Keeping your project on track – contracting with Network Rail

Network Rail is the sole owner and operator of the railway infrastructure in Scotland and is held to account by the Office of Rail and Road (ORR). It is responsible for 20,000 miles of track; 30,000 bridges, tunnels and viaducts; and thousands of signals, level crossings and stations*. Given the expansive reach of Scotland’s railway network, public sector bodies, developers and contractors regularly require to liaise with Network Rail when developing a project and carrying out construction works that fall within close proximity of the railway network. Such engagement is critical to ensure the safe operation of the railway at all times as well as the safe operation of the relevant proximity works being undertaken.

Historically, however, Network Rail has often been perceived as a difficult entity to deal with. In response to such criticism following the Hansford Review, Network Rail, amongst other things, introduced new service levels and updated its suite of documents and template agreements that it requires be used for enhancement projects or works being undertaken close to the railway corridor.

The key documents used by Network Rail when contracting with third parties in relation to railway investment are as follows:

• Basic Implementation Agreement/Implementation Agreement (either can be Fixed Cost or Emerging Cost) – used where Network Rail are implementing works for the customer on low risk projects up to £5m (basic) or larger and more complex projects in excess of £5m. Network Rail essentially acts as a construction manager and uses one of its works contractors to carry out the required design/construction as appropriate and, as such, the agreements look different from a typical construction contract. Such agreements are typically used for enhancement projects on or around the railway corridor.
• Basic Asset Protection Agreement/Asset Protection Agreement – used where the customer rather than Network Rail is implementing works on or around the railway corridor and Network Rail facilitates the project/works through asset protection at the cost of the customer. Network Rail provides services such as attendance at meetings; co-ordinating interaction of the works with the railway; booking line possessions and general oversight of the works to ensure the continued safety of the railway.
• Basic Services Agreement/Development Services Agreement – used to cover pre-feasibility works by Network Rail to scope out a project for a customer (basic form) and more detailed development and design work for a customer project. This allows for surveys and investigations of the railway network; provision of asset information to help inform and develop the project etc.

The above documents contain Network Rail bespoke terms including in relation to:

• Risk Allocation – the documents have been drafted with specific financial risk allocation principles in mind given the regulatory and legislative environment in which Network Rail operates.
• Network Rail Fee/Industry Risk Fee/Additional Expense – these are specific fees payable to Network Rail to fund its contractual liabilities in relation to events within and without its control respectively and any additional expense it might incur in relation to incremental maintenance and operational costs. The fees are typically a percentage of fees payable under the relevant agreement.
• Network Rail Liability Cap – Network Rail’s liability is capped at the value of the works/services being provided.

Although these are template documents with typically limited scope for negotiation, it is still important to carefully review them and consider any project specific adjustments that may require to be raised with Network Rail. It is also important to consider if, and how, any obligations require to be passed down into any supply-chains. This can be complex and require detailed consideration in relation to risk apportionment depending on the project.

Harper Macleod has worked with clients in relation to the negotiation of many Network Rail contracts, (including other forms of agreements not referenced in this article, such as bridge agreements) so please get in touch if you require any advice in relation to the same.

*Source from Network Rail website.