Achieving greater harmonisation in rail type approval is key to unlocking innovation and long term productivity

The Issue

Today’s co-regulatory rail safety framework is a risk-based approach whereby the Government sets a performance requirement on railways to operate safely and provides operational flexibility to establish and implement standards, rules and methods of operation necessary to reflect their operations.

While flexibility is a legitimate policy objective that can help to drive innovation, it can also impose unintended costs.

Type Approval is the process by which an organisation satisfies itself that a particular type of product or methodology meets the rail transport operator’s requirements and specifications.

But the prevalence of multiple rail networks and operators has led to a wide range of ‘bespoke’ requirements and Type Approval processes, leading to inconsistencies and duplicated effort.

This can be costly and burdensome for a rail operator that must traverse multiple networks for a single train journey, as Type Approvals with one rail network does not contribute towards an approval with another. This creates a barrier to investment and innovation, as the approval burden for new equipment types is high. It has also led to inconsistencies in the technologies introduced across networks, further exacerbating the broader interoperability challenges that continue to plague Australian rail networks today.

There are calls from the rail industry for a more ‘harmonised’ Type Approval framework to address some of these issues.

The Solution

In order to continue to advocate for industry change, RISSB and the ARA commissioned Synergies to undertake a cost benefit analysis of improving harmonisation in the Type Approvals process.

Synergies conducted a series of consultations with industry participants (network operators, contractors and suppliers) and prepared an assessment of the costs of existing Type Approval processes. We examined the direct costs imposed on the rail industry from the approval process, as well as the ‘indirect costs’ imposed on the broader economy in terms of lost competition, innovation and long term rail productivity.

Synergies found that:

• The direct costs to the rail industry from existing Type Approvals processes is significant at around $230m per annum, with the majority of the costs (62%) associated with testing for ‘network-specific’ aspects of new products and technology.
• The remaining portion (38%) of direct costs was associated with testing products to meet ‘technical’ requirements (i.e. is the product workable).
• The requirements to demonstrate the ‘technical’ validity of new products and processes are overly burdensome, and the requirements for confirming network-specific suitability are often poorly focussed, adding significantly to the cost of Type Approval.
• Product suppliers bear the cost of duplication of TA requirements across jurisdictions / organisations.

Synergies’ report futher noted while the scale of direct costs associated with existing processes is substantial, the indirect costs of the current framework are likely to be much larger, in terms of lost competition, innovation and long term productivity.

Synergies identified a number of options for reducing cost and unlocking rail innovation:

• Harmonising standards and approval processes, together with mutual recognition of approvals, provides scope to achieve significant savings in direct costs. While the precise magnitude of the cost savings would depend on the degree of harmonisation that is ultimately adopted, stakeholders Synergies consulted with indicated that over 50 per cent of the current requirements could be avoided, with an annual cost saving of over $40 million;
• Repurposing of the TA process towards assessing those assets and technologies that are genuinely considered ‘productivity enhancing’ products; and
• Improving the precision of network specific assessments to ensure that trials and tests are undertaken with a clear need or objective being specified.

Regulation has a critical role to play in promoting a safe and reliable rail industry. However, regulatory measures must not stifle investment and innovation; rather they should align with broader industry goals to harness technological development and promote operating efficiency.

The Benefits

The opportunities for harmonisation in Type Approvals is part of a much larger, live issue in Australian rail about improving network inter-operability and broader freight rail efficiency.

Synergies’ report demonstrated that significant benefits are available from strategies to streamline and improve Type Approval processes.

A copy of Synergies’ report is available from ARA’s website at: click here.  It is also available from RISSB’s website at:  click here

A  webinar showcasing Synergies analysis is available from RISSB’s website: click here