ERTMS Benchmarking: driving costs and their actual evolution

Istanbul, 01-03 April 2014

Piero Petruccioli – UIC Rail System Department

ERTMS Benchmarking : purpose

CostsStructure of purchasing company

Key performance

indicators

Procurement strategies

Maintenance strategies

Project description

Cost drivers

Cost evaluation (CAPEX, OPEX) as a function of all relevant factors.The later, the more precise (but less useful…)

Late predictionEx post analysis

Early predictionFeasibility studies

Regulatory benchmarking

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli2

ERTMS Benchmark, UIC

> UIC project, 2008-2014 ; “late” or “ex post” flavour

> Geographic scope : EU, 19 companies, 32 projects (board, lines)

> Technical scope: ETCS + GSM-R extensions for L2No comparison with other subsystems

No global signaling system comparison, just Train Control

> Project view, not network(s) viewIncluding share of R&D costs, but…

…not considering migration strategies and their induced financial costs

> Costs : LCC (R&D, investment, op. & maintenance, disposal)

> 2014 complementsMaintenance strategies and main cost drivers

Putting costs in relation with performance (explanatory factors), in addition to technical

complexity and purchasing strategies

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli3

4

ERTMS in operation today in Europe

Source : UIC ERTMS Database (status Oct 2013)

Difficulties (1/2): A narrow scope

In Operation: L1 1870 L1 and L2 1920 L2 2165 Regional 134

TOTAL 6089Contracted: 5267

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Difficulties (2/2): An evolving market

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli5

ERTMS Commercial Operation - 2014

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli6

ERTMS Commercial Operation – plan 2020

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ERTMS Commercial Operation – plan 2025

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli8

ERTMS Commercial Operation – plan 2030

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli9

> IM and RU involved in ERTMS are primarily focused on time and costs for implementation and commercial exploitation

>O&M aspects tended to be passed over

> In many cases only a couple of years of O&M are contracted

>O&M phase has strong impact on the total LCC of ERTMS

>Railways can get into strong dependency of their industrial suppliers

>Highly recommended: manage the long term O&M early in the first / main tender

ERTMS Operation and Maintenance

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli10

>OUTSOURCING - Main decision drivers: • Price• Control over maintenance costs• Managing complexity, mostly for IM• Mandated for SW updating/upgrading • Timely with the tendering phase (to limit the vendor lock-in)

> IN-HOUSE - Main decision drivers• Cost of the maintenance staff• Technical Maturity of the staff• Small or preventive maintenance of big series• Flexibility to manage the Business Risk transfer, mostly for RU

ERTMS maintenance - main strategies

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli11

> Personnel costs (for in–house)

>Costs of man-hours (for outsource, higher than standard)

> Safety Software Updating / Upgrading

> Special equipment,

> Spare parts

> Storage costs for the components

> Training documentation

ERTMS maintenance - main cost drivers

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli12

Phase Level 1€ / dtkm

Level 2 € / dtkm

On board € / OBU

R&D 20 k€ 100 k€ 110 k€

Investment 90 k€ 400 k€ 340 k€

Total initial costs

110 k€ 500 k€ 450 k€

Range (observed)

35 – 140 k€ 140 – 940 k€ 120 – 800 k€ *

Operation & Maintenance

15 k€ 130 k€ 110 k€

LCC, total 125 k€ 630 k€ 560 k€

Result: ETCS Average Life cycle cost

Source: UIC Benchmark project

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli13

>Uncertain Economics due to:Deep Influence of pre-existing systems;Wide range of applications and expected performance;Transition costs;· Comprehensive planning is difficult in a ‘shared’ system

>Market expansion and version management still have unfathomed effects

>RU- Business case vs. IM- Public CompanyOnboard: low flexibility, high costs, low direct benefits put RUs in a difficult situation(direct subsidies are problematic); therefore:· Importance of setting access charges right· Importance of low cost developments, so IMs can pass substantial

benefits to RUs.

Conclusions (1/2)

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli14

>Remaining works under UIC Benchmarking project:

• Integrate maintenance ROI

• Attempt to link costs with high level performance criteria

Conclusion (2/2)

Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli15

16 Istanbul, 01-03 Apr 2014, ERTMS World Conference, ERTMS Benchmarking – Piero Petruccioli

Thank you for your kind attention

Piero Petruccioli, project manager