Auckland Transport have announced that they’ve postponed their tender for running train services in Auckland. Back in April they said they shortlisted Kiwirail, Serco and Transdev to run services from the middle of next year. I had assumed they must have been getting close to picking a winner.

Coming to the western line soon

Here’s what they’ve said as to why it is now being postponed

The procurement of a new contract for Auckland’s commuter rail operations is being placed on hold.

In April, Auckland Transport short-listed three companies, Transdev Auckland, KiwiRail and Serco NZ, to tender to operate rail passenger services from July 2016.

General Manager AT Metro Mark Lambert says the decision to postpone the release of the request for tender is being made due to a number of contributing factors.

“Since the decision to tender for a new contract, the Auckland Transport Alignment Project (ATAP) between Auckland Council and the Government has commenced that will consider strategic transport opportunities, which is likely to include rail services and infrastructure. The significant City Rail Link (CRL) infrastructure project will also commence enabling works in the next few months bringing the delivery of this project closer. With these key strategic considerations in mind it would be prudent to wait for any outputs that may impact the scope of future rail service delivery before we go to tender”.

Another key factor relates to the recent transition to full electric train operations (other than between Papakura and Pukekohe) from 20 July and achieving a stable period of high rail punctuality and reliability performance prior to release of the request for tender.

Thinking about these and starting with the last one, as we know train performance has improved considerably since moving to a fully electric fleet so obviously AT don’t feel there as urgent a need to replace Transdev. Given their contract was due to expire in June next year I assume they’ve now extended that again – after they had a three year extension in 2013 to keep some stability while rolling out the electric trains.

The more interesting factor is the comment about ATAP likely looking at strategic opportunities including rail services and infrastructure. I haven’t heard anything to back this up but my guess to the thinking is that they will tie the running of trains into a PPP along with the construction of the CRL (and perhaps other infrastructure). In other words a company or consortium of companies would build and operate CRL plus all the trains through it. That would see the cost of the project shift from CAPEX to OPEX so rail services cost more but include the cost of building new infrastructure. Given this is the approach being taken for some of the big RoNS projects it’s a setup that might also be more appealing for the government.

My understanding is that the CRL is explicitly outside the terms of reference for ATAP, given this does it perhaps suggest we’ll hear more about the project soon?

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  1. It would make sense to bundle certain services. There’s a large program of work excluding the CRL that needs completion. But operating trains and building tunnels and crossings have different sets of needs, and pulling them all together seems like a really good way to lose accountability and control. Particularly if this is a long term (5+ year) contract.

    1. It’s actually quite common for example LRT on the Gold Coast was a similar deal. Consortium built and operate tracks and the vehicles in return for the right to operate then for 15 years for a set fee.

      1. There’s a huge difference between Auckland and your Gold Coast example. In that instance the entire network is part of the deal. In Auckland, the CRL is only a tiny portion of the network. The majority of it already has an owner/maintainer – KiwiRail. Unless you think perhaps responsibility for the Auckland network (Swanson-Pukekohe), in terms of ownership/maintenance etc, may shift to the CRL consortium, but I would be surprised if the government would go for partial break up of the network. If anything, they shold be including the CRL in the KiwiRail network.

        Is there any indication of how long this postponement is for? A few months, or a decade?

        1. Hard to see KR adding value to AKL’s growing Metro demands; from the outside they appear to be pretty much a freight company burdened by infrastructure they can’t afford to maintain, let alone expand; their attention is elsewhere. It’s not hard to see value in this and other reorganisations of NZ’s rail assets and management making sense. But there is a lot at stake and at risk. We’ed want to tread carefully here.

        2. Geoff I think that the council/AT will push for the ownership or at least the management of the network to be part of discussion and no reason the government couldn’t force the changes on Kiwirail. I know in the past AT have talked about wanting to take control of it.

          No indication as to how long the postponement is but I understand Transdev have had their contract extended by a year

        3. Matt, in 2001 Tranz Rail and the ARC negotiated a deal whereby ARC would buy the Auckland network (Helensville-Papakura IIRC) for $112m. The government intervened and purchased it instead, for $81m. Two years later the same government purchased the rest of the national network, and reintegrated the two networks. Having more than one network causes several significant issues, safety being one.

          I’m not convinced that a “build and operate” contract can be applied to pre-existing infrastructure, especially when it’s core national infrastructure with a purpose greater than just local needs, much like the existing motorway network. Further, IMO it would be a bad idea to hand responsibility for the passage of freight in and out of Auckland over to another party. But then there’s no indication from AT’s press release that such a thing is being considered.

        4. Geoff I’m not saying it will happen but I’d be surprised if it wasn’t discussed. I think there could be some advantages to AT or NZTA controlling/operating the network in Auckland and having the ability to prioritise funding as appropriate compared to cash strapped Kiwirail but also some issues too. KR could have guaranteed number and time slots within that to prevent freight from being shut out. I’ve got an open mind about it all and no predetermined position.

        5. Matt, Auckland Metro funding is already independent of KiwiRail’s core-business funding. I don’t think government would spend a different amount according to who is charged with delivering on the investment, be it KiwiRail, NZTA or anyone else.

        6. There are a number of separate but interrelated issues at stake here. These include:

          1. The current absence of any funding source for rail extensions and upgrades
          2. The ‘lumpy’ nature of rail capex investment costs, in contrast to lifetime of the benefits [ie preference to smooth these funding demands over time]
          3. The ongoing need for PT operating subsidy with economic benefit but real financial cost
          4. Competing demands on the network of both passenger and freight growth
          5. The clear inter-realtionship of capex and opex structures and decisions

          It is clearly good that all these issues, and more, are being considered from a high altitude together as solutions to any one is likely to impact on others. If all bets are off; that’s a good thing.

    2. There is value to be had there too. If the same outfit has to build the tunnel and run the trains, then they need to build the tunnel properly to ensure that the trains can run well, and in an efficient and cost effective manner.

      Often if you split the two you get a construction that cuts corners or makes compromises that saves capex, only to cost more or do less with opex. And that isn’t necessarily penny pinching. One company might know how to make holes and pour concrete, but wouldn’t have a clue how that could impact on running trains through it. Or you have a construction that works great for the first five or ten years, then needs a massive amount of maintenence and renewals. If the same company has to pay for that maintenance then they have an incentive to make things efficient up front.

  2. Certainly bundling the operation of the trains with the supply of extra rolling stock makes some sense. The need for extra rolling stock depends largely on the success of the operator in attracting passengers, and could be as high as 50 extra units before the CRL is in commission. That’s about half a billion of capex which would strain AT politically, even though the economics of boosting passenger numbers are overwhelming.

  3. For the life of me, I can’t understand why they don’t just bring it all in-house and operate it directly themselves. It’s such a small, relatively uncomplicated network.

      1. Yeah right.

        Once they’ve siphoned off their profits overseas it becomes better to keep the services in-house. AT should bring this in-house.

  4. Also I suspect AT might have been hoping for a few more “big name” international operators to come through to the short list…..

    Currently they have….

    Transdev (the incumbent, that I suspect AT probably could be happy to see the back of….
    Kiwirail , the local rail SOE that is always cash strapped…..
    and Serco, whose name is pretty much mud…

    Not exactly a great choice if you are aspiring to have a world class rail operation…..

    1. Well they run Melbourne’s network and I can assure you the trains aren’t on time 99.9% of the time. Hong Kong just has excellent infrastructure

  5. There’s likely to be some value in either 1) having the services operated in-house or 2) via a PPP between AT and whoever wins contract for CRL.

    Ensuring those who develop PT infrastructure also have skin in the PT services game is a great way to align short and long term incentives.

  6. “Since the decision to tender for a new contract, the Auckland Transport Alignment Project (ATAP) between Auckland Council and the Government has commenced that will consider strategic transport opportunities, which is likely to include rail services and infrastructure.”

    This is an incomplete sentence which means nothing, I checked the original statement and the error exists there too. If the authors of public statements are unable to create coherence, one realizes that intellectual confusion and disorder is the order of the day in our public bodies.

    1. “the Auckland Transport Alignment Project (ATAP) between Auckland Council and the Government has commenced”

      This on it’s own is a complete sentence the rest is just clauses around this.

  7. Given our current government’s view of public rail transport over the last seven years I am very sceptical that this new ‘alignment’ isn’t simply a way for the government to have more control over rail projects in Auckland and a means for them to make sure that their ‘no’ to projects is what happens.

    1. Maybe, but increasingly I detect a new, and real, interest from government in this area. Don’t underestimate just how huge the ridership response by Aucklanders to the recent investment has been; this is proving extremely hard for even the most sceptical observer to ignore. Including by Cabinet Ministers, certainly by the more open minded ones, anyway….

      1. On the ridership response, I’d like AT/Transdev to keep working to keep and increase their patronage, Patrick. I use the trains most days of the week and it still seems to take a good half hour to get from Britomart to Avondale. Same journey time as the diesels. This might be a reasonable period of time, I don’t know, but I find it a bit frustrating with the TM structure. Keep working to improve your customer service Transdev.

        1. Yep. I’m just saying don’t lose that increased ridership through levels of service, Transdev, otherwise we’ll lose the argument with government.

        2. Maybe you are right, but current evidence seems to indicate that their current level of sincerity is, about as “unacceptably flabby” right now as the dwell times Jeff mentions.

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