Can Network Rail do better? Scope for productivity improvements

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Client Office of Rail Regulation (ORR)
Dates 2012
Sector(s)Transport
Service(s)Regulation & Competition

CEPA was retained by the Office of Rail Regulation (ORR) to estimate Network Rail’s scope for efficiency improvements in support, operations and maintenance costs for each year of the fifth price control period (CP5).

Measures and empirical results provided to ORR included:

  • Quantifying Real Unit Operating Expenditure (RUOE).
  • Labour and intermediate input (Energy, Materials and Services) cost measures (LEMS).
  • Total factor productivity measures.

In calculating the RUOE figures, we built upon well-established methodology in extending time frames based on time since privatisation and length of price controls, dealing with scale changes and taking into consideration business cycle effects. For the LEMS cost, we analysed the sensitivity inherent in these calculations with respect to changes in the amount of capital employed. For total factor productivity measures, we built a composite index by examining the sector in relation to other comparable sectors. The report is available here.

After further qualitative and quantitative investigation, the work culminated in providing ORR with a range for the scope of efficiency improvements that might be achievable for Network Rail over CP5. This work contributed to ORR’s initial view in its first consultation for PR13. It can be found here.

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