Research: Investigating the Cost Efficiency of Metros

Transport bodies across the world often use Key Performance Indicators (KPIs); this work goes beyond standard KPI comparisons to consider causality for differences in cost efficiency. Using the rich data set gathered from the international Community of Metros, investigates why metro cost performance varies so significantly between different cities. The research showcases a successful partnership between RTSC researchers at Imperial College and practitioners at London Underground (LU). The resulting academic insights are being used to inform LU’s £10 billion efficiency programme.

Using regression analysis and panel data, for both the network and line level, we reviewed the main cost drivers of operating costs and its subcategories, including service operations, maintenance in various categories, and administration. For each subcategory we estimated expected costs for each metro given the metro’s conditions and compared them with the metro’s actual costs. This enabled us to benchmark each metro with “itself,” as if it behaved like the average CoMET and Nova metro. We also quantified the relative impact of each cost driver on metro costs.

Overview of the constituents of metro operating cost modelled by this study

Overview of the constituents of metro operating cost modelled by this study

The analysis revealed important factors that affect metro costs within and outside operator control, which conventional benchmarking can mask. For example, rolling stock maintenance costs were observed to increase by 2-3% with a 10% increase in fleet age. The effects of unit prices in labour and energy were quantified, offering a detailed understanding of the cost structure of various transport operators. Historically, LU unit costs have appeared higher than peers; this work helps LU understand why.

This research gives the transport provider (in this case London Underground) invaluable guidance as to how best to target performance improvement initiatives and optimise available funding to generate maximum value, given scarce resources and high demand for services. LU is using this research to validate their plans, and to determine whether efficiency targets are sufficiently stretching. For any public body operating in a political context, negotiating and working with stakeholders can be challenging. The research facilitates better communications with government and other stakeholders – for example by allowing the reasons for decisions to be communicated.

Posted in Community of Metros Research