Murray Basin Rail Project

The situation

The Murray Basin is a nationally significant region for grain, mineral sands, fruit, vegetables and wine production. Much of this product is exported via the Ports of Portland, Geelong and Melbourne and is transported using the region’s road and rail network. Although rail has a natural advantage over road for bulk freight products over long distances, a lack of rail investment has diminished this advantage despite increasing volumes of freight.

The approach

Advisian was appointed by the Department of Economic Development, Transport, Jobs and Resources (DEDJTR) to help build a cogent case for significant rail freight investment in the Murray Basin Region. The project is designated a High-Value High-Risk (HVHR) project by Victorian Treasury, which means the business case attracts a high degree of scrutiny and review.

In addition to overseeing the overall business case, Advisian’s particular roles included:

• Articulating and assessing the problems to be solved

• Canvassing strategic interventions to address these problems

• Preparing the benefits management framework including the higher-level outcomes to be achieved

• Preparing risk-adjusted cost plans for each of the proposed project options.

Working with the client team and project stakeholders, and engaging directly with key industry groups, Advisian identified and documented comprehensive evidence and case studies of key export supply chain issues in the region.

These issues included declining performance of the rail network, lack of competition between rail operators and a lack of port contestability due to the different rail gauges across the region. Advisian identified the significance of these issues to the economy.

Advisian elicited, tested and articulated the benefits to be delivered by the project, including critical quantitative measures and key performance indicators for each investment benefit. Advisian linked these benefits to the project’s governance to ensure they will be realised as intended.

Advisian’s depth of understanding of the problems and benefits in the region enabled a convincing analysis of a broad range of supply, demand and productivity interventions. This led to an optimal strategic option which took a holistic approach to addressing freight inefficiencies and barriers to export competitiveness by focusing on improving rail infrastructure and connectivity.

The Advisian team developed a clear framework for defining and evaluating the core project scope, including that relating directly to State investment, as well as enabling and supporting infrastructure and industry co-investment. This proved important in communicating and agreeing the project’s assumptions and scope to stakeholders.

A detailed appraisal of costs and risks was undertaken in accordance with Commonwealth’s and Victorian Treasury’s best practice guidelines. Despite limited availability of information, Advisian’s substantial experience and understanding of cost drivers and risks was crucial in DEDJTR obtaining agreement to these costs from the deliverer (V/Line) and from Treasury via its HVHR independent review.

Results

Advisian helped the department identify and prioritise the key strategic drivers for regional freight in the Murray Basin region. The business case process brought into focus the underlying needs for investment, the benefits and impacts and demonstrated convincingly the preferred option that best meets those needs.

The project received funding from both the Victorian and Australian Governments.

Comprehensive engagement with stakeholders and industry resulted in a significant investment proposal that received strong endorsement from industry, bringing long-awaited certainty to the future of the region’s rail network, paving the way for complementary industry investment in.

Value Delivered

• Designed a strategic options appraisal that clearly demonstrated that a ‘network’ solution was required to deliver on the required benefits

• Advisian’s project options framework justified the preferred option, which did not have the highest benefit cost ratio

• Developed resonant problem statements with case studies and evidence that these problems were occurring

• Developed a scope framework that resolved and clarified the core scope of this initiative from the complementary (nice to have) and interdependent scope items

• Prepared a benefits management and governance framework to ensure the higher-level outcomes would be achieved

• Advisian’s experience in appraisal of costs and risks in the absence of detailed information was crucial in gaining stakeholder agreement and funding from the Victorian and Australian Governments