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21st Century Ford 4,

Richard Brown

 

‘Brown RH', better known in the railway industry as Richard Brown, first appears in my collection of British Rail Directories in the 1985 edition when, on page 17, listed as InterCity Planning Manager. Not for the last time, he was clearly in the right place at the right time.

In the 1980s the business led railway really began to motor and young managers, Brown was then 32, could make their present felt. There is no better indication of this zeitgeist than the correction five lines below Richard Brown's entry. Alongside ‘Director, London & Soutb East I have crossed out ‘D D Kirby' and inserted C E W Green.

After his spell in InterCity's planning ‘engine room', Brown moved to the sharpest point in its operational bed of nails, as Manager Birmingham. Then Organising for Quality, which created self contained operations within BR's main businesses, he got his chance to really run a Railway as Director Midland/Cross Country for InterCity. He was not yet 40.

Reorganisation for privatisation soon followed. Midland/Cross Country was split and Richard Brown kept charge of Midland Main Line. An unsuccessful management buy out, followed where, characteristically, Richard Brown's reaction to defeat was to congratulate the winner and confirm a willingness to work with the new owners – National Express Group.

 

Career path

At NEG the upward career trajectory continued. Midland Main line was now not only owned by a large bus and coach group, it was one of five franchises – the largest number to be owned by a single operator.

Turnover of NEG's Rail Division in 1999 was around £920m. This compared with £200million for buses and £170million for the coach business.

 

National Express Rail Division

Franchise Period (years)

Gatwick Express 15

Midland Main Line 10

Silverlink 7

Central Trains 7

ScotRail 7

 

Within a month of NEG acquiring the last of its franchises , NEG appointed Richard Brown as Managing Director of the Group's new Train Division. And it didn't stop there. since July last year he has been NEG's Commercial Director on the main board of a £1.34 billion business.

Now we are talking over a sandwiches in his glass walled office in the NEG headquarters beside Bond Street Tube station. In fact the headquarters is not a building, but one floor of a building and all the glass walls reveal a very low head count – very different to BR headquarters.

 

Franchise records

First, a brief tour of NEG's rail franchises, where the first to be acquired, Gatwick Express and Midland Main Line, celebrated their fourth birthday in the private sector in May. In response to my suggestions that performance across the group is patchy Brown says that it is not a picture he recognises. ‘All our companies are providing a significantly better service for passengers than when we started'.

In fact, all five franchises were on an ‘improving trend' when they were taken over. ‘What we can take the credit for is building on that trend' says Brown, adding with a grin, ‘and not killing it off'.

A factor in this performance, says Brown, has been the retention of existing strong rail management while bringing in fresh blood to each of the TOCs. As an example of new blood he instances Alastair McPherson who ‘has brought new impetus and ideas to ScotRail while keeping the best of what was there'.

 

Privatisation was always about fresh ideas, fresh blood, some clearing out of deadwood, but actually making damn sure the live wood is nurtured.

 

In contrast to ScotRail with its tight national focus, NEG's other regional franchise, Central Trains, is a big sprawling TOC. Despite criticism of its performance, Brown reckons it has done well to keep it's place in the performance league tables, particularly bearing in mind that it runs through many of Railtrack's best known congestion ‘hot spots'. It is also, claims Brown, the fastest growing regional TOC.

He sees Central as a classic example of the NEG philosophy at work, winning more passengers and reinvesting the profits from a combination of ‘lots of new fair offers, plus more intensive marketing for services that ‘were not marketed well under BR'. Overall he rates Central as a ‘quiet success story'.

When it comes to Midland Main line, Brown admits to a ‘soft spot' for his former command. He is patently proud of its achievement. ‘we have delivered all the promises there – new trains and doubling the timetable'.

 

Leicester example

But what about problems in making the cross platform transfers at Leicester ?

‘If you set yourself up to do that, you set yourself up to fall when you don't. To make transfers work you've got to have very high standards of reliability'.

For example, even if all MML's trains manage 90% right time at Leicester, cross platform transfer, means that the 10% late running compounds to 20% of potential missed connections. So well over 90% right time is essential.

But cross platform transfer works in Germany . Yes, but German station dwell times are longer than in Britain . On top of which, since Leicester has only four platforms, the intensive traffic through the station means that longer dwell times ‘would put a significant premium on platform capacity'.

 

Capacity enhancement

So why not build more platforms? Well, yes, but the funding would have to be addressed as part of a franchise replacement policy consciously geared towards growth and MML is a 10 year franchise.

Which is not to say that things can't be done within existing franchises. MML signed up to ‘several millions' in additional track access charges in return for Railtrack adding a platform at Bedford, doubling a junction south of Leicester and reinstating platforms at Derby and Nottingham all to accommodate the half hourly service.

While admitting that the enhancements under this partnership were relatively small in scale, Brown says ‘we did a deal, we're both happy with it, now it needs to be done across the country writ large'.

Meanwhile MML ridership in February was up 24% year on year and 17% up for the whole of 1999, a year when the impact of the half hourly timetable was felt only during the second half.

Continuing the grand tour, Richard Brown, reckons Silverlink has done pretty well, particularly on performance. Reacting to my body language, he concedes ‘yes, they went been through a sustained bad patch when we took the franchise on, because they had suffered the brunt of the run down of the West coast infrastructure after Railtrack took ver in 1994'.

But, ‘to Railtrack's credit' a lot of those problems have been overcome – ‘certainly as we see them'. Mind you, there have been some blips, like the autumn of 1998.

That, you will remember, was when Railtrack's Chief Executive chose to tell the TOCs they should do better on performance. Silverlink Managing Director, Charles Belcher, to his credit responded with a devastating analysis of his infrastructure provider's performance that had other, more pusillanimous TOCs cheering – in private.

Brown even has kind words for the North London line. ‘Hauling it back to a ‘C'' in the latest SSRA Performance bulletin is no mean achievement. And further improvement to ‘B' by the end of this year is possible.

Gatwick Express, until the new trains enter service, has probably changed the least since privatisation. ‘It's a;ways been good' says Brown and the real achievement has been to maintain market share despite ‘ pretty aggressive marketing' from Connex South Central and Thameslink once the invisible hand of Adam Smith replaced the corporate hand of BR.

Inevitably, the one disappointment is the delay to the service entry of Gatwick Express' new Class 460 electric multiple units . Brown points out that the franchise is a small business and that they relied on train builder Alstom ‘to sort everything out'.

This contrasts with SWT, where the TOC's engineering input to the acceptance programme for the near identical Class 458 made a major contribution to the achievement of passenger operation. ScotRail is similarly frustrated with acceptance of its Juniper EMUs and you do wonder why the owner of the most franchises lacks SWT's in house technical ability in an engineering-based industry.

Overall, Richard Brown reckons most of his five franchises are growing at or above the industry average for their peer groups. Central Trains and ScotRail are first and second in the Regional growth leagues, while Midland , thanks to its doubled service is the fastest growing Intercity TOC.

 

Railtrack improving

With its geographical spread of operations, NEG has a panoramic view of Railtrack's performance as an infrastrucrre provider. ‘I think Railtrack have come a long way in the last two years' is Brown's summary.

But, ‘inevitably there is still great frustration on both sides of a relationship with so many dimensions and you are both totally tied to the other. One should never assume that an arrangement like that is ever going to be pure sweetness and light'.

Earlier concerns, such as Railtrack's focus on costs and slow reactions to defects or changing safety processes have been recognised. When Brown says ‘I think they are much more operationally and output orientated now' I suggest that this reflects Gerald Corbett's influence.

Richard Brown agrees, ‘he has refused to believe things can't be done'. He goes further ‘I think lesser managers would have thrown their hands up in horror at the Regulator's performance targets and said it's impossible, but Railtrack have dug down and worked away at it. They won't quite achieve the minutes reduction but they've made a pretty good shot at it'.

 

Minor player

That tribute paid, NEG is still concerned that on any particular route, its franchises tend to be one of the smaller players. Scotland is the exception, and Brown believes that the good relationship with Railtrack there reflects NEG's status as the dominant player.

Contrarily, Virgin and GNER are less than happy in Scotland and think that ScotRail gets more than its fair share of attention. Brown understands this attitude, since he believes Silverlink plays second fiddle to Virgin West Coast while Gatwick Express is ‘very much a minority player'.

Less than 10% of Gatwick's minutes lost are down to the TOC, the rest being attribute to either Railtrack or TOC-on-TOC. ‘It's disappointing when a TOC like Gatwick falls from a B grade to a C grade (in the SSRA performance league) when it's all down to Railtrack or other TOCs'.

Looking to the future, Richard Brown identifies the big challenge as Railtrack rising to the challenge of refranchising and the associated acceleration in enhancements for growth. He also wants a new working relationship between Railtrack and the TOCs.

‘We can understand Railtrack wanting to defend and maintain their monopoly. But we can also understand the SSRA's desire to introduce special purpose vehicles, with one objective being to introduce competition. The trick for us and Railtrack is to ensure that this conflict doesn't get in the way of delivering improvements'.

Quite. Special Purpose Vehicles (SPV) are schemes to fund and implement improvements to the rail infrastructure. They are the baby of SSRA Chairman Sir Alastair Morton and fiercely opposed by Railtrack. Hence, says Brown, the need for new relationships.

Railtrack's ostensible objection is that SPV work would have to fit in with overall possession management. Brown agrees that only Railtrack can manage the network, that possessions are a constraining resource and that Railtrack will have to be the guardian of the possession plan.

‘You've got to have one body doing it (organising possessions) right across the network', he says. But he also believes that there will be a role for SPVs, the key being to identify schemes where they genuinely add value.

 

Tomorrow's managers

Given that Brown is the product of a structured recruitment and career development programme, I ask him where the new generation of railway managers will come from. Last year, NEG's Trains Division recruited five graduates as management trainees for the first time. This followed an ‘inevitable' pause in recruitment in the lead up to, and during, privatisation. There will now be an annual graduate recruitment programme.

With the right structures, Brown believes the railway remains a very attractive industry in which to work. And, in the case of NEG, there is the further attraction, as Brown has demonstrated, of working in a range of transport operations and not just rail.

One differences since privatisation, in Browns view, is that the top talent can be moved on faster, although it has to be said that he seemed to rise quickly within BR. Another change he sees is a greater willingness to recruit from the ‘shop floor' – one example being MML's train managers who are managing their teams in a far more active way than traditional supervisors would have done.

 

Export/import

Britain led the world in rail privatisation. With other railways following this lead, privatisation veterans such as NEG are now seeking to exploit their expertise overseas.

Brown is particularly pleased with NEG's performance in Australia . Winning three out of the five franchises in the State of Victoria was one of last year's highlights.

When the State Government decided to privatise its public transport, it set up the Transport Reform Unit (TRU), recruited some people from the Office of Passenger Rail Franchising in Britain and also took on former Franchising Director, Roger Salmon as a consultant.

‘Richard Brown gives the TRU ‘full marks' for the way they learned ‘very intelligently' from the British experience and used this to design their approach to franchising. The system was divided into two suburban and two tram networks (both vertically integrated) plus the V-Line rural network

This evolution of the British model has some significant variations which Nrown thinkls could be re-imported. For example, the three NEG franchises (one suburban and one tram company, plus V-line) range between 10 and 15 years.

Infrastructure investment, each franchise features a number of schemes mandated by government. The franchisee implements these schemes and has the costs reimbursed on completion.

In addition, the franchisee can seek to have further schemes mandated and funded. The mechanism for such enhancements is, Brown thinks, s ‘a good deal less bureaucratic than current processes in the UK '.

Another twist is a ‘per passenger' incentive regime. If NEG achieves growth above 20%, then the Government tops up the resulting incremental revenue by 50%.

This is, of course, a strong incentive to grow ridership In a subsidised rail operation, the increase in revenue from extra ridership rarely covers the associated extra cost – for example the rental on extra rolling stock. The top up guarantees an enhanced return on such investment.

Richard Brown feels that this argument has not been really taken on board in the UK . Not surprisingly he has commended the Australian solutionit to the SSRA.

 

New world

So, finally, what about franchise replacement. For Brown, refranchising can't come soon enough. But there are some caveats.

For example, the SSRA's commitment to higher penalties under the performance regime will not be free issue, indeed it will have ‘a direct price impact'.

If the policy really is to incentivise the train operators by hitting profit margins, then groups such as NEG won't be able to sign off the replacement deal unless they are satisfied that they can deliver the required performance and make a commercial return. Indeed, investors and banks would only let industry sign up to deals that make a return. And the city is much more rail-savvy than first time around.

Not surprisingly, Brown feels that Sir Alastair Morton's call for cuts in subsidy, of premium payments, to come back into the industry rather than going to the Treasury is ‘absolutely right'. And, encouragingly, he thinks it will happen. ‘This is quite important', he adds, ‘because the £200million a year loss in grant plus the £250million a year growth in revenue would, would leverage a lot more investment than the industry has been able to finance in the past'.

Then there is the SSRA's desaire to redraw the franchise map. Brown points out that this is very difficult if you are not reletting franchises simultaneously. ‘If you're moving a boundary you have to have the TOCs on each side of the boundary in play simultaneously'.

Brown suspects that what is happening is that potential franchisees will be asked to bid separate prices depending on whether a sub-division is in or out. In the case of Central Trains, the SSRA could then exercise the option to transfer Mid Wales to the WalesRail TOC.

In other words, bidding is broken down in top spmaller sections which can be reassembled into different combinations as required.

Surprisingly, Brown is now worried by this Balkanisation – provided it is what you were bidding for. But if it tuned out that NEG was losing the bulk of a franchise ‘you would ask “what's left for me”?'

So what about franchise replacement? ‘We're pretty happy that Central is the first NEG franchise to be for replacement'.

But hasn't the Shadow Strategic Rail Authority suggested that Central could be split into a PTE TOC and a regional TOC? ‘That's not what they've told us', says Brown, laughing. ‘We actually suggested to the SSRA that we felt that the West midlands travel-to-work area would be better handled as a separate franchise contract, with CENTRO taking the lead'.

Odd, I am sure Franchise Director Mike Grant mentioned the possibility of a separate franchise as well as a separate contract within a franchise. ‘No', says Brown ‘it was our suggestion and we never suggested that it should be a separate franchise because operationally there is a lot of synergy'. Hmm, we shall see.

Anyway, the logic is that a ‘getting Birmingham to work franchise contract' would focus on the PTE services and that the franchise would easier to develop with separate contracts, one with the PTE and the other with the SSRA. This would also clarify finances, where Brown currently sees some cross subsidisation in favour of ‘greater Birmingham '.

 

Criteria

NEG is worried by the lack of evidence ‘so far' that an operator's track record will have a role in franchise bidding. ‘We believe a track record has to be established or earned and as a group we've worked extremely hard to try and earn it. Our track record is not perfect, but we believe it's well above average' claims Brown.

‘Yes, I say, ‘if track record counts why is the SSRA letting Go Ahead compete against M40 Trains for Chiltern which has the best customer satisfaction record in the London commuter market, has supported infrastructure enhancement is still buying new trains. ‘Roger, that's precisely it' is Brown's heartfelt reply.

And while the franchise replacement short lists are dominated by the usual suspects, and Brown doubts that any of the established operators would repeat some of the ‘foolish bids' that won first time around, he is still worried about poorly informed wild-card bidding from those not that experienced in the industry. To prevent this he would like to see the SSRA carry out due diligence on the deliverability of the bids. Providing such criteria are laid down in advance, the lowest bid doesn't have to be accepted.

Second time round National Express is nothing if not a well informed franchise bidder. And one with an ‘old railway' manager at the commercial helm. Sir Bob Reid would have enjoyed that.

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