Following discussions with the Office of Rail and Road (ORR), Network Rail have announced from Thursday 1st of April 2021, their Risk Fees will be reduced for third party work.
What are Risk Fees?
Network Rail employs many third party contractors a year to help maintain and upgrade the UK’s large railway network and make a better system for customers and stakeholders.
To provide an incentive to third party companies to invest in the railway, Network Rail created Risk Fees, whereby they would agree to be responsible for certain risks related to the work being carried out in return for a fee, applied as a percentage of uplifts.
This system has been in place since 2006, and although being successful back then, 15 years later, the percentages for some risks have been deemed too high.
Two risk types will receive a percentage reduction, these are:
- Development Services
- Asset Protection
The aim of reducing the fee is not only to reduce costs for third party companies working with Network Rail but make it easier for firms to work with Network Rail in the future, opening many new opportunities.
The Office for Road and Rail has played a key part in assessing the current pricing strategy and determining a new fee for future businesses. On top of this, the process for claiming has been made easier for third party firms.
Director Corporate Commercial, Network Rail Helen Andreou said: “We’re always looking for ways to improve value for money and make it easier for the industry to do business with us. With this fee reduction, we will pass on our risk efficiency savings to our third-party customers to make it cheaper for them to invest in the railway.
“We have challenged ourselves on costs, and we are starting to see a trend of improving control over some of our third-party risks. We believe this is a win-win situation for all parties involved.”
Director of Planning and Performance at the Office of Rail and Road Graham Richards said: “We welcome these improvements, and we’re pleased Network Rail has taken steps to address the efficiency and effectiveness of the Risk Funds. The changes will help to make third-party investment in the railway cheaper and easier.
“Over the past couple of years, we have worked with Network Rail to adopt recommendations from reviews of industry and the resulting fee reduction, and improved claims process are a key output of our close working. We will continue to work with Network Rail to improve transparency around the funds and encourage and facilitate investment in the network.”
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