Committee view and
recommendations
5.1
The committee's inquiry has highlighted the contradiction that has
emerged in relation to Australia's rail industry. Evidence to the committee has
demonstrated the continuing rise in, and growing demand for, passenger,
freight, tram and light rail in Australia. Yet despite this resurgence,
including the development and expansion of Australia's rail networks, the
inquiry has highlighted a number of challenges and threats to the Australian
rail industry. These challenges have led to a decline in locally available work
as well as a decline in local companies, local investment, local jobs and apprenticeships.
5.2
The committee is of the view that rail has a central role to play in
meeting Australia's transport infrastructure challenge. Traditionally, state
government involvement in the rail industry has centred primarily on
metropolitan rail. The committee recognises that state governments, through
their metropolitan plans, can ensure that investments in rail infrastructure
keep pace with growing cities. State investment in transport, and all state
transport plans should include rail. Plans should also be drafted to take
advantage of the full range of benefits rail has to offer, including reduced
congestion, social inclusion and a reduction in road accidents and pollution.
5.3
The committee acknowledges the views of stakeholders, and agrees that if
Australia's rail network and its manufacturing sector are to modernise,
innovate and take advantage of technological advances, a number of the
challenges identified in this report will need to be met head-on. The committee
is also of the view that the emergence of a modern, technologically advanced,
and competitive rail manufacturing industry will depend to a significant degree
on the Commonwealth, state and territory governments working together with
industry to develop and implement a national strategy.
5.4
Achieving the necessary investment will require a combination of public,
private and public/private partnership funding. More importantly, however,
investment needs to be made in a coordinated and planned way. It should also
take into consideration the full costs of various modes of transport, as well
as longer term transportation goals.
5.5
As governments across the country plan to spend over $46 billion on rail
public transport projects within a decade, the Australian rail industry stands
at a crossroad. For such investment to achieve maximum benefit for Australia
and Australians, the committee cannot overemphasise the importance of embedding
a local content component in government procurement contracts. As the committee
has already noted, economies of scale and procurement strategies which set
standards in relation to local content and build, have the potential to provide
benefits to the industry and the Australian population over the long term.
A National Rail Manufacturing
Industry Plan
5.6
The committee acknowledges the work the ARA has done in developing their
proposal for a National Rail Industry Plan. The areas of priority identified by
the plan cover a wide range of complex issues and include: a greater
recognition of the importance of rail for Australia's infrastructure
development; harmonization of standards and maximising economies of scale;
growing the capabilities of individuals and companies; maximising opportunities
for industry and fostering innovation, research and development.
5.7
The ARA proposal for a National Rail Industry Plan, provides a starting
point to focus and coordinate the efforts of the rail industry to maximise
the benefits of future Commonwealth and state government investment. These
benefits include economic growth, increased efficiencies and increased
productivity. The plan will also deliver a range of social benefits including:
regional development, workforce participation, training and development, and
transport infrastructure. The committee congratulates the ARA on its efforts –
and notes the extensive consultation undertaken with a range of stakeholders,
including Commonwealth and state governments and industry – to produce a truly
national plan.
5.8
The committee therefore recommends that the Australian Government
develop a National Rail Manufacturing Industry Plan through the Department of
Industry.
5.9
The committee also recommends that Commonwealth, state and territory
governments provide adequate funding and resourcing to allow a National Rail
Manufacturing Industry Plan to be implemented efficiently and effectively for
the benefit of Australia's rail industry and Australian manufacturing as a whole.
Recommendation 1
5.10
The committee recommends that the Australian Government establish
a National Rail Manufacturing Industry Plan to maximise the benefits of the
$46 billion in investment expected over the next decade.
Recommendation 2
5.11
The committee recommends that a National Rail Manufacturing
Industry Plan develop a mechanism for the Commonwealth to smooth out the peaks
and troughs in market demand and create more certainty and predictability for
manufacturers servicing the rail industry.
Recommendation 3
5.12
The committee recommends that, following the Australian
Government's establishment of a National Rail Manufacturing Industry Plan, state
and territory governments endorse the plan and agree on methods to adequately
support, resource and progress the plan.
Towards a new procurement culture:
National Rail Procurement Strategy
5.13
The committee recognises the need for a change in procurement culture.
The industry needs to move away from a culture based on 'cheapest upfront
price', to one which takes into account the wider implications and benefits of
such procurement decisions. These include workforce improvement, consistency of
employment, benefits to regional communities, as well as state and national
economies, while also recognising whole-of-life costs.
5.14
Noting that Australia's manufacturing standards are frequently higher
than those of their competitors, the committee is confident that a shift in
procurement culture would ultimately benefit the Australian economy and
Australian consumers. Australian trains, made by Australians, to meet
Australian conditions.
5.15
In addition to establishing a National Rail Manufacturing Industry Plan,
the committee recommends the development of a National Rail Procurement
Strategy. Noting the success of the Victorian model, the committee recommends
that a national policy in relation to procurement draw on this initiative.
Requirements such as: a 50 per cent local content requirement for building
rolling stock and the use of local apprentices, trainees and engineering cadets
for at least ten per cent of the total labour hours are central to this policy
and should be replicated nation-wide. In addition to the inclusion of a minimum
50 per cent local manufacturing requirement, the Victorian Government's
procurement contracts encourage the uptake of new technologies and the adoption
of best practice environmental and safety standards.
5.16
The committee is of the view that the introduction of a National Rail
Manufacturing Industry Plan, supported by a National Rail Procurement Strategy
will result in increased productivity and innovation and greater uptake of
technology, which will in turn provide greater opportunities for the export of
Australian manufactured equipment, knowledge and expertise to the Asia-Pacific region.
5.17
A National Rail Manufacturing Industry Plan and a National Rail
Procurement Strategy will help overcome the existing lack of a strong pipeline
of investment in rolling stock and a lack of continuity in rail manufacturing
work. These absences have led to a disincentive for business to invest in research
and development. Any National Rail Procurement Strategy must have a specific
focus on maximising investment in local research and development as well as
industry engagement with universities and research agencies.
Recommendation 4
5.18
The committee recommends the development of a National Rail Procurement
Strategy by the Commonwealth in coordination with all states and territories.
As signatories to the strategy, states and territories should include
procurement contract measures – consistent
with international trade obligations – which allow for the development of
industrial capabilities for small and medium sized enterprises (SMEs). As part
of these contract measures, consideration should also be given to:
-
maximising local content for the manufacture of passenger,
freight and light rail rolling stock in procurement;
-
the relevant financial and non-financial costs and benefits of
each project including, but not limited to:
-
the quality of goods and services
-
fitness for purpose of the proposal
-
the potential supplier's relevant experience and performance
history
-
flexibility of the proposal (including innovation and
adaptability over the lifecycle of the procurement)
-
environmental sustainability of the proposed goods and services
(such as energy efficiency and environmental impact)
-
whole of life costs
-
requirements for contractors to undertake training strategies to
educate and engage local apprentices, trainees and engineering cadets;
-
commitments to local industry development and supply chain
engagement; and
- harmonisation of safety standards.
Recommendation 5
5.19
The committee recommends that a National Rail Procurement
Strategy be used to work with all states and territories to maximise investment
in local research and development, as well as engagement with universities and
research agencies.
A Rail Advocate
5.20
The committee notes that the meeting of the Transport and Infrastructure
Council (TIC), held in Brisbane on Friday, 19 May 2017, included a
"strategic discussion regarding rail infrastructure and operations, recent
pressures and developments and the future of rail investment in Australia".
The committee also notes that a number of rail industry representatives and
stakeholders attended the meeting as observers.
5.21
The committee is of the view that this type of advocacy should continue
on a more formal basis. The committee therefore recommends the establishment of
a Commonwealth coordinating body to drive and coordinate a National Rail
Manufacturing Industry Plan and a National Rail Procurement Strategy. The
committee also recommends that a Rail Advocate be appointed to support the rail
industry in dealings with Commonwealth, state and territory governments and
industry bodies.
5.22
The committee is also of the view that there needs to be further engagement
undertaken with the rail manufacturing supply chains as a more even demand
curve is produced. The Commonwealth coordinating body should be given direct
terms of reference to work with supply chains in expanding and developing
industry capability networks.
Recommendation 6
5.23
The committee recommends the establishment of a Commonwealth
coordinating body – to be headed by a tripartite council – to drive and
coordinate a National Rail Manufacturing Industry Plan, a National Rail
Procurement Strategy and industry
consultation.
Recommendation 7
5.24
The committee recommends the re-establishment of a Rail Supplier
Advocate to promote the rail industry in dealing with Commonwealth, state and
territory governments and industry bodies.
Recommendation 8
5.25
The committee recommends that a Commonwealth coordinating body be
given direct terms of reference to work directly with the rail manufacturing
supply chain in developing and expanding industry capability networks.
Rail Industry Skills Centre
5.26
In addition to focused investment in local manufacturing, efforts should
also be directed to skills development, training and innovation. To this end,
the committee notes the inclusion of 'technology transfer' (including that of
innovation) as part of the selection criteria under the revised Victorian VIPP
Strategic Projects policy. This is an important initiative, and one which
strongly encourages the inclusion of innovation as a criterion in the
consideration of local content tenders.
5.27
The government plays an important role in facilitating investment
through its procurement policy decisions. The local rolling stock and rail
manufacturing industry makes a significant contribution to the Australian
economy, and has the potential to contribute more if the right policies are in
place. The committee strongly supports the development of a coherent skills and
training plan, as a means of attracting the best talent, and increasing
productivity while maximising high-quality, sustainable rail manufacturing
jobs. By upskilling workers and providing an apprenticeship scheme, the training
plan will complement a National Rail Manufacturing Industry Plan and a National
Rail Procurement Strategy.
5.28
To accompany these training initiatives, the committee recommends that
training and skills development be embedded in tender and procurement
processes, to invigorate apprenticeship schemes, provide opportunities to
people from disadvantaged backgrounds, and provide appropriate support to
upskill the rail workforce.
5.29
The continuity of critical skills development and training in the rail
sector are fundamental to Australia's transport future. Estimates suggest that
Australia will need 11,000 railcars in the next 30 years, given projected
patronage growth.[1]
It is critical, therefore, that Australia maintain a local capacity to maintain
rail infrastructure – including rolling stock – while also investing in local
manufacturing. This second aspect is critical, as recognised by Mr Crane,
Managing Director of Lovells Springs:
Whilst maintenance of rolling stock over its life cycle is an
important function that will always be needed, only the design and construction
of complex systems like locomotive and passenger trains results in the
accumulation of real Intellectual Property and expertise in this country.[2]
Recommendation 9
5.30
The committee recommends that the Australian Government work with state
and territory governments, and the rail industry, to develop Rail Industry
Skills Centres at local TAFEs and colleges.
Senator Glenn Sterle
Chair
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