rail industry

Get policy settings right and rail will help lead recovery

In the aftermath of COVID-19, there is a huge opportunity for the rail industry to support Australasia’s rebound, writes Caroline Wilkie, CEO of the ARA.

As COVID-19 struck, many industries wound down as travel restrictions and social distancing measures started to bite.

The much-discussed hibernation was a necessary reality for many, but for the rail industry the essential work of keeping our communities connected and economy moving ploughed on.

Public transport operators kept the trains running on time, and in many cases maintained their normal schedules to ensure those who needed to travel could maintain social distancing requirements.

The added work of additional cleaning and maintenance to keep their customers COVID safe was quickly implemented and continues as we return to a more normal way of life.

Throughout all the changes we’ve seen since this crisis began, dedicated teams that support the safe operation of our train network have been a saving grace for those that still needed to get to work, to care for family or simply buy essential supplies.

The rail freight industry also became an important part of keeping supply chains open as international borders closed.

The big swings in demand for household basics like toilet paper called for fast and reliable delivery to replenish supermarket shelves, and Australia’s freight operators helped meet that challenge throughout the worst of the pandemic.

Meanwhile, the suppliers that maintain and operate the industry’s rollingstock, track and technology kept the network operating smoothly by continuing their essential work.

The outstanding efforts of the rail industry in difficult times has been of great benefit to the community and we thank the many people who have gone above and beyond in their roles to meet the challenges of this time.

But as the industry kept on moving, rail suppliers, contractors and freight operators were still feeling the impact of COVID-19.

A recent Australasian Railway Association (ARA) survey of 58 of its members found constraints on international shipments and falling customer spending were the biggest challenges they were experiencing in the face of the pandemic.

Concerned about the financial impact on their business, they worried the pipeline of government projects would slow – and some had already seen evidence of just that.

About half had deferred investments, putting workplace expansions and capital expenditure on hold as they repositioned their businesses to get through these unprecedented times.

But the industry showed its commitment to the long term, with only a relatively small number of respondents taking the tough decision to stand down staff or roll out redundancies.

Despite the challenges, the survey respondents were already planning for recovery and preparing their businesses for the growth that will eventually come.

Our members told us maintaining the current project pipeline was the single most important thing governments could do, followed by funding stimulus projects.

The ARA has acted on this feedback and has been engaging with federal and state governments on potential stimulus projects to support the rail industry.

ARA members also called for improved local content policies and procurement processes as more and more businesses considered a shift to using more local suppliers.

In fact, a staggering three quarters of those looking to make changes to their supply chain said they would seek more suppliers in Australia or their home state.

This is a huge opportunity for the rail industry and for Australian jobs.

The ARA’s tendering framework, released in May, supports the need for a nationally consistent procurement approach.

Making such a change was already considered vitally important before COVID-19, but now, taking that step could help the industry realise its ambition to support even more local content.

Strong local content policies and more uniform national standards would give suppliers the economies of scale they need to build sustainable businesses here in Australia and help the industry boost the resilience of its supply chains.

The success of the National Cabinet has shown that collaboration between the states can work to achieve consistent approaches.

That is exactly what we need right now.

The good news is the industry is ready for that recovery and expect it will come quickly when the time is right.

About a third of survey respondents told us they could be back to normal operations within a month once the impact of COVID-19 was over.

Most others said it would take them less than a year.

So as the many essential workers in the rail industry keep working through this most unusual year, there are signs of optimism for recovery on the other side of this event.

Getting the policy settings right to speed that process will be key to supporting a strong rebound for the benefit of all Australians.

Procurement reform a vital step for economic recovery

ARA CEO Caroline Wilkie makes the case for procurement reform in rollingstock and signalling to assist infrastructure spending to stimulate the economy.

Governments in Australia have indicated that they will continue to fund committed infrastructure projects and have begun to bring projects forward to further stimulate the economy to support job growth and investment due to the impacts of COVID-19.

The Australasian Railway Association (ARA) commends this sensible approach. Infrastructure spending is in the long-term national interest, stimulating multiple parts of the economy, not just construction. Stimulating rail manufacturers and suppliers would be of immense benefit, particularly in regional Australia, where many are located.

However, there are other areas where governments could go further to identify and act on measures that could be introduced to support further cost savings and improve the delivery of new rail projects.

Reforms in the area of tendering and procurement would deliver better, faster, and cheaper projects in the rail sector. While this debate is not new within the infrastructure portfolio, the economic impact of COVID-19 has highlighted the importance of pursuing efficiencies to ensure the rail infrastructure construction sector and rollingstock supply chain remain in a position to support the government’s infrastructure agenda and further stimulate the economy during
these difficult economic times.

Australia’s tendering practices are significantly costlier and more time consuming compared to international benchmarks. The tendering costs in Australia are estimated to be around 1-2 per cent of a project’s total cost, which are double the world benchmark of 0.5 per cent. Increased tender costs are immediately reflected in the project pricing, so reducing the costs of tendering should be important to all parties. High tender costs also increase the risk profile for tenderers and thereby tend to discourage participation.

The ARA proposes that significant benefits could be realised if improvements were made to current Australian industry procurement practices. Substantial improvements can be achieved through more streamlined and consistent tender processes that improve efficiencies for both suppliers and purchasers, from pre- qualification right through to contract award.

These changes would minimise the consumption of resources on redundant and non-productive outcomes, reduce procurement cycle times, further reducing costs and releasing industry capacity for delivery. Further, tendering on the basis of appropriate and more standardised contracting models and risk allocation frameworks for delivery will also reduce tender development and negotiation costs. Creating a consistent and well understood delivery environment will also lead to more successful project delivery outcomes.

The ARA commends the recent procurement-related initiative in NSW, embodied in the NSW government’s Action Plan: A 10-point commitment to the construction sector. The plan reduces the red tape for firms with a proven track record and supports streamlined prequalification schemes for contractors, tiered according to their size and capacity. It reviews existing pre-qualification schemes to ensure they focus on capacity and capability and do not impose unnecessary costs and administrative burdens on suppliers; and minimise the number of project-specific bidders that are required to generate and submit prior to the selection of a preferred tenderer.

The ARA believes that all states should adopt similar principles.

The benefits arising from any process optimisation and standardisation are multiplied when adopted across Australia’s procurement agencies. The ARA supports the convergence and the maximum practical standardisation of procurement practices on a national basis as an urgent and worthwhile objective.

Under the auspices of its Rail Industry Group, the ARA has convened an expert committee of suppliers, consultants, and other interested parties to make specific recommendations for improvement.

The Best Practice Guide to Rolling Stock and Signalling Tendering in the Australian Rail Industry analyses present deficiencies in current tendering frameworks that add unnecessary cost and complexity to already complex tender processes. It makes recommendations for improved practice by procuring agencies in eleven thematic areas.

The ARA has written to Transport and Infrastructure Council ministers with the Guide and is meeting officials to advocate for its implementation.

Procurement – similar to standards, specifications, and training – particularly in regard to rail systems, are areas where Australia has suffered due to its colonial legacy, with differing policy and arrangements in place throughout the six states acting as a deadweight against a national industry.

States, territories, and the federal government have demonstrated their ability to work collaboratively on issues of national significance where there is clear benefit to doing so during this pandemic. This cooperative model should be utilised for other key matters where federation has imposed challenges for industries, where significant savings can be achieved through harmonisation such as rail industry procurement.