AusRAIL, Market Sectors

The sustainability of rail contracting in Australia

The heads of Australian rail’s major construction companies that participated in the Rail Constructors Panel yesterday at AusRAIL 2012 were unanimous in agreeing that one of the biggest constraints currently facing the sector and its future sustainability, is the high cost of tendering.

Tendering costs in Australia, which panellists put at 1-2% of a project’s total cost, are high compared with world benchmarks of 0.5%.

“The cost of tendering is extremely prohibitive and is having an effect on all of our bottom lines and is affecting our sustainability as an industry as a whole,” AbiGroup general manager, rail, Greg Rush said.

“Time is also a cost,” Rush added, “The procurement period in Australia is far, far too long.”

However, according to Thiess head of rail business, Glenn McIlroy, small changes in this area are occurring, with some of the industry’s “more mature clients” now paying for some of the tender fees which is resulting in clients’ attracting “higher calibre” contractors.

The unpredictable and cyclical nature of investment was also named by panellists as a major prohibitive factor impacting the sector’s sustainability.

“The big, glory projects are attractive to governments to announce but a focus on maintaining the existing network in a steady state is often more challenging for them,” McConnell Dowell operations manager rail, Mike Sutcliffe, said.

The need for greater surety on behalf of all levels of governments in Australia around the pipeline of rail projects and a nationally-agreed procurement method was also named by the panellists as necessary for the future sustainability of the sector.

The current uncertainty around rail’s pipeline of projects is also impacting the sector’s ability to retain, train and invest in its workforce. Boom-bust project cycles are affecting contractors’ ability to provide jobs for their workforce during the &quotspaces between major projects&quot.

“The pipeline is such a boom-bust thing,” McIlory said. “Many contractors put people off as no big jobs are coming along.”

The alternative that is needed, according to John Holland Rail general manager, Richard Stewart, is a base load of work to keep contractors healthy – and their workforce – in between boom-bust cycles.

The age-old spectre of rail’s state-based legacy was indeed apparent in the discussion, with Sutcliffe pointing out that the sector is faced with a lot of bureaucracy that it has to wade through in terms of multiple levels of government.

“I don’t know the answer to that and I suspect that if anyone did, they would be an extremely popular person in the industry,” he said.

The panellist’s convenor, Australasian Railway Association CEO, Bryan Nye, suggested that the Federal Government needed to take on a greater role – potentially via Infrastructure Australia or the Council of Australian Governments (COAG) – in coordinating a consistent, national demand for projects.

On the upside, panellists spoke of an increase and ‘definite change’ in the sector’s ability to attract young graduates and importantly, that graduates were increasingly viewing rail as an ‘industry of choice.’

Nye pointed out that this was compared with a couple of years ago when sewerage engineering was rated by engineers as a better career than rail.

Downer Australia executive general manager rail, Paul Kyte, attributed this to the volume of rail projects occurring now and into the future in Australia as well as the growing prospect of high-speed rail.

“Rail is also an extremely sustainable and safety-conscious industry and young people really value this,” McIllroy added.

The number of female engineers in the sector is also on the increase.
“16% of the workforce are females and gender diversity programs are at the forefront of most companies’ thinking,” Rush said.

In addition, the sector is seeing a greater number of females taking up project management roles, Leighton Contractors general manager major projects, Rob Boulger added.

Moving forward, Boulger believes that greater collaboration amongst contractors is definitely needed.

“We all fight hard to get these projects and by working in a more collaborative way and going back to some of the old alliance ways of working and having two clients in a single procurement process will give us greater value for money,” he said.

“Contractors need a unified voice in selling rail as a serious contender to road,” Laing O’Rourke business development manager Mark Harris added.

The future sustainability of the industry, according to Stewart, is “all about balance.”

“We need to work as an industry to get to the stage where we have a contract form that meets the client’s needs – governments or the private sector – then balance that off with the cost of construction and if we can get that right then we can take that forward and lobby for it,” he said.

For an extensive Q&ampA with panellists from AusRAIL 2012’s Rail Constructor’s Panel see the AusRAIL print edition of Rail Express – free to all delegates at the conference and subscribers.


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