€

Kosten

P1

Fall in additional yield

P2

Costs

Performance

Relationship between costs and performance with Relationship between costs and performance with changed departure pointschanged departure points

Relationship between costs and performance with Relationship between costs and performance with changed departure pointschanged departure points

Prestatie

€

Kosten

P2

Fall in additional yield

P1

Costs

Performance

Illustra

tion

12

ProRail Dashboard: internal management instrument for measuring the results achieved within the concession agreement

KPIs

13

5 Safety &Environment

5. … within statutory frameworks for safety and the

environment...

6Finance

6. … as efficiently as possible...

1Availability

1. ProRail will guarantee optimum availability…

3Adjustment

3. … complies with agreements with operators...

4Use

4. …will optimise supply/demand for the available track …

2Transfer

2. … lives up to agreements on transfer facilities...

Indicators

7Personnel

8Innovation

The Board of Directors’ dashboard with 6 top KPIs & 2 organisation KPIs

14

5 Safety &Environment

5. … within statutory frameworks for safety and the

environment...

6Finance

6. … as efficiently as possible...

1Availability

1. ProRail will guarantee optimum availability…

3Adjustment

3. … complies with agreements with operators...

4Use

4. …will optimise supply/demand for the available track …

2Transfer

2. … lives up to agreements on transfer facilities...

Indicators

7Personnel

8Innovation

The Board of Directors’ dashboard with 6 top KPIs & 2 organisation KPIs

15

The dashboard covers all parameters in the financial model

‘Trade off’

‘Trade off’

Financial modelFinancial modelPerfor-mancePerfor-mance

CostsCosts

Departure points

Departure points

1Availability

2Transfer

3Adjustment

4Use

5 Safety &Environment

6Finance

16

The top KPIs from the dashboard have been translated into more specific KPIs at underlying management levels

5 Safety &Environment

6Finance

1Availability

3Adjustment

4Use

2Transfer

7Personnel

8Innovation

Board of Directors

Director Infra Management5 Safety &

Environment

6Finance

1Availability

3Adjustment

4Use

2Transfer

7Personnel

8Innovation

Contract manager

17

A target value represents the target aimed at by ProRail.

A threshold value is the target according to which ProRail will be held accountable. A target value is therefore less absolute than a threshold value. A threshold value can only be determined once ProRail has sufficient experience with a KPI. The eventual intention (at the latest by 1 January 2008) is that all KPIs will have threshold values.

Internal regulation limits have been agreed to focus ProRail on the agreed targets. They indicate, according to a colour code, whether the KPIs are ‘on track’. The colours have the character of traffic lights. The colour green means that the KPI is developing according to the target, and is on track. The colour orange indicates that there is a temporary deviation for which no (more) separate actions need be taken. The colour red indicates that additional action and therefore attention are necessary to tackle the deviation from the target.

Green Orange Red

Internal regulation limit 1

Internal regulation limit 2

Target values and/or threshold values have been agreed for all KPIs

18

Target values and threshold values 2005

KPI/NPI Dashboard Items

Targ

et v

alu

e (i

nte

rnal

re

gu

lati

on

lim

it 1

)

Inte

rnal

reg

ula

tio

n

limit

2

Th

resh

old

val

ue

2005

(A

gre

emen

t M

inis

try

of

Tran

spo

rt)

1 KPI Availability1.1 NPI-Unplanned non-available (TAO (#) *(FHT (hours)) 14.200 * 14.605 N/A 20051.2 NPI Planned non-available (TVP (#)) 344 380 N/A 20051.3 NPI Weighted unplanned non-available (TAO (#) *(FHT (hours)*BVW) In development N/A 2005

2 KPI Transfer2.1 NPI Appreciation social safety (daytime) 84% 76% 76%2.2 NPI Appreciation social safety (night-time) 45% 37% 37%2.3 NIP Appreciation cleanliness 48% 42% 42%

3 KPI Adjustment3.1 NPI Information provision according to agreements 98% 95% 95%3.2 NPI Adjustment according to agreements 92% 92% 90%3.3 NPI number of irregularities in route setting 1.075 1.100 N/A 2005

4 KPI Use4.1 NPI Successful appeals Netherlands Competion Authority (NMa) 40% 60% N/A 2005

5 KPI Safety & Environment5.1 NPI System safety In development N/A 20055.2 NPI Work safety In development N/A 2005

6 KPI Finance6.1 NPI Overhead costs 15,0% 16,5% N/A 20056.2 NPI Costs per train km (costs including capital costs) € 8,23 8,64€ N/A 2005

7 KPI Personnel (internal KPI)7.1 NPI Absenteeism due to sickness 5% 5,40% N/A 20057.2 NPI RGB discussions held (planning and evaluation meetings) 90% 75% N/A 20057.3 NPI Employee satisfaction 73% NTB N/A 2005

8 KPI Innovation (internal KPI)8.1 NPI Innovation In development N/A 2005

The following NPIs are information items for the Board of Directors**

1.1.1 NPI Availability due to unplanned withdrawal (TAOs (#)) Information item N/A 20051.1.2 NPI Average functional repair time for a TAO (FHT (hours)) Information item N/A 20052.3.1 NPI Cleanliness (objective measurement) Information item N/A 2005

* Target value + Package of measures agreed with Ministry of Transport, Public Works and Water Management

** Information items are not on the Board of Management Dashboard, but are reported to the BoM once a quarter or monthly

19

Track Access Charge

TOCs have to pay for the use of the Rail Infrastructure, but…….. this is only possible when the TOCs earn sufficient money to make a profit. This is a delicate balance between business possibilities and limitations.

20

Development of Track Access Charge in the Netherlands

Income Rail Infrastructure from user fee

1938

5986

119

163179

195

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007

Mio

Eu

ro

Maintenance & Renewal costs 2004, (excl Traffic Control & Capacitymanagement)

420

162

78

66

188

893

119

98

0

100

200

300

400

500

600

700

800

900

1000

1100

Costs 2004 Income 2004

Mio

Eu

ro

User fee

Government

Organisation and overhead

Intrest

Management

Depreciation

Track renewals

Maintenance

In 2007, the track access charge will provide ProRail with about 20% of its total income

21

Attribution of Track Access Charge to systems and cost drivers

Train km

Train km

Ton km

Stops kWh

61

65

9

41

20

Superstructure , tonkm

Signals & Traffic Control , trainkm

Yards & Sidings , trainkm

Electrical energie , kWh

Stations , stops

million Euro

million Euro

million Euro

22

Situation from 2006 onwards

*New Railways Act and EU Directive 2001/14–Track access charge must be agreed with TOCs –ProRail sets the system and the tariffs–Competition Authority monitors developments–Payment based on realisation figures

Conclusion: New revised system necessary

*EU Directive is strictly followed–% variable cost is set on basis of 2000 to 2003: Approx. 19% of our costs are variable–Standard costs instead of estimated costs: stable tariff –Attribution of costs to cost drivers carried out by experts

23

Cost drivers and tariffs (beyond 2005)

*Signalling & Control: € 0.5046 per train km*Yards: 14% surcharge on train km fare*Catenary: € 0.02989 per kWh*Superstructure: € 0.001711 per tonne km*2006: € 0.0005 per ton km for freight trains

Stations:*Very large (4 stations): € 5.0672 per stop*Large (approx. 35 stations): € 2.4848 per stop*Small (approx. 350 stations): € 0.8615 per stop

INFORMATIVE

24

Cost drivers are measured

*Train kilometres and stops: by traffic control within the VPT system.*Axle loads, speed and round wheels: new measuring system “Quo Vadis”*kWh from cost model, used for the allocation of electricity costs (no measuring system yet)

25

Conclusions1. The concession model has laid down the conditions for further

professionalisation of the railway transport sector in the Netherlands.

2. The requirements imposed by government on ProRail to head towards output are encouraging and effective.

3. Establishing a transparent relationship between costs – performance - activities - departure points is a challenge which appears fulfillable, but which will demand maximum effort from the organisation.

4. By introducing the “track access charge”, train operators impose explicit demands on the rail infrastructure: “he who pays the piper calls the tune”. This will have a stimulating effect.

5. Instruments for measuring use have been introduced for the track access charge, which will increase the efficiency and effectiveness of train operators and ProRail.

6. Focusing on KPIs has increased management involvement and effectiveness.

enGovernment

Train Operators

Transport concession(Passengers only )

Performancecontract

Train Operators

Transport concession(Passengers only )

Performancecontract

Network statementAccess agreement

Track Acces ChargePerformance regime

Network statementAccess agreement

Track Acces ChargePerformance regime

RIBVLProRail

•Management concession•Managementplan•Budget: financialmodel •Performance: kpi’s •Track Access Charge

RIBVLProRail

•Management concession•Managementplan•Budget: financialmodel •Performance: kpi’s •Track Access Charge

26

Thank you for your attention

Any questions?