Delivery of Australia’s largest inland freight rail project has been savaged by a damning new report, which says that the project suffers from a litany of management failures.

Conducted by Dr Kerry Schott AO, the review of the Inland Rail project was commissioned by the then-newly elected Labor Government last October and was released last week.

According to the review, the project’s delivery has been compromised by substandard practice in several areas.

In particular:

• The Commonwealth owned entity that was tasked with delivering the project did not have the skills required to manage a project of this complexity.
• The project’s estimated cost has more than tripled from $10 billion when first announced to the current estimate of more than $31 billion. This includes a near doubling in cost estimate from $16.4 billion to more than $31 billion over the past two years alone.
• The project is four years behind a schedule that was set only three years ago in 2020.
• Construction began in 2018 even before the scope of the project had been settled, the start and end points had been finalised and interstate approvals had been secured.
• Even now, the $31 billion cost estimate cannot be accepted with confidence as major details surrounding the scope, schedule and delivery costs are yet to be determined.

Conceived by the previous Coalition Government as a statement in commerce-shifting and nation building, the Inland Rail project aims to revolutionise the movement of freight up and down Australia’s populated east-coast and across the nation.

When complete, it will add around 1,700 kilometers of standard gauge line that will carry freight between Melbourne and Brisbane. This will involve upgrading 1,087 kilometers of existing track and construction of 628 kilometers of new track.

It will also link with the East West Interstate line which carries freight from Melbourne and Sydney to Perth via the regional city of Parkes in New South Wales (see map).

According to the report, the project’s importance should not be underestimated.

As things stand, most freight movement on Australia’s east-coast network takes place by road.

Rail freight is unable to compete on a cost-competitive basis on account of aging and inefficient infrastructure that restricts weight to single-stack trains and constrains travel times.

These challenges are accentuated on the existing north-south corridor link between Melbourne and Brisbane, where further time restrictions for rail freight are added on account of passenger train preference in and around Sydney.

Indeed, the only route where rail freight competes with road is the long-haul east-west route to Perth.

Particularly on the east coast, this is causing concern.

Reliance upon road for freight transport using heavy vehicles on intercity highways is exacerbating challenges associated with growing congestion and leading to higher costs for road maintenance as well as safety concerns.

This is especially worrying as economic and population growth mean that overall domestic volumes of freight along the corridor are expected to increase by 20 percent between 2018 and 2040.

Once the project is complete, by contrast, benefits from Inland rail are expected to include:

• Greater overall capacity in Australia’s freight network between major population centres.
• Greater supply chain resilience during extreme weather or other disruptions through having an alternative north-south and east-west route for freight transport in addition to main highways.
• Reduced carbon emissions of up to 750,000 tonnes per year by 2050 through shifting the movement of goods from road to rail.
• Lower levels of congestion associated with having fewer trucks on major intercity highways.
• Improved market access for regions which are located along or nearby the Inland Rail route.

As detailed in the review, however, the project’s delivery has been affected by a litany of problems.

First, the organisation that was charged with delivering the project does not have the skills which are necessary for an undertaking of this size or complexity.

The Inland Rail Project is managed by the Australian Rail Track Corporation (ARTC) – a Commonwealth Government owned enterprise.

Specifically, the project is managed as a division of ARTC. This division reports to the ATRC board through a sub-committee that was set up to oversee the project as well as through the CEO of ARTC.

However, the report says that neither the board nor its subcommittee have adequate skills to oversee this project.

Despite an informed request by the Chairman of ARTC to the then-Minister responsible under the previous Coalition Government, replacement appointments to the Board did not provide the skills required.

This, the review found, is concerning.

As a Commonwealth owned entity with an annual revenue of around $900 million along with complex operations across Australia, the ARTC needs a board which is capable and which possesses an understanding of rail operations, project management, the freight industry and regional areas as well as legal and accounting skills.

Beyond this, the project has been affected by serious mismanagement.

While construction started five years ago in 2018, there is still uncertainty about the details of much of the route as approval processes are not yet complete.

Indeed, the project commenced without the government being certain about exactly where in Melbourne it will start or where in Brisbane it will finish.

Particularly at the Queensland end of the project, lengthy delays in approval processes have been caused in part by immature design and poor Environment Impact Statements which needed to be changed and resubmitted numerous times.

Meanwhile, cost blowouts have been astonishing.

Originally estimated at $10 billion, the project’s cost had grown to $16.4 billion by 2020.

Over the two years since then, the estimated cost has almost doubled to $31 billion.

Even that cost estimate should not be accepted as being reliable, Schott said, as the aforementioned uncertainty about the final route and related schedule and delivery costs make it impossible to have any confidence regarding the numbers.

In terms of delays, meanwhile, the project is running four years late even compared with estimates made as recently as 2020. According to best current estimates, the section running between Melbourne and Parkes is likely to be complete by 2027 whilst the overall project is likely to finish in 2030/31.

As with the cost estimates, Schott says estimates of completion dates should not be viewed as reliable on account of the aforementioned uncertainty around project scope.

Until the project scope and details are finalised, she said that no confident assessment of either cost or schedule can be made.

Going forward, the review makes nineteen recommendations.

First, the board of ARTC should be replaced with a new chair and directors who possess the skills which are needed to run the complex operations of ATRC as a whole.

Next, the Inland Rail project should cease to be managed as a division of ATRC and should instead be managed by a subsidiary company of ATRC. This subsidiary should have its own board and its own CEO who has specialised experience in rail project delivery. Delivery of Inland Rail should be its sole task.

Such an arrangement would enable Inland Rail to be managed in a tightly focused manner with a specialist CEO.

It would also free the current board and CEO of ARTC to focus on business-as-usual matters without being distracted by Inland Rail.

On project scope, meanwhile, the report recommends that the Commonwealth engage an independent specialist to review design solutions developed by ARTC and to define the project scope as precisely as possible. When doing this, the specialist should take into account anticipated requirements which are likely in order to obtain relevant project approvals.

As for cost, the Commonwealth should engage an independent value engineer/cost estimator to analyse the anticipated cost and expenditure for the project. When doing this, the person should coordinate with the work being done to define project scope.

Once costs can be estimated with more confidence, a year-by-year budget should be established to facilitate better project management.

In addition, these more reliably established costs should be compared with anticipated future benefits.

Finally, in terms of the route, Schott said the project should commence in Truganina in Melbourne’s west and finish at Ebenezer in Brisbane’s west.

In light of difficulties associated with Queensland based approvals, the project also be split into stages.

This would enable the southern section of the proposed line from Melbourne as far as Parkes (where the line will intersect with the east-west freight line) to be prioritised and delivered first.

Schott said the project was an excellent idea but had suffered from poor management.

“It’s not a bad project, it’s just been managed really badly,” she told reporters.

Commonwealth Infrastructure and Transport Minister Catherine King said the problems associated with the project were a reflection on the previous Coalition Government, which was in power for nine years before the current government was elected last year.

(The line had been a pet project of former National Party leader and Deputy Prime Minister Barnaby Joyce.)

Citing its benefits, King said that Inland Rail will go ahead.

However, there will be significant changes in line with the report’s recommendations.

“Frankly, this report is an absolute, damning indictment on the Liberal and National Party,” King said.

“The previous government began this project with no idea where the rail line would start in Melbourne and where it would finish in Brisbane.”

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