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Gathering information on Regional Rail Fleet project

The purpose of the report is to gather relevant information on the Regional Rail Fleet project to identify and manage risk factors that may affect the proposed new rail system that the NSW government plans to install from Perth to other regional centers in Western Australia. The more specific purposes of the report are as follows: to identify possible risk responses/treatment elements that are identifiable and appropriate; to create a risk management plan that highlights the summary of positive/negative risks gathered, pertinent risks and methods of managing these risks; to give recommendations concerning the rail project including suitable justifications for the next steps in the project realisation.
The main methodology used to gather the information was desk research as all the information relevant to the project was researched through the internet. A good number of primary and secondary sources consisting of over 20 reports and websites were gathered on both national and international scope. The sources were consulted and analyzed to write the report. The full list of references is present at the end of the report.
The major methodological challenge was the difficulty in identifying the most objective criterion to create a distinction between overall business data for those that represent the suburban and regional segments of railways. Most sources did not single out passenger railway businesses where some reports even bore no distinction between freight and passenger data.
Findings and conclusions

1 Introduction

The New South Wales (NSW) government decided to replace the old NSW regional rail fleet that comprises of XPLORER, XPT and Endeavour trains where some of the trains in the fleet have been in operation for up to 36 years. The reason for the replacement of the aging train system is because the new system presents several benefits. These benefits include improved safety, accessibility, and comfort for clients who travel from Sydney to other many regional areas in New South Wales and also to major cities like Melbourne, Canberra, and Brisbane. On a more specific perspective, the key benefits of the new rail system include the provision of functional and comfortable carriage designs that offer spacious buffet cars, reversible seats and sufficient overhead space for storage of luggage. Secondly, the new rail system will provide wider doors, accessible help points, accessible toilets in each carriage and priority seating. Third, the new trains will feature selective door opening for the stations built along short stages and modern CCTV cameras. Finally, the new carriages will contain device charging ports, laptop tray tables and spacious pockets on the seats.
Additionally, the NSW government will also commission the installation of a new train maintenance facility in Dubbo with a broader aim of stimulating economic growth and assist in the creation of sustainable skills and job opportunities in the area. After the bidding process, the NSW government awarded the tender of the Regional Rail Fleet Project to Momentum Trains, an international consortium made up of several companies. The all-inclusive contract covered project financing, building, designing and, maintenance of the fresh regional rail fleet. The contract covered the same areas mentioned for the purpose-built maintenance facility in Dubbo.

1.1 Regional Rail Fleet Implementation

The tender was awarded to Momentum Trains after their proposal won over other companies that took part in the tendering process on December 2017. The other companies that participated in the tendering process included Bombardier consortium and Regional Futures. Momentum Trains consists of CIMIC GROUP, UGL, Pacific Partnership, and CPB contractors. CIMIC Group is involved in leading project development while Pacific partnership provides equity financing and leadership. CPB contractors play a role of commissioning, designing and construction of Dubbo facility. The role of UGL on the hand is to maintain both the Dubbo facility and the 117 carriages fleet. Finally, CAF will be tasked with manufacturing rail carriages while DIF, an independent manager of funds will contribute the financial equity with Pacific partnership.
The process of implementation of the new rail fleet will start after the planning process is complete. The planning process is done by Transport for NSW where the first step was the development of the project’s concept design options which included consideration and identification of environmental risks, constraints, and opportunities. The second step of the planning process is where Transport for NSW formulates a Review of Environmental Factors (REF) for the purpose of public display and to encourage submissions. The third step of the process is where Transport for NSW responds after assessing feedback by preparing a report that highlights strategies to combat the environmental impacts of the project. The fourth step involves Transport for NSW choosing the Proposal. The final step is the commencement of construction once the tendered company complies with set conditions.
As of now, the project is past the fourth step of the planning process where construction will start in early 2019 and the maintenance facility will be operational by 2021. NSW government expects the first trains to be operational by 2023, upon which the rest of the fleet will join the service progressively. The maintenance facility in Dubbo will cover an area of 25 hectares and will house around six trains of length up to 200 meters.

1.2 Purpose of this study

The Regional Train Fleet project is a massive civil and mechanical installation and therefore the project is bound to affect the environment around its construction space among other risks. A well-researched report that investigates the potential risks and opportunities of such a project is important because it adequately prepares the project’s shareholders of what lays ahead. The first purpose of the study is to identify possible risk responses/treatment elements that are identifiable and appropriate. Risk response or treatment is how a business response to potential risks in the market and how the business will manage the risk whether the risks are high, low or acceptable. Often referred to as risk assessment plans, risk treatment helps identify how to mitigate risk, avoid risk, accept risk and transfer risk.
The second purpose of the stud is to create a risk management plan that highlights the summary of positive/negative risks gathered, pertinent risks and methods of managing these risks. Risk management involves five steps of actions where the first step is identifying the risk and the second step is analyzing the risk. The third step of risk management is the evaluation or ranking of the risk while the fourth step is risk treatment or risk response planning. The final step in risk management is monitoring and reviewing the risk.
The final purpose of the study is to give recommendations concerning the rail project including suitable justifications for the next steps in the project realization. After creating a risk response strategy and finally a risk management process, the study will give a recommendation based on the findings of the two purposes of the study. The recommendations will be supported by intuitive justification to create a greater understanding of the decisions taken concerning the risks.
1.3 Scope of this study
The extent of the study involved creating a risk framework which covered several broad categories of risks that the Regional Rail Fleet of NSW might be faced with. These categories included financial risks, social and political risks, and technical. Environmental issues that are present in Western Australia and may affect the construction process will also be discussed. Under each of the broad categories of the risks, specific examples were identified and evaluated critically. Finally, the risks that are uniquely relevant to Regional Rail Fleet of NSW will be identified.
1.4 Sources and methods
The material for the study was sourced from relevant websites for the background information on the project and also to learn about the common risks faced in the rail industry both on a local and international basis. The findings from the sources were used to create a risk management plan that will be used to assess the pertinent risks to Regional Rail Fleet and consequently create a structure for identifying and managing the risks. The main methodology used to gather the information was desk research as all the information relevant to the project was researched through the internet. A good number of primary and secondary sources consisting of over 20 reports and websites were gathered on both national and international scope. The sources were consulted and analysed to write the report.

2 Findings and discussion
The risks involved in the Regional Rail Fleet of NSW can be categorized into three groups as financial risks, technical risks, and social/political risks. The main financial risks include acquiring funding and cost overrun. The technical risks involved in the project are construction and engineering risks which rely on the project’s technical complexity. The political risks mainly arise from the politics of decision making procedure, safety perceptions by the public and other planning logistics like station and route selection. According to (), large scale construction work like this of Regional Rail Fleet has all the risks in complex interplay which has normally defied individual risk analysis. Consequently, the risks of interplay are known to create project delays and cost overrun.
2.1 Financial risks
Securing sufficient funding for the project is a vital step in the implementation process of the Regional Rail Fleet. The presence of enough capital and also within the planned time frame is very critical for the project’s success. Since the project is new and unique, references for budgeting are not as accurate and therefore estimates of costs of materials and service were done. Estimates often become inaccurate for such projects because rolling stock cost which in many cases is off by a significant amount.
Cost overrun is a major risk in the financial category. For instance, the average cost of some components needed in construction depicted a broad discrepancy between actual and estimated figures. Furthermore, input costs in the construction sector have been fluctuating due to the state of the economy and therefore having an accurate estimate is not an easy task. The cost of the project is inherently inaccurate because it involves setting probable costs in an uncertain future and as many allowances for cost fluctuations are always provided, it is difficult to pinpoint exact figures.
Delay cost is a financial risk is hard to avoid because often, delays are caused by external factors beyond human control for example delays caused by extreme weather events. Some of the factors that cause delays have been observed from similar projects from across the world. Some factors that cause delays could be political in or environmental in nature. Delays cause increases in cost and also social opportunity costs. For instance, delays caused KTX train project in South Korea about 25.5 percent increase in overall project cost for the period 1993-1997 ( ) and therefore it is objectively clear that delays can be very costly.
2.2 Technical risks
Design and production codes are very vital in rail development projects. Especially, when engineers apply new technology in building the trains, the structure, scope, and content of the codes change by definition and therefore a clear interpretation of these codes is paramount. For new designs to be used in the project, construction specifications and existing design codes could be upgraded or new codes developed. The codes and the specification are for engineering safety and so they are very important where a lack of adherence to costs could lead to financial losses and even life losses. The rail industry heavyweights like Germany and Japan often set the precedents for rail codes
System integration and complexity is one of the technical risks encountered in train construction. Employing new technology over the old system involves complex integration that often proves challenging even for seasoned engineers and therefore this area poses a risk. Use of outside help like Momentum Trains for all the stages of implementation helps alleviate this risk. The technical complexities of or rail construction sometimes lead to delays and as discussed under the financial risks, delays could prove very costly.
Building and infrastructure procurement is a technical risk where the strategy for system procurement is done concurrently with the procurement strategy for infrastructure. There are two approaches to procurement which are the turnkey procurement and the conventional approach. The conventional approach allows for greater project control but with more risks in comparison to the turnkey method. Depending on the approach utilised by the constructing company, risks exist in both approaches.
2.3 Social and political risks
Regulatory risks involve all the uncertainties in acquiring permits and licenses in time. Some examples of these permits and licenses include Transportation Impact Statement (TIS), Environmental Impact Statement (EIS), Site Impact Analysis and several more documents. EIS covers issues like noise and dust pollution while other documents cover social and environmental issues. During the planning stages, the contracted company must get such permits however during construction, adverse effects often arise and it is only with right permits and licenses that the company could avoid civil suits.
Project feasibility risks arise from political influences that big projects like the Regional Rail Fleet trigger. Generally, route and station selection is politically influenced. Significant milestones in construction like ground-breaking or opening have their timelines heavily influenced by the political atmosphere. The political influence could be positive or negative however, it is hard to evaluate hence it is an issue of “value” which the planners and engineers do not possess. The government is the main source of funds for the NSW project and therefore it makes most of the critical decisions which often may not be favorable for the company on site. As much as economic efficiency influences courses of action, political power often supersedes the economical directives.
The perception of the public on safety is a risk that could potentially affect the project’s implementation. The common citizen has a different view of safety than an engineer. An engineer is equipped with vast knowledge hence can objectively view risks whereas political bodies and the public have a more simplistic view on risk and often hard to control. Media hype influences perceptions especially during accidental incidents on the construction sites over the objective judgment of the engineers, adding unnecessary duration and cost to the project.
2.4 Risks treatment/response
Risk response involves four strategies for handling operational, strategic, legal and other types of risks. The first risk treatment strategy is avoidance strategy which involves quitting a course of action that leads to risk. Avoidance strategy closes the possibility of the risk completely. This strategy is often used by companies when the potential risk is too severe like employee safety or threatening the firm’s existence. Regional Rail Fleet, for instance, could employ the avoidance strategy by completely halting construction in an area in case of a possible severe risk.
Secondly, reduction strategy is a risk response element where it involves taking action to decrease the likelihood of risk or reduce the impact of the possible risk. People apply this strategy unknowingly by using safety belts where the action does not eliminate the risk of an accident but it reduces the impact of the accident on the passenger. This strategy allows a wider degree of freedom and as such is a very popular strategy.
Thirdly, transfer strategy is a risk response approach where the risk is not eliminated or reduced but it is transferred or delegated to a third-party entity. The common methods of risk transfer include acquiring insurance covers or incorporating some specific requirements in binding contracts. An insurance cover transfers the risk to the insurance firm in exchange of premiums for example insurance cover on fire does not prevent the fire but provides a safety net in case the fire occurs. Notably, risk transfer only happens after the risk has occurred and this strategy is very common for construction companies.
Finally, acceptance strategy involves treating the risk as a miscellaneous occurrence, i.e. no action is taken to avoid the risk. This strategy is commonly used when the probability of the risk is low or the impact of the risk is excusable. Most organization make budgetary provisions to deal with the impacts of such risks.
2.5 Risk management plan
Risks that were collected were categorized into three broad categories that include financial risks, technical risks and, social and political risks. The financial risks discussed include delay cost, securing funding, and cost overrun. The technical risks in the report include design codes, system integration and complexity, and Construction/Infrastructure Procurement. The social and political risks include regulatory permits and licenses, project feasibility, and public perception of safety.
Some relevant risks were collected from the NSW area. One political risk encountered was in the regional politics of NSW when the state government allocated the space for a maintenance facility in the central west area. The government’s decision sparked a community outrage among the leaders in the Orange city who wanted train facility base located around the Orange city. One positive risk identified was a financial risk where the NSW government reported that some of the funds for financing the project will come from the private sector and as such will accelerate the project’s timeline further.
An effective strategy to manage the risks involves installing a systematic risk management structure with clear steps geared towards avoiding the risks’ impacts. The first step in the risk management strategy is identifying the risk. A research individual uncovers, recognises and describes the risk that hinders the project at hand. The second step is risk analysis whereupon risk identification, the risk’s likelihood and the consequence are investigated by creating a comprehension of the risk’s nature and the potential influence of the risk to project’s aims. The third step is risk ranking or evaluation. In this step, the magnitude of the risk is determined by combining consequence and likelihood to rank the risk. The researcher then makes the decisions on the risk’s acceptance or if severe enough to require treatment. The fourth step is risk treatment or the risk response planning that has been discussed above where the steps outlined in the risk response section are followed when treating the risk. The final step is that of reviewing and monitoring the risk. This step is made possible by using a Project Risk Register where every step of risk management is recorded in the register to track, monitor and review risks.
3 Conclusions
The Regional Rail Project has a comprehensive strategic rationale and will lay a foundation for rail passenger transport network creating a direct connection between Perth and other parts of Western Australia. Several risks were identified in the report research and the risks were grouped into financial, technical and political and social risks. The report also discussed risk treatment strategies that can be used in response to the risks. Finally, the report outlines a comprehensive risk management structure that can be used to manage the risks uncovered in the study.
4 Recommendations
Following the findings and discussion in the report, possible risks to the Regional Rail Fleet project were uncovered. Therefore, recommendations on the next step in the implementation of the project are necessary. Foremost, a new railway project is extremely complex and therefore the addition of more project goals should be avoided completely. Unplanned aims of such a project like regional development should always remain as secondary goals. The project goals must also be simple and concrete to avoid conflicting approaches to the set goals by the project’s shareholders. Conflicting approaches harms the control of the duration and the cost of the project.
The project should have a realistic schedule, scope and cost approximations. The development of a project is greatly hindered by actions that attempt to make up delays brought in by external factors such as system procurement delays. Additionally, technology transfer should focus on the integration of the system rather than primarily on rolling stock. For successful implementation of specific technologies, the government should always be ready to invite external experts to mitigate project risks.
Finally, even after addressing all the issues of the project, risks never end and new ones will always come up. It is the intrinsic characteristic nature of all risks. Improbability cannot be eradicated by one-time risk management processes, rather it should be a continuous strive. By this sense, the presence of an effective program manager group and a good organization structure to persistently observe risk items and identify them is vital to effective project development

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