Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by Railtrack PLC

  Further to your letter of 9 November 2000, the following response corresponds with the indexing used in your letter.

  (a)  Railtrack awards long term Track Renewal Contracts (typically three or more years) in which it is stipulated that Railtrack will provide the requisite rail on a free of charge basis.

  Railtrack also awards long term contracts for infrastructure maintenance whereby the practice has been for the maintenance contractors to provide an all inclusive price. The maintenance contractor is free to buy the rail from its chosen source with no instruction from Railtrack, provided the source has technical approval from Railtrack, and on occasion the Infrastructure Maintenance Contractors elect to buy the rail from Railtrack. This latter policy may change in favour of free issue in the future for all Railtrack projects.

  For the current rail supply contracts, Railtrack's National Logistics Unit invited tenders for the supply of rail in September 1999 to the specifications laid down in Railtracks's Line Standards. The notable changes in these tenders being that we wished to deliver long welded rail in 216 metre strings with as few factory welds as possible and that we would be predominantly using CEN60 rail in the future in line with the heavier European standard. At the same time as we issued the invitation to tender for the supply of rail we issued an invitation to tender for the design and build of a welding depot in the South of England and for the provision of a welding service.

  The benefits of an alternative independent welding operation are as follows;

    —  It will allow us to seek competitive tenders for rail without the constraint of all rail needing to be welded by Corus.

    —  It will allow us to produce 216 metre output strings from the option of 36, 72 or 108 metre input lengths thus reducing the number of factory welds from the Corus standard of 36 metre input and 180 metre strings, a major improvement in track dynamics.

    —  It will reduce haulage of rail when delivered to the South of the country where most of the requirement is (a reduction of around £2 million per annum).

    —  It will release train paths previously taken up by the movement of rail from the North to the South of England.

  (b)  Over the past 5 years we have bought approximately 90 per cent of our rail from Corus, with the remainder from Voest Alpine in Austria. A breakdown of rail type would not be of benefit because both Corus (formerly British Steel) and Voest Alpine were able to produce the whole range of our requirement, except that we would have preferred longer input lengths from Corus. At this stage our rail delivery trains would not be able to deliver greater than 182 metre strings, they are being modified now to do so. The Corus sales to Railtrack have been as follows;

    1995-96—45,000 tonnes

    1996-97—51,000 tonnes

    1997-98—55,000 tonnes

    1998-99—58,000 tonnes

    1999-00—65,000 tonnes

    2000-01—now projected at least 70,000 tonnes

  (c)  When the new rail contracts were placed in May 2000 it was intended that we would buy around 95,000 tonnes in total and that this would be allocated as follows: 45,000 tonnes minimum to Corus; 25,000 tonnes minimum to Voest Alpine (Austria) and 15,000 tonnes minimum to Lucchini (Italy). The outstanding 10,000 tonnes would be ordered from wherever Railtrack had the opportunity to optimise volume discounts, provided expedient supply could be effected. The current emergency procedures to satisfy the rail replacement programme to eliminate gauge corner cracking indicates that Railtrack's demand is likely to exceed 120,000 tonnes this year and due to expediency Corus is likely to supply the majority of the extra 25,000 tonne requirement.

  (d)  Due to the gauge corner cracking re-railing programme for which 113A is being used, it is now unlikely that we take delivery of CEN60 rail in any great volume until that programme is complete.

    (i)  The long term strategy is to convert to CEN60 rail on our premier routes and the West Coast Route modernisation project will be the first and largest user. The benefits of CEN60 are that it is a stronger rail and is compatible with the standard used throughout Europe. CEN60 does not involve any metallurgical change from BR rail sections. In the last two years Railtrack has approved the use of CEN60 rail and it is now starting to take effect in earnest, on heavy traffic and high speed lines initially. Rail to this standard has been in common and highly successful use in Europe and elsewhere for very many years.

    (ii)  The primary preference with regard to length is 216 metre strings so that we reduce the number of on site applied alumino thermic welds which have been a source of rail breaks. Since 216 metre is 20 per cent longer than 180 metres, theoretically, there will be 20 per cent fewer alumino thermic welds and therefore 20 per cent fewer rail breaks attributable to them. 216 metres is the preferred length because that is the maximum length we are able to haul and unload on our rail delivery vehicles.

  The secondary preference is for fewer factory welds both from a quality and cost viewpoint and the 180 metre input length at the Southern rail depot will require only one weld per 216 metre string. A similar string of 216 metre from Corus (which they cannot supply until they upgrade the Castleton plant at the end of this year) will require 5 factory welds until such time as they are able to provide 72 metre lengths from the Corus plant in France at which point it will require two welds. We are driven by the relative unreliability of site-made welds and the rising requirement to reduce the population of site welds in track. There is also a need to reduce the number of factory-made welds which are also important but less so than the reduction of site-welds.

  (e)  Railtrack is compliant with EC Procurement Law in the way that we tender and award contracts and within that framework we seek to obtain the most economically advantageous contract terms in the broadest sense giving due consideration to quality, safety, logistics and costs. We have opened up the market to fair competition from mainland Europe with our strategy and that is wholly compatible with our efforts to improve the position for our customers and shareholders alike. The ability of a supplier to meet that requirement would be a key element of the acceptance process. No supplier will be used if their product does not get technical acceptance.

5 December 2000

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