RMS’ SMC contract management includes most elements of good practice, including governance and dispute resolution mechanisms. However, key elements are missing which reduces its effectiveness.

Roads and Maritime Services (RMS) is responsible for the Sydney region State roads network This includes over 2,800 kilometres of roads and associated road corridor infrastructure such as bridges, tunnels and drainage structures. RMS divides the network into three geographical areas: south, west and north zones.

In 1995, RMS first outsourced road corridor infrastructure maintenance for the north zone through a Performance Specified Maintenance Contract (PSMC). The current 10-year PSMC for the north zone will expire in October 2018. Prior to November 2013, RMS maintained roads in the south and west zones through its Road and Fleet Services unit. 

In November 2013, RMS outsourced road maintenance services for the south and west zones using Stewardship Maintenance Contracts (SMC). The contracts run for seven years with an option for a further three years at RMS’ discretion. RMS estimated that the annual cost of these contracts was around $240 million in total. In March 2018, the contract prices are due to be reset by negotiation to reflect the contractors’ experience with, and better information about, the road networks and routine maintenance requirements. 

The SMC model adopted stewardship principles to improve value for money. RMS defined stewardship principles as a broad set of values, attitudes and behaviours, required of the contractor to effectively manage the assets on behalf of RMS. The SMC also includes commercial principles, such as linking risk to reward, and a performance framework where outcomes drive performance.

This audit assessed whether RMS had effectively managed the outsourcing of road maintenance in the Sydney region south and west zones. In making this assessment, we answered the following questions:

1. Did RMS justify the decision to adopt the SMC model?
2. Do SMCs include key performance indicators (KPIs) and incentives which promote efficiency and effectiveness? 
3. Does RMS collect high quality information on contractor performance and take action to correct performance deficiencies?
4. Are the expected benefits being achieved?

The Stewardship Maintenance Contract

RMS justified adopting the SMC model and included KPIs to drive efficiency and effectiveness

The SMC model includes features that RMS had not previously used for road maintenance contracts. These included adopting stewardship principles and transferring price risk to the contractor over time as the contractor becomes familiar with the assets being maintained.

The SMC model meets RMS’ requirements for flexibility in pricing models, the need for collaboration in asset maintenance planning, promoting innovation and effective performance management.

RMS used many good practices to develop the SMC model, including:

• preparing a robust business case comparing the SMC model to RMS maintaining the road network itself, as well as assessing whether two other contracting models
  (traditional and alliance) would meet its requirements
• assessing experiences with similar arrangements in other jurisdictions and identifying elements that worked to get the best outcomes
• developing a robust performance framework, which included a mix of efficiency and effectiveness KPIs that reflected NSW Government policy and RMS priorities
• incorporating risk and reward incentives delivered through cost sharing arrangements which change as the contract matures
• using a contract duration that supports RMS priorities and provides an incentive for better quality outcomes.

RMS uses data provided by the contractor to measure performance and calculate payments to the contractor. The SMC includes a specific sanction if RMS finds that the contractor provided incorrect performance data, but no specific sanction if the contractor provides incorrect financial data. If RMS finds that the contactor provided incorrect performance or financial data, RMS can only recover over-payments which may have been made using the incorrect data.  

To provide a stronger incentive for the contractor to ensure data it provides is accurate, RMS should consider whether to incorporate stronger sanctions when negotiating the commercial reset due in mid-2018 for south and west zones. RMS should also consider this for the new contract for the north zone when the current PSMC contract expires in October 2018.

RMS' contract management approach and benefits realization

RMS can improve the effectiveness of its oversight and management of the SMC

RMS does not have SMC specific contract procedures to guide its contract managers. Consequently, RMS has not exercised several significant SMC requirements, such as having the contractors account for an efficiency dividend in their pricing at the start of each three-year works period. Effective contract management should be supported by contract specific procedures, with explanations of, and allocation of responsibility for, the various interventions that RMS may be required to exercise in the SMC.

Performance and financial reporting under the SMC is based on a mix of RMS and contractor provided data. While there are a range of audits of contractor provided performance and financial data that RMS can conduct each year under the SMC, it does not have a schedule of audits it will conduct and when.  
During the first year of the SMC, RMS commissioned some limited audits of financial data. In the first three years of the SMC, RMS did not conduct any audits of performance data. Had there been SMC specific procedures in place, this would have reduced the risk of RMS not implementing a systematic audit program to give it reasonable assurance on the quality of the data that the contractor has provided. This is important because the data is used to measure performance and calculate contractor payments.

RMS has been aware of data quality issues since 2015. While RMS advised that it commenced addressing some data quality issues in response to a series of reviews conducted in 2015, a recent internal audit report indicates that RMS has not resolved the data quality issues.  

RMS achieved benefits in the first year, but has not tracked benefits since

As part of the business case, RMS agreed to implement a benefits realisation strategy, including a benefits tracking tool. RMS commenced tracking benefits, but did not establish a comparative baseline pre-SMC on non-financial benefits, and has not tracked benefits past year one.

In 2015, a benchmarking study commissioned by RMS found that it had achieved 80 per cent of the expected recurrent cost savings and other benefits, such as improved workplace safety, in the first full year of the SMC. However, there was no clear baseline to measure
non-financial performance. The study was qualified due to gaps in available data. The study also did not reconcile the actual one-off transition costs to the business case estimate.

During the course of the audit, RMS advised that it intends to repeat this type of study to determine whether it has achieved all expected benefits (and their value), and that it would use the results to inform its negotiation with the SMC contractors as part of the commercial reset due in mid-2018.

Roads and Maritime Services is responsible for the State Roads network in the Sydney region

Roads and Maritime Services (RMS) is responsible for the Sydney region State roads network. This includes over 2,800 kilometres of roads and associated road corridor infrastructure such as bridges, tunnels and drainage structures. The network is divided into three geographical areas: south, west and north zones. Prior to November 2013, RMS maintained roads in the Sydney region south and west zones through its Road and Fleet Services unit.  

In 1995, RMS first outsourced road corridor infrastructure maintenance for the north zone through a Performance Specified Maintenance Contract (PSMC). The current 10-year PSMC for the north zone will expire in October 2018. This contract is worth around $35 million per annum.  

NSW Government priorities and road maintenance

Efficient and effective road maintenance contributes to the following NSW Government priorities:

• improving road travel reliability
• ensuring on-time running of public transport
• reducing road fatalities
• improving government services
• keeping our environment clean.

The NSW Commission of Audit recommended outsourcing the maintenance of State roads

The NSW Commission of Audit in its Final Report on Government Expenditure (May 2012) recommended contestability as an appropriate strategy to consider for improving road maintenance service delivery for State roads.  

The Commission benchmarked RMS’ road surface quality and cost per lane kilometre against those of Western Australia, Victoria, and Queensland. This showed that New South Wales lagged the other states on both these measures.  

The Commission noted that RMS had conducted two independent reviews to examine the potential for extending road maintenance contestability. The Commission found that there was inadequate and inconclusive benchmarking to establish the efficiency of RMS’ Road and Fleet Services unit when compared to outsourcing. It recommended that RMS bring forward a proposal to conduct a competitive tender for the road maintenance of the Sydney region south zone road network to inform the feasibility of a progressive rollout of road maintenance contestability across other areas of the State. In August 2012, the NSW Government adopted the Commission’s recommendation.

The NSW Government introduced road maintenance contestability through Stewardship Maintenance Contracts

In April 2013, the NSW Government announced that it would introduce road maintenance contestability across the Sydney region, using a Stewardship Maintenance Contract (SMC) model to improve value for money. In doing so, it excluded RMS’ Road and Fleet Services unit from tendering.  

The SMC model is based on the following key commercial and performance principles set by RMS:

• performance driven by outcomes
• flexible and adaptable
• transparent and measurable
• linking risk to reward
• continuous improvement
• criteria for selection of, and transition to, different payment models.

The following key stewardship principles underpin the SMC’s broad set of values, attitudes and behaviours, which are required of the contractor to effectively manage the assets on behalf of RMS:

• putting RMS’ customers (road users and the general public) first and being responsive to them
• being responsible and accountable for the outcomes resulting from the management of the assets
• managing the assets diligently, efficiently and effectively with limited direction from RMS
• working collaboratively with RMS to deliver services that are tailored to meet RMS’ evolving needs
• acting with integrity and transparency in performing the services
• performing the services in the best interests of RMS and asset users.

Other key features of the SMC include:

• service requirements which describe the scope of the services, and the standards the contractor must meet
• a commercial framework which defines how payments are structured, how performance assessment will impact on payments and outlines the key commercial principles. SMCs primarily divide payments into two main mechanisms, these being the priced component (or fixed price) and the target cost calculated as follows:
  • fixed price – the contractor is paid a pre-agreed amount for specific services being provided, regardless of the actual costs incurred
  • target cost – RMS and the contractor agree on a target cost for a project, and any cost overruns or underruns are shared between them
• a performance framework which provides mechanisms for assessing contractor performance. This includes a comprehensive listing of the key result areas (KRAs) and key performance indicators (KPIs) against which RMS measures the contractor’s performance. The framework also outlines the scoring methodology that RMS uses to determine whether the contractor’s bid margin (profit and overheads) is reduced due to less than satisfactory performance or whether a bonus is paid if a threshold performance score is exceeded.

Road maintenance under SMCs for Sydney region south and west zones commenced in November 2013

In November 2013, RMS awarded SMCs to the Leighton Boral Amey consortium, now named Ventia Boral Amey (VBA), for the south zone and the DownerMouchel (DM) consortium for the west zone. The contracts run for seven years with an option for a further three years at RMS’ discretion. In April 2014, full services commenced following a four-month transition period. RMS estimated that the annual cost of these contracts was around $240 million in total. In March 2018, the contract prices are due to be reset by negotiation to reflect the contractors’ experience with, and better information about, the road networks and routine maintenance requirements. 

1. Roads and Maritime Services should consider whether to incorporate stronger sanctions in the Stewardship Maintenance Contract if the contractor provides incorrect performance or financial data to RMS, when:
    
   1. negotiating the commercial reset for the next works period with the Sydney region south and west zone contractors due in July 2018.
   2. finalising a new SMC contract for the Sydney region north zone, due to commence in October 2018.

Roads and Maritime Services should, by September 2017:

2.  Review its contract management framework for SMCs to ensure that all authorities and accountabilities of
     contract managers are clearly defined, including:

a) accountability and procedures for exercising all operational clauses in the SMC where RMS may opt to, or be required to intervene, or make a decision

b) authority to approve or initiate the interventions RMS is required to, or may, exercise under the SMC

c) the audits that RMS will conduct to systematically validate the performance and financial data that the SMC contractors provide

d) the accountabilities of RMS contract managers to systematically review audits and quality reviews that the SMC contractors must conduct to demonstrate compliance with their service plans

e) the accountabilities of RMS contract managers to check that the monthly and annual reports provided by SMC contractors do not contain errors, omissions or inaccuracies.

3.  Improve its management of benefits realisation by:

a) initiating a further benefits realisation review and record the benefits delivered against those
    estimated following the tender process, including the one-off transition costs

b) identify any benefits, including savings, not yet attained and develop strategies to address any short-falls

c) establish a tool to track the ongoing realisation of benefits.

Appendix One - Response from Roads and Maritime Services

Appendix Two - Better practice contract management framework

Appendix Three - About the audit

NorthConnex is a nine-kilometre tolled motorway tunnel between the M1 Pacific motorway at Wahroonga and the M2 Hills motorway at West Pennant Hills. The total cost for the project is $3.1 billion. NorthConnex will be funded through toll charges, and contributions from the NSW and Australian Governments of up to $405 million each. In January 2015, the NSW Roads Minister signed the final contracts for NorthConnex.

By December 2017, the Department of Premier and Cabinet should:

1. publish an updated ‘Unsolicited Proposals – Guide for Submission and Assessment’ which clarifies obligations with requirements in other NSW Government policies such as the NSW PPP guideline and Infrastructure Investor Assurance Framework. The update should require:

a) a business case to be prepared, and a business case gateway review completed, as part of the assessment of the detailed proposal (currently stage 2)

b) probity reports must be completed and considered before the decision to proceed to the next stage.
 

The Department of Premier and Cabinet and NSW Treasury should immediately:

2. improve record keeping to ensure compliance with the State Records Act 1998 and the NSW Government Standard on Records Management.

Appendix One - Response from Agency

Appendix Two - Governance Arrangements for NorthConnex

Appendix Three - About the Audit

The total value of security deposits held has increased from $500 million in 2005 to around $2.2 billion in 2016, covering around 450 mine sites in New South Wales.

While there have been substantial increases in total deposits held, mine rehabilitation security deposits are still not likely to be sufficient to cover the full costs of each mine's rehabilitation in the event of a default.

This audit was undertaken when the Department of Industry, Skills and Regional Development was responsible for ensuring land disturbed by mining activities is rehabilitated in accordance with the relevant development approval, including the administration of mining rehabilitation security deposits. On 1 April 2017, this responsibility was transferred to the Department of Planning and Environment (the Department).  

This audit assessed whether the Department maintains adequate security deposits to cover the liabilities associated with mine closures, including rehabilitation. Companies authorised by the Department to undertake mining activities must provide a security deposit to cover the full costs of rehabilitation in the event of default by the company. Rehabilitation is the treatment of disturbed land or water to establish a safe, stable, non-polluting and sustainable environment.

Mining companies must provide an estimate of rehabilitation costs for each site. The Department provides a Rehabilitation Cost Calculation tool to assist companies calculate the deposit amount. Companies are also required to ensure that the cost estimate is in accordance with the approved Mining Operations Plan (MOP). The MOP is intended to be a mine rehabilitation and closure plan, and forms the basis for the estimation of the security deposit. The Department reviews the estimates and determines the deposit for each site.  

Security deposits are an option of last resort. The Department has other legislative and regulatory tools which it normally uses to promote compliance with rehabilitation requirements before accessing a security deposit. It can direct action by the mining company, issue fines and even have the Minister revoke a mining lease. To date, the Department has never had to access a security deposit for a state significant development mine site.

Security deposits are close to calculated value and should be accessible if needed

The value of securities held by the Department aligns with the latest approved rehabilitation cost estimates. This contrasts with the situation found by investigations in Victoria and Queensland, where deposit amounts held fell below the calculated costs.

The security deposits are usually in the form of a bank guarantee or cash. The Department has obtained legal advice indicating that it should be able to claim on these bank guarantees if the need arises. As the guarantee is between the financial institution and the Department, if a mining company goes into liquidation the Department should still be able to access the funds.  

When the latest estimate of rehabilitation costs is higher than the existing deposit, the Department will request additional security. It has experienced extensive delays in obtaining additional security for some sites, increasing the risk that available funds will be insufficient if needed.

Rehabilitation cost estimates are not yet adequate, but improvements are planned

The Department’s policy is for security deposits to cover the full cost of rehabilitation. No discounts are provided to mining companies for past good behaviour or low likelihood of default, unlike in some other states. Discounting could undermine the policy position.  

Current security deposits are unlikely to cover the full cost of rehabilitation on each mine site. The Department provides a rehabilitation cost calculation tool to help mining companies calculate the cost of rehabilitation and the required deposit amount, but:

• several activities required to effect closure are not included and others underestimated
• it does not make provision for industry cost changes over time
• the rates used in the tool have not been updated since 2013
• it was not able to provide the basis for the rates and allowances in the tool.

The Department reviews cost estimates provided by mining companies, but its verification of the extent of rehabilitation work on which these estimates are based is limited. It relies instead on section 387C of the Mining Act 1992 which makes it an offence for mining companies to provide false or misleading information. It is not evident how the Department would establish that information provided was false or misleading without more verification work, and six of the 14 cost estimates we reviewed were not signed by the mine manager, making enforcement more difficult.  

The Department has developed a new calculation tool, and recently released it for industry consultation. The new tool should improve rehabilitation estimates. It updates rates and allowances, and includes additional items to better cover required rehabilitation tasks. While a substantial improvement, the new tool could be further improved by providing additional coverage for stakeholder engagement, additional planning approvals, insurance costs, and any additional design, research and verification work required for successful closure.

There is no financial assurance over long-term environmental risks

The Department does not hold any financial assurance to cover the costs associated with mitigating any future environmental degradation once a mine closes and the security deposit is relinquished to the mining company. Security deposits are probably not the appropriate mechanism to cover these long-term risks but the risk of potential post-closure environmental degradation still needs to be costed and covered. A fund to cover the state-wide risk, to which all mines would contribute, is a possible mechanism.

Rehabilitation and closure outcomes are vague, particularly for unplanned closure

Rehabilitation outcomes in the MOPs we reviewed were generally not specific. Any lack of specificity in MOPs translates into uncertainty about rehabilitation work required if a mining company defaults. Part of the problem is that rehabilitation outcomes established in planning approvals are usually not specific and may not address all closure requirements. The Department has recognised there is scope to improve the clarity and specificity of rehabilitation requirements in planning approvals, and has started a review focusing on open-cut mines.

Rehabilitation outcomes are even less specific in the event of an unexpected early closure because they will probably be different from that achievable from a planned closure.  

MOP guidelines do not cover management of some key closure matters, such as the requirements of environment protection licences issued by the Environment Protection Authority and the management of heritage sites during closure.

There were significant variations in quality of MOPs we reviewed and the way closure risks and uncertainties were identified and addressed. The Department plans to improve the quality of rehabilitation programs through enhanced guidance and oversight.

Monitoring is not adequate to effectively gauge rehabilitation progress

The Department was not able to show it has been monitoring operational mine sites effectively to gauge the progress of ongoing site rehabilitation and the management of closure risks. There was no protocol for site inspections and limited evidence of inspections for the sites we reviewed.

The Department receives annual environmental management reports from mining companies, with most describing the areas of disturbance and rehabilitation occurring at each mine site. The Department recently established procedures for reviewing these annual reports, and has developed a risk-based process for prioritising reviews.

Most annual reports we reviewed did not explain environmental changes over time, nor the risks to mine closure and the measures required to mitigate them. For example, analysis of changes to surface water and groundwater quality was limited despite its relevance for assessing future contamination risks.

The Department does not currently have adequate processes in place to effectively verify the reported areas of disturbance and rehabilitation. It is developing geographic information system-based tools to better measure areas of disturbance and rehabilitation, new rehabilitation guidelines, and a procedure for determining whether rehabilitation has been successful. These initiatives should improve the monitoring and reporting of rehabilitation progress at mine sites.

There is no mechanism to prevent a mine being in ‘care and maintenance’ indefinitely

The Department does not have a clear policy on the length of time and circumstances under which a mine can remain in ‘care and maintenance’. Indefinite postponement of rehabilitation and closure is therefore possible. 'Care and maintenance' is the period following temporary cessation of operations when infrastructure remains largely intact and the site continues to be managed. There are a range of valid reasons for a mining company to put a mine in ‘care and maintenance’, but it is also reasonable for the community to expect a limit to how long it has to wait for proper rehabilitation.

Mining operations make a significant contribution to the NSW economy, including over $1.3 billion in royalties each year. Around 400 mine sites throughout NSW provide over 40,000 jobs and are a major source of economic activity for many communities. Despite these benefits, it is important to ensure that mining companies fulfil their obligations to rehabilitate land disturbed as a result of mining activity.

We recommend that the Department should, by January 2018:

1. Improve the quality of rehabilitation and closure plans by:

• ensuring plans submitted by mining companies include robust mine rehabilitation and closure risk assessments
• clarifying the level of detail required in plans at each stage of a mine’s operation
• specifying how requirements set under other legislative instruments (e.g. environment protection licences, heritage assets) should be addressed.

2. Improve assurance that security deposits are sufficient by:

• ensuring its new cost calculation tool adequately covers all works needed for rehabilitation and closure
• increasing the contingency for uncertainties associated with mine rehabilitation and closure, at least until the mining company provides a detailed closure plan
• verifying the cost estimates for a sample of high risk sites annually
• ensuring that when mining companies are required to provide increased security deposits, they do so with minimal delay.

3. Enhance oversight of mine rehabilitation by:

• developing a protocol to ensure sufficient and adequate site inspections
• ensuring mining companies report performance against rehabilitation targets and environmental changes clearly, including an analysis of long-term surface water and groundwater trends in terms of levels, flow and quality
• improving how it determines the progress and success of mine rehabilitation
• developing clear policy and procedures for ensuring a mine cannot be put into ‘care and maintenance’ indefinitely.

4. Collaborate with relevant agencies to establish a financial assurance mechanism, such as a sinking fund, to cover the risk of long-term environmental degradation after mines are closed and security deposits returned.

Appendix One - Response from the Department

Appendix Two - About the audit

Based on forecast patronage increases, the rail agencies will find it hard to maintain punctuality after 2019 unless the capacity of the network to carry trains and people is increased significantly. If recent higher than forecast patronage growth continues, the network may struggle to maintain punctuality before 2019.

A NSW Government priority is to ‘maintain or improve reliability of public transport services over the next four years’. Punctuality is a key element of reliability, and the level of patronage is a critical factor in the ability to maintain punctuality. Increasing patronage places pressure on the length of time trains need to wait at stations to load and offload passengers which can lead to delays. The NSW Long Term Transport Master Plan forecasts that rail patronage could increase by 26 per cent between 2012 and 2031.  

Passenger rail services in NSW are provided under a purchaser-provider model. Transport for NSW enters contracts with:

• Sydney Trains for Sydney suburban passenger rail services
• NSW Trains for services that commence or terminate outside Sydney, including intercity services that operate between Central station and the South Coast, Southern Highlands, Blue Mountains and Central Coast and Newcastle.

Transport for NSW sets performance targets and standards for these services, develops the timetables, procures trains for the service providers, and is responsible for long term planning.

This audit assessed whether these rail agencies have plans and strategies to maintain or improve performance in getting the growing number of suburban and intercity rail passengers to their destinations on time.

Punctuality measurement is satisfactory, but agencies could publish more information

Passenger rail punctuality indicators adopted in NSW are good practice. The key train punctuality indicator is better than indicators used by many other rail operators. It is also better than the on-time-running indicator that it replaced. Unlike the on-time-running indicator, the punctuality indicator classifies trains that have been cancelled or skipped stations as late and results are not adjusted to take account of delays caused by factors such as extreme weather or police operations.

NSW also has a customer delay measure which represents good practice. Work has started on refining and embedding customer delay as a key performance measure for the planned new Rail Operations Centre.

As train frequency approaches a ‘turn up and go’ level of service, rather than running to a timetable, more emphasis will need to be placed on excess waiting time and customer delay when assessing performance.

Measurement of punctuality is reasonably precise. There are some measurement inaccuracies which should be addressed, such as the estimated arrival time of a train being incorrect at some destination stations, but these do not affect punctuality results materially.  

Train punctuality is reported publicly, but not to the detail of the indicators in the contracts between Transport for NSW and Sydney Trains and NSW Trains. There is very limited public reporting of customer delay.

Overall punctuality is good, but some services are relatively poor

System-wide train punctuality has usually exceeded target since 2005, but some services suffer from poor punctuality compared to the rest of the network.  

The part of the network around North Sydney is creating problems for the punctuality of afternoon peak services heading through it and out to Western Sydney and to Hornsby via Strathfield. Transport for NSW and Sydney Trains are well advanced with strategies to address this up to 2019.  

The East Hills express trains in the afternoon peak also performed well below target. The rail agencies recently analysed this issue and believe it relates to the train timetable and signalling which restricts how close trains can run behind each other into Campbelltown. It further advises that this will be corrected over the next three years.  

Intercity train punctuality is below that of suburban trains and there was an extended period of declining punctuality between 2011 and 2014. Transport for NSW suggested that the old age of trains is a factor, and the recently announced intercity fleet acquisition may help address this. Apart from ensuring that train crew and station staff are available and perform their duties adequately, NSW Trains can do little to impact the punctuality of its intercity services directly. Train maintenance, track and signal maintenance, and management of trains on the rail network are performed by Sydney Trains. NSW Trains’ ability to influence improvement is hampered by key indicators in some contracts being undefined. Transport for NSW, Sydney Trains and NSW Trains are now working collaboratively to make improvements to the contracts.

Initiatives are in place or are planned to deliver good punctuality until 2019

Patronage increases, which can lead to overcrowding and trains having to wait longer at stations, are likely to present a significant challenge to maintaining punctuality into the future.

Based on patronage projections, the rail agencies have strategies to maintain punctuality up to and including joining the Sydney Metro Northwest to the network at Chatswood in 2019. These include improving infrastructure at particular parts of the network, increasing staff training, reducing the number of speed restrictions, and a new Rail Operations Centre. The projects are being managed by experienced staff, with good governance arrangements, quality assurance processes and planning systems in place. New timetables should provide more services and cater for more passengers, including off peak. They should increase network efficiency through better utilisation of capacity, but some passengers may face longer journey times and more may need to change trains mid-journey.  

The planned Rail Operations Centre has the potential to make operational decision-making more customer-focussed, by placing more emphasis on minimising customer delay during disruptions. If implemented well, it will also generate information to help agencies better identify the root cause of incidents that delay trains and improve communication with passengers so they can make better real-time travel decisions.

Predicted passenger growth presents a risk to punctuality after 2019

The rail system will struggle to maintain punctuality much beyond 2019 based on current patronage forecasts and system limitations.

From 2024, the Sydney Metro City and Southwest will help by extending the metro network from Chatswood under Sydney Harbour, through the city and out to Bankstown. Announced fleet upgrades will also help. Transport for NSW advises that it is also working with the Greater Sydney Commission to ensure network capacity constraints are considered in future urban planning.

In addition to investment in new metro networks, sustained and substantial investment needs to be made into the existing heavy rail network to meet demand and ensure its ongoing reliability. Transport for NSW has been developing strategies for this purpose, including an Advanced Train Control system. Its aim is to put a costed plan to the government by the third quarter of this (2017) calendar year. Given the likely lead times involved with major infrastructure projects, there remains a significant risk of poor punctuality after 2019.

Punctuality could be at risk sooner if recent patronage growth continues

If patronage continues to increase at a faster rate than forecast, particularly during the morning peak, the network will struggle to cope before 2019. Transport for NSW forecast that between 2011 and 2026 morning peak rail patronage would increase each year by approximately 3.3 per cent. Between 2011 and 2016 the number of passengers travelling to the city during the morning peak grew by an average of 4.4 per cent each year, including annual growth of 6.6 per cent since May 2014.

A good understanding of patronage levels, trends and drivers is critical to effective planning. The audit identified some shortcomings in measurement of peak passenger loads. Transport for NSW advised that measurement approaches have been improved recently, and this will soon flow into improved data quality.  

Given the increasing flexibility in work practices available to many city workers, the relatively new field of behavioural insights may offer opportunities to ‘nudge’ some passengers away from travelling at the height of the peak with benefits for them and the network.

1. Transport for NSW should ensure that programs to address rail patronage growth over the next five to ten years are provided to the government for Cabinet consideration as soon as possible.
    
2. Sydney Trains and Transport for NSW should:
   a) maintain effective oversight and resourcing for all strategies designed to address rail patronage growth
   b) adjust strategies for any patronage growth above projection.
    
3. Sydney Trains, NSW Trains and Transport for NSW should publish Customer Delay results by June 2018.
    
4. Transport for NSW, Sydney Trains and NSW Trains should agree by December 2017:
   a) specific performance requirements for intercity train, track and signal availability and reliability
   b) guidelines for train priorities during disruptions and indicators of control centre performance in implementing these guidelines.
    
5. Sydney Trains, NSW Trains and Transport for NSW should by June 2018:
   a) improve the accuracy of patronage measurement and develop a better understanding of patronage growth trends
   b) address small errors in the adjustment factors used for determining a train’s punctuality status
   c) improve their understanding of the factors impacting on intercity punctuality.
    
6. Transport for NSW should, commencing June 2017, explore the potential to use behavioural insights to encourage more passengers to travel outside the height of the morning peak (8 am to 9 am).