Rail Failings Require First-Class Response

Whilst it is important that government gets value for money under the franchise agreement for the maintenance and renewal of railway assets, proper maintenance of railway assets is critical for the delivery of a safe and reliable service that must be carried out as efficiently as possible in line with best practice. Such an outcome should be expected by a responsible government but has not been realised for many years and was the subject of a Victorian Auditor General (VAGO) report in February 2023.     

Concerns about this state of affairs were raised by Dr John Stone (Melbourne University) in his report in 2016 when the franchise agreement was being renewed. In his report Stone asked:

Who is driving the capital works and major maintenance program?

• Does government have a strategic vision for asset renewal and maintenance and what are the indicators of progress?
• Does PTV have strong tendering and procurement skills, necessary to ensure Government aims and objectives are realised in a way that provides value for money, particularly as crucial skills were leaking to the private sector or being downsized in the Department which was likely to compromise its ability to design, implement and administer the franchise agreement?
• To what extent is Metro Trains (MTM) steering maintenance and renewal programs and taking control of capital assets?
• Which renewals are done under the infrastructure lease and which are under projects agreement and who drives decisions about “enhancement” and cross subsidisation?  

More specific concerns were raised about higher renumeration rates provided for “project” (enhancement) works compared to essential maintenance and renewal works and the opportunity this provided for the franchisee to maximise financial returns (for shareholders) at the expense of essential maintenance.

Stone also questioned who is likely to bid against MTM in 2023 and whether this may end up becoming a private monopoly that exploits the government and Victorians as a whole.  He listed five ways to protect the public interest:

• Strong and public negotiation of rollover
• Separate and consistent reporting of expenditure
• Shows maintenance and renewal linked to long term outcomes
• Strengthen public sector skills.

We would add a further concern about the performance targets set by government for the franchisee which we believe are far too low and well short of world best practice. This has implications for government as well ie to provide the environment in which higher performance standards can be achieved by the franchisee.

Seven years later, railway maintenance has become the subject of a Victorian Auditor General (VAGO) report which was tabled in February 2023. Key findings from the report for the franchise period 2017-2022 were as follows:

• The Department has not assessed whether Metro is optimising asset costs and if the current maintenance and renewal approach will sustain asset performance in the long term
• The Department does not have a long term strategy for its infrastructure and technology assets or
•  Have an effective way to measure asset performance and asses Metro’s work.

Further, the Department needs this information to ensure the current agreement and any future contracts deliver value for money. VAGO provided 10 recommendations including

• 5 about how assessing how railway assets perform
• 3 about better guiding how Metro plans maintenance and renewal work
• 2 about overseeing the works Metro delivers

The Department has agreed to implement eight of these by 2026 at the latest, but serious questions remain. VAGO has echoed concerns voiced by Stone seven years earlier, including skills and expertise to establish reporting/recording data systems etc to measure asset performance and assess Metro’s work.

All of these concerns are of fundamental importance and must be addressed, including the need to raise benchmark standards, but the focus must be broadened. A maintenance plan must be part of an integrated transport plan for which railways are only part. It must also be updated based on future scenarios for which business as usual projections will no longer be appropriate, reflecting  changes in travel and transport needs in a rapidly changing world. This new world will demand a total rethink of the transport paradigm and infrastructure to support it as discussed at our forums over the last three years, a world that will demand

• rapid improvement in efficiency and reduction in greenhouse emissions
• increased energy and material constraints of all kinds
• a more frugal and constrained approach by government at all levels as economic and financial pressures increase and the ability of governments to fund essential services and capital and maintenance works becomes increasingly constrained.

The most likely scenario will not be one of endless growth but short term growth followed by decline, including the decline in demand for services of all kinds including transport with implications for supporting infrastructure and the embodied energy and emissions to provide, maintain and renew it. This will drive radical changes in transport and travel patterns accompanied by mode shifts in favour of more energy efficient and lower emission modes. It will demand the realisation of efficiency potential: no more empty buses, trams and trains – they must be well patronised to justify emission reduction targets at a time when the capacity of government to finance these services becomes increasingly stressed.

Under this scenario the economic life of all asset classes as well as standards to maintain them must be revised to ensure efficiency improvements and emission reductions are realised. Under this scenario it is inevitable that much of the existing transport infrastructure, including freeways will be downsized or become stranded assets and redeveloped for other purposes.

Infrastructure maintenance and renewal standards must also be reviewed to reflect changing environmental impacts such as extreme weather, rising sea levels etc and improve service delivery targets which are already well below those expected from world best practice.

In summary the VAGO report highlights significant shortcomings in the way railway infrastructure is carried out under the franchise agreement but terms of reference are relatively narrow

• confined to infrastructure that supports railway operations rather than the transport system as a whole
• it is silent on issues raised by Stone, including the cost of the franchise model, whether it is suitable and will ever deliver optimal outcomes for Victorians
• its recommendations are based on a business as usual scenario for the future, a scenario which is totally unrealistic. Whilst principles outlined in the report remain valid they must be modified to reflect a rapidly changing environment which will demand a new transport paradigm.   

It is argued that all of the above are important and require more detailed investigation. The extent to which governments and policy makers are prepared to respond is not clear, but sooner or later economic and environmental pressures will force a change in thinking. How long this takes is an open question but it may happen sooner than most policy makers and their political masters think.