Lessons learned from light rail projects

Substantial and growing interest in new or revitalised light rail systems around the world results as cities look towards light rail systems to provide comfortable, reliable and convenient transport in urban settings.

Light rail complements heavy rail, affording direct access to jobs and concurrently reshaping the form and character of urban areas – it has become a lever for governments to grow their economies and improve amenity.

As affluence increases and the demand for travel grows, road traffic congestion increases and associated amenity reduces, unless high-quality public transport services are provided. This social infrastructure development relies on smart use of road space, where priority is afforded to users in accordance with the primary functions of that road. This is a critical factor to consider for the successful operation of light rail.

Our work in most Australian cities – Melbourne, Sydney, Canberra, Newcastle and Gold Coast - where light rail projects are being operated, delivered and planned, draws on our lesson learned. Informed by these lessons, we’ve identified the key challenges, opportunities and risks that need to be managed to ensure the successful development, delivery and operation of light rail systems.

Overcoming key challenges 

Delivering investor confidence

Delivering investor confidence requires a robust business case to demonstrate a light rail project:

• Addresses the identified problems and needs of the government and community
• Delivers benefits that are linked to the identified problems and aligned to the government’s stated policies and strategies
• Has a clearly defined scope and cost
• Is justified on the basis of the net triple-bottom-line benefits
• Can be delivered as planned to ensure the intended benefits are realised

The business case must be underpinned by the strategic argument for the project.

The business case should clearly describe why the project is needed, and have a clear and specific statement outlining the overall benefits to customers as a result of the development. 

Is light rail the best option? 

Comprehensive strategic modal options analysis (e.g. more efficient buses, light rail, train, demand management, better use of existing system) is critical to any business case and strengthens the argument for the chosen solution. More detailed project options analysis around the preferred strategic option (in this case light rail) including the transport corridor alignment, land-use interaction and stop locations can then be undertaken.

The project options analysis should be followed by a detailed, transparent, evidence-based appraisal of preferred options requiring the quantification of the transport, economic, financial, environmental and social benefits to demonstrate why this project is justified and delivers value for money.

The overall business case narrative should then draw on this evidence base to provide clarity around the need for the project (i.e. why do we need it now, why the benefits are important and why is a light rail project the best option).

Containing scope creep 

The development of a value management scope framework that clearly defines scope inclusions and exclusions is a critical communication tool, and clarifies to all stakeholders the basis of the business case/funding ask and the economic appraisal. This framework is a must for all projects and, when properly constructed, brings great clarity to multi-faceted stakeholders with competing interests and requirements.

The value management scope framework will ensure there is clear definition around the scope, cost and risks of the preferred light rail project.

The period of greatest potential to influence scope and cost occurs in the early phases of projects so it is essential that significant time and effort is spent in this phase to capture the opportunity, to ensure clarity and to make sure that ultimate costs may be contained.

How will the light rail project be delivered? 

Large-scale projects are fragile and can be sensitive to seemingly small decisions that can significantly erode benefits over time. Benefits management is an ongoing process that ensures decisions taken at each project stage are not only technically and commercially prudent, but also set the project on course for delivering at least the value on which economic justification was predicated. Benefits therefore need to be managed strategically and dynamically throughout the life of the project. 

Details of how the project will be delivered and installing the appropriate governance are critical here. Governance must be robust – including separate client, sponsor and deliverer – to give the project its best chance to realise the intended benefits.

The sponsor is responsible for active pursuit of the business case and ongoing achievement of the planned benefits throughout the project lifecycle. The sponsor can operate at arm’s length of the project deliverer, as the project deliverer will need solely focus on successfully delivering the project.

The project sponsor should focus on the different phases of benefit management throughout the project life cycle, including:

• Strategic assessment – benefit identification
• Business case – benefit quantification
• Procurement/delivery – benefit assurance
• Operations – benefit realisation

Benefits should be identified and quantified during project planning and development. This is so benefits align with and support the higher order plans that capture policy objectives of government. The drivers and critical success factors underpinning these benefits must be kept within the project scope during the procurement and delivery phases. The decision to move forward on an option must be based on a consistent and balanced evaluation, with thorough consideration of alternatives and their costs and benefits over time.

Firm resolve from the outset as to when it is desired to deliver the project will have a powerful effect on the business case and planning phases. Clarity on timing provides greater focus and speed in the delivery of the business case, planning and approvals. Though, care should be taken when integrating light rail systems with dense, high-profile, CBD streets with potentially major impacts on surrounding streets and transport.

Risk and opportunities to be considered

Service relocations 

There is a major risk of significantly underestimating costs associated with service relocation, particularly electricity services, which could impact budget credibility – significant attention should be given to this risk.

Land acquisitions and potential value capture

The process for land acquisition in most jurisdictions is long established and well understood, so it should be relatively straightforward for light rail – particularly as it is generally within road reservations. In some cities though, it could pass through a residential area requiring compulsory acquisition. This important matter is and remains controversial. 

The ability to explain the net benefits of the project and why it is so important for the community is important in dealing with sensitive issues such as this.

There are also significant opportunities for value capture to offset the capital and operating cost burden on the client. For example, ongoing increases in property values along a new light rail alignment can be incorporated into the project to offset initial costs. 

Co-investment/funding arrangements

There is significant opportunity to enter into Third Party Agreements - tier one agreements for ‘participating’ partners, such as large city councils and businesses that benefit from the light rail project, to contribute to the funding arrangements.  Lower level agreements are also suggested for stakeholders, such as service and road authorities, to establish ground rules and participation in the project.

Whilst this process can be arduous and difficult at times, it could potentially be catastrophic to the project if this is not included. It could potentially help to control scope and manage stakeholder expectations.

Planning

Early consideration of planning risks particularly around visual, noise impacts, road network operations and encroachment on parking spaces, loss of parkland and local businesses is important – though, there is significant opportunity associated with urban renewal benefits, catalysing and activating precincts.