Great North Eastern Railway (GNER)

Managerial support and reducing costs during the handover of operations.

The work covered many disciplines and was underpinned by rigorous analysis – of the client’s environment, position in the industry, and processes – to highlight opportunities to improve the business.


In December 2006, having lost the franchise to operate the East Coast Mainline, GNER was allowed to continue to run it under a Management Contract on behalf of the Secretary of State until a new franchisee was found. The Department for Transport (DfT) was responsible for providing the service and running the business. GNER was accountable to it for day-to-day operations, under a strict financial regime with stringent reporting. The industry is highly regulated, with standards set for reliability, punctuality, and health and safety.

Collinson Grant (CG) had been working with GNER before December 2006 to help find and implement cost-cutting measures to boost operating efficiency. So it was a natural extension for CG to work with GNER during the Management Contract period to help draw up improvement initiatives for the DfT to approve and for GNER to apply.


Our work in the Management Contract period included initiatives:

  • to be party to the discussions and provide support on detailed contractual negotiations, clause by clause, to do with the handover of the franchise
  • to support the finance team with specific accounting and financial matters – the opening balance sheet, contingent liabilities, force majeure items, fixed asset valuation and risks to it – which both affected the fee earned and mitigated GNER’s financial exposure
  • to help to collate and analyse evidence to counter a non-performance claim made against GNER.
  • After the franchise was terminated in December 2007, we helped:
  • to finalise fees and sort out contractual matters with the DfT. This required CG’s close knowledge of schemes and their progression
  • to resolve residual matters to do with the rail operation, including GNER’s contractual commitment to support the DfT on remaining administrative matters for the operation of the East Coast Mainline during the Management Contract period, such as settlement of insurance matters
  • to set up a reporting mechanism for the parent company’s finance team to manage the funding provided by the DfT to GNER. This funding was to settle the residual obligations of the rail operation
  • to provide regular reports to GNER’s management team and the DfT as required.

Overall, CG managed the work programme of the GNER team, which included a number of other independent advisors.

Cost-saving initiatives

In addition we worked to improve performance in all parts of GNER’s business: marketing, purchasing, train operations (on-board included), depot maintenance, fleet maintenance, property maintenance, administration and finance. We worked with each department to find and then to quantify initiatives for improvement. CG helped to draft the proposals and to support detailed discussions with the DfT.

They aimed:

  • to reduce overheads in a sustainable way – to try to make internal controls more effective, to reduce insurance costs, and to use innovative training techniques to avoid using external suppliers, amongst others
  • to improve the effectiveness of plans for maintaining property – for example, repair and maintenance work was done when it was seen to be needed rather than according to a schedule
  • to harmonise operational contracts and to cut costs by putting tenders out for services – such as heavy cleaning and upholstery cleaning on trains
  • to rationalise the supply chain – examples being to manage the use and renewal of consumables in the depot maintenance departments, and to have the current station cleaners clean trains in depots too
  • to bring work in-house, where practical – for example, to test products in-house or have the catering service provider test them, rather than use consultants
  • to renegotiate contract terms to increase cost-effectiveness – for example, the frequency of examinations for train maintenance was changed without affecting safety or reliability
  • to use people better – for example, with station and on-board crews, to use the permanent rather than the temporary staff. A new managerial structure was put in place in the depots
  • to speed up the processes for resolving disputes and for collecting rebates and refunds.

The cost savings generated by different work packages varied from tens of thousands to several hundreds of thousands of pounds. In total, around £10m was saved during the Management Contract period – about 4.8% of budgeted, controllable costs.

Controlling the performance of the cost-saving initiatives

CG helped GNER’s financial team to put in place a monthly reporting tool to measure savings (actual performance against budget) and to compare this with the amount in the approved initiative. If the savings were less than expected, we worked with managers and initiative owners to understand why. This allowed GNER to take corrective action as necessary. Forecasts were prepared monthly to show the total expected savings in cost. CG worked with the finance team to produce these in tandem with the usual internal timetable for financial reporting.

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