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The role of international benchmarking in developing rail infrastructure efficiency estimates

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  • Smith, Andrew
  • Wheat, Phill
  • Smith, Gregory

Abstract

International cost efficiency benchmarking played a central role in informing the Office of Rail Regulation's (ORR) determination of Network Rail's future funding during the 2008 periodic review (PR08) of the company's finances. This paper sets out how international benchmarking can inform a regulator's decisions on efficiency and, in particular, how international econometric studies can be used alongside other evidence in the regulatory context. We start by reviewing the use of previous international benchmarking work. We then set out the data, methodology and results in respect of the two separate econometric studies carried out as part of PR08. The further work that was done in support of the econometric results is then described. The paper shows that top-down econometric techniques, combined with bottom-up engineering analysis produced a robust comparison between Network Rail and its peers. We conclude by outlining how the econometric results were used, in conjunction with other evidence, to reach a final efficiency determination, and how we consider that international benchmarking can be applied by other regulators.

Suggested Citation

  • Smith, Andrew & Wheat, Phill & Smith, Gregory, 2010. "The role of international benchmarking in developing rail infrastructure efficiency estimates," Utilities Policy, Elsevier, vol. 18(2), pages 86-93, June.
    • Handle: RePEc:eee:juipol:v:18:y:2010:i:2:p:86-93
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    References listed on IDEAS

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    1. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
    2. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-374, October.
    3. Rafael Cuesta, 2000. "A Production Model With Firm-Specific Temporal Variation in Technical Inefficiency: With Application to Spanish Dairy Farms," Journal of Productivity Analysis, Springer, vol. 13(2), pages 139-158, March.
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    Cited by:

    1. Gillies-Smith, Andrew & Wheat, Phill, 2016. "Do network industries plan to eliminate inefficiencies in response to regulatory pressure? The case of railways in Great Britain," Utilities Policy, Elsevier, vol. 43(PB), pages 165-173.
    2. Odolinski, Kristofer & Wheat, Phill, 2018. "Dynamics in rail infrastructure provision: Maintenance and renewal costs in Sweden," Economics of Transportation, Elsevier, vol. 14(C), pages 21-30.
    3. Jonathan Cowie & Sarah Loynes, 2012. "An assessment of cost management regimes in British rail infrastructure provision," Transportation, Springer, vol. 39(6), pages 1281-1299, November.
    4. Wheat, Phill, 2017. "Scale, quality and efficiency in road maintenance: Evidence for English local authorities," Transport Policy, Elsevier, vol. 59(C), pages 46-53.

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