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Working paper

Protecting the public interest in Melbourne's rail franchise

15 Feb 2017
Description

It is nearly 30 years since the wave of neoliberalism swept through the government institutions that had managed Victoria’s public utilities with varying degrees of success over many decades. The privatisation of Melbourne’s train and tram systems, begun in 1999, is currently unique within Australia as it represents the only outsourced urban rail system in the country. In Europe and North America it is also unusual - public sector delivery of complex urban rail systems tends to be the norm (Mees 2010). For some supporters of neoliberalism, the Melbourne tram and train franchises, by keeping track and rolling stock in state ownership, may be seen as a sophisticated attempt to address some of the problems that followed from more radical assets sales and deregulation in the rail systems of New Zealand and the UK (Abbott and Cohen 2016, Clark 2011). For the sceptics, even this lighter touch, in which only the operations and maintenance of complex urban transport systems are contracted to a private consortium, is a recipe for regulatory capture and erosion of the public good (Mees 2005).1 Locally, the performance of the Melbourne model is under scrutiny for two reasons. First, some are suggesting the expansion of the Melbourne franchising model to the Sydney and regional NSW passenger rail services (Clayton Utz 2016), systems currently provided by the public sector. Second, Melbourne’s existing rail franchisee has now entered sole negotiations with the State Government, for a seven-year extension on contracts first signed in 2009. This paper aims to identify the issues at stake in these negotiations and to suggest improvements to existing contracts to protect the public interest. It begins by setting the Melbourne franchise model in an international context and describing the key features of the current contracts. We then highlight major issues of concern that emerge from an analysis of publicly available data, and suggest possible solutions. We explore ways in which the current contracting model provides incentives for the parties to act in particular ways that do not always produce beneficial outcomes for users of the system, and where change is needed to better serve the public good.

Publication Details
Publication Place: 
Melbourne
License Type: 
All Rights Reserved
Published year only: 
2017
63
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