Below Rail Infrastructure

ARA releases rail construction tendering guide to cut costs and improve procurement

rail construction

The Australasian Railway Association (ARA) has published a rail construction tendering guide that provides advice to governments to streamline procurement for rail construction.

With over $150 billion of investment in rail planned for the next 15 years, improving procurement processes has the potential to create a catalyst for innovation and ensure value for money, said ARA CEO Caroline Wilkie.

“Failure to address these issues could see fewer contractors bidding for projects, reducing competition and driving costs higher.”

Tendering costs in Australia are high by international standards, comprising 1-2 per cent of a project’s cost, four times the global benchmark.

“Increasing costs and complexity associated with tender processes can be huge barriers for some contractors to even consider bidding for a project,” said Wilkie.

Driven by the need to stimulate the broader economy, an emphasis has been placed on speeding up procurement and broadening the base of private sector that can tender for major projects. COVID-19 has been one catalyst for a rethink in procurement, said a spokesperson for the Department of Infrastructure, Transport, Regional Development and Communications.

“Through COVID-19, many State and Territory government procuring agencies have applied innovative procurement practice to respond to market needs.”

This was realised at the federal level in the streamlined procurement process for Inland Rail implemented by the Australian Rail Track Corporation (ARTC).

“Developed after consultation with industry, the process allows for industry to work collaboratively in order to give more businesses and more diverse businesses the opportunity to secure contracts that contribute to Inland Rail. ARTC is working closely with project proponents to accelerate project tenders, maximise opportunities to participate and de-risk procurement processes, resulting in the acceleration of benefits for business and communities,” said the spokesperson for the federal Department of Infrastructure.

On the Tottenham to Albury (T2A) section of Inland Rail, two joint ventures have been engaged through an Early Contractor Involvement process to validate reference design for five of the 12 sites to be upgraded in the first tranche of the section. The process will run for 12 weeks and will assist ARTC in selecting the best fit and services to take forward for the full contract for construction of the first sites on T2A.

“This competitive model encourages innovation in the reference design,” said the Department spokesperson.

The Best Practice Principles for Rail Construction Procurement documents sets out a number of practical proposals to address these issues. These include national pre-qualification schemes, to flexible risk mitigation measures that consider a project’s unique requirements.

The federal government has also looked to ensure procurement is meeting the capabilities of the market.

“Through the Federal Budget, the Australian government provided additional funding to Infrastructure Australia to lead an annual assessment of market capacity across all infrastructure sectors,” said the spokesperson for the federal Department of Infrastructure.

Implementing these measures and others including the standardisation of tender documentation and terms and conditions would enable better outcomes from the current project pipeline, said Wilkie.

“Major project procurement must encourage innovation and invite bidders to put forward new solutions that get the best for the client and the best for the community.”

The guide acknowledges the work of some jurisdictions, however calls for a more collaborative approach.