Part 5: Long-term planning for the rail network
| Key messages Ontrack had started to prepare a long-term plan for the rail network. Preparing a long-term plan for the rail network is a significant and complex task. Ontrack had not determined the extent of work required or how it would be resourced. It did not have project management disciplines in place to ensure that the plan preparation would occur in a logical and timely way. Ontrack did not have all the information or systems it needed to prepare a long-term plan. It was doing work to address some of these deficiencies. However, it had not identified the fit between these pieces of work and the preparation of the long-term plan. Effective asset management relies on clear service levels. The service levels and performance measures for the rail network were not clear. Ontrack told us that negotiations with Toll NZ had precluded agreement about service levels. Toll NZ told us that they disagree with this view. Until clear service levels are established and there is clear, accessible information about the state of the rail network, Ontrack will not be able to determine optimum strategies for managing the rail network, or have a clear idea about how much this will cost. |
5.1
In this Part, we discuss:
- why long-term planning is important;
- our expectations;
- Ontrack's long-term planning; and
- Ontrack's systems, plans, policies, and procedures to support long-term planning.
Why long-term planning is important
5.2
Many of the assets making up the rail network are long-life assets. To manage the rail network effectively, there needs to be a long-term plan with supporting systems, plans, policies, and procedures. A long-term plan sets out what the network is expected to deliver, how the assets are going to be managed cost-effectively over time, and what the financial and other implications of this are.
5.3
Integrating information from throughout an organisation into a long-term plan enables that organisation to highlight important issues and set a strategic direction for managing those important issues. It provides for management decisions to be made about particular activities and for resources to be co-ordinated in an informed way.
5.4
A long-term plan can demonstrate that there is a logical basis for decision-making. As such, it can provide for improved governance and accountability.
5.5
A long-term plan is a crucial planning tool, and needs to be underpinned (see Appendix 3) at least by:
- service levels;
- asset information and systems;
- information about planned physical work; and
- financial forecasting.
5.6
Long-term planning, particularly that used by decision-makers and for external consultation, should include specific information about planned physical work and forecast spending for at least the next 10 years. The policies and strategies that underpin it should look decades ahead when considering the implications of the age of the assets, the condition of the assets, and the costs of managing them.
5.7
Ontrack does not have a legal obligation to prepare a long-term plan for managing its assets. However, the Rail Network Bill 20051 proposes that Ontrack prepare a Rail Network Development Plan each year and include it within its Statement of Corporate Intent. The Rail Network Development Plan must set out a statement of Ontrack's priorities for the rail network during the next 10 years, including a 10-year forecast of proposed capital spending.
Our expectations
5.8
We described the long-term planning we expected an established infrastructure manager to have for managing their assets (see Appendix 3).
5.9
As discussed in paragraph 1.14, Ontrack is not an established infrastructure manager. It had been responsible for the rail network for about three years when we carried out our audit. We reviewed Ontrack's performance against our expectations, to give us a clear idea of the progress Ontrack had made.
5.10
We did not necessarily expect Ontrack to have completed its long-term plan. However, we expected Ontrack to have identified the work it needed to do to prepare one.
Ontrack's long-term planning
5.11
Ontrack did not have a long-term plan for managing the rail network's assets. In 2006, Ontrack had identified that it needed a long-term plan and started to prepare one.
5.12
Ontrack had not clearly defined the tasks it needed to do to prepare a long-term plan for managing the rail network assets, and had not identified whether it had all the necessary information to prepare one. Ontrack needs to identify this work so it can sequence tasks - as some tasks depend on others occurring first. Some of the tasks that Ontrack needs to do to prepare a long-term plan will take time, so organising the sequence of tasks is important for the work to occur efficiently.
5.13
Ontrack had not identified when it expected to complete the plan, or how it would record its progress. It had not assessed what resources it would need to prepare the plan or whether those resources were available. It was not clear who was accountable for preparing the plan, or the importance Ontrack put on having a long-term plan in place to direct work on the rail network.
5.14
Some decisions about how to formulate the long-term plan, and the strategies adopted within the plan, may need to be agreed at a senior management or board level. Ontrack needs to identify when and how this will occur for efficient plan preparation.
5.15
Ontrack recently prepared guidance material for staff with project management roles. This information would help staff apply project management disciplines in preparing the long-term plan and the elements underpinning it.
| Recommendation 6 |
|---|
| We recommend that Ontrack determine the extent of work required to prepare a long-term plan and how it can be resourced, put project management disciplines in place, and have senior management staff actively sponsor the work that needs to be done. |
Ontrack's systems, plans, policies, and procedures to support long-term planning
5.16
Overall, the systems, plans, policies, and procedures Ontrack had to support long-term planning - and the work it was doing to put these in place - had occurred as isolated pieces of work. Ontrack had not identified the fit between these pieces of work and the preparation of the long-term plan.
5.17
Often, the work Ontrack was doing was specific to one asset group. The separate systems, plans, policies, and procedures may not necessarily result in information that can be used in a consistent way to inform a long-term plan.
5.18
We spoke with several staff about the work Ontrack was doing to prepare a long-term plan for the rail network assets. They provided conflicting or confused accounts about who was responsible for delivering particular work that would support the preparation of a long-term plan, the timeframes for the work, and whether the work had started.
| Recommendation 7 |
|---|
| We recommend that Ontrack clarify and convey to staff how their work both supports and is driven by the long-term plan. |
Service levels and performance targets
5.19
Service levels describe the quality of services provided by an asset, while measures and targets describe how performance will be assessed and the level of performance sought.
5.20
Service levels are critical to long-term planning because they collectively describe the outcomes the asset manager is seeking to achieve. The discipline of developing and integrating information about the assets, management programmes, and expected costs through long-term planning helps the asset manager to work out the most cost-effective way of achieving these outcomes.
5.21
There are various reasons for setting service levels - for example, to meet legal or contractual obligations, or to provide transparency and accountability to stakeholders.
5.22
Ontrack had done some work to prepare service levels. It also had some performance targets. We reviewed the service levels and performance targets to see how they directed work on the rail network.
Preparing service levels under the National Rail Access Agreement
5.23
The National Rail Access Agreement requires Ontrack and Toll NZ to use their best endeavours to agree service levels, and for service levels to be based on national rail objectives for:
- providing a viable nationwide rail service;
- safety (including third party safety);
- operating standards and efficiency;
- customer satisfaction; and
- facilitation of other (permitted) operators' operations on the rail network.
5.24
Ontrack told us that negotiations with Toll NZ had precluded agreement about service levels. Toll NZ told us that they disagree with this view.
5.25
Ontrack had prepared “performance operating parameters” as part of its work to fulfil its obligations to prepare service levels under the National Rail Access Agreement.
5.26
It was not clear whether the performance operating parameters were intended to achieve objectives in the National Rail Access Agreement, or to provide for other outcomes or objectives. For example, it was not clear whether the performance operating parameters sought to achieve any safety outcomes.
5.27
The performance operating parameters relied on, and included references to, information in separate documents. Information in these separate documents could change independently of, and therefore effectively change, the performance operating parameters.
5.28
There were no clear targets and measures for the performance operating parameters.
5.29
Ontrack did not report or evaluate its performance against the parameters. Therefore, it was difficult to determine whether Ontrack was managing the rail network to meet the parameters, or what Ontrack considered its accountability for meeting the parameters was.
Time lost because of temporary speed restrictions
5.30
Temporary speed restrictions require trains to travel slower than the rail network provides for because of a fault or a problem with the line. Ontrack had targets for minimising the delays to trains caused when temporary speed restrictions were in place. It was not clear what the basis of the targets was - whether they were expected to achieve particular objectives or outcomes.
5.31
Each week Ontrack measured and reported on its performance against the targets. The reports were detailed, and included information on the reasons and accountabilities if targets were not met.
5.32
Ontrack staff closely reviewed the information within the reports. It was clear that the time lost because of temporary speed restrictions, and the reporting of that information, were a key performance measure for Ontrack.
5.33
We had some concerns about using the time lost because of temporary speed restrictions as a single measure of performance. It inherently focuses on short-term improvements. Without a long-term plan, or service levels and measures that reflect long-term targets, the focus on short-term improvements means that work may not be directed toward areas where it will realise the most benefits over time.
5.34
Ontrack's performance in, and accountability for, time lost because of temporary speed restrictions were highly visible to staff. This is commendable. However, if other performance measures or outcomes sought are not as visible, staff may not have a balanced approach to meeting the outcomes that Ontrack seeks. For example, reports on whether Ontrack was meeting the requirements in code documents (which form part of its safety system) were produced quarterly, were not always prepared to a high standard, and were reviewed by far fewer staff. This raises the question of the relative importance Ontrack places on reducing the time lost because of temporary speed restrictions and complying with code requirements, and how well staff understand that relative importance.
Corporate targets for renewal work
5.35
Ontrack had three sets of targets for planned physical work during 2007/08, including renewal work. It had separate reports of performance against each set of targets. The three sets of targets had a different basis from each other. Information about the targets is set out in Figure 6.
Figure 6
Targets Ontrack had for planned physical work during 2007/08, including renewal work
| Statement of Corporate Intent | Annual Report | Operational Plans | |
|---|---|---|---|
| Basis for the targets | Renewal work (excludes upgrades) Level crossing upgrades |
All physical work on the rail network (including upgrades) | Unclear |
| Rail laid | 35km rail laid | 40km new rail laid | 22.5km rail laid |
| Sleeper | 90,000 new sleepers laid | 123,000 new sleepers laid | 122,000 sleepers laid (including breakdown by sleeper type) |
| Level crossings | Minimum 6 level crossing upgrades | 10 level crossing upgrades | 100 level crossing upgrades |
| Line destress | - | 100km line destressed | 120km line destressed |
| Bridge replacement | - | 560m of bridges replaced | - |
| Ballast renewal | - | - | 70,075m3 ballast renewed. |
| New turnouts | - | - | 35 new turnouts |
| Performance against the targets is reported within | Annual report (same year) | Annual report (following year) | Operational plans |
5.36
The sets of targets and reports against them were inconsistent. It was difficult to determine:
- the relationships between the three sets of targets and reports; and
- Ontrack's key performance measures and targets for planned physical work.
5.37
Ontrack had not identified the links between corporate and operational planning and reporting for the rail network. Part of the work Ontrack needs to do in preparing a long-term plan is to identify links between the long-term plan, corporate and operational plans, and the reporting associated with them. This would help Ontrack to ensure that information in long-term plans is in a suitable format to inform corporate and operational planning, and that performance targets and associated reporting are clear and aligned.
Concluding remarks about service levels and performance targets
5.38
Ontrack has various obligations to describe how it intends the rail network to perform. For example, it must prepare service levels under the National Rail Access Agreement, and set out objectives and targets within its Statement of Corporate Intent. Paragraphs 5.23-5.35 described the various ways Ontrack had sought to do this. The varied approaches and lack of alignment between some of the targets and performance reporting made it difficult to determine what Ontrack intended to do on the rail network, and whether it was doing it.
5.39
It was not clear whether Ontrack had collectively considered its various obligations for describing how the network would perform. Doing so would ensure that the various service levels, performance targets, and measures were consistent with each other. It could help Ontrack to streamline the performance information it collects and reports.
| Recommendation 8 |
|---|
| We recommend that Ontrack provide clear and consistent information about service levels and performance targets that Ontrack intends to meet, and state whether these have been agreed with external parties. |
Asset information and information systems
5.40
Long-term planning for infrastructure assets requires different types of information, including information about assets, risks, and constraints. Information about assets is important at many levels of the organisation. For example, senior managers may need information about the overall condition or value of the assets, while operational staff may need specific information about the age or condition of assets they are responsible for.
5.41
Information about risks and constraints helps decision-makers focus on the areas of greatest importance.
5.42
Asset managers may also use information from demand forecasts to identify areas where they can expect risks or constraints in the future.
Asset information
5.43
Information about assets, particularly the condition of assets, is critical for asset management planning. This information, together with information about service levels, is needed to identify the gap between actual and desired asset condition, so the best way of managing the asset over time can be determined.
5.44
Ontrack had only some of the information it needs about rail network assets. It did not have a clear set of information about the condition of signals, telecommunications, and electric traction assets.
5.45
Ontrack was limited in the way it could use the asset information it had. In some instances, information was stored in a variety of formats and locations, and was difficult to access. In at least the short to medium term, staff may not be able to use the data they hold to direct long-term planning.
5.46
Information that Ontrack held about rail network assets, including information about the condition of assets, was separate for each asset group. Ontrack was unable to aggregate asset information about the three groups. For example, if Ontrack wanted to know what assets were in a particular location or along a certain line segment, or what condition the assets were in, it would need to source this information separately for each asset group. It might not be able to collate the information in a useful way. Further, it may be difficult for Ontrack to find the information it needed about the signals, telecommunications, and electric traction assets at that location.
5.47
Ontrack had identified some problems with data accessibility for each asset group. It had formal projects to improve the asset information system for structures and to build an asset information system for signals, telecommunications, and electric traction assets. Ontrack considered problems accessing track data to be less significant and did not have a formal project to address them.
5.48
It will take some time for Ontrack to put asset information systems in place, so there may be a delay in its ability to retrieve the necessary information in order to formulate clear maintenance and renewal programmes.
| Recommendation 9 |
|---|
| We recommend that Ontrack complete work on its asset information systems so the information is up to date and able to be readily used for long-term planning and decision-making. |
Risk management
5.49
Ontrack had a principal risk register for the rail network. The register provided an overview of the most important risks that Ontrack had identified for the rail network, and specified controls and planned actions to manage those risks.
5.50
Ontrack had other detailed information about risks within various risk management frameworks. In some places, it was easy to see how the information fed into the principal risk register. However, this was not always the case.
5.51
Ontrack had not identified the rail network's critical assets. Information about critical assets helps inform approaches to asset management. For example, if there are significant consequences of particular assets failing, then Ontrack may need specific risk management strategies or plans.
Constraints
5.52
Ontrack did not have clear information about constraints on the rail network. It had identified various constraints within its documents and reports. For example, within one document it had identified that tunnel clearances form constraints on different lines. As described in paragraph 3.24, Ontrack had identified that its ability to access the tracks in Wellington was a significant constraint to achieving its renewals programme.
5.53
The constraints work had occurred in isolation. Ontrack had not pulled the information together, nor had it comprehensively reviewed constraints on the rail network.
5.54
Comprehensive information about constraints will set out the limits of the rail network's performance with the existing assets. This will assist decision-makers to target major problem areas first.
Demand forecasting
5.55
Ontrack did not have a clear method for demand forecasting or detailed demand forecasts. However, Ontrack had a view on where there were opportunities to expand the rail network or increase its capacity. Ontrack formed this view based on commercial assumptions.
5.56
Ontrack told us that it needs information about Toll NZ's business plans to forecast future demand for the rail network, because Toll NZ is the largest provider of freight and passenger services on the rail network. Similarly, Toll NZ may need information about Ontrack's activities. The National Rail Access Agreement recognises this, and requires Ontrack and Toll NZ to exchange certain types of information.
5.57
Ontrack told us that that the track access charge negotiations made it difficult to consult with Toll NZ on its long-term business plans.
5.58
Demand forecasts, including the information that underpins them, are essential to plan for the rail network. It is important that any future arrangements for the rail network enable Ontrack to carry out detailed demand forecasting.
5.59
There is always uncertainty in predictions about the future. Because the consequences of an error in demand forecasting can vary in size, it is important that Ontrack's demand forecasting work includes an assessment of the risks and sensitivities associated with the demand forecasts.
Planned physical work
5.60
Ontrack regularly performed various maintenance and renewal activities. It also had several projects to upgrade parts of the rail network.
5.61
Ontrack had not documented the scope and nature of those activities. It was difficult to determine the different types of maintenance and renewal work it did, or the relative size and scope of the different maintenance and renewal activities - and whether this was expected to change over time. It is not clear how the upgrade work Ontrack was doing fitted in with maintenance and renewal activities.
5.62
Without information about maintenance and renewal activities, and how they fitted in with upgrade projects, it was difficult for us to have a clear picture of how the rail network was being managed, or how Ontrack intended to manage the network over time.
5.63
In our view, Ontrack needs to prepare clear information about planned physical works, including maintenance and renewal work programmes and upgrade projects. This will enable Ontrack to review whether it has the right mix of work to achieve long-term outcomes and objectives, and to identify where it can optimise work programmes or activities. It will also help Ontrack to determine what the expected costs of planned work will be over time.
5.64
After our audit fieldwork, Ontrack prepared programmes for various aspects of capital spending for bridge assets. It is not clear whether Ontrack intends to follow these programmes. However, it is a start in identifying what work Ontrack may need to do in the future and will be useful if Ontrack needs to prepare a Rail Network Development Plan, as proposed in the Rail Network Bill.
5.65
Ontrack had various regimes for inspecting its assets. It had documented many aspects of the regimes and, in some instances, had detailed information about planned inspection work for years to come.
5.66
Inspection regimes were a significant factor in workload peaks at an area level. Setting out information about inspection regimes, including the required frequency and workload implications for staff, could help Ontrack identify whether it could better phase some inspection programmes. It would be useful for Ontrack to include information about inspection regimes within a long-term plan.
Financial forecasting
5.67
Ontrack has a statutory obligation to set out expected expenditure for the next three years within its Statement of Corporate Intent. It has a contractual obligation under the National Rail Access Agreement to forecast expected cash expenses for a three-year period.
5.68
Beyond meeting these obligations, Ontrack's financial forecasting was limited. Ontrack had been gradually refining information it held about anticipated capital works for structures, to help it identify work and capital expenditure requirements for the next four years.
5.69
In our view, forecasting three to four years ahead does not provide enough certainty about the future cost of managing the rail network, or that the network can be managed effectively without this information. For example, we noted in paragraph 2.18 that Ontrack prepared an assessment of the state of the rail network in 2005. The assessment reported that 900 bridges (about half of all the bridges) were 80 to 90 years old - which is close to the end of their average estimated life of 100 years. The assessment did not set out the financial implications but noted:
… the ‘bow-wave' of life expired structures may not hit in this Forecast period but it cannot be ignored.
5.70
Ontrack's bridges were valued at $1 billion in total. The need to replace or upgrade 50% of these structures is likely to have a significant financial effect for Ontrack in the foreseeable future.
5.71
Longer-term financial forecasting for all rail network assets would provide an early indication of large spikes in expected capital spending. Ontrack would have more time to determine the most cost-effective way to manage the assets now and over time.
5.72
The bridge programme information Ontrack had prepared after the fieldwork for our audit sets out information about expected capital costs of the programmes for the next 11 to 27 years. It is not clear how far the proposed work in these programmes will go toward meeting the expected “bow wave” of structures to be upgraded or replaced. However, this information is a start in determining the work Ontrack will need to do on the assets and the costs associated with this. Ontrack will need to collect information about expected costs associated with other activities to have a clear picture of expected future costs.
| Recommendation 10 |
|---|
| We recommend that Ontrack gather information about expected long-term costs for the rail network. |
1: In 2005, a Rail Network Bill was introduced into Parliament proposing to make Ontrack a Crown entity. The Bill sought to align Ontrack's objectives and functions with the New Zealand Transport Strategy. In June 2006, the Government Administration Committee reported back to Parliament recommending that the Bill be passed, but with some amendments. No further progress has occurred.