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      "text": "The ORR’s PR08 assessment of NR’s required risk buffer was informed by a report commissioned from Oxera in 2006, “What is the necessary margin for Network Rail to accommodate risk?”",
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      "text": "The underlying cost volatility includes a number of items: NR efficiency vs target; Deferral of expenditure for a variety of reasons; Additional work carried out for a variety of reasons",
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      "text": "Oxera identified that its base case overstated volatility for two reasons and implemented adjustments to address these two issues: truncated the distribution to exclude extreme events; removed the profile of systematic variations during a control period",
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      "text": "It should be noted that the ORR would not necessarily categorise all of any under-spend as “outperformance” in its annual efficiency assessment",
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      "text": "L.E.K. has applied the smallest standard deviations of cost expenditure derived by Oxera to the PR08 efficient expenditure determination for OM&R in order to estimate the potential impact of underlying cost volatility on EBS payments",
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      "text": "Source: What is the necessary margin for Network Rail to accommodate risk? Oxera, October 2006; Periodic Review 2008, ORR ORR/ATOC/Network Rail. Rail industry cost and revenue sharing.",
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      "text": "L.E.K. has used Oxera’s PR08 analysis of underlying cost volatility to evaluate the impact of this uncertainty on an outperformance only Regional EBS mechanism",
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