procurement

National approach needed for rail procurement

The dichotomy between building trains in Australia or overseas ignores the opportunities for procurement reform that would keep Australia competitive, writes Australasian Railway Association CEO Caroline Wilkie.

In recent months we have seen two very different approaches to rail procurement in Australia.

In New South Wales, the state government welcomed new rollingstock onto the network, after importing trains from overseas.

Meanwhile, in Victoria, the state government confirmed the order of the next tranche of V/Line trains, to be manufactured at Bombardier’s Dandenong facility.

As one state looked to promote local jobs in its own backyard, the other claimed doing so wasn’t really an option.

The truth is, both procurement processes highlight some of the challenges the industry is facing.

The NSW government’s erroneous claims that is wasn’t realistic to build trains in Australia were understandably met with disappointment from the industry.

We have – and always have had – a strong rail manufacturing industry in Australia.

We can be proud of our $2.4 billion rollingstock manufacturing and repair industry with capability and experience across the country.

Companies like Alstom, Bombardier, Downer, and UGL are leading the way in Australia, with over 900 businesses involved in rail manufacturing and supply nationally.

The industry can design, manufacture, maintain, and repair rollingstock to the highest standards, with capability in Cardiff and Broadmeadow in NSW; Dandenong, Ballarat and Newport in Victoria; Maryborough in Queensland; and East Perth in WA.

Metropolitan Sydney and Melbourne are the largest centres of rollingstock maintenance and repairs in Australia, and two of the three largest non-capital city employment bases for the industry nationally are in Newcastle and Lake Macquarie.

But the sector lacks the scale of its international counterparts and is hamstrung by the procurement processes that exist across the country.

While contract awards like those in Victoria do create jobs and support local businesses, more needs to be done to support the long- term health of the sector.

Victoria, like most state governments, applies local content requirements at the state level.

It is not hard to see why governments are prone to favouring a state-first procurement policy when awarding these contracts.

Research conducted by the ARA this year found that while the average business spends about twice their wages cost on intermediary inputs, the rollingstock manufacturing
and repair industry spends five times their wages cost.

It is understandable that governments believe keeping manufacturing in their state will realise these flow-on benefits and maximise the jobs and economic benefits generated from their investment.

But in practice, it really means there are fewer and fewer chances for the industry to win work, create jobs and support innovation and growth.

It means the team working on rollingstock in Victoria might not meet the local content requirements set by NSW, Queensland, or WA.

If the same team wanted to bid for a very similar contract outside of Victoria, they might need to have facilities and people located in the state where they are bidding.

For many companies, that kind of duplication – often for a single contract – is impractical, expensive, and difficult to manage.

Even if they do choose to establish a local presence, the costs can be prohibitive not just because of the need to be local, but because different states may favour different specifications to achieve the same outcome in their tender process.

In the end, this creates layer upon layer of complexity that drives up costs, makes it hard for rail manufacturers to work across jurisdictions and erodes the size of the project pipeline Australian businesses can work towards.

A national approach to rail procurement is the only solution.

We need an approach that recognises our manufacturing industry can only grow and scale up if we treat the whole of Australia as one single market.

We need to ask industry to deliver an outcome or solve a problem, rather than specify the individual components that must be used, even if they are not the best choice available.

We must consider the whole of life costs of an asset, and the additional economic and sustainability benefits our industry can deliver, rather than choose options that are cheap to produce but could cost much more to maintain.

If we take these simple steps, the industry will have greater certainty, increase its investment and training, and have access to a bigger project pipeline.

They will achieve new efficiencies and forge innovation that will make a difference for the industry and the people that rely upon it.

Ultimately, rail manufacturing will grow and increase its competitiveness, providing more jobs and opportunity than is possible right now.

We were heartened to hear NSW Minister for Transport and Roads, Andrew Constance confirm that he is willing to work on the issue with other state governments.

With more rail contractors and manufacturers looking to increase their use of Australian suppliers in the wake of COVID-19, there is no better time to act than now.

We look forward to working with Constance and his counterparts across the country to deliver better outcomes for the industry and the economy.

Melbourne Airport

Melbourne airport rail link no longer up in the air

A future train line to the Melbourne airport will utilise the under-construction Melbourne Metro tunnel, Prime Minister Scott Morrison and Victorian Premier Daniel Andrews confirmed on Saturday.

The route was confirmed along with a start date for construction and a forecast completion date of 2029. Read more

Rail industry grew by 14 per cent from 2016 to 2019

The value of the rail sector to Australia’s economy has grown by 14 per cent, as shown in a new report from Deloitte Access Economics, on behalf of the Australasian Railway Association (ARA).

From 2016 to 2019, the Australian rail industry grew by $3.7 billion. Today, the rail industry contributes $30bn to the Australian economy, 1.5 per cent of the national total.

Read more

Port Botany

Freight coalition unite in calling for rail container incentive scheme

Freight and logistics groups have called out the NSW government’s undermining of its own mode share target for containers carried by rail into Port Botany.

The Australian Logistics Council (ALC), Freight on Rail Group of Australia (FORG), Freight and Trade Alliance (FTA), and the Australasian Railway Association (ARA) along with individual port rail freight operators are questioning the wisdom of allowing more high productivity vehicles on Sydney’s roads.

“By incentivising HPVs, government is perversely derailing their own policy to grow rail’s mode share target – at a time when Sydneysiders want safer roads and less traffic congestion and vehicle emissions,” said ALC board member and Qube managing director Maurice James.

The NSW government has been issuing permits for high productivity vehicles to access the Sydney road network and major motorways such as WestConnex. By allowing trucks which can carry two containers to travel within Sydney, this reduces the competitiveness of rail for the metro import container market.

The NSW government has set itself the goal of having 28 per cent of the container trade through Port Botany being handled by rail by 2021, however just 17.6 per cent is currently hauled by rail.

Instead of having each mode compliment each other, with rail for longer distances and trucks for the first and last mile, road transport was monopolising container traffic, with impacts on the local community, said FORG chair and Pacific National CEO Dean Dalla Valle

“Today, many HPVs are doing ‘every mile’ of the freight task in Sydney, placing heightened pressure on traffic congestion, road safety and vehicle emissions,” he said.

Dalla Valle advocated for a measure such as the Western Australian government’s Port of Fremantle container incentive scheme was needed in NSW.

“Prior to introduction of the incentive scheme at the Port of Fremantle in 2006-07, rail mode share was a meagre two per cent. The scheme underpinned growth of rail’s mode share which is now above 20 per cent – the highest in the country,” said Dalla Valle.

Director of the FTA and secretariat to the Australian Peak Shippers Association Paul Zalai said that governments should encourage importers to use rail services.

“Governments must maximise port assets and manage our trade gateways through incentivisation of rail usage for imports to metropolitan sites and importantly, streamlined connectivity to regional areas to cost effectively reach export markets.”

ARA CEO Caroline Wilkie said communities would be feeling the brunt of the lack of rail transport.

“The balance has tipped so far we run the risk of Sydney’s roads being over-run with trucks unless there is urgent action to use more rail.”