New South Wales (NSW) has a comprehensive passenger rail network, including metropolitan lines in Sydney and regional lines across the State. Transport for NSW (TfNSW) is responsible for two heavy rail fleet procurements: the New Intercity Fleet (NIF) and the Regional Rail Fleet (RRF). Procurement of the NIF and the RRF is the focus of this audit.

According to the Australasian Railways Association, the average life of heavy rail rolling stock in Australia is 25–30 years. Decisions made as part of the procurement of rolling stock have long-term implications for rail operators and customers. The procurement process¹ is complex, involving multiple interdependencies and significant risks that require diligent management over several years. Major investment decisions must address patronage forecasts, customer needs and expectations, a rail network’s physical location, long-term operational and service goals, and integration with existing assets and infrastructure.

The NIF is fully funded by the NSW Government, whereas the RRF procurement – to design, build and maintain the fleet – was conducted through a Public Private Partnership (PPP). In both cases, the new fleet is owned by the Transport Asset Manager of NSW, which is a government-owned entity. The new fleets will also be operated by government-owned entities. At the time of this report, these procurements are estimated to have a combined capital cost of $6.8 billion.

New Intercity Fleet

The NIF is comprised of Mariyung (or D-set) electrically powered trains.² When the NSW Government called for expressions of interest (EOI) in 2014, it was estimated that the cost of the NIF would be $2.8 billion.³ This was to cover the capital cost of 520 cars, contingencies and client costs, but exclude a new maintenance facility and other enabling works. It was anticipated that the first trains would enter service by 2019 and the rest of the fleet would enter service through to 2024. When the contract for the rolling stock was awarded in 2016, the estimated total capital cost of the NIF project was $2.9 billion. This included new trains comprising 512 cars, a new maintenance facility, other enabling works, client costs and contingencies.

The first NIF trains entered passenger service on the Central Coast and Newcastle Line on 3 December 2024 and on the Blue Mountains Line on 13 October 2025. NIF trains have not yet been deployed on the South Coast Line. At the time of this report, the total capital cost for the NIF project is estimated to be $4.5 billion. This includes the new trains, a new maintenance facility, power supply upgrades, other enabling works, the administrative costs of the protected industrial action, the cost of the resultant delays and modifications to the fleet, other client costs and contingencies.

Regional Rail Fleet

The RRF will be R-set bi-mode diesel-powered trains that will be able to operate on electrified routes. When EOI were called for in 2017, it was announced that the new RRF would provide regional services and intercity non-electric services, and the contract would include maintenance of the trains and a new rail maintenance facility. At contract award in 2019, the RRF project capital cost was estimated to be $1.5 billion. This included new trains, the new maintenance facility, enabling works, contingencies and client costs.

It was anticipated that the RRF would be introduced from early 2023. At the time of this report, no RRF trains have entered passenger service, and TfNSW estimates the project capital cost to be $2.3 billion.

¹ Under the NSW Government Procurement Policy Framework, ‘procurement’ has a broad end-to-end definition from needs identification to contracting and placing orders, managing contracts and supplier relationships, and disposing of government assets. This audit adopts the same broad definition. However, the focus of the audit is planning and sourcing. We discuss contract management and supplier relations where this informs our findings about the earlier stages of the procurement process. We acknowledge that investment decisions and contract management functions have occurred under successive governments.
² Refer to Appendix 2 for an overview of all train types mentioned in this report.
³ For consistency, the monetary values quoted in this report are nominal values unless otherwise specified.

The objective of this audit is to assess the effectiveness of TfNSW in planning and sourcing new passenger rail rolling stock. Our assessment was made with reference to the following questions:

1. Did TfNSW effectively identify its business needs, including meeting government objectives, during the planning stage of the procurements? Did it justify any variations to scope?
2. Did TfNSW execute a procurement sourcing process that ensured probity and value for money?

This audit does not comment on NSW Government policy decisions to source rail rolling stock from overseas or local manufacturers. The Future Fleet Program, announced in 2023–24, is out of scope for this audit.

TfNSW did not effectively procure the New Intercity Fleet (NIF) or the Regional Rail Fleet (RRF). TfNSW did not effectively link transport planning to procurement decisions and manage the implications of potential design clarifications for the RRF or the compatibility of new rail rolling stock with existing infrastructure. However, it followed all relevant processes required by the NSW Government and its own procurement policies, and managed probity and conflict of interest issues in alignment with procurement policies.

TfNSW did not effectively scope or estimate the full costs of the NIF or the RRF to inform assurance activities or investment decision-making. TfNSW did not properly identify and estimate the costs of enabling works, and it significantly underestimated those costs for both the NIF and the RRF. TfNSW did not properly account for the number of NIF trains required to avoid overcrowding on some peak services, despite being aware of the likelihood of overcrowding. This led to additional works and costs, including by way of contract variations to purchase additional trains at higher unit costs.

TfNSW did not engage effectively with operational staff, such as drivers and guards, in the planning and procurement of the NIF or the RRF. This limited its ability to make allowances for the foreseeable risks and potential consequences of industrial action, specifically the risks arising from the decision for the NIF to be driver-only operated.

Documented ‘lessons learnt’ warned of the risks of using a PPP for the procurement of rolling stock, including the risks of variations. However, TfNSW did not effectively engage with and manage these elevated risks for the RRF. The likelihood of the risks eventuating was exacerbated by the decision that the PPP would not include operation of the fleet. This meant that the operational risks would be (and now are) carried by TfNSW and not the contractor.

TfNSW complied with all relevant process steps for key statutory and procurement policy requirements throughout the NIF planning and sourcing stages

Throughout the planning stage for the NIF procurement, TfNSW followed the processes established in NSW Government Tendering Guidelines, TfNSW’s Procurement Policy, the Gateway Review System for project assurance and relevant NSW Procurement Board Directions. TfNSW also followed its own Tender Evaluation Methodology template (Request for Tender (RFT) stage only) and used the NSW Procurement Board Evaluation Plan template (RFT stage only).

In addition, the NIF procurement was subject to Infrastructure NSW’s (INSW) Health Check processes. These processes are similar to Gateway Reviews and ‘examine the level of confidence that the project is being effectively and efficiently [managed] … and that there is confidence in achieving the best possible outcome'. The Health Checks provided an ‘independent snapshot of project status at a point in time’ and supplemented Gateway Reviews as part of the Department’s internal governance processes.

TfNSW complied with economic, financial and probity requirements for the planning stage of the NIF procurement

The process included developing a Probity Process Plan for the strategic planning and program establishment phases of the project, to promote the integrity of the appointment of consultants and contractors. An independent probity advisor was engaged to ensure probity was observed.

TfNSW also prepared a risk assessment, a project delivery strategy, and secured funding approval from the NSW Treasurer. Although the risk was major and foreseen, TfNSW did not identify the potential costs of industrial action as a result of the change in the operating model.

TfNSW decided that seating capacity per carriage on two intercity lines could be reduced, but later needed to procure almost 100 additional NIF carriages at an increased cost of around 28% per car in February 2019 and 63% per car in September 2021

The initial NIF rolling stock contract awarded in August 2016 was for 512 cars, in a combination of 10-car long-NIF trains and 8-car short-NIF trains. This configuration, including the number of cars, was based on the rolling stock required to replace services provided by the OSCAR (Outer Suburban Cars) and V-set fleets.

TfNSW made the decision to require '2+2' seating for the NIF – consisting of a four-seat row with an aisle in the middle. This resulted in a 22.5% reduction in seating capacity on the South Coast and Central Coast via North Shore services where short-NIFs will replace OSCAR trains, which have '2+3' seating.

This decision was made despite TfNSW knowing that there were existing problems with overcrowding on the intercity trains and that patronage was forecast to increase in the future.

TfNSW advised this audit that trains on the South Coast Line travelling towards Sydney begin to reach 100% seating occupancy once the intercity trains reach Waterfall (approximately 40 km from Sydney) and enter the suburban network. At this point suburban passengers can elect to use the intercity trains into Sydney as an alternative to the suburban trains, and this increases the pool of potential passengers on these trains. Further, the highest loading on the South Coast Line occurs when trains are leaving the suburban station of Hurstville in the morning peak (approximately 15 km from Central Station). In 2016, train loads at Hurstville regularly exceeded 135% of seating capacity.

In February 2019, TfNSW varied the existing rolling stock contract with the contractor (RailConnect) to provide an additional 42 cars to provide a 25% increase in seating capacity on the South Coast Line. The announced contract price increase was $130 million. The overall impact on the NIF program capital budget was an increase to $180 million, including contingencies and client costs.

In September 2021, an additional 56 NIF cars were ordered under Stage 3A of the More Trains, More Services program to provide additional trains for the Central Coast Line to commence in 2024. The contract price increased by $221 million.

On average, the price per car for the initial 42 additional cars was around 28% higher than the price in the original order of 512, with a 63% increase in price per car for the further 56 cars. These additional procurements took the total NIF fleet from 512 to 610 cars.

Foreseeable changes to the NIF operating model, resultant delays and the cost impacts of avoidable industrial action added $1 billion to the project’s costs

The original position of the NSW Government was that NIF trains were to be driver-only operation, replacing the driver and guard operation on the existing fleet. This decision had foreseeable risks and consequences. TfNSW understood that these design requirements had the potential to raise concerns amongst its workforce, and that there was a risk that changes to the traditional driver-guard operating model may not be implementable if industrial implications could not be resolved.

As part of its project appraisal, TfNSW prepared a risk assessment and project delivery strategy, and secured funding approval from the NSW Treasurer. However, it did not make allowances for the risks of industrial action related to the fundamental change in operating model.

In March 2016, almost 18 months following the release of the EOI, TfNSW provided the Minister for Transport and Infrastructure (the Minister) with a written brief on the work practice changes necessary to accommodate driver-only operations. The brief noted that union consultation was required under the terms of the NSW Trains Enterprise Agreement, and that formal discussions with the union were expected to commence in June 2016.

Issues associated with the operation of the NIF rolling stock led to an extended period of industrial disruption from 16 August 2018. By June 2019, the NSW Government changed the proposed operating model to a driver with a customer service guard.⁴ Following settlement of the dispute with the union in November 2022, the operating model reverted to the traditional driver-guard model.

In 2022, the NSW Government approved an additional $1 billion in project funding to cover the impacts of changes to the NIF operating model, including the protected industrial action. The costs of the industrial action included administrative and legal costs and the costs of storing and modifying the trains.

The change to the operating model and the related industrial action contributed to the delay in introducing the NIF trains to service. The first NIF trains were originally expected to begin service in 2019 but Sydney–Newcastle services commenced on 3 December 2024. On 30 June 2025, all V-sets on the Sydney–Newcastle service were replaced by NIF trains. NIF services on the Blue Mountains Line commenced on 13 October 2025. A TfNSW media release dated 4 July 2025 stated that NIF ‘passenger services on the South Coast Line are still on track to commence in 2026’. This is more than a decade after the contract was awarded. In August 2025, TfNSW subsequently advised this audit that ‘a staged deployment of the NIF across the Central Coast and Newcastle Line, Blue Mountains Line and the South Coast Line is planned, which will reflect the availability of modified trains and the infrastructure upgrades to the network required to support the new operating model’.

The delay of at least five years for the NIF trains to start to come into service delayed the retirement of the V-set trains and the transition of OSCAR trains to Sydney’s suburban services. Some intercity passengers are still travelling on V-set trains, which were built between 1977 and 1989, have manually operated doors, and are therefore less accessible for passengers with limited mobility.

TfNSW did not include the full scope and cost of enabling works to inform the investment decision to procure the NIF rolling stock

In August 2015, TfNSW estimated the total capital cost for enabling works in the Final Business Case. By September 2016, at award of the NIF rolling stock supply contract, the list of enabling works had grown and the capital cost for all the enabling works (including contingencies) had increased by 55% to $1.1 billion.

At the same time, the capital cost of the initial fleet of 512 NIF cars was lower than estimated in the Final Business Case, at $1.3 billion. This allowed for additional enabling works to be added to the NIF project scope without going over its total allocated budget at that point in time. However, as discussed above, almost 100 additional NIF cars were ultimately purchased to accommodate the reduction in car seating capacity.

TfNSW increased the estimated cost of route clearance work on the Blue Mountains Line to $149 million, 72% more than the initial estimate made at NIF pre-contract award

TfNSW procured the NIF trains fully aware that the width of the rolling stock would require route clearance and widening on some routes, particularly the Blue Mountains Line. In 2020, TfNSW estimated the total cost of the Blue Mountains Route Clearance work to be $149 million (a 72% increase over the initial estimate made at pre-contract award in June 2016).

⁴ The role of a customer service guard (CSG) was a reduced version of the traditional train guard’s role. Key changes included an increased customer service role, but CSGs would no longer be responsible for opening and closing customer doors and, instead, these duties would be performed by the driver using CCTV cameras located at the doors of the trains.

TfNSW complied with all relevant process steps in key statutory and procurement policy requirements throughout the RRF planning and sourcing stages

Throughout the planning stage for the RRF procurement, TfNSW followed the processes established in NSW Government Tendering Guidelines (December 2011), TfNSW’s Procurement Policy, the Gateway Review System for project assurance and relevant NSW Procurement Board Directions. This included having project governance structures in place. TfNSW also followed the NSW Public Private Partnership Guidelines (TPP17-07) and used NSW Treasury’s Template for PPP Bid Evaluations for the RRF Request for Proposals (RFP) stage.

The RRF procurement was also subject to the INSW Health Check processes. As noted for the NIF, Health Checks were an ‘independent snapshot of project status at a point in time’ and supplemented INSW’s Gateway Reviews as part of the Department’s internal governance processes.

TfNSW complied with the economic, financial and probity requirements for the planning stage of the RRF procurement

TfNSW developed a Probity Process Plan for the strategic planning and program establishment phases of the project, to ensure the integrity of the appointment of consultants and contractors. An independent probity advisor was engaged to ensure probity was observed. TfNSW also completed a cost-benefit analysis (including a pre-tender cost estimate) as part of its strategic and final business cases.

After TfNSW selected and recommended a preferred proponent, TfNSW prepared a Negotiation Plan, which included the objective of ensuring a value for money outcome for the State.

TfNSW achieved its negotiation objectives in compliance with its procurement policy and the Negotiation Plan. The outcomes of the negotiations were reported to the project’s multi-agency steering committee on 29 January 2019. The committee noted the report of the negotiation team and agreed that TfNSW was in an appropriate commercial position to award a contract to Momentum Trains Pty Ltd (Momentum Trains).

The compressed timeframe for contract award increased the risks of TfNSW not fully identifying RRF project business needs

The timeframe for procurement of the RRF was time constrained.

On 14 August 2017, the NSW Government announced that the XPT, Xplorer and Endeavour trains would be replaced by the RRF, with a contract awarded in early 2019. The RRF would be procured using private finance in a Design, Build and Maintain (DBM) contract, which would include a new regional maintenance facility located in Dubbo.

A PPP contracting model was to be used and the new trains would be operated by NSW Trains, a government owned operator. This meant operation of the RRF would remain in government ownership, rather than being included as part of the procurement, which was a departure from TfNSW’s planning at that point.

Given the compressed timeframe, the project’s complexity, and the widely known inflexibility of the PPP procurement model, TfNSW should have been proactively identifying risks and planning its response.

Excluding the operation of the RRF from the PPP significantly increased budget risks, but TfNSW did not effectively manage these risks, or brief the NSW Government accordingly

The decision announced in August 2017 that NSW Trains would continue to operate regional rail services differed from TfNSW’s prior planning for operation of the RRF.

TfNSW acknowledged during this audit that the decision to preclude operation of the fleet from the PPP increased the risk of additional costs to government if the contractor was delayed or the project scope was later varied for any reason. The PPP arrangement used for the RRF required TfNSW to prepare a performance-based specification. Without sufficient detail to ensure that all the needs of the operator were fully described, there was an increased risk of disputes over whether the contractor’s design solution met the operator’s requirements, as compared to a PPP with a scope that included contractor responsibility for both design and operation. Where private financing is involved, such as in a PPP model, this risk is further magnified by the additional financing costs in the event of project delays.

The audit sought, but was not provided with, documented evidence that TfNSW had briefed the Minister on the additional risks and consequences of the NSW Government’s position on the use of private financing and the decision to exclude ‘operate’ from the contract.

TfNSW did not apply lessons learnt from previous PPPs to effectively manage project-specific risks associated with the procurement of the RRF

In a TfNSW learnings report on the Waratah trains PPP and the Inner West Extensions Light Rail Rolling Stock Procurements (dated 6 June 2014), the following key learnings were made about the use of PPPs for the procurement of rolling stock:

• ‘Have performance based requirements, but a contract that provides absolute clarity’
• ‘Engage early with stakeholders and understand needs before detailed design starts’
• ‘PPP increases complexity and may not be suitable for rolling stock within an existing network due to the high risk'.

During the procurement of the RRF, TfNSW referred to previous lessons learnt from the Waratah, Millennium, OSCAR and Hunter rolling stock procurements. TfNSW also conducted workshops on lessons learnt from the NIF project. However, the audit did not see any evidence of these lessons being applied in the procurement of the RRF.

TfNSW could not provide evidence that it engaged effectively with operational staff, such as drivers and guards, when developing the RRF train specifications prior to contract award

The need to engage with key stakeholders, including operational staff, before detailed design starts in a PPP procurement was identified in lessons learnt from previous PPP procurements by TfNSW.

TfNSW advised that there was significant operator involvement during the development of the train specification, RFP documentation, proposal evaluation and contract finalisation process. This included executing a Project Agreement with NSW Trains in June 2017 outlining its involvement in the RRF procurement. The agreement lists key NSW Trains personnel who would be involved in the stages of developing the business case, the RFP and post-contract award procurement activities. The listed personnel, based on their position descriptions, are at managerial or technical level.

TfNSW did not provide evidence of similar engagement with operational staff such as drivers, guards and station staff, including in meeting agendas, notes and outcome reports.

TfNSW is in dispute with the contractor regarding RRF design clarifications

To date, multiple contract variations have been approved by TfNSW. A sampling of these variations indicates that they were detailed, justified and approved in accordance with TfNSW procedures and delegations.

TfNSW is currently in dispute with the contractor, Momentum Trains, regarding design clarifications directed by TfNSW. The claims include the costs (including prolongation and financing) arising from delays to finalising the rolling stock design. At the end of September 2025, this dispute is ongoing. This audit does not provide an assessment and should not be interpreted as suggesting a view on the validity of the position of any party to the dispute.

TfNSW did not include the full scope and cost of enabling works to inform the investment decision on the procurement of the RRF

Immediately prior to contract award, enabling works attributable to client costs were estimated by TfNSW, and formed part of the overall project estimate on which the decision to award the contract was based. At contract award in February 2019, TfNSW had budgeted $44.5 million for enabling works.

In March 2020, TfNSW commenced preliminary scoping of enabling works. During 2021, the RRF project team identified significant additional enabling works that had not been included in the overall project estimate on which the decision to award the contract to Momentum Trains was based. These involved works of varying complexity, including works at up to 120 stations, six stabling locations and other locations spanning three states.

In June 2022, the estimate and the full scope of enabling works was further refined. In January 2023, the NSW Government approved an additional $826 million capital funding to deliver the RRF, with the cost for the additional enabling works being the largest component of this additional funding.

TfNSW is separately procuring the enabling works required to support the RRF operating on the network via an established TfNSW Incentivised Delivery Entity. The cost of those enabling works is to be drawn from the $826 million capital funding approved in January 2023.

TfNSW advised the audit that, at the time of contract award, it was not possible to foresee the additional enabling works. However, before contract award TfNSW was aware of the configuration of the rolling stock being offered by the preferred proponent, Momentum Trains. It would have known at that time that the new trains had a different configuration and different dimensions to the trains the RRF would replace. It would have also known that enabling works would be required across four jurisdictions. This means that TfNSW did not complete the work needed to give the NSW Government reasonable assurance on the estimated cost of enabling works at the point of investment decision.

TfNSW applies higher sensitivity classifications to many more documents than is required or can be justified by government policy and this limited transparency

There is little public transparency on financial reporting by TfNSW for either the NIF or RRF projects. Where TfNSW has disclosed financial information publicly, it is difficult to accurately identify, track and compare point in time costs and total estimated and actual costs for each project.

This audit found that documents prepared by TfNSW are frequently labelled Cabinet-in-Confidence, including in instances where documents do not meet the definition of Cabinet-in-Confidence as defined in the NSW Government Information Classification, Labelling and Handling Guidelines. The guidelines specify that security classifications are only to be used when there is a clear and justifiable need to do so.

The frequency of classifying documents as Cabinet-in-Confidence limits the transparency of details that can be provided in this report.

By December 2026, TfNSW should ensure that it has:

1. transport planners and operators working together to assess, agree on and document the current and forecast demand for rail passenger services, and ensure that this informs investment decisions and procurement activities for rail rolling stock
2. introduced mandatory requirements so that planning, technical and operational requirements are informed by consultation with internal and external stakeholders to define design requirements for all rolling stock procurement projects throughout the planning, development and procurement stages
3. developed and embedded effective assurance processes to identify, manage and report on inter-dependencies, critical pathways and risks for all rail rolling stock procurement projects, so that all enabling and related works are included in the scope, cost and timeline for all project stages
4. improved public transparency by reporting clearly, consistently and comprehensively on the scope, timeline, actual expenditure and estimated costs of major capital projects (including any approved increases)
5. established expectations and processes to ensure that Ministers and Cabinet receive written advice, to enable effective decision-making that upholds the public interest, that:
   1. is comprehensive, evidence-based and objective with regards to the options-for and consequences-of implementing NSW Government policy directions
   2. includes advice on any change in risk exposure and recommended mitigations.
6. established expectations and processes to maintain records, including advice to Ministers and NSW Government, throughout all project stages and to properly classify those records so that they are consistent with the NSW Government Information Classification, Labelling and Handling Guidelines.

In 2012, the passenger rail network in NSW (outside Sydney) was 3,450 km of rail track. For much of this network, the track was managed by the ARTC, with passenger services operating on the same track as freight services. These rail services were supported by coach services that provided connections to train services at key points along the network.

To understand the historical context of government investment decisions to procure the New Intercity Fleet (NIF) and the Regional Rail Fleet (RRF), an important reference document is the NSW Long Term Transport Masterplan December 2012 (the 2012 Masterplan).

The 2012 Masterplan states that, every day, people in regional NSW made around 7.5 million trips. Almost nine out of ten trips in regional cities were undertaken by car. It also reports that population growth and employment growth was uneven in regional NSW, with growth along the coast and falling employment in the west. By 2031, the number of people over 65 was expected to increase to 21% of the population across all of regional NSW.

Table 1 shows patronage on intercity and regional trains and coaches, as reported by NSW Trains over the financial years 2013–14 to 2023–24. It shows a 5.6% increase in regional travel on trains and coaches, and a 1.5% increase in patronage on intercity trains.

Note: The figures given for regional trains and coaches represent combined patronage as NSW Trains only reports an aggregate figure. For the two years where a split is given, rail travel represented between 66% and 70% of the total number of trips reported.
Source: Audit Office of NSW analysis based on data in NSW Trains annual reports.

Despite these signs of growth in public transport patronage, travel by train was reported as the main mode of transport for 0.2% of the population of regional NSW in the 2021 census – down from 0.9% in the 2016 census. In comparison, driving remained the dominant form of transport in regional NSW with 64.5% of regional residents reporting that they used a car (either as a passenger or driver) in the 2021 census and 73.4% in the 2016 census.

Intercity rail

In 2023–24, NSW Trains reported that it conducted an average of 2,999 intercity train services each week, and an average of 160 regional rail services each week.

The intercity services on electrified routes are integrated with the suburban fleet and carry suburban passengers within the Sydney metropolitan area before continuing to their destination. Diesel-powered XPT (eXpress Passenger Trains) and Xplorer trains travel further afield, providing regional services. Electric intercity trains in NSW run on three lines: the Blue Mountains Line, the Central Coast and Newcastle Line, and the South Coast Line. Figure 1 shows the electrified intercity rail lines across NSW.

The New Intercity Fleet procurement

As part of the 2014 Implementation Plan for the ‘Sydney’s Rail Future’ program, the NIF procurement planned to replace all existing electric intercity trains. This included the ageing V-set trains that primarily serviced the Newcastle and Blue Mountains intercity Lines. These trains had been manufactured between 1977 and 1989 and were approaching end of life. It was also intended that the new rolling stock would replace the OSCAR (Outer Suburban Cars) trains servicing the Central Coast and South Coast intercity Lines. This would then allow the OSCAR trains to be ‘cascaded’ to replace ageing S-set trains on Sydney suburban lines. The S-set trains had been manufactured between 1973 and 1980 and were also approaching end of life, lacking modern amenities such as air conditioning and compliance with disability requirements.

In comparison to these ageing trains, the OSCAR trains were relatively modern (manufactured between 2006 and 2012) and, with some modification, were seen as being suitable to meet contemporary standards of performance and amenity for suburban trains. This included such things as CCTV, passenger information displays, digital voice announcements and air conditioning.

Transport for NSW (TfNSW) issued an invitation to submit expressions of interest (EOI) on 11 August 2014 for the supply of rolling stock for the NIF for operation on the electrified rail network. The EOI invited respondents to submit proposals for rolling stock that would satisfy a range of specific business requirements.

The then Minister for Transport’s media release accompanying the EOI indicated that the NSW Government was investing $2.8 billion in the procurement. This figure was restated in the 2018–19 NSW Budget Papers. The NIF project reported total expenditure of $388 million against a total budget of $2.8 billion at 30 June 2018.

The $2.8 billion referred to the capital cost of the new trains only. It excluded the costs of a new maintenance facility and enabling works, both of which were essential to the commissioning and operation of the NIF.

Seven responses were received to the EOI and TfNSW shortlisted four of the seven respondents to proceed to the Request for Tender (RFT) stage. TfNSW issued the RFT for the new rolling stock to the shortlisted tenderers on 4 September 2015 and responses were received on 23 December 2015. The RFT included four major packages:

• supply of 512 cars from a proven standard platform design for intercity operation
• provision of a simulator for the purpose of driver training
• installation of train maintenance equipment in a new maintenance facility
• provision of maintenance services for a period for 15 years at a still to be constructed, dedicated maintenance facility.

The construction of a new maintenance facility was a critical part of the package of works that comprised the NIF program, but it was not part of the procurement for the rolling stock. The $300 million contract to design and construct the maintenance facility at Kangy Angy on the Central Coast was awarded separately to John Holland in 2017 and is out of scope for this audit.

On 3 August 2016, the NSW Government approved awarding the contract for rail rolling stock to RailConnect NSW (RailConnect), an unincorporated joint venture between UGL Ltd, Hyundai Rotem Company and Mitsubishi Electric Australia. On 17 August 2016, the TfNSW delegate approved executing a contract with RailConnect in accordance with TfNSW delegations. The next day, TfNSW executed the project deed with RailConnect for the price of $1.3 billion for the supply of the NIF rolling stock.

At contract award in August 2016, the estimated overall capital cost of the NIF program, including the new trains, a new maintenance facility, other enabling works, client costs and contingencies was $2.9 billion. At the time of this audit, the total capital budget for the program is $4.5 billion (including the costs of the protected industrial action, resultant modifications to the fleet, enabling works such as the new maintenance facility and the cost of power supply upgrades and contingencies).

By 2016, TfNSW revised the Implementation Plan to procure additional suburban Waratah trains to accelerate the retirement of the S-set trains to 2018–19. Following the later introduction of the NIF trains, the OSCAR trains would be transferred from their intercity services to replace the C-set and K-set trains, which were also approaching end of life.

NIF trains were originally expected to begin service in 2019. However, the first NIF trains entered passenger service on the Central Coast and Newcastle Line on 3 December 2024. As of July 2025, there were six 8-car trains and 13 10-car trains operating on this line, replacing all the V-set services. NIF trains also commenced services on the Blue Mountains Line on 13 October 2025. NIF trains have not yet been deployed on the South Coast Line. A TfNSW media release dated 4 July 2025 stated that NIF ‘passenger services on the South Coast Line are still on track to commence in 2026’. This is more than a decade after the contract was awarded. TfNSW advised this audit that ‘a staged deployment of the NIF across the Central Coast and Newcastle Line, Blue Mountains Line and the South Coast Line is planned, which will reflect the availability of modified trains and the infrastructure upgrades to the network required to support the new operating model’.

The Regional Rail Fleet procurement

Just prior to the March 2015 state election, the then NSW Government made a commitment to replace the XPT regional trains if re-elected. In October 2016 and again in August 2017, this commitment was expanded to the replacement of all regional trains, which included replacing the Xplorer trains as well as the Endeavour diesel-powered trains providing intercity services (other than in the Hunter region). The expanded commitments included having a contract for the replacement trains, including their maintenance for 15 years and a new dedicated maintenance facility awarded before the end of the then current term of NSW Parliament (March 2019) and a stated NSW Government position that private financing would be used to facilitate delivery.

On 21 August 2017, TfNSW issued a request for EOI for the supply and maintenance of new rolling stock and a new maintenance facility to replace all the regional trains and the Endeavour intercity trains.

The EOI invited respondents to submit proposals outlining their capability and capacity to supply and maintain new diesel-powered rolling stock to service customers travelling across NSW and between Sydney, Canberra, Melbourne and Brisbane, as well as on intercity routes serviced by Endeavour trains. The selected proponents would also be expected to design, construct, commission and maintain a new maintenance facility at a regional location to be selected by TfNSW as well as arranging private financing. In the same month, Dubbo, where the Government owns land, was confirmed as the maintenance facility location.

The EOI closed in September 2017 and TfNSW shortlisted three of the four respondents to proceed to the Request for Proposals (RFP) stage. The RFP laid out the scope for the project for which the successful proponent would be responsible. This included:

a) the design, manufacture, supply, delivery, testing and commissioning of a new RRF (comprising long and medium-haul diesel trains and intercity diesel trains) to operate on the regional rail network, together with associated supporting equipment

b) the design, construction, testing and commissioning of a new maintenance facility located in Dubbo (including the provision and installation of all plant, equipment and materials at the maintenance facility site)

c) asset management services to maintain the new RRF, maintenance facility and other related assets for a period of 15 years

d) financing for the new RRF and maintenance facility (including asset management services).

TfNSW issued the RFP to the shortlisted respondents on 15 December 2017 and initial responses were received from two respondents on 27 June 2018 (extended from 1 June 2018 and 22 June 2018). The third respondent withdrew from the RFP process on 16 May 2018. The proposals were evaluated, including submission of best and final offers, prior to contract award.

On 13 February 2019, the TfNSW delegate executed a contract with Momentum Trains Pty Ltd (Momentum Trains), which included key subcontracts with CAF SA (rolling stock supplier), UGL Rail Services Pty Ltd (train maintenance provider) and CPB Contractors Pty Ltd (new and upgraded maintenance facilities). The NSW state election was held in March 2019.

The RRF project's estimated capital cost at contract award in February 2019 was $1.5 billion, including rolling stock, client costs and contingency. The estimate increased to $2.3 billion in January 2023. This was a 52% increase between March 2019 and January 2023.

The original completion date of December 2022 (with new regional trains due to start services in early 2023) was revised to April 2026. At the time of this report, services had not commenced.

Timeline of key events

Figure 5 shows the key events in the procurements of the NIF and the RRF.

The NSW Treasury policy that was applicable in 2012 (TPP12-15) required that, for any public infrastructure project with a total estimated capital value exceeding $100 million, a Public Private Partnership (PPP) ‘must be assessed as a potential procurement method having regard to value for money drivers’.

Following assessment and recommendations from Transport for NSW (TfNSW), the NSW Government decided not to use a PPP to procure the New Intercity Fleet (NIF) – also known as the Mariyung fleet. The Mariyung fleet was funded by the State Government (not the private sector).

TfNSW complied with all relevant process steps for key statutory and procurement policy requirements throughout the NIF planning and sourcing stages

Procurement of the NIF was subject to various legal and compliance obligations. These included requirements in the Public Works and Procurement Act 1912.

Table 2 shows TfNSW’s compliance with the relevant agency and NSW Government policies and guidelines, which included: NSW Government Tendering Guidelines (December 2011), TfNSW’s Tender Evaluation Methodology template (Request for Tender (RFT) stage only), NSW Procurement Board Evaluation Plan template (RFT stage only), TfNSW’s Procurement Policy (July 2015), the Gateway Review System for project assurance and NSW Procurement Board Directions.

Source: Audit Office of NSW analysis of NIF procurement documentation, and NSW Government procurement policies, procedures and guidelines.

In addition, the NIF procurement was subject to INSW's Health Check processes. These processes are similar to INSW’s Gateway Reviews and ‘examine the level of confidence that the project is being effectively and efficiently [managed] … and that there is confidence in achieving the best possible outcome'. The Health Checks provided an ‘independent snapshot of project status at a point in time’ and supplemented INSW’s Gateway Reviews as part of the Department’s internal governance processes.

TfNSW complied with economic, financial and probity requirements for the planning stage of the NIF procurement

This included developing a Probity Process Plan for the strategic planning and program establishment phases of the project, to promote the integrity of the appointment of consultants and contractors. TfNSW also assessed the potential risks and benefits of selecting four shortlisted tenderers following the EOI stage.

When the shortlisting decision was made, TfNSW gave due consideration to TfNSW’s Project Procurement Policy. This policy sets out that, on major design and construction projects, TfNSW will shortlist a maximum of three prospective tenderers. This is to ‘ensure appropriate competitiveness and to minimise the cost to industry of tendering’.

When choosing to select four tenderers, TfNSW prepared a discussion paper outlining the risks and benefits of shortlisting two, three or four respondents. The paper notes that shortlisting only three respondents carries the risk that if one respondent fails to submit a tender, competitiveness may be reduced in the process. The discussion paper also notes that an increase in the perceived complexity of the procurement and substantial exchange rate fluctuations may affect the capability or willingness of international parties to participate in the tender process. Accordingly, the discussion paper concludes that there are inherent risks to shortlisting only two (which was deemed unviable) or even three respondents.

TfNSW achieved its negotiation objectives for the NIF procurement by acquitting and resolving outstanding commercial departures and other non-commercial issues

The NSW Government Procurement Policy (2004) states that negotiations can be conducted with the ‘most acceptable’ tenderer if, after a competitive tendering process, none of the tenders are acceptable either due to the level of non-conformance or because they do not represent sufficient value for money.

In this case, three of the four tenderers had outstanding commercial departures at the end of the evaluation process, with the fourth tenderer not representing value for money. Consistent with the NSW Government Procurement Policy (2004), TfNSW commenced negotiations with the most acceptable tenderer, which had 23 outstanding commercial departures.

The NSW Government Procurement Policy (2004) states that the aim of negotiations is to achieve a tender that is ‘mutually acceptable’. TfNSW’s Tender Review Panel approved entering into deeper discussions and clarifications with the preferred tenderer on 27 April 2016. The Negotiation Strategy for the NIF tender was documented in TfNSW’s ‘Project Procurement Tenderer Discussion Plan’ dated 9 June 2016.

There were some relatively minor shortcomings in the Discussion Plan’s compliance with the Transport Procurement Policy (2015) and some inconsistencies with the Tender Evaluation Plan and NSW Government’s Negotiation Plan template (October 2015). Nevertheless, the outcomes of the negotiations indicated that either an ‘aspiration’ or ‘realistic’ position was reached on all negotiation points and TfNSW’s objectives from the negotiations were met, that is, several non-commercial risks were resolved, the number of commercial departures were reduced, and all outstanding clarifications and departures were resolved and closed out.

TfNSW developed comprehensive probity plans and engaged an independent probity advisor

TfNSW developed separate probity plans for the EOI and RFT stages. These plans addressed the minimum elements that the Independent Commission Against Corruption (ICAC) recommended should be included in a probity plan.

TfNSW engaged independent probity advisory services for both the EOI and RFT stages of the procurement process. This was consistent with both the TfNSW policy and the Procurement Board’s directions, which advised that a probity advisor should be considered when, among other things, a procurement process is extremely complex or there is substantial government funding involved.

During the EOI stage, the probity advisor described six probity-related matters that had to be managed. The probity advisor concluded that no probity-related issues it had been made aware of had made the EOI evaluation process unfair or inequitable. During the RFT stage, the probity advisor described probity-related matters that occurred. The probity advisor did not raise any probity-related concerns with how TfNSW managed any of these matters.

Before starting the tender process, TfNSW determined the characteristics of the NIF trains and the amenities to be provided to passengers

The NIF was designed to provide a more comfortable and modern travel experience for passengers. Specifically, these trains provide: 

• '2+2' seating
• arm rests between seats
• wider aisles and less cramped standing room
• in-seat amenities, including flip-down tray tables and in-seat power
• bicycle racks
• luggage storage.

In addition, the layout of the NIF was designed to optimise compliance with the Disability Standards for Access to Public Transport. This includes extra space for wheelchairs and prams and the inclusion of accessible toilets.

TfNSW applied a business requirements methodology, including industry soundings and limited customer engagement, to determine the specific design requirements for the NIF

TfNSW had a clear understanding of its objectives for the NIF procurement program to deliver new electrically powered trains for intercity services from Sydney to:

• the Central Coast to Gosford, Wyong and Newcastle
• the Blue Mountains to Mount Victoria
• the South Coast to Kiama and Port Kembla.

The high-level objectives of this procurement program included:

• replacing trains that were approaching (or had already exceeded) their lifespan, and were increasingly too expensive to safely and reliably operate and maintain
• growing service capacity to address population growth and emerging and predicted overcrowding
• providing passengers with improved accessibility, such as wheelchair access and accessible toilets, and improved travel information.

The specific design requirements for the NIF rolling stock procurement evolved iteratively over the course of the procurement. Key high-level requirements were articulated prior to the EOI being issued, and further refinements were made during the RFT, contract negotiation and award stages.

The requirements were informed by several key inputs, including:

• the Sydney's Rail Future: Modernising Sydney's Trains Report (June 2012), which established the expectation that the intercity fleet would remain double deck⁵
• an internally prepared Fleet Management Strategy for the electric fleet (December 2013) that was intended to outline future train requirements from 2014–36 including stabling, maintenance centres and traction supply
• an independent external Fleet Modernisation Review (February 2014) to ‘provide a strategic study of refurbishment or replacement options for NSW passenger rolling stock’
• requirements of the existing network – particularly regarding train width, platform length, and width of tunnels, electrical power capacity and stabling.

In addition and prior to the release of an EOI in August 2014, TfNSW conducted a structured program of market soundings. An industry briefing was held on 30 May 2014 and market sounding workshops were conducted with 18 major international suppliers of rolling stock, systems and financiers in early June 2014. These suppliers had been identified by the project team through initial analysis of both the local and international train markets.

Participants were invited to provide feedback on issues such as the adequacy of the initial scope and delivery strategy, potential options for financing and cost management, and key risks the procurement could face. Responses from industry participants were collated into a collection of key messages that either informed or confirmed preliminary design requirements, such as:

• the preliminary requirement for 1,200 seated passengers would require a double deck solution
• there was no single deck product that could seat 1,200 passengers in a '2+2' configuration without being longer than the maximum length specified by TfNSW
• a PPP model was considered unsuitable, especially given the tight project timeframe
• coupling the supply and maintenance of the rolling stock with the construction of the maintenance facility would reduce the attractiveness of the project to the international rolling stock market
• a maintenance term of 15 years was optimal with provisions to break, reset or extend over the period of five years that had initially been envisaged.

A report on the market sounding process was subsequently presented to TfNSW on 26 June 2014. As well as outlining a number of further steps the procurement program would undertake, this paper specifically recommends a modification to the delivery strategy to separate the construction of the maintenance facility from the supply and ongoing maintenance of the rolling stock. This delivery strategy was subsequently adopted for the NIF procurement program.

TfNSW also engaged with passengers and user groups to better understand their needs and preferences for intercity trains. However, a proposed customer experience research project was ‘wound back’ in November 2015 to limit its focus to customer attitudes to seating configuration and premium class options only. Engagement with customers was viewed as a ‘risk or issue’ to be mitigated prior to the RFT through the development of a plan to get customer input without setting expectations that their input would be included in the end product.

The customer experience research informed some business requirements decisions, such as the decision not to introduce premium seating, which was found to be of little interest to passengers.

Other customer views, such as the preference for reversible over fixed seats (where half of seated passengers in each car face backwards on each trip) were not adopted.⁶

TfNSW advised this audit that the decision to move to '2+2' seating was driven by passengers’ preferences for comfort on longer trips and dislike of the middle seat. However, this advice does not align with evidence provided to this audit dated 2012. Further, customer research in December 2015 to inform seating layout found that, for intercity passengers, standing versus seated can have a marked impact on their journey experience. This same research also concluded that while the middle seat in the row of three was not popular with passengers, it was preferable to standing. Observational research conducted at the same time ‘emphatically demonstrated’ that:

TfNSW developed a Business Operational Requirements Document (BORD) to set out the business requirements of the NIF. The BORD process, including the limited passenger engagement, resulted in key high-level requirements being identified and articulated before the EOI stage. Each of the business requirements set out in the BORD was designated as either essential or desirable. The BORD in turn formed the basis of the Train Performance Specifications used in tender documentation for the procurement.

Critically, the requirements emphasised that the new rolling stock should, where possible, meet the specifications of the existing network.

At an early stage in the procurement, the business requirements also established that the new intercity trains would be capable of driver-only operation (that is, without train guards) ‘where safe and appropriate’. This was reflected in both the EOI and RFT stages of the procurement. The implications of these requirements are discussed later in Section 3.3 of this report.

Selected key high-level requirements for the new rolling stock included that it must:

• have a ‘kinematic envelope’⁷ to allow its use within the constraints of the routes already operated by ‘Medium Electric’ class rolling stock⁸ on the TfNSW network. This would:
  • allow maximum scope for seating
  • offer space for interior features, such as wheelchair spaces, accessible toilets, luggage areas, bicycles and water bubblers
  • allow tenderers maximum space to install technical equipment in the otherwise constrained double deck envelope
  • minimise stepping distance between trains and platforms across the network.
• comply with Commonwealth legislation for disability access on public transport.
• meet specified height restrictions for overhead wiring and length restrictions for platforms (especially for short platforms such as those in the CBD tunnels) or be enabled with selective door-opening technology.

In addition, it was required that the new trains be ‘designed to cater for journeys of up to three hours and longer suburban journeys of between 20 and 50 minutes’.

TfNSW decided that seating capacity per carriage on two NIF lines could be reduced, despite having modelling showing that it would result in overcrowding on some services

The number of cars purchased under the NIF procurement program was subject to analysis that considered existing and anticipated services, including the impact on service requirements on the northern lines after the planned commencement of the North West Rail Link (Sydney Metro Northwest) in 2022.

The required number of cars to be procured reduced over the course of the procurement process. In the EOI, the initial expected order was 520 cars which was reduced to 512 cars in the RFT and the awarded contract. The number of cars was based on calculations for the rolling stock required (including a small number of spares) to replace services provided by the OSCAR and V-set trains. The size of the fleet also took into account fleet operations on the different intercity lines:

• For services from Sydney to Newcastle or the Blue Mountains, the fleet would operate using 34 10-car long-NIFs with a total length of up to 205 metres.
  • By RFT, TfNSW determined that to service the required number of passengers, long-NIFs would require a capacity of 1,200 passengers (seated and standing).
• For services to the Central Coast via the North Shore and to the South Coast, 21.5 8-car short-NIFs with a total length of up to 168 metres would be used.
  • Trains on the South Coast Line were limited to 8-cars due to platform length restrictions in the CBD tunnels from Central to Bondi Junction, as well as on some South Coast Line station platforms. The length of these trains was also limited by the available stabling facilities.
  • Short-NIFs were intended to have a capacity of 1,005 passengers (seated and standing).

TfNSW also made the decision to require '2+2' seating (consisting of a four-seat row with an aisle in the middle) across the entire intercity fleet. This decision, taken together with the planned fleet operation, resulted in a substantial reduction in seating on some NIF services compared to services provided by OSCAR trains, which provided '2+3' seating. This was particularly the case for the short-NIFs, where seating capacity was planned to reduce from 864 on OSCAR services down to a maximum of 690 on the new trains. This resulted in a 22.5% reduction in seating capacity on the South Coast and Central Coast via North Shore services where short-NIFs were to replace OSCAR trains.

The reduced seating capacity, particularly on the South Coast Line, was identified as an issue in the expert assurance report on the Final Business Case. While options had been identified to resolve the issue (such as additional services facilitated by network upgrades), no work was in scope or funded.

As a partial response to this issue, the tender documentation invited tenderers to include an option to provide '3+2' seating for short-NIFs to be considered during the tender review process.

When TfNSW prepared the NIF business cases, the adverse impacts of a '2+2' seating arrangement on overcrowding and forecast increased patronage were known.

At the time of contract award for the NIF trains, TfNSW did not have a funded program to mitigate impacts of overcrowding on peak services on the Central Coast and South Coast Lines

TfNSW sought the Minister for Transport and Infrastructure’s (the Minister) approval for the '2+2' seating specification in June 2016 on the basis that ‘a range of operational mitigations are being investigated’ to resolve the reduction in seating capacity resulting from the '2+2' layout. However, TfNSW recognised that it was possible that OSCAR trains would continue to be required to operate the affected services until those unscoped and unfunded operational mitigations were determined and implemented. The possibility of having to procure additional rolling stock was not foreshadowed as one of these mitigations.

Given customer preferences and the potential operational impacts of overcrowding, it is not clear why TfNSW chose to procure NIF trains that reduced seating capacity on peak services for two of the four intercity lines without having in place a funded program to mitigate the impacts of overcrowding.

⁵ This was reinforced through industry soundings which found that single deck trains could only accommodate the required number of seated passengers if they exceeded maximum platform lengths.
⁶ A customer experience working group was only formally established after April 2017, after contract award in August 2016. The establishment of this group was intended to ‘… ensure an improved and enhanced customer experience for intercity customers through effective engagement and customer focus of relevant NIF fleet and readiness deliverables'.
⁷ The kinematic envelope of a train is the maximum space it occupies when moving and includes the impact of any tilting and swaying that the train might do as well as the effects of any cant (slope) in the track when cornering. This is larger than the physical size of the train itself.
⁸ 'Medium Electric' refers to electrically powered medium-width trains. These trains are 3.03 metres wide and can operate on the Sydney Trains suburban network. Examples of medium-width trains in NSW include the Waratah A-set, OSCAR and Millennium trains.

Foreseeable changes to the NIF operating model, resultant delays and the cost impacts of avoidable industrial action added $1 billion to the project’s costs

The original position of the NSW Government was that NIF trains were to be driver-only operation, replacing the driver and guard operation on the existing fleet. This position was established before the EOI was issued. The EOI released in August 2014 included the design requirement that the rolling stock must include options that were capable of:

• train driver-only operation
• train driver and modified customer service guard operation
• existing train driver and guard operation.

The design requirements included that any proposed train must allow the train driver to control the passenger doors and monitor the train–platform interface without leaving the cab in all operation options. It was also a requirement that external bodyside cameras must be provided to allow the driver to monitor customer boarding and alighting via the in-cab screen display.

TfNSW understood that these design requirements had the potential to raise concerns amongst its workforce, and that there was a risk that changes to the traditional driver-guard operating model may not be implementable if industrial implications could not be resolved.

While the NIF design requirements allowed for the alternative operating models, driver-only operation was, at least initially, the NSW Government’s preferred and expected NIF operating model.

As part of its project appraisal, TfNSW prepared a risk assessment and project delivery strategy, and secured funding approval from the NSW Treasurer. However, it did not make allowances for the risks of industrial action due to the fundamental change in operating model.

Industrial relations were identified as a significant risk to the procurement project. In March 2016, almost 18 months after the release of the EOI, TfNSW provided the Minister with a written brief on the work practice changes necessary to accommodate driver-only operations. This brief sets out what is described as a ‘comprehensive approach’ to the issue. It notes that consultation is required with the relevant union under the terms of the NSW Trains Enterprise Agreement.

During this audit, senior executives at TfNSW advised the audit that the Department had weekly meetings with the Minister, and that the Minister’s office was ‘very hands on’ in the process. TfNSW did not provide evidence demonstrating the timing of such meetings or the advice given by the Department to the Minister in these meetings.

The March 2016 TfNSW brief also states that formal discussions with the union are expected to commence in June 2016 on the implementation of driver-only operation, and with an agreed timetable being proposed to ensure all industrial issues are resolved by July 2017. According to evidence submitted by TfNSW to the Fair Work Commission, a ‘lengthy process of consultation’ commenced in July 2016. The Commission found that extensive consultation had taken place since July 2016.

A briefing note to the Minister from TfNSW on 16 February 2017 notes the NSW Government’s confirmation of its continuing commitment to implement driver-only operation.

However, by June 2019, the intended operating model had changed to a driver with a customer service guard.

In November 2019, NSW Trains published a document on the NIF operating model for staff called ‘Your Guide to the New Intercity Fleet’. This document explained to affected staff that:

Under this model, drivers would have additional responsibilities, including:

• controlling the customer doors
• using CCTV to manage the platform train interface and platform departure.

In its evidence to the Fair Work Commission, the union submitted that it had not been consulted on this document and had not agreed to the revised operating model. NSW Trains advised the Fair Work Commission that consultation with the union on this model had commenced in August 2019.

Issues associated with the operation of the NIF rolling stock, particularly the role of guards, led to an extended period of industrial disruption, including a series of disputes lodged by the relevant unions with the Fair Work Commission from 16 August 2018. This audit did not examine the merits of claims made during these disputes or the conduct of the parties.

However, the scope of this audit does include the planning and procurement decisions for the NIF program, including how risks were identified and mitigated by TfNSW.

Client interests, including those of NSW Trains, were represented on various project governance committees during the development of the RFT and review of tenders. The representation was executive or technical. Early NIF program planning documents reviewed by this audit did not identify unions or operational staff as stakeholders in the process of developing design requirements. For example, two delivery strategy workshops were convened in April and May 2014. The background meeting papers for these workshops do not identify operational staff or unions as stakeholders, despite identifying a key risk that ‘industrial relations issues arise as a result of this project’. The 2023 independent Sydney Trains Review reports that issues arose over the course of the procurement that reflected ‘a lack of effective engagement with workers and their unions during the procurement process’. This included modifications to the rolling stock to support the role of guards.

This audit was not provided with evidence of any consultation with the relevant unions or operational staff on driver-only operation before July 2016. While TfNSW provided evidence that selected staff were involved in the process of developing design requirements and assessing market proposals, these were primarily senior managers and executive-level staff, and did not include staff such as drivers or guards who would be involved in operating the new trains. While the industrial relations risk was identified at a project level, the audit did not see evidence of a designated corporate ‘owner’ of this risk who was accountable for its management.

Evidence reviewed by this audit shows that consultation with the relevant union commenced almost two years after formal industry engagement and market soundings had taken place to inform the design requirements and delivery strategy for the NIF procurement. This was after completion of the RFT and selection of the preferred tenderer. This is despite TfNSW having identified the potential risk to the program posed by the interplay of industrial relations, workforce change management and design requirements, well before the EOI was issued in August 2014. Moreover, the independent review of the safety of a modified operating model that included a Customer Service Guard who would assist the driver was not conducted until September 2019, over three years after the rolling stock contract had been executed.

The Commission’s 26 August 2020 decision set out an explanation of the meaning of ‘consultation’ in the context of industrial relations. It said that consultation:

Moreover, the Commission explained that:

In 2022, the NSW Government approved an additional $1 billion project funding to cover the changes to the NIF operating model, including the impacts of the protected industrial action. The costs of the industrial action included administrative and legal costs and the costs of storing and modifying the trains. It also significantly delayed the deployment of the new trains.

The change to the operating model and the related industrial action contributed to the delay in introducing the NIF trains to service. The first NIF trains were originally expected to begin service in 2019 but commenced Sydney to Newcastle services in late 2024. On 30 June 2025, all V-set trains on the Sydney to Newcastle service were replaced by NIF trains. NIF trains also commenced services on the Blue Mountains Line on 13 October 2025. A TfNSW media release dated 4 July 2025 stated that NIF ‘passenger services on the South Coast Line are still on track to commence in 2026’. This is more than a decade after the contract was awarded. TfNSW advised this audit that ‘a staged deployment of the NIF across the Central Coast and Newcastle Line, Blue Mountains Line and the South Coast Line is planned, which will reflect the availability of modified trains and the infrastructure upgrades to the network required to support the new operating model’.

The delay of at least five years for the NIF trains to start to come into service delayed the retirement of the V-set trains and the transition of OSCAR trains to Sydney’s suburban services. This means that some intercity passengers are still travelling on V-set trains which were built between 1977 and 1989, have manually operated doors, and are therefore less accessible for passengers with limited mobility.

At the time the driver-only operating model was to be adopted, the consultation clause in the NSW Trains Enterprise Agreement required NSW Trains to consult with employees where there was a proposed change and to communicate the proposed change to affected employees. The clause did not require joint design or collaborative development of fleet with employees or unions but preserved these decisions for the employer.

The proposed new enterprise bargaining agreement for employees of both Sydney Trains and NSW Trains includes ‘a “streamlined” process for consulting on new fleets and infrastructure projects’. This now requires the collaborative involvement of staff and unions in the design of new rolling stock. A collateral Major Change agreement also sets out a consultation framework for new fleet, which recognises the value of early engagement in complex technological implementations.

Contract variations

TfNSW varied the train supply contract in February 2019 to procure an additional 42 NIF cars at an increased cost of around 28% per car, despite knowing before contract award that the NIF would cause overcrowding on services on both the South Coast and Central Coast Lines

In September 2015, the RFT detailed an initial order of 512 cars which was based on the rolling stock required to replace the OSCAR and V-set trains. This also took into account the intention to use 34 10-car long-NIFs from Sydney to Newcastle and to the Blue Mountains, and 21.5 8-car short-NIFs for services to the Central Coast and South Coast.

TfNSW also made the decision to require '2+2' seating across the entire intercity fleet, resulting in a reduction in seating on some NIF services compared to services previously provided by OSCAR trains on the South Coast and Central Coast Lines.

In November 2018, the NSW Government approved capital funding for the procurement of 42 additional NIF cars. This funding was allocated to TfNSW under the NIF component of Stage 2 to the More Trains, More Services program.⁹ Stage 2 of More Trains, More Services was intended to upgrade infrastructure on the suburban T4 Illawarra and T8 Airport Lines and intercity South Coast Line to reduce constraints on the network’s capacity. This included the purchase of additional rolling stock for both suburban and intercity services. In 2024, More Trains, More Services was renamed the Rail Service Improvement Program.

The additional 42 cars were to provide for the conversion of 21 8-car short-NIFs into 21 10-car long-NIFs for use on peak services, primarily (or even completely) on the South Coast Line. The additional cars were expected to provide a 25% increase in seating capacity on services. This was ‘to address increases in train customer demand’ following what was described by the then Minister in February 2019 as an ‘explosion in growth on the South Coast-Illawarra Line’.

TfNSW advised this audit that trains on the South Coast Line travelling towards Sydney begin to reach 100% seating occupancy once the intercity trains reach Waterfall (approximately 40 km from Sydney) and enter the suburban network. At this point suburban passengers can elect to use the intercity trains into Sydney as an alternative to the suburban trains, and this increases the pool of potential passengers on these trains.

Further, the highest loading on the South Coast Line occurred when trains were leaving the suburban station of Hurstville in the morning peak (approximately 15 km from Central Station). In 2016, train loads at Hurstville regularly exceeded 135% of seating capacity.¹⁰

In March 2016, prior to the award of the NIF rolling stock contract in September 2016, multiple trains leaving Hurstville in the morning peak were over the 135% threshold. These were the:

• 8.04am from Kiama – 147%
• 8.24am from Dapto – 141%
• 8.41am from Thirroul – 171% (also 158% loading at Wolli Creek)
• 8.44am from Kiama – 137%.

The loading at Hurstville for the 8.41am service exceeds the threshold at which displacement occurs, and passengers may be unable to board the train due to the level of overcrowding. However, TfNSW still elected to reduce seating capacity by moving to a '2+2' seating configuration for the NIFs.

As a result, in February 2019, TfNSW varied the existing contract with RailConnect to procure an additional 42 cars, taking the total order from 512 to 554 cars and resulting in approximately 3,440 additional seats.¹¹

The announced total contract price increase of the procurement was $130 million. When contingencies and client costs were added, the overall impact on the NIF program capital cost was an increase to $180 million.

Based on information in project deeds, on average, the price per car for the initial 42 additional cars was around 28% higher than the price in the original order of 512.

The number of cars purchased under the NIF procurement program was subject to analysis that considered existing and anticipated services, including the impact on service requirements on the northern lines after the planned commencement of the North West Rail Link (Sydney Metro Northwest) in 2022.

To provide increased services on the Central Coast Line, TfNSW varied the train supply contract again in September 2021 to procure additional NIF rolling stock at an increased cost per car of around 63%

TfNSW advised that, in 2021, analysis showed that the opening of the Sydney Metro City and South West had fundamentally changed travel patterns on Sydney’s North Shore. Prior to this time, TfNSW intended to keep operating the OSCAR fleet (which has 25% more capacity than an 8-car short-NIF) on the Central Coast via North Shore Line services.

However, as heavy rail train patronage was forecast to significantly reduce with the opening of the Metro, TfNSW decided to use NIF trains on this line and use the OSCAR trains to meet increasing growth on the suburban network. As a result, more NIF cars were procured in September 2021.

TfNSW advised that using the NIFs on the Central Coast via North Shore Line services also ensured that the entire electric intercity fleet would be homogenous, generating maintenance efficiencies for Sydney Trains and unlocking operational benefits by removing the crewing and industrial relations complexities associated with retaining a small number of OSCAR trains as part of the intercity fleet. The veracity of the operational efficiencies and benefits has not been audited.

As a result, in September 2021, an additional 56 NIF cars were ordered under Stage 3A of More Trains, More Services. This represented an increase of approximately 4,590 seats on the Central Coast Line. The additional 56 cars were intended to provide NIF trains for the Central Coast Line commencing in 2024.

Based on project deeds, on average, the price per car for the 56 additional cars was around 63% higher than the price in the original order of 512.

This additional procurement took the total NIF fleet from 512 cars under the initial contract to:

• 554 cars with the additional 42 cars ordered under Stage 2 of More Trains, More Services
• 610 cars with the additional 56 cars ordered under Stage 3A of More Trains, More Services.

TfNSW did not develop separate business cases for the acquisition of additional NIF cars, and has not provided a value for money assessment justifying the cost of the variations

Both Stages 2 and 3A of the More Trains, More Services initiative were subject to separate business cases and assurance reviews conducted under the INSW Infrastructure Investor Assurance Framework. The business cases for Stages 2 and 3A included the NIF procurements together with the much larger procurements of suburban trains, and the NIF element was not separated out for the economic and financial assessments.

The audit has not seen evidence of separate business cases for each of the variations to increase the number of NIF cars. Nor has TfNSW provided a value for money assessment of the variations justifying the apparent high unit cost per car negotiated with the rolling stock supplier, compared to the cost per car in the original contract, or the cost impact on enabling works.

The conversion of 8-car to 10-car NIF trains will limit services to underground stations and require additional capital works to lengthen platforms and reconfigure enabling infrastructure

The initial decision to source 8-car trains had been justified, particularly for the South Coast Line, partly on the basis that these trains serviced underground stations on the Eastern Suburbs and City Circle Lines, not all of which could accommodate the longer 10-car trains.

The extension of 8-car trains to 10-car trains will result in those services not being able to use all the underground platforms on those lines. Consequently, for example, South Coast Line services that previously ran to Bondi Junction will terminate at the Sydney Terminal, with passengers being required to transfer to another train. This will effectively reduce the scope of services provided by the NIF.

This has contributed to the need for capital works to be conducted on Sydney Terminal platforms 9 to 11 (as well as related infrastructure) under the Sydney Terminal Area Reconfiguration Project. Additional capital works will also be required for platforms and stabling facilities on the South Coast Line.

These additional capital works were not included in the business case for the NIF. On the contrary, the expectation was expressly that no platform extension would be required to operate the NIF. Similarly, the lengths of the NIF trains were specified to minimise impact upon stations and stabling locations; therefore, no capital was included in the business case for additional stabling.

Enabling works

TfNSW did not include the full scope and cost of enabling works to inform the investment decision to procure the NIF rolling stock

In addition to the purchase of new rolling stock, enabling works were necessary for the operation of the rolling stock.

In August 2015, TfNSW estimated the total capital cost of enabling works in the Final Business Case. In September 2016 at contract award, the list of enabling works had grown and the capital cost for all the enabling works (including contingencies) had increased by 55% to $1.1 billion.

At contract award, in September 2016, the capital cost of the initial fleet of 512 NIF cars was $1.3 billion, which was lower than estimated in the Final Business Case. This afforded capacity for additional enabling works to be added to the NIF project scope without exceeding the budget allocation at that point in time. This is distinct from the purchase of the additional NIF cars that were initially funded from More Trains, More Services.

The estimates used by TfNSW in August 2015 for enabling works understated the costs by 49% and hence overstated the economic benefits of NIF.

TfNSW increased the estimated cost of route clearance work on the Blue Mountains Line to $149 million, 72% more than the initial estimate made at NIF pre-contract award

TfNSW procured the NIF trains with full awareness that the width of the rolling stock would require route clearance, including tunnel widening on some routes, particularly between Springwood and Mt Victoria on the Blue Mountains Line. Over the course of the procurement, some media reporting suggested that TfNSW had overlooked these implications.

The 2014 NIF business requirements included that the rolling stock comply with the ‘medium electric’ structure gauge to maximise internal space and minimise stepping distance between car and platform. The medium width is also consistent with the suburban and OSCAR trains that provide intercity services on other lines.

When the procurement commenced, under existing route standards, trains classed as ‘medium electric’ could not operate west of Springwood in the lower Blue Mountains. While the line could allow V-set trains and all diesel trains, including the XPT, Xplorer and freight trains, it was not capable of accommodating the ‘kinematic envelope’ of the NIF trains.

An engineering study concluded that the route could be cleared for medium-width rolling stock as far as Mt Victoria, west of Katoomba. The funding envelope for the NIF program included $40 million for this work between Springwood and Mt Victoria, which was considered by TfNSW to be ‘minor route clearance work’ and included alterations to stabling and track layout at Mount Victoria.

Route clearance beyond Mt Victoria was considered ‘significantly more onerous’ due to the constraints of the Zig Zag tunnels (or ‘Ten Tunnels Deviation’), the dimensions of which prevented the operation of medium electric trains.

TfNSW understood that providing NIF services only as far as Mt Victoria would lead to a reduction in intercity train services on the Blue Mountains Line. TfNSW also recognised that Blue Mountains route clearance to Lithgow was a program risk as it constituted a potentially related project that was not within the initial scope of work for the NIF program. Accordingly, further planning work was undertaken from 2015 to 2016 to explore options for continuing services to Lithgow.

These options included a rail coach service between Mt Victoria and Lithgow, continuing local narrow-width train services, or additional route widening.

On 4 February 2016, TfNSW undertook the development of scoping and investigations reports that considered options for servicing Lithgow and included the development of the required scope of works, costing and benefits for each option.

In May 2016, an options paper proposed that there was an acceptable business case for performing route clearance work to extend NIF services to Lithgow. It set out three options:

• Sufficient route clearance to allow NIF trains to run between Mt Victoria and Lithgow but with no passing from any train on the opposite track. This option was costed at $28 million.
• Sufficient route clearance to allow a NIF train and a narrow-width train to pass on the two tracks between Mt Victoria and Lithgow. This option was costed at $72.4 million.
• Sufficient route clearance to allow two NIF trains (or any other medium-width trains) to pass at any point. This ‘dual line running with passing’ option was costed at $288.5 million.

The economic assessment undertaken indicated that the minimum scope route clearance option, which was costed at $28 million, had economic merit. Based on this assessment, in May 2016, TfNSW endorsed NIF services to extend to Lithgow.

In 2020, TfNSW estimated the total cost of the Blue Mountains Route Clearance work to be $149 million – a 72% increase over the initial estimate made at pre-contract award in June 2016.

In 2018, TfNSW announced that a new ‘sub-medium’ rolling stock standard would be introduced to the metropolitan heavy rail network. Sub-medium rolling stock would be required to comply with the medium electric rolling stock standard in all regards (for example, they have the same width), except that they would operate with a different kinematic response and comply with narrower kinematic tolerances under certain prescribed track conditions and speeds. A maximum speed limit of 50 km per hour was established for sub-medium rolling stock on prescribed tracks. The prescribed tracks included both the east- and west-bound tracks between Mt Victoria and Lithgow.

Imposing a 50 km per hour speed limit allowed NIF trains to operate through the Ten Tunnels Deviation without the restriction of single-line running (that is, no passing) through the tunnels, reducing the impact on services operating in the opposite direction.

There has been a lack of transparency about the estimated total capital cost of the NIF program over time, which increased from $2.9 billion in 2019–20 to $4.5 billion in November 2024

With a procurement program of this complexity, it is not unreasonable that there will be changes to cost estimates over time. However, both the changing scope and increasing costs of the NIF program (including after the award of the rolling stock contract) and different figures used in different sources of government information, has made it extremely difficult to accurately track the estimated and actual total cost of acquiring and introducing the NIF trains into service – and therefore considering if value for money has been demonstrated.

The NIF procurement process was first announced by the NSW Government on 8 May 2014 with an estimated cost of $2.8 billion. This would cover the capital cost of 520 cars, contingencies and client costs, but exclude a new maintenance facility and other enabling works. In August 2015, the approved funding for the program was revised to $3.9 billion (a 40% increase on the original estimated cost).

The scope of included works in September 2015 was limited to:

• a fleet of 512 new cars, including two driver training simulators
• dedicated maintenance facility
• a limited number of enabling works, including clearance work and upgrades to stabling facilities.

This increase in estimated capital cost was reflected in the Audit Office’s 2014-15 financial audit volume for the Transport cluster. The report notes that:

The contracted price for the initial fleet of 512 cars was substantially lower than had been estimated when the business case was developed. This afforded scope for additional enabling works to be added to the program scope without the program going over its allocated budget.

In addition to the enabling works added to the program scope before the rolling stock contract was awarded, further budget has been committed, including for the additional rolling stock procured under Stages 2 and 3A of More Trains, More Services. This includes additional platform work, as well as additional funding for power supply upgrades and for an upgrade to the NIF maintenance facility.

NSW Budget Papers from 2019–20 to 2022–23 report that the NIF program had an estimated total capital cost of $2.9 billion. Within this period, a series of new NIF-related spending commitments were reported, including:

• 2018–19 NSW Budget Half-Yearly Review – new $180 million commitment and noted ‘higher capital spending … on the procurement and delivery of new intercity trains … under the More Trains, More Services program’
• 2020–21 NSW Budget – new $1.1 billion commitment (details not specified)
• 2021–22 NSW Budget – new $280 million commitment (details not specified).

The 2022–23 NSW Budget Papers state that the estimated total capital cost of the NIF program is ‘under review’. However, no estimated total cost is provided in the 2023–24, 2024–25 or 2025–26 NSW Budget Papers on the grounds that the procurement is a ‘rolling program’.

The 2025–26 NSW Budget Papers state that the estimated expenditure to 30 June 2025 was $3.3 billion, with an estimated forward expenditure of $714.5 million over the four years to 2028–29. This indicates a minimum total spend of approximately $4.0 billion for the project.

TfNSW internal budget reporting in November 2024 suggests an estimated total capital cost of $4.5 billion.

⁹ The More Trains, More Services initiative was a rolling multi-stage program of works that commenced in 2016 to ‘simplify and modernise the rail network’, including through timetable changes, infrastructure improvements and new rolling stock.
¹⁰ A load factor of 100% means that every passenger will get a seat. TfNSW advised that a load factor of 135% is the benchmark at which crowding is considered ‘operationally unreliable’ – that is, that passengers experience crowding and dwell times at stations become long enough to impact on-time running. At 170% loading, passengers experience ‘displacement’ and are unable to board the train.
¹¹ TfNSW advised that each new car would represent 81 or 82 additional seats.

The NSW Treasury policy applicable in 2017 (TPP17-07) required that, for any public infrastructure project with a total estimated capital value exceeding $100 million, a Public Private Partnership (PPP) ‘must be assessed as part of the development of a project’s strategic business case and give regard to value for money drivers’.

Following assessment and recommendations by Transport for NSW (TfNSW), the NSW Government decided to use the PPP approach to procure the Regional Rail Fleet (RRF), resulting in a Design, Build, Finance and Maintain contract being awarded to Momentum Trains Pty Ltd (Momentum Trains). The Project Summary prepared in accordance with TPP17-7 is publicly available on NSW Treasury’s website. The Project Documents, with confidential information redacted, are available on the TfNSW website.

TfNSW complied with all relevant process steps for key statutory and procurement policy requirements throughout the RRF planning and sourcing stages

Table 3 shows TfNSW’s compliance with the relevant agency and government policies and guidelines, which included: NSW Government Tendering Guidelines (December 2011); NSW Public Private Partnerships Guidelines 2017 (TPP17-07); NSW Treasury Template for PPP Bid Evaluations (Request for Proposals (RFP) stage only); TfNSW’s Procurement Policy (2016); the INSW Gateway Review System for project assurance; and relevant NSW Procurement Board Directions.

Source: Audit Office of NSW analysis of RRF procurement documentation, and NSW Government procurement policies, procedures and guidelines.

The RRF procurement was also subject to the INSW Health Check processes. Health Checks are an ‘independent snapshot of project status at a point in time’ and supplement INSW’s Gateway Reviews as part of the Department’s internal governance processes.

TfNSW complied with the economic, financial and probity requirements for the planning stage of the RRF procurement

TfNSW developed a Probity Process Plan for the strategic planning and program establishment phases of the project, to promote the integrity of the appointment of consultants and contractors. It also completed a cost-benefit analysis (including a pre-tender cost estimate) as part of its strategic planning.

TfNSW achieved its negotiation objectives for the RRF in compliance with its procurement policy and the Negotiation Plan

After TfNSW selected and recommended a preferred proponent, the NSW Government approved TfNSW entering negotiations with the preferred proponent to resolve unresolved commercial and non-commercial issues. Following NSW Government approval, TfNSW prepared a Negotiation Plan, which included the objective of ensuring a value for money outcome for the State.

The outcomes of the negotiations were reported to the project’s multi-agency steering committee on 29 January 2019. The committee noted the report of the negotiation team and agreed that TfNSW was in an appropriate commercial position to award a contract to Momentum Trains.

TfNSW developed a comprehensive probity management plan and engaged an independent probity advisor

TfNSW developed a probity plan covering both the EOI and RFP stages. The plan addressed the minimum elements that the NSW Independent Commission Against Corruption (ICAC) recommended should be included in a probity plan.

TfNSW engaged independent probity advisory services for both the EOI and RFP stages of the procurement process. This was consistent with both the TfNSW Procurement Policy (2016) and the Procurement Board’s 2013 Direction on ‘Engagement of probity advisers and probity auditors’ (PBD-2013-05), which states that a probity advisor should be considered when, among other things, a procurement process is extremely complex or there is substantial government funding involved.

The probity advisor provided regular oversight and advice during the procurement process, which aligned with good practice guidance provided by the ICAC. Members of the evaluation teams were able to raise any of their probity concerns directly with the probity advisor.

During the EOI stage, the probity advisor concluded that no probity-related issues it had been made aware of had made the EOI evaluation process unfair or inequitable.

During the RFP stage, the probity advisor produced five reports at various stages of the RFP process. The probity advisor did not raise any concerns with how TfNSW managed any probity-related matters.

Before starting the tender process, TfNSW determined the characteristics of the RRF trains that would be provided to passengers

RRF trains will offer a more comfortable and modern travel experience for passengers. Specifically, they will provide improved accessibility features including:

• single deck carriages
• accessible spaces with tray tables
• priority seats
• accessible toilets
• wider doors than the current fleet
• real time, internal and external visual displays and announcements
• hearing augmentation in all passenger areas.

In addition, the new trains are expected to have:

• charging points
• seat pockets and reading lights
• luggage storage
• selective door opening for short platforms
• retractable external steps.

Unlike its XPT (eXpress Passenger Trains) predecessor, the new RRF will not have sleeper compartments, which were a feature of the previous regional trains for overnight travel from Sydney to Brisbane, Sydney to Melbourne, Melbourne to Sydney and Casino to Sydney. Instead, the RRF will have reclining seats.

The compressed timeframe for contract award increased the risks of TfNSW not fully identifying RRF project business needs

The timeframe for the procurement of the RRF was time constrained.

On 14 August 2017, the NSW Government announced that:

• the XPT, Xplorer and Endeavour trains would be replaced with a new fleet of diesel trains with a contract awarded in early 2019
• the new fleet would be procured through a Design, Build and Maintain (DBM) contract that would include a new regional maintenance facility
• private financing would be used to facilitate delivery of the trains and a new maintenance facility
• Dubbo had been identified as the site for the new regional maintenance facility
• the new trains would be operated by NSW Trains, a government-owned operator.

This announcement meant that the operation of the new trains for regional services would remain in government ownership, rather than being included as part of the procurement, which was a departure from TfNSW’s planning to that point.

The RRF procurement would be based on a PPP model. Given the compressed timeframe, the project’s complexity, and the widely known inflexibility of the PPP procurement model, TfNSW should have been proactively identifying risks and planning its response.

Excluding operation of the RRF from the PPP increased budget risks significantly, and TfNSW did not effectively manage these risks, or brief the NSW Government accordingly

In August 2017, TfNSW announced that NSW Trains would continue to operate regional rail services, while the procurement of the RRF trains would be done through a Design, Build and Maintain (DBM) contract using private financing through a PPP. This differed from TfNSW’s prior planning, which was for the contractor to design, build, operate and maintain the fleet.

By removing the operational risk from the contractor, TfNSW assumed that risk while the contractor assumed responsibility for design to meet the needs of the operator. TfNSW acknowledged that the decision to preclude operation of the fleet from the PPP increased the risk of additional costs to government if the contractor was delayed or the project scope was later varied for any reason.

The PPP arrangement that was used for the RRF required TfNSW to prepare a performance-based specification. Without sufficient detail to ensure that all the needs of the operator were fully described, there was an increased risk of dispute over whether the contractor’s design solution met the operator’s requirements, as compared to a PPP with a scope that included contractor responsibility for both design and operation. Where private financing is involved, such as in a PPP model, this risk is further magnified by the additional financing costs in the event of project delays.

The audit sought, but was not provided with, documented evidence that TfNSW had briefed the Minister on the additional risks and consequences of the NSW Government’s position on the use of private financing, and the decision to exclude operation from the contract scope.

TfNSW did not apply lessons learnt from previous PPPs to effectively manage project-specific risks associated with the procurement of the RRF

In a TfNSW learnings report on the Waratah trains PPP and the Inner West Extensions Light Rail Rolling Stock Procurements (dated 6 June 2014), the following key learnings were made about the use of PPPs for the procurement of rolling stock:

• ‘Have performance-based requirements, but a contract that provides absolute clarity’
• ‘Engage early with stakeholders and understand needs before detailed design starts’
• ‘PPP increases complexity and may not be suitable for rolling stock within an existing network due to the high risk’.

During the procurement of the RRF, TfNSW referred to previous lessons learnt from the Waratah, Millennium, OSCAR (Outer Suburban Cars) and Hunter rolling stock procurements. These lessons are not contained in any publicly available documents.

TfNSW also conducted workshops on lessons learnt from the New Intercity Fleet (NIF) project. These were directed at supporting the preferred procurement strategy. These included workshops held in June and September 2017 on procurement strategy/models, risk management and PPP documentation.

The Regional Rail Register of Lessons Learnt dated 3 October 2017 included the following lesson:

TfNSW could not provide evidence that it engaged effectively with operational staff such as drivers and guards when developing the RRF train specification prior to contract award

The need to engage with key stakeholders, including operational staff, in a PPP procurement was identified in lessons learnt considered by TfNSW.

TfNSW advised that there was significant operator involvement during the development of the train specification, RFP documentation, proposal evaluation and contract finalisation process. This included executing a Project Agreement with NSW Trains in June 2017, which outlines its involvement in the RRF procurement. The agreement lists key NSW Trains personnel who would be involved in the stages of developing the business case, the RFP and post-contract award procurement activities. The listed personnel, based on their position descriptions are at managerial or technical level.

Refinement of the train concept design during the contract finalisation process was heavily influenced by NSW Trains. For example, there was a late change (in Q4, 2018) to the requirements for a second crew seat, from a flip-down seat mounted on the back wall to a full, second ‘driver's seat’ being included in the specification and concept design.

However, TfNSW did not provide this audit with evidence of similar engagement with operational staff, such as drivers, guards and station staff, including in meeting agendas, notes and outcome reports.

Contract variations

TfNSW is in dispute with the contractor regarding RRF design clarifications

To date, multiple contract variations have been approved by TfNSW. A sampling of these variations indicates that they are detailed, justified and approved in accordance with TfNSW procedures and delegations. One of the variations is the Bi-mode propulsion option, which enables operation by overhead electricity as well as diesel power. This makes up around 65% of the total cost of the approved variations. Proponents were required to price this option in their proposal, but it was not part of the scope at the time of contract award. This approach provided some competitive price tension. TfNSW exercised this option as a contract variation shortly after contract award.

TfNSW is currently in dispute with the contractor, Momentum Trains, regarding design clarifications directed by TfNSW. The claims include the costs (such as prolongation and financing) arising from delays to finalising the rolling stock design. At the end of September 2025, this dispute is ongoing. This audit does not provide an assessment and should not be interpreted as suggesting a view on the validity of the position of any party to the dispute.

Enabling works

TfNSW did not include the full scope and cost of enabling works to inform the investment decision on the procurement of the RRF

At the time of contract award in February 2019, TfNSW had budgeted $44.5 million for enabling works. However, in early 2021, TfNSW identified a number of additional works that were essential for the new regional rail rolling stock to operate on the train network. These works were in addition to the enabling works budgeted at contract award.

Just prior to contract award, enabling works attributable to client costs were estimated at $44.5 million, and formed part of the overall project estimate on which the decision to award the contract was based. TfNSW advised that the breakdown of the $44.5 million¹² primarily consisted of extensions and other minor modifications to the Moss Vale stabling facility. In March 2020, TfNSW commenced scoping enabling works. During 2021, the RRF project team identified significant additional enabling works that had not been included in the overall project estimate on which the decision to award the contract to Momentum Trains was based.

TfNSW is separately procuring the enabling works, required for the new RRF to operate on the network, via an established TfNSW Incentivised Delivery Entity. The enabling works involve works of varying complexity, including works at up to 120 stations, six stabling locations and other locations, such as training sites spanning three states.

The essential works were grouped into five categories:

• stopping, boarding and alighting
• stabling capacity
• provisioning
• operability of stabling and maintenance sites
• transition between fleets.

The explanation TfNSW provided for the increased scope of enabling works was that the original scope:

• included an assumption that ‘like-for-like’ fleet procurement would limit the need for significant enabling works
• was based on limited information (for example, the need for stabling at Wollongong was not understood)
• did not fully capture the required scope.

In June 2022, the estimate for the full scope of enabling works was further refined. The essential items of work were described as follows:

• Platform Works – Upgrades – 11 platforms
• Platform Works – Adjustments – 43 platforms
• Lighting Upgrades – 144 platforms
• Stopping markers on platforms – 549 markers
• Stopping markers off platforms – 139 markers
• Stopping markers – Stabling – 50 markers
• Automatic Selective Door Opening (ASDO) – Off train infrastructure – 188 beacons
• Automatic Train Protection (ATP) – balises¹³ and signage – 1 unit
• Stabling – Wollongong – 1 site
• Stabling – Moss Vale – 1 site
• Stabling – Orange – 1 site
• Stabling – other locations – 11 sites
• Refuelling – Grafton – 1 site
• Refuelling – Southern Cross (Melbourne) – 1 site
• Simulator Trailer integration – 5 sites.

The need for the additional enabling works was further detailed as being driven by:

• the new trains being longer and, in some cases, not fitting in existing stabling
• the new trains’ ability to use Diesel Exhaust Fluid
• changes in position of decant points, water points and diesel fill points
• changes to location on platforms at which trains stop (and doors open)
• differences in cab sightlines
• differences in the way the trains cast light onto surrounding areas at stations
• the new trains not having auxiliary engines that can be left running overnight
• the introduction of ASDO.

In January 2023, the NSW Government approved an additional $826 million capital funding to deliver the RRF, with the cost for the additional enabling works forming the largest component of this additional funding.

TfNSW advised this audit that the revised scope of the enabling works resulted from a government decision in March 2023 to make service plan changes and add network upgrades to the project scope. These changes required the project to undertake additional works on the network. However, at the time of contract award (in February 2019) it was not possible to foresee this strategic change and so these additional enabling works were not included then.

TfNSW has not provided evidence of the service plan changes, or the impact of those changes on the scope of enabling works. However, the detailed changes proposed for the enabling works were first identified and quantified in November 2021 and further refined in June 2022 – well before March 2023.

In addition, TfNSW was aware of the configuration of the rolling stock being offered by Momentum Trains in October 2018, when Momentum Trains was recommended as the preferred proponent. At that time, TfNSW would have known the dimensions of the new trains compared to the old fleet and their various configurations when in operation.

TfNSW would also have known how each carriage in the new trains would be equipped with traction and auxiliary engines and fuel tanks, meaning that each train would require different refuelling points compared to the old fleet. In comparison, the XPT trains, for example, are driven by two power cars (engines) – one at each end of the train with their own fuelling point.

Further, at that time, there were no contemplated timetable changes on regional and intercity services other than one additional one-way daily service from Dubbo to Sydney and one additional Sydney to Bathurst return service. This means that TfNSW would also have known the number and composition of the trains running on each line.

TfNSW should have been able to determine, prior to any recommendation made for awarding of a contract, that the $44.5 million allowance for enabling works was inadequate to meet the specific configuration needs of each timetabled train on all of the routes to be serviced by the new rolling stock. Figure 6 details some of the differences between the XPT, Xplorer and the RRF, which would have been known to TfNSW before the contract was awarded, and which would necessitate enabling works to ensure that the new trains could fit existing platforms and could be fuelled effectively.

¹² The breakdown of the enabling works adds up to $44 million, which was estimated in 2021. At the time of contract award this was reported as $44.5 million. The difference may be due to rounding but we are unable to reconcile these numbers.
¹³ ‘Balises’ are small electronic transponders that are installed in a train track between the rails. A balise transmits lineside speed and signaling information to a train as it travels over the top of the balise. This information is then passed to an on-board computer which is part of the Automatic Train Protection system which is used to monitor and restrict the speed of the train.