{ "docId": "019dd923-5de0-76bd-a165-578b9862173f", "docSlug": "091122f6e046fa86", "documentTitle": "Rail industry cost and revenue sharing (2011)", "authorId": "misc", "authorName": "L.E.K.", "documentKindSlug": "consulting-deck", "documentKindLabel": "Consulting deck", "sourceTypeSlug": "strategy_consulting", "sourceTypeLabel": "Strategy consulting", "presentationDate": null, "orientation": "landscape", "aspectRatio": 1.414, "pageNumber": 89, "pageCount": 170, "prevPage": 88, "nextPage": 90, "slideType": "diagnosis", "function": "diagnose", "density": "overcrowded", "nDataPoints": 1, "notes": "The slide discusses the asymmetry of risk in an outperformance-only incentive scheme compared to a symmetrical one.", "elementsJson": [ "headline_text", "bullet_list", "quote_block" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-5de0-76bd-a165-578b9862173f/89", "deckHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f", "deckJsonHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f.json", "deckAnchorHref": "/decks/019dd923-5de0-76bd-a165-578b9862173f#slide-89", "components": [ { "bbox": null, "kind": "callout", "text": "There is a risk that this systematic bias could lead to leakage of NR funding to train operators, unless: Train operators pay for this benefit (e.g. by factoring it into their franchise bids) or Train operators make a large enough contribution to improving NR’s efficiency to more than offset the impact.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd951-edac-778d-bcb7-9bb78204c438", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.6 }, "kind": "list", "text": "However, the same underlying uncertainty would have a potentially significant impact on an outperformance-only Regional EBS mechanism because even if NR outperformance and underperformance were equally likely to occur, the former would lead to EBS mechanism payments whereas the latter would not", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0f0a0416-fac0-4088-9f8d-51139ee274ef", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.49 }, "kind": "list", "text": "If the ORR has set its efficient expenditure determination at the level where it judges that NR is equally likely to outperform and to underperform then the underlying uncertainty over NR’s cost outturn would not lead to a systematic bias", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3a9865b0-b96e-4921-a0de-4202b4a0b5f5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.38 }, "kind": "list", "text": "There will also be a number of other causes of underlying uncertainty over NR’s costs, including imperfect asset condition knowledge, the impact of innovations and other management initiatives, and unforeseen events such as extreme weather and terrorist attacks.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "673d3090-8955-4944-bf0b-420ca896a821", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.26 }, "kind": "list", "text": "We highlighted earlier that there is significant uncertainty over the current size of the efficiency gap between NR and top quartile infrastructure managers. \"... the efficiency gap given by the various studies lies in a broad range, with a central range of 30% to 50% ...\" PR08 Determination, Para 7.85", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "7e914815-ae95-4fbc-ac74-f1f7e1ea118a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.71 }, "kind": "list", "text": "There is a risk that this systematic bias could lead to leakage of NR funding to train operators, unless: Train operators pay for this benefit (e.g. by factoring it into their franchise bids); Train operators make a large enough contribution to improving NR’s efficiency", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d2b5c3c6-02c3-4ad1-af8a-9c106f1a63b6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.16 }, "kind": "paragraph", "text": "One of the potential issues with an outperformance only Regional EBS mechanism is that TOCs could benefit from the underlying uncertainty over NR’s costs and efficiency target. L.E.K. has carried out some high level analysis to investigate this issue", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5976130f-7de3-4fd3-b259-a1494eea357a", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“... the efficiency gap given by the various studies lies in a broad range, with a central range of 30% to 50% ...” PR08 Determination, Para 7.85", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd951-edac-778d-bcb7-9c89cbc6ca03", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.25, "x": 0.65, "y": 0.08 }, "kind": "title", "text": "Option 2: Outperformance only EBS", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d4589a31-8fba-46fb-bd8f-3439747eb73d", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "List presentation", "slug": "list-presentation", "agent": null, "layer": "slide", "matchId": "ab331dd6-5715-4f03-9d07-534d2d53ca03", "evidence": "The slide contains a list/bullet component with several items.", "confidence": 0.9 } ], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }