Australia’s procurement of trains and rolling stock could significantly benefit from adopting a national rather than a state approach to local content in contracts, a report by the Australasian Railway Association (ARA) has found.
The Towards a National Local Content Policy report found state governments often used local content policies (LCPs), which require a portion of contracts to be sourced or manufactured within their state, when sourcing public transport vehicles and their components.
But by doing so they were missing out on the wider benefits that a national approach could offer, such as greater economies of scale.
“Accessing a larger national market can create more opportunities, increase competition, and address the boom-bust cycle of rail manufacturing by providing a smoother project pipeline. This can facilitate investment, lower costs and improve quality,” said the report.
However, to realise the full benefits of a national LCP states would need to adopt a more long term and strategic perspective.
This would lead to LCPs becoming more transparent and simpler.
Even so, achieving full policy harmonisation would be difficult because of the wide differences between state LCPs and the physical differences between rail networks and political realities of state-based investment.
The report said the political will to adopt a fully national approach in relation to rail procurement and LCPs “may be limited”, given states were likely to be reluctant to relinquish their current procurement policies.
Therefore any move towards a national approach would need to stress how state economies would benefit from the change.
A series of other steps could help harmonise the procurement approach:
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Develop a consistent definition of local content
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Create alignment of regulatory requirements across states
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Identify opportunities to integrate state requirements
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Understand federal government involvement
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Review tender evaluation mechanisms
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Review auditing, and compliance requirements
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Generate greater market awareness of suppliers’ capabilities and requirements.
Caroline Wilkie, ARA chief executive officer, said: “Different local content policies between states can increase costs, inhibit investment and create inefficiencies throughout the procurement process.
“A more holistic, national approach to local content policies would help rail businesses achieve economies of scale, reduce costs, improve quality and create greater competition in the market.”
Wilkie said a nationally-consistent approach would lead to better outcomes for both industry and government, maximising the return on investment for critical rail infrastructure.
Australia’s largest four jurisdictions are currently investing almost A$14bn in new rolling stock projects, all with different LCPs.
Even small moves to harmonise procurement policies could generate cost savings, the report said.
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