Disjointed rail procurement cost govts $1.85bn: Report

Joseph Brookes
Senior Reporter

Inconsistent rail procurement policies cost Australian governments nearly $2 billion over the last decade as states upped local content but took varying approaches, a new report by the rail sector’s peak body has found.

The report by the Australasian Rail Association looks back at the ignored recommendations is made in 2013 to harmonise policies and quantifies the cost it said was ultimately borne by the jurisdictions procuring the stock.

The findings, which includes supplier warnings that operating in different states is like operating in different countries, are being used by the Albanese government to back its move to a national approach to rail procurement.

However, the federal government is not yet endorsing the report’s call for a national approach to local content policies.

Assistant Minister for Manufacturing Tim Ayres is leading the govt’s election commitment for a national approach to rail procurement

Assistant Minister for Manufacturing Tim Ayres will launch the report on Friday at a rail manufacturer in Western Sydney and use it as evidence for the benefits to the local rail industry of a more nationally coordinated approach to rail procurement.

“We know the different approaches by the states and territories to rail procurement and manufacturing leads to capabilities being duplicated,” Assistant Minister Ayres said ahead of today’s launch.

“This pushes up costs, exacerbates skills shortages, and constrains investment.”

The Australasian Rail Association report, completed by BIS Oxford Economics, examined how the proposed procurement policies would have impacted 12 major rolling stock acquisitions over the last decade.

The 12 projects deliver about 3000 cars to governments in Queensland, New South Wales, Victoria and Western Australia at a total cost of nearly $30 billion, according to the report.

The industry group found savings of $1.85 billion could have been had across the country with better scale, reduced complexity and major component harmonisation for heavy rail passenger rolling stock policies.

Most of the savings ($811 million) would have come from reduced complexity in planning and design and from increased scale ($717 million), while major componentry harmonisation would have saved another $318 million, the report said.

The report concludes that while local content policies have sought to protect local manufacturing jobs they have also acted as a barrier for suppliers to access each state government’s procurements. It calls for a national local content policy.

However, this national approach to local content is not publicly supported by the Albanese government.

Mr Ayres has carriage of the Albanese government’s delivery of a National Rail Manufacturing Plan, which does include National Rail Procurement and Manufacturing Strategy, a new Rail Industry Innovation Council and a Rail Supplier Advocate to help manufacturers identify procurement and export opportunities.

In government, Mr Ayres has sharpened is criticism of New South Wales, which has relied heavily on overseas procurement of rolling stock while other state governments increased local content mandates.

The New South Wales Liberal government has justified the use of international train manufacturers as a cheaper alternative, claiming local cost like materials, labour and energy add a 25 per cent premium to building trains onshore.

But McKell Institute analysis of six major transport procurement decisions made by the New South Wales government found for four of them the alleged higher costs would have been offset by the broader economic benefits of awarding the major tenders to domestic firms.

Mr Ayres said the New South Wales government’s reliance on overseas suppliers has cost jobs in the state and led to worse outcomes.

“The NSW Liberals’ lack of confidence in Australian workers and Australian capability has gnawed away at our capacity to create the rolling stock of the future,” he said.

“It’s destroyed regional rail manufacturing and killed good jobs in the regions and outer suburbs.”

Ahead of this month’s New South Wales election, the state Labor party has committed to match the Victorian Andrews government with a target of 50 per cent minimum local content for future rolling stock contracts.

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