1. OPERATIONS AND MAINTENANCE OUTSOURCING IN THE UK 27 th April 2010 Mike Levery MCL Consultancy Ltd © MCL Consultancy Ltd 2010

2. Fundamental Questions: Asset Criticality Do the areas we are considering for outsourcing: -Contain assets whose function is to deliver the objectives of the business? i.e. critical assets Depending on criticality are we considering O&M or maintenance only? © MCL Consultancy Ltd 2010

3. Fundamental Question: Asset Performance Of the assets considered for O&M or maintenance only outsourcing -is asset performance in the control of operations? -or maintenance? -or shared equally between the two functions? © MCL Consultancy Ltd 2010

4. As a case study, lets examine the track record of a company which failed to answer these two fundamental questions when embarking on a key O&M outsourcing initiative. © MCL Consultancy Ltd 2010

6. History of Railtrack Established April 1994 as part of rail privatisation in the UK Floated on the stock exchange May 1996 Responsible for O&M of the track, signalling, tunnels, bridges, level crossings and stations Enters administration October 2001 Replaced by Network Rail October 2002 © MCL Consultancy Ltd 2010

7. Maintenance Outsourcing June 1997.Appointment of Gerald Corbett as Chief Executive of Railtrack Jan 1998.Decision to outsource maintenance Dec 1998.Rail infrastructure suppliers conference Nov 2000.Gerald Corbett resigns Nov 2002.Network Rail announce plan to insource maintenance © MCL Consultancy Ltd 2010

8. Maintenance Related Fatal Accidents DateLocationFatalitiesCause Oct 1999Ladbroke Grove31SPAD (8 in 6 years) Oct 2000Hatfield4Gauge corner cracking May 2002Potters Bar7Badly maintained points Feb 2004Tebay4Runaway contractor’s trolley Notes: 1. One fatal maintenance related accident between 1968 and 1998 2. SPAD = Signal Passed At Danger © MCL Consultancy Ltd 2010

9. What lessons can we learn? Have we satisfactorily answered the fundamental questions? What impact will outsourcing have on the staff affected and will we suffer from the loss of significant expertise? Will we retained sufficient knowledge within the business to ensure the contracting strategy meets its objectives? Will the market place provide added value? © MCL Consultancy Ltd 2010

10. Fundamental Questions Do the areas we are considering for outsourcing: -Contain assets whose function is to deliver the objectives of the business? i.e. critical assets Depending on criticality are we considering O&M or maintenance only? Of the assets considered for O&M or maintenance only outsourcing -is asset performance in the control of operations? -or maintenance? -or shared equally between the two functions? © MCL Consultancy Ltd 2010

11. In Summary Outsourcing contracts in the area of O&M and Maintenance which are established for short term financial gain will invariably have a detrimental effect on the business in the longer term © MCL Consultancy Ltd 2010