by Caroline Wilkie, Chief Executive Officer, Australasian Railway Association (ARA)
The release of the ARA’s Rail Supply Chain Blueprint recently included a strong focus on procurement as one of its key themes.
Procurement challenges emanating from the legacy of the rail industry’s pre-Federation origins are well known and complex to solve.
Each state has their own systems and procedures, making it difficult for organisations to standardise product delivery across multiple jurisdictions.
This results in suppliers creating bespoke solutions across borders, making it harder to achieve economies of scale or innovate and grow. For example, wheel sets have a different set of requirements in each state.
Different components are used in NSW and Queensland, which also run on different systems compared to Victoria.
A national approach to this issue would see the industry working to the same standards and requirements across borders, making the entire process more efficient, from manufacturing to maintenance. The cost savings to suppliers and clients would boost the entire sector and assist with growth.
As the industry prepares for another wave of growth, a more consistent approach is needed to reduce the relatively high costs of tendering in Australia, which can be as much as four times the global benchmark of 0.5 percent of project costs.
Reducing tendering costs would deliver multiple benefits, from increasing competitiveness to expediting project delivery. A parliamentary inquiry is currently underway to examine how to improve procurement practices across government-funded infrastructure and the ARA welcomes its consideration of this important issue.
Standardising terms and conditions
There are several key areas the ARA would like to see highlighted in procurement reform. Harmonising pre qualification processes can save time and money, as a result of reducing duplication.
Presently, businesses are required to demonstrate capacity and capability each time they submit a tender. The ARA proposes, and is currently investigating, a national pre-qualification system to streamline accreditation and certification information across all tenders.
When tendering, contractors would confirm no material changes have occurred since registration, which removes costs and time from the procurement process.
Standardised terms and conditions can also reduce administration during the tender process. Both clients and organisations spend hundreds of hours negotiating special conditions, which detracts from the intent and benefits of standard contracts. Consistent generic terms and conditions would save time across every step of the supply chain.
Risk mitigation and innovation
The nature of infrastructure projects is that inevitably, despite best efforts, issues will arise. The ARA proposes a risk mitigation model for all contracts, so smaller contractors are protected and able to bid for large projects that are not split into bite-sized contracts.
At present, risk is not fairly allocated to those who can appropriately manage risk, based on responsibility, knowledge, or authority. Innovation is a critical part of our future to drive sustainability and technological development in Australia.
As technically advanced as the rail industry is, the ARA’s research has confirmed that innovation, research and development in Australia is lagging our global counterparts. A strong national rail innovation culture could be supported by a national type approval process to mutually recognise type-approved products across jurisdictions, and establish a transparent national register of type-approved products.
The ARA has worked closely with industry to provide clear guidance for achieving these goals in partnership with government.
Improving the procurement process
We released the Best Practice Principles for Rail Construction Procurement and a Best Practice Guide to Rollingstock and Signalling Tendering in 2020 to advocate for these improvements, and have been engaging with government and industry to progress these issues since that time.
As part of this process, we have developed a traffic light report to understand the adoption of these principles and opportunities across Australia.
We continue to consult with state transport and infrastructure agencies on these issues, and have established a National Procurement Working Group to work collaboratively to progress these initiatives.
Developing a sustainable rail construction industry is critical to delivering the rail infrastructure pipeline and boosting our economy. The industry needs greater national coordination to drive innovation, maximise investment and reduce duplication so we can streamline project flows, from planning to construction.
While these issues are complex, they can be solved. Importantly, improving the procurement process benefits all of us, allowing industry to innovate, grow and prosper, driving efficiencies for government agencies and clients, and delivering sustainable infrastructure that meets community needs – now and for the long term.