BULL HEAD SERVICES PTY LIMITED 2014 Compliance...Independent Engineering Assessment of Incremental...

Independent Engineering Assessment of Incremental Costs – ARTC HVAU – 2014 to 2016 1

BULL HEAD SERVICES PTY LIMITED Consulting Engineers to the Rail and Road Transport, Quarrying, Building, Civil

Engineering and Resource Industries

ABN 46 099 733 749

A Member of the Dawn Alliance

PO Box 158 CHERRYBROOK NSW 2126

Phone: (02) 9980 5211 Facsimile: (02) 9980 5811

Mobile: (0412) 408 611 e-mail: [email protected]

website: www.bullhead.com.au

21 July 2016 Australian Rail Track Corporation Ltd, 11 Sir Donald Bradman Drive, KESWICK TERMINAL SA 5000 Attention: Ms Nadine Judge, Manager Customer Contracts, Hunter Valley Business Unit

RE: INDEPENDENT ENGINEERING ASSESSMENT OF INCREMENTAL COSTS – ARTC HVAU – 2014 TO 2016

Dear Ms Judge, Thank you for the opportunity to undertake this challenging assignment to provide an independent assessment of the incremental costs of various maintenance activities and capital works. Our recommendations have been based on the following supplied documentation and our related research:

“Scope for Independent Engineering Assessment of Incremental Costs for Job 0074”, dated 10 June 2016 (included as Attachment 2 to this report) prepared by Paul Bugler of Lacertus Verum Pty Ltd on ARTC’s behalf;

A briefing telephone call of 14 June 2016 from Paul Bugler, and the agreed documented notes from those briefing discussions, confirmed on 16 June 2016 as “Lacertus Verum Briefing 14.06.16”;

WIK Consult TÜV Consultant Report titled “Assessment of the Incremental Costs of Pricing Zone 3 Access Holders’ Use of Pricing Zone 1 and 2 of the Australian Rail Track Corporation’s Hunter Valley Rail Network” dated 30 September 2015;

ARTC 2014 Hunter Valley Corridor Capacity Strategy;

ARTC 2015 Hunter Valley Corridor Capacity Strategy;

E-mail from Paul Bugler dated 15 June 2016 and its attached Spreadsheet titled “Allocations” for Maintenance, Corridor Capital and Major Projects.

mailto:[email protected]

http://www.bullhead.com.au/


As an output, Bull Head Services Pty Limited as the “Consultant”, has provided this written report, plus appropriate spreadsheets in Microsoft Excel setting out the matters identified in Section 2 of the Scoping document (see Attachment 2 to this report), with a view that extracts of this Consultant’s report will be provided within ARTC’s response to the ACCC at some future point in time, as an independent justification for ARTC’s identification of costs, whether either fixed or incremental and the allocation of those costs between different traffics. In summary, the Consultant:

Has undertaken assignment preparation, being a detailed review of the WIK Report and the approach adopted by WIK in determining the proportion of activities and projects that are incremental, together with their method of apportionment. In addition, as is required by the scope, the Consultant has reviewed the ARTC Hunter Valley Corridor Strategy documents for 2014 and 2015;

Has undertaken a detailed review of Maintenance Activities, both Routine Maintenance (RCRM) and Major Periodic Maintenance (MPM), being for 116 different categories of maintenance activities. For those activities not otherwise considered by WIK, the Consultant has provided an assessment of the proportion (Allocation) that should be considered variable with traffic and the Allocator mechanism, either gross tonne kilometres (GTK)or train kilometres (Train Km). The results of this review by the Consultant are provided in the ‘Maintenance’ worksheet of the “Allocations” spreadsheet, which is Attachment 1 to this report;

Has undertaken a detailed review of the activities that underpin each Corridor Capital activity undertaken by ARTC in the Hunter Valley. The Consultant has, for each Corridor Capital related activity provided, attempted to identify the incremental proportion (Allocation) and Allocator mechanism (either GTK or Train Km), applying the outcomes from the WIK Report, where WIK has made an assessment, or otherwise forming an independent assessment. The results of this review by the Consultant are provided in the ‘Corridor Capital’ worksheet of the “Allocations” spreadsheet (Attachment 1);

Has undertaken a detailed review of Major Projects undertaken by ARTC in Pricing Zone 1 of the Hunter Valley network and the Consultant has commented on their incremental proportion and allocation mechanism (either GTK or Train Km). For the Major Projects specifically requested by ARTC which have a value in excess of $10 million, a summary and critique of these ‘Major Projects’ is provided in Appendix A of this report. The results of this review / critique by the Consultant, together with assessment for other Major Projects scheduled by ARTC, are also provided in the ‘Major Projects’ worksheet of the “Allocations” spreadsheet (Attachment 1);

Has in addition to the above, in undertaking a Review of the WIK Report, identified instances where WIK’s assessment of some projects and activities for the 2013 Calendar Year appear to contain errors. These errors tend to be of the nature of comments that are unrelated or inconsistent with the relevant project or activity, or for which the conclusions do not follow. A schedule of these apparent errors is provided in Appendix B of this report.


We thank you ARTC for the opportunity to undertake this challenging and most appreciated assignment and look forward to assisting you again soon. Yours faithfully

David Bull Director & Secretary


APPENDIX A – MAJOR CAPEX PROJECT SUMMARIES PROJECT Nos: 3585 & 5255 - MAITLAND TO MINIMBAH THIRD ROAD – STAGES 1 & 2 The major issues affecting the Operating Capacity of the Main North Line between Maitland and Minimbah are headways, speed through junctions / turnouts and the continuous flow of trains. Headways are fundamentally a function of signal spacing and design. Drivers should ideally only ever see a green signal on double track, so that they do not slow-down in anticipation of potentially encountering a red signal. To achieve this outcome, a train needs to be at least 4 signals behind the train in front of it, so that the signal a driver encounters, and the next one beyond, are both at green. Signal spacing also needs to take into account train speed and braking capability. Signals need to be spaced such that a train travelling at its maximum speed, and with a given braking capability, can stop in the distance between a yellow and a red signal. In some cases, these constraints start to overlap, in which case it becomes necessary to go to a fifth signal, with a pulsating yellow indication. Steep Grades particularly on the Minimbah and Allandale Banks, also affect the headways for trains. The steep grades on these banks slow down trains to such an extent that it is not possible to obtain an adequate frequency of trains, irrespective of how closely the signals are spaced. This requires a third track to be constructed at the banks; which have been completed for these two major banks, plus Nundah on the Country side of Singleton. Junctions and Turnouts - There are numerous junctions / turnouts on the Hunter Valley rail network where train conflicts located at the at-grade interfaces, impact on capacity. The connection between the main lines north of Maitland and the main lines to the east is through a set of old slow-speed, high-maintenance turnouts. The main issue this raises is the amount of possession time required to maintain these turnouts. Congestion is also exacerbated by the slow speed turnouts, but at current forecast volumes this is manageable. Whittingham Junction turnout speeds were upgraded to 70 km/h, in conjunction with the 80 km/h approach to Minimbah Bank project, and the junction now has a three track configuration, as a result of the Minimbah Bank Third Track Project. This allows loaded trains to exit the branch without needing to find a slot between loaded mainline trains. Accordingly, this junction is now highly efficient. The operational capacity increase between Minimbah and Maitland would be achieved by asset enhancements, including:

Minimbah Bank Third Track;

Minimbah Bank Resignalling;

Branxton to Greta Third Track;

Greta to Allandale Third Track (Allandale Bank);

Farley to Maitland Bi-Directional Third Track (Concept Design);

Maitland Junction Turnout Renewals. Total Estimated Cost: $486 million to commissioning


Project Finish: The third road was commissioned in 2012. The Consultant concurs with the approach adopted in the WIK Report for these projects as being “100% / GTK driven”, where “Project expenditure can be assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assumes that track extensions, third roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher network capacity respectively, delivering a reduction in maintenance impacts through increasing operational flexibility”.


PROJECT No: 5811 – NUNDAH THIRD TRACK – ALL PHASES The major issues affecting the Operating Capacity of the Main North Line on Nundah Bank are headways, speed through junctions / turnouts and the continuous flow of trains. Headways are fundamentally a function of signal spacing and design. Drivers should ideally only ever see a green signal on double track, so that they do not slow-down in anticipation of potentially encountering a red signal. To achieve this outcome, a train needs to be at least 4 signals behind the train in front of it, so that the signal a driver encounters, and the next one beyond, are both at green. Signal spacing also needs to take into account train speed and braking capability. Signals need to be spaced such that a train travelling at its maximum speed, and with a given braking capability, can stop in the distance between a yellow and a red signal. In some cases, these constraints start to overlap, in which case it becomes necessary to go to a fifth signal, with a pulsating yellow indication. Steep Grades particularly on the Nundah Banks, also affect the headways for trains. The steep grades on these banks slow down trains to such an extent that it is not possible to obtain an adequate frequency of trains irrespective of how closely the signals are spaced. This requires a third track to be constructed at the bank; which have been completed for this major bank, plus Minimbah and Allandale on the City side of Singleton. Junctions and Turnouts - There are numerous junctions / turnouts on the Hunter Valley rail network where train conflicts at the at-grade interfaces impact on capacity. The connection between the main lines north of Maitland and the main lines to the east is through a set of old slow-speed high-maintenance turnouts. The main issue this raises is the amount of possession time required to maintain these turnouts. Congestion is also exacerbated by the slow speed turnouts, but at current forecast volumes this is manageable. Camberwell Junction was upgraded to high speed turnouts in conjunction with the Nundah bank third track project, though the speed on the balloon loop limits the practical speed. The operational capacity increase on Nundah Bank was achieved by asset enhancements, including:

• Nundah Bank Third Track; • Drayton – Whittingham Bi-directional Signalling; • Drayton – Whittingham Re-signalling (including Nundah); • Camberwell Junction Upgrade and Turnout Renewals.

Total Estimated Cost: $75 million to commissioning Project Commissioning: The Nundah Bank Third Track project was commissioned in late 2012. The Consultant concurs with the WIK Report’s Assessment of this Major CAPEX project as being “100% / GTK driven”, where “Project expenditure can be assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assumes that track extensions, third roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher network capacity


respectively, delivering a reduction in maintenance impacts through increasing operational flexibility”.


PROJECT No: 6387 – HEXHAM RELIEF ROADS – CAPACITY ENTERING TERMINAL AREAS The major issues affecting the Operating Capacity and mitigating congestion for unit coal trains entering ‘Terminal Areas’, can be improved using infrastructure solutions such as the provision of holding roads, third tracks, associated re-signalling projects. Hexham Holding Roads - Past Capacity Strategies have highlighted through analysis that a four-track re-sequencing facility at Hexham was desirable to be able to manage disruption for unit train volumes above 180 MTPA. It also noted that the number of trains out of sequence had been estimated to increase by 55% as a result of the 15% increase in volume in ramping up from 180 MPTA to 208 MPTA, and that in recognition of this, it would be desirable to take advantage of the space available to construct a fifth holding track. The Rail Capacity Group (RCG) approved construction of a five-track facility at Hexham in 2013, and in 2014, construction of this project was progressing rapidly. It was to be located between the Up and Down Coal Roads, but will only be accessible from the Up Coal Road. The design allows for future use as a crew change facility, but these physical works are not included in the approved scope. The facility is opposite the proposed Aurizon provisioning facility but does not have any operational interaction with the facility. Total Estimated Cost: $130 million to commissioning. Project Commissioning: The Hexham Relief Roads were commissioned in late 2014. The Consultant concurs with the approach adopted in the WIK Report for Major CAPEX projects of a similar nature which are primarily required to service additional coal volumes. As such this project should be considered as “100% incremental / GTK driven”.


PROJECT No: 6928 – DRAYTON JUNCTION UPGRADE Junctions and Turnouts - Drayton Junction (as well as Newdell Junction) have been upgraded with high-speed, low maintenance turnouts. While this was primarily maintenance driven, the speed upgrade means that these junctions are now highly efficient as they provide operational enhancements. The operational capacity increase for coal trains utilising Drayton Junction was achieved and improved by asset enhancements using Turnout Renewals, through High Speed Turnout Installation; Total Estimated Cost: $22 million. Project Commissioning: This project was commissioned in late 2014. The Consultant concurs with the approach adopted in the WIK Report for this project “We assume that junction upgrade is mainly driven by asset enhancement for higher network capacity.”, noting that the need for improved maintenance is driven primarily by the increasing volumes of traffic. As such this project should be considered as “100% incremental / GTK driven”.


PROJECT No: 8665 – No: 3 DEPARTURE ROAD AT KOORAGANG COAL TERMINAL The only ARTC reference provided, is within the 2014 Hunter Valley Corridor Strategy which states that Kooragang Coal Terminal (KCT) Departure Road No 3, which had been dedicated to Pacific National (PN) to it use as a Provisioning Road, and during 2013 it was acquired by ARTC and extended to become an additional dedicated departure track, having also reconfigured the junction for this track to give them an additional clear Departure Road. This will increase the number of clear Departure Roads at KCT to nine. ARTC had also developed an initial concept to extend Cripple Roads 3 and 4, which are on the inside of the KCT Balloon loop, to give an additional two departure roads (nominally called Departure Roads 7 & 8), which would deliver a total of eleven at KCT. Total Estimated Cost: $31 million. Project Commissioning: Commissioned in 2013. The Consultant concurs with the approach adopted in the WIK Report for this project as being “50% incremental / GTK driven”, where “Project expenditure investment into a Departure Road is mainly driven by asset enhancement for higher network capacity, but some share is also to provide higher buffering capacities at port”.


PROJECT No: 8669 – DRAYTON DOWN RELIEF HUB This infrastructure enhancement was constructed to allow departure of empty trains from port within an hour of completion of unloading. In order to achieve this, it is necessary to provide Holding Roads at locations removed from the port precinct. The Drayton Down Relief Hub is a single holding track adjacent to the mainline immediately before the Drayton Branch and connecting directly to both the mainline and the Drayton Branch and provides the opportunity to depart trains from the port prior to a load point being available to receive the train. The Drayton facility’s construction was originally due for completion in early 2015. Estimated Cost at Commissioning: $23 million Project Commissioning: This project was commissioned in late 2014. The basis of this project is to provide is to relieve congestion at the port that otherwise impacts the unloading of trains due to the Departure Roads being occupied. To this end, it is appropriate to follow the WIK reasoning for Project No: 8665. The Consultant concurs with the approach adopted in the WIK Report for similar projects of this nature such as Project No: 8665 where the investment is related substantially to the improvement of coal terminal operations, rather than being strictly required for network capacity. The Consultant assesses this project as being “50% incremental / GTK driven”.


PROJECT No: 8667 – KOORAGANG ARRIVAL ROADS STAGE 2 The ARTC 2014 Hunter Valley Corridor Strategy states that Hunter Valley Coal Chain Coordinator (HVCCC) advice in recent years has been that a capacity constraint on the KCT Arrival Roads would continue to limit track system capacity below contracted volumes until such time as the full KCT Arrival Roads Project was complete. During early 2014, HVCCC and ARTC undertook work on a revised congestion model incorporating updated inputs and an alternative approach to releasing trains onto Kooragang Island, once the Hexham Relief Roads project is complete. On the basis of this modelling, HVCCC advised ARTC that capacity into the port terminals would be of the order of 195 MPTA without the KCT Arrival Roads Stage 2 Project, but also noted that the project would underpin track and terminal capacity robustness from around 190 MTPA throughput through to existing terminal contracted levels. Port Waratah Coal Services (PWCS) Kooragang Island Coal Terminal (KCT) is better configured than their Carrington Coal Terminal for modern rail operations. However, while it now has 9 Departure Roads for its four dump stations, there is only one Arrival Road for each dump station. As a result, trains need to queue on the mainline before being called forward into the Arrival Road, as the preceding train moves through the KCT dump station. Past HVCCC modelling found that the current configuration of the KCT Arrival Roads is not capable of processing the required volume of trains and is a major constraint on current volumes. Both permissible and observed speeds contribute to the issue. The primary causes of the low speeds appear to be crew changes at the throat of the terminal, K3 signal delaying trains, and the appropriate speed of trains in a yard environment, where drivers need to use their discretion as to an appropriate speed given the conditions. In February 2015 the RCG approved construction of the Kooragang Arrival Road Stage 2 Project, on the basis of advice from the HVCCC that it provided broader system benefits noting that it was not strictly required for capacity. Total Estimated Cost: $32 million. Project Commissioning: This project commenced in early 2015 and is forecast to be finished in 2016. The Consultant concurs with the approach adopted in the WIK Report for similar projects of this nature such as Project Nos: 8665 and 8669 where their investment was related substantially to the improvement of coal terminal operations, rather than being strictly required for network capacity. The Consultant assesses this project as being “50% incremental / GTK driven”.

Independent Engineering Assessment Of Incremental Costs – ARTC HVAU – 2014 To 2016 13

APPENDIX B – WIK REPORT - INTERPRETATION ERRORS & POSSIBLE INCORRECT COMMENTS The following table provides extracts from the WIK Report dated 30 September 2015, where some Projects and Activities of the HVAU assessed by them for the 2013 Calendar Year, appear to contain errors. These errors tend to be of the nature of comments that are unrelated or inconsistent with the relevant project or activity, or for which the conclusions do not follow.

Cost Category

Activity / Project

% Variable

as Assumed by ARTC

% Incremental

(as Assessed by WIK/TÜV)

WIK Cost Driver

(Incremental Cost)

Consultant’s Cost Driver (Fixed Cost)

Explanation

Minor CAPEX

0916M9 - Turnout Renewal with 60kg Rail and concrete bearers, 0937M8, 0946P1, 0947O7, 0948L1, 0958C2; 091671, 091646, 091624, 0930E2, 0937E1, 0956G7 094713

0

0

75

75

GTK

Train Km

GTK

GTK

WIK’s comment is “We assume that the need for turnout renewals with an upgrade to 60kg rails is more related to volume rather than time. Therefore, we assessed a cost variability of 75%”, which is agreed with, but for Project 094713. Note: Project No. 0947I3 – Turnout Renewal at 209.989km incorrect as ‘Train Km’ (should be ‘GTK’); as for the other 12 Turnout Renewal Projects, scheduled.

Minor CAPEX

095591 - Fit nose rollers: Singleton SNX's; 094873 - Fit nose rollers: Minimbah crossovers 092632 - Hanbury Junction to Sandgate (via coal) Nose Rollers

0 50 Train Km n/a

WIK’s comment is “We assume that the need for point machine replacement resp. point motor renewal is caused by both, time and volume likewise. Therefore, we assessed a cost variability of 50%.” It is believed switch roller fitment to a SNX is additional CAPEX as they were probably never previously included in the SNX supply. If WIK agree with ARTC’s assessment of cost variability for Project No. 0948C1 - Install Spherolocks to No 160 and 161

Independent Engineering Assessment Of Incremental Costs – ARTC HVAU – 2014 To 2016 14

0956G7 - Install switch rollers at Mount Owen

crossovers, (being ‘0 / 0 / No Cost Driver’), then the same scenario should apply for SNX rollers.

Minor CAPEX

0936B5 - 182.781km Replace culvert

0 75 GTK n/a

WIK’s comment of “WIK & TÜV agree with ARTC's assessment of cost variability” is inconsistent with the incremental value applied (75%). It would appear that this is an unintended error and that WIK intended to agree with ARTC that culvert replacement is not dependent on traffic. In normal circumstances, culverts should not degrade due to traffic. Rather culverts will degrade due to the state of the embankment and environmental issues, e.g. floods. The incremental value should be 0% and incremental the cost driver “n/a”.

Major CAPEX

357601 - Ulan Line Signalling & CTC (971 / 972 - 41.16 / 149.11 & 973 / 974 - 107.95 / 149.11)

0 100 GTK Train Km

WIK’s comment is “We assume that level crossing upgrade is mainly driven by asset enhancement for higher network capacity.” This CAPEX is essentially signalling and train control upgrades, and as such could be reclassified as “0 / 50 / Train Km”. The project is associated with level crossing upgrades.

Major CAPEX

358401 - Bi-Directional signalling Maitland to Branxton – 946 / 947

0 100 Train Km Train Km

WIK’s comments is “We assume that investments in provisioning facilities are mainly driven by asset enhancement for higher network capacity.” This CAPEX is essentially signalling and train control upgrades, and as such could be reclassified as “0 / 50 / Train Km” to be consistent with WIK’s treatment of similar items elsewhere. This is not associated with the building of provisioning facilities.

Attachment 1

Allocation Values & Mechanism: Maintenance

Key: Comments and values in black reflect agreement with the WIK report.

Comments and values in red reflect either a divergent view from WIK or WIK did not evaluate the item.

Activity

CodeDescription % Incremental

Incremental

AllocatorExplanation

Maintenance (by activity)

Maintenance Allocation Table Start

3 Management Fee - Site Overheads (RCRM) ? ? The Consultant is unable to comment on the appropriateness of the 'Allocations' or the Allocator.

4 Internal Plant & Equipment E/W (RCRM) ? ? The Consultant is unable to comment on the appropriateness of the 'Allocations' or the Allocator.

6 Consumables E/W (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

12 Supervisors & Vehicles (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

100 Routine Inspections - Track (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

101 Detailed Inspections - Structures (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

103 Worksite Protection 100% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

104 Routine Inspections - Overbridges (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

106 Routine Inspect - Underbridges (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

107 Routine Inspect - Culverts & Misc (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

108 Routine Inspect - Closed Lines (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

109 Routine Inspections - Turnouts 0% The Consultant agrees with WIK's assessment of cost variability.

110 Engineering Investigations (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

111 Routine Inspections - Right of Way (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

112 Sundry Maintenance (MPM) ? ? Not assessed by WIK. The Consultant is unable to comment on the appropriateness of the 'Allocations' or the Allocator.

113 Environmental Programs (MPM) 0% Not assessed by WIK. Environmental programs are related to the environment within the rail corridor and adjacent to the rail track and are

invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

121 Callouts Track & Structures (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

141 Pest Control (RCRM) 0% Not assessed by WIK. Pest control programs are related to the environment within the rail corridor and are invariant with traffic volumes.

The Consultant has therefore assessed this activity as 0% incremental.

142 Facilities, Housekeeping and Stores Management 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

143 Fire Prevention (RCRM) 0% Not assessed by WIK. Fire prevention programs are related to the environment within the rail corridor and adjacent to the rail track and are

invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

144 Vegetation Control - Reactive (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

145 Vegetation Control - Planned (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

146 Right of Way Maintenance (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

147 Rural Fencing - Replacement (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

148 Urban Fencing Repair (RCRM) 0% Not assessed by WIK. Fencing activities relate to the environment on the rail corridor boundaries and are invariant with traffic volumes.

Should be the same as for Activity 149. The Consultant has therefore assessed this activity as 0% incremental.

149 Urban Fencing Replacement (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

150 Access Road Maintenance (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

152 Right of Way Maintenance (MPM) 0% Not assessed by WIK. This activity relates to maintenance within the rail corridor, other than the specific railway infrastructure and is invariant

with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

160 Ultrasonic Rail Examination (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

161 Rail Lubrication (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

162 Ultrasonic Testing Ongoing (RCRM) 0% Not assessed by WIK. Should be the same as for Activity 160 (to retest known defects ultrasonically). The Consultant has therefore

assessed this activity as 0% incremental.

163 Rail Defect Removal (RCRM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

164 Wheel Burn Removal (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

165 Insulated Rail Joints (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

166 Welded Track Stability (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

168 Rerailing Minor (MPM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

171 Rail Grinding (MPM) 90% GTK

The Consultant generally agrees with WIK's assessment particularly with respect to wheel burns; however their variation in the incremental

element component due to surface rust is not an issue in the heavily trafficked HVCC. Except to enhance track circuit activation of level

crossing protection mechanisms on very low trafficked lines, ARTC would not need to grind to remove surface rust from the rails. However,

squat and rolling contact fatigue (RCF) removal still gives sufficient justification to apply a 10% fixed component.

172 Turnout Grinding (MPM) 90% GTK

The Consultant generally agrees with WIK's assessment particularly with respect to wheel burns; however their variation in the incremental

element component due to surface rust is not an issue in the heavily trafficked HVCC. Except to enhance track circuit activation of level

crossing protection mechanisms on very low trafficked lines, ARTC would not need to grind to remove surface rust from the rails. However,

squat and rolling contact fatigue (RCF) removal still gives sufficient justification to apply a 10% fixed component.

173 Rail Straightening (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

174 Ultrasonic Test Car (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

180 V Crossing Maintenance (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

181 Turnout Maintenance - Reactive (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

183 Turnout Retimbering (MPM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

187 Turnout Steel Component Replacement (MPM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

200 Track Geometry Fault Repairs (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

201 Reactive Track Geometry Correction (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

203 Maintenance Resurfacing (MPM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

205 Turnout Resurfacing (MPM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

206 Ballasting (MPM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

209 Track Geometry Recording (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

210 Rectify Line & Top faults Initiators (MPM) 75% GTK Not assessed by WIK. The Consultant's assessment is that variability should be similar to Acivity Code 200.

214 Survey Monument Restoration (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

216 Survey Monument Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

220 Resleepering - Timber (MPM) 75% GTK

Not assessed by WIK. Cost variability is a mix of usage, time and specifically environmental factors (termites, dry rot, weather, etc?), with

usage being the predominant factor. Therefore the Consultant has assessed this activity as 75% incremental with an allocator of 'GTK' for the

incremental component.

221 Resleepering - Steel (MPM) 75% GTK

Not assessed by WIK. Cost variability is a mix of usage and specifically environmental factors (eg corrosion), with usage being the

predominant factor. Therefore the Consultant has assessed this activity as 75% incremental with an allocator of 'GTK' for the incremental

component.

222 Resleepering - Concrete (MPM) 75% GTK

Not assessed by WIK. Cost variability is a mix of usage and specifically environmental factors (eg corrosion), with usage being the

predominant factor. Therefore the Consultant has assessed this activity as 75% incremental with an allocator of 'GTK' for the incremental

component.

225 Fastening Maintenance (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

226 Pad Replacement (MPM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

230 Yard & Siding - Track Rehabilitation (MPM) 50% GTKNot assessed by WIK. Cost variability is a mix of usage, time and environmental factors, with usage being a significant factor. Therefore the

Consultant has assessed this activity as 50% incremental with an allocator of 'GTK' for the incremental component.

232 Spot Resleepering (RCRM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

242 Bridge Transoms (MPM) 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

243 Ballast Removal from Bearings (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

244 Culvert Cleaning (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

245 Formation & Scour Protection (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

247 Tunnel Maintenance (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

248 Underbridge - Reactive Repairs (RCRM) 25% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

249 Overbridge: - Reactive Repairs (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

252 Culvert Structural Repairs or Cleaning Maintenance 0% The Consultant agrees with WIK's assessment of cost variability.

255 Overbridge Refurbishment (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

257 Overbridge Works (CRN) and (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

258 Steel Underbridge Repairs (MPM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

259 Concrete / Masonry Underbridge Repairs (MPM) 25% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

260 Level Crossing Reactive Maintenance - Civil 0% The Consultant agrees with WIK's assessment of cost variability.

261 Track & Civil - Level Crossing Maintenance (MPM) 25% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

264 Timber Underbridge Repairs (MPM) 25% GTKNot assessed by WIK. Cost variability is a mix of usage, time and environmental factors, with usage being a partial factor. Therefore the

Consultant has assessed this activity as 25% incremental, with an allocator of 'GTK' for the incremental component.

266 Culvert Reactive Corrective Maint (RCRM) 25% GTKNot assessed by WIK. Cost variability is a mix of usage, time and environmental factors, with usage being a partial factor. Therefore the

Consultant has assessed this activity as 25% incremental, with an allocator of 'GTK' for the incremental component.

280 Cutting, Embankment Maintenance & Geotechnical (MPM) 0%

Not assessed by WIK. Cuttings and goetechnical work are not traffic related, while it could be argued that embankment work may have a

component that does vary with usage. While these three activities are grouped under a single code, the Consultant has assessed this activity

as 0% incremental. ARTC could consider splitting the embankment activity into a separate code for greater accuracy, provided that it is

reasonable to split cost allocations at that level.

281 Cess & Top Drain Maintenance (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

284 Mud Hole Rectification - Dig outs (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

285 Shoulder Ballast Cleaning (MPM) 90% GTKNot assessed by WIK. The Consultant is of the view that cost variability should be 90% consistent with Activity Code 286. The allocator for

the incremental portion should be GTK.

286 Ballast Cleaning (MPM) 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

288 Terminal Drainage (RCRM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

292 Subsurface Drainage Maintenance (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

293 Mudholes Full Track Reconditioning (MPM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

294 Ballast Undercutting (MPM) 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

301 Siding Maintenance (RCRM) 25% GTKNot assessed by WIK. This activity is invariant with traffic volumes; but as sleeper degradation within sidings is a function of GTK as well as

environmental issues, the Consultant has assessed this activity as 25% incremental.

302 Third Party Support (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

320 Rest House Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

322 Stores Management (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

323 Training (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

324 Unscoped Works - Track & Civil (MPM) 75% GTKNot assessed by WIK. Cost variability is a mix of usage, time and environmental factors, with usage being the predominant factor. Therefore

the Consultant has assessed this activity as 75% incremental with an allocator of 'GTK' for the incremental component.

325 Facilities Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

326 Signal Equipment Building Maintenance (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

327 Wayside Detection Systems (RCRM) 0% Not assessed by WIK. As very few wayside components (except in-track weigh-bridges and WILD equipment), are mounted to the track, this

activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

328 WILD Maintenance (RCRM) 50% GTKNot assessed by WIK. As WILDs are track mounted and their maintenance is partially related to the impact loads incurred, the Consultant

has assessed this activity as 50% incremental with GTK as the allocator.

335 Removal of Redundant Infrastructure, not to be replaced (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

343 Wayside Detection Systems - Component Repairs 25% Train Km The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

686 HVMP Program Expenses 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

700 Inspect Testing & Minor Repairs - Level Crossing (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

701 Inspect Testing & Minor Repairs - Signals (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

702 Inspect Testing & Minor Repairs - Points Interlocking 0% The Consultant agrees with WIK's assessment of cost variability.

703 Inspection Testing & Minor Repairs - Cable and Line 0% The Consultant agrees with WIK's assessment of cost variability.

704 Voice Radio Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

705 SCADA Telemetry Maintenance (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

706 Other Comms System Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

707 Signals High Voltage Power Supply - Inspect, Test & Repairs (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

708 Inspections - Comms Towers (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

710 Callouts Signalling (RCRM) 50% Train Km The Consultant agrees with WIK's assessment of cost variability.

711 Callouts Comms (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

712 Inspections - Signals & Comms (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

722 VicTrack Communications Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

This activity is also not relevant to the HVAU; and only applicable to Victoria.

733 Training - Signals & Comms (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

743 Cable Replacement (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

745 Point Machine Renewal (MPM) 50% Train Km

Not assessed WIK as an MPM activity, but from WIK's Corridor Capital Assessment (see WIK Report p.30 and various Corridor Capital

projects relating to points machines), the Consultant agrees with WIK's assessment that this activity is related to both traffic and time and is

therefore 50% incremental, with an allocator of Train Km.

749 Level Crossing Equipment Replacement (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

754 Pole Line Renewal (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

758 Location Case Replacement (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

766 Power Supply Upgrade (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

768 Track Circuit Batteries (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

770 Track Circuit Maintenance (MPM) 50% Train Km The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

771 Track Lead Replacement (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

775 Signal Box Maintenance (RCRM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

776 Inspect Testing & Minor Repairs - Train Control and Signalling Indication

Systems 0% The Consultant agrees with WIK's assessment of cost variability.

777 Inspect Testing & Minor Repairs - Track Circuit 0% The Consultant agrees with WIK's assessment of cost variability.

778 Inspect & Minor Repairs - Enclosures / Location 0% The Consultant agrees with WIK's assessment of cost variability.

779 Inspect Testing & Minor Repairs - Signals Power Supply 0% The Consultant agrees with WIK's assessment of cost variability.

780 Inspection & Minor Repairs - Other Comms 0% The Consultant agrees with WIK's assessment of cost variability.

786 Inspect Testing & Minor Repairs - Wayside Equipment 0% The Consultant agrees with WIK's assessment of cost variability.

788 Reactive Maintenance - Callouts Country North 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

794 Signalling System Modification (MPM) 25% Train Km The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

796 Equipment Access Maintenance (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

807 Communications Systems Modifications (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

814 Plan & Document Maintenance - Signals (MPM) 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

820 Signage Maintenance (RCRM) 0% The Consultant agrees with WIK's assessment of cost variability.

911 RCRM - Forecast – Civil Infrastructure 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

915 Expense Recovery (MPM) 0% The Consultant agrees with WIK's assessment of cost variability.

917 RCRM Forecast – Signals & Communications 0% Not assessed by WIK. This activity is invariant with traffic volumes. The Consultant has therefore assessed this activity as 0% incremental.

918 Timefiler Labour Accruals ? ? The Consultant is unable to comment on the appropriateness of the 'Allocations' or the Allocator "GTK' as adopted by ARTC.

Maintenance Allocation Table End

Attachment 1

Allocation Values & Mechanism: Corridor Capital



Activity

CodeDescription % Incremental Allocator Explanation

Minor CAPEX (by activity)

Corridor Capital Allocation Table Start

17 Design Costs Capital Projects N/aThe Consultant is unable to comment on the appropriateness of the incremental proportion nor the allocator due to the non-specific

nature of this activity.

21 Investigations / Feasibility Studies for Capital N/aThe Consultant is unable to comment on the appropriateness of the incremental proportion nor the allocator due to the non-specific


151 Land Acquisition N/aThe Consultant is unable to comment on the appropriateness of the incremental proportion nor the allocator due to the non-specific


158 Rail Lube Overhaul / Major Maintenance 50% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

170 Rerailing Upgrading 75% GTK

The Consultant is unable to identify if Activity Code 170 has been assessed by WIK & TÜV. However, Allocators and cost variability

for Rerailing Upgrading from 53kg to 60kg rails, is more related to volume than to time, and therefore assessed at a cost variability

of 75% (being of similar scenario to Activity Code 186 "Turnout Renewal"), with these also being the views of the Consultant.

178 Rerailing 90% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

186 Turnout Renewal 75% GTK

The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion, and assumes that these

turnout renewals are 'Upgrades' from low speed 53kg turnouts to higher speed 60kg tangential long radius turnouts with FNX or

SNX and HD bearers to support 30TAL (similar scenario to Activity Code 170). However, should the turnout be purely a 'like-for-like'

renewal, based on its degradation due to GTK, then an incremental cost variability of 90% is recommended by the Consultant

(similar Scenario to Activity Code 178).

223 Resleepering 75% GTK Not assessed by WIK. The Consultant recommends 75% incremental and GTK as a cost allocator.

229 Track Strengthening / Upgrading 75% GTK The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

250 Overbridge Renewal 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

253 Bridge Replacement or Modification 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

254 Culvert Replacement or Modification 0% The Consultant agrees with WIK's assessment of cost variability.

262 Level Crossing Upgrade 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

263 Bridge End Track Upgrades 100% GTKNot assessed by WIK. Bridge end ballast and track degradation are variant with GTK. The Consultant has therefore assessed this

activity as 100% incremental.

265 Ballast Wall Extension - Capital (CAPEX) 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

267 Level Crossings Externally funded 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

330 Wayside Detection Systems - New Install 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

331 Redundant Civil Infrastructure Removal 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

390 Insulated Rail Joints 75% GTK

Not assessed by WIK directly as capital but assessed by them as a maintenance activity (Activity Code 165) at '75% incremental

and GTK driven'. The replacement of an insulated joint occurs when simple repair is not feasible but the underlying causes for

degradation of the joint are likely to be similar in nature. Therefore, the Consultant has applied 75% incremental and GTK driven for

this capital activity.

645 Works - Noise Barriers 0%

Not assessed by WIK. Noise barriers are a response to community amenity. The volume of noise and the community impact will

vary dependent on a number of circumstances specific to the location. It is, therefore, difficult to apply any generalised approach.

Having said this, it is not necessarily the mass of the train nor the number of trains that will drive the requirement for noise barriers.

Therefore, the Consultant has assessed this activity as 0% incremental.

744 Plan & Document Update - Signals 0%

The extent of documentation relating to a signalling system will be dependent on the complexity of the system which may be related

to the level of train activity in the long term but is invariant to incremental changes in volumes and is also related to the related

specific infrastructure configuration. The Consultant has therefore assessed this activity as invariant with volume and 0%

incremental.

759 Point Machine Replacement 50% Train KmThe Consultant generally agrees with WIK's assessment of cost variability and allocator for the incremental portion. However, in the

case of derailment damaged, it could not be considered as incremental.

760 Track Circuit Renewal, Installation or Upgrade 0%

Not assessed by WIK. The majority of track circuit components are not traversed by a train, as they stand clear of the track (only

the associated insulated joint and cabling forms or joins part of the track). As modern non-relay based track circuits have few to no

moving parts, they are not train volume related. Deterioration is likely to be driven by environmental factors or an incident. The

Consultant has assessed this activity as invariant with volume and 0% incremental.

764 Level Crossing Upgrade 100% GTKThe Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion. However, where the cost

is related to the road user / owner this would be expected to be paid for by a third party.

772 Signalling System Upgrades 50% Train Km The Consultant agrees with WIK's assessment of cost variability and allocator for the incremental portion.

773 General Signal Equipment 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

815 Power Supply Upgrade 0% Not assessed by WIK. This activity is invariant with rail traffic volumes. The Consultant has therefore assessed this activity as 0%

incremental.

816 Signal / Level Crossing Lamp Upgrading 0% The Consultant agrees with WIK's assessment of cost variability.

817 Installation of upgraded communications 0%

Not assessed specifically by WIK. However, all projects assessed by WIK containing a communications component were assessed

at 0% incremental. The Consultant notes that the upgrading of communications may be driven by a number of factors, particularly

technology or protocol changes, which may, or may not, be related to changes in the levels of activity. On this basis, the Consultant

has assessed this as invariant with traffic as a generalised approach, noting that in some instances it may be appropriate that this

activity be assigned an incremental component.

951 Wagon Instrumentation 0%

Not assessed by WIK. This activity relates to the instrumentation of vehicles to assess the impacts of moving from 25 TAL to 30

TAL, particularly relating to Zone 3 operations, but also with regard to other parts of the network where the coal wagons operate.

Notwithstanding this, the nature of the investigation is invariant with volume and therefore 0% incremental.

Minor Capex Table End

Attachment 1

Allocation Values & Mechanism: Major Projects



Project

Code

Commissioning

Year

Approx. $m at

CommissioningDescription % Incremental Allocator Explanation

Major CAPEX (by project)

Major Capital Allocation Table Start

3585 2010 133 Maitland to Minimbah Third Road – Stage 1 – All Phases 100% GTK

For this Third Road, the Consultant concurs with the WIK Report on the nature of this project “100% / GTK driven”, where “Project

expenditure can be assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assume that

track extensions, third roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher

network capacity respectively, delivering a reduction in maintenance impacts through increasing operational flexibility”.

5255 2012 353 Maitland to Minimbah Third Road – Stage 2 – All Phases 100% GTK

For this Third Road, the Consultant concurs with the WIK Report as “100% / GTK driven”, where “Project expenditure can be

assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assume that track extensions, third

roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher network capacity


5811 2012 75 Nundah Third Track - All Phases 100% GTK

For this Third Road, the Consultant concurs with the WIK Report as “100% / GTK driven”, where “Project expenditure can be

assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assume that track extensions, third

roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher network capacity


6928 2013 22 Drayton Junction Upgrade (Capital) 100% GTK

For this Junction Upgrade, the Consultant concurs with the WIK Report, as being “100% / GTK driven”, where “Project expenditure

can be assessed as incremental due to their relationship to the capacity enhancement outcomes. WIK assume that track

extensions, third roads and their associated new and resignalling systems, are mainly driven by asset enhancement for higher

network capacity respectively, delivering a reduction in maintenance impacts through increasing operational flexibility”.

6387 2014 130 Hexham Relief Roads - Capacity entering terminal areas 100% GTK

For this project, the Consultant concurs with the approach adopted in the WIK Report for Major CAPEX projects of a similar nature

which are primarily required to service additional coal volumes. As such, this project should be considered as “100% incremental /

GTK driven”.

8665 2013 31 No.3 Departure Road at KCT 50% GTK

For this project, the Consultant concurs with the approach adopted in the WIK Report for this project as being “50% incremental /

GTK driven”, where “Project expenditure investment into a Departure Road is mainly driven by asset enhancement for higher

network capacity, but some share is also to provide higher buffering capacities at port”.

8667 2016 H2 32 Kooragang Arrival Roads Stage 2 50% GTK

For this project, the Consultant concurs with the approach adopted in the WIK Report for similar projects of this nature such as

Project Nos: 8665 and 8669, where their investment was related substantially to the improvement of coal terminal operations, rather

than being strictly required for network capacity. The Consultant assesses this project as being “50% incremental / GTK driven”.

8669 2014 23 Drayton Down Relief Hub 50% GTK

For this project, the Consultant concurs with the approach adopted in the WIK Report for similar projects of this nature such as

Project No: 8665, where the investment is related substantially to the improvement of coal terminal operations rather than being

strictly required for network capacity. The Consultant assesses this project as being “50% incremental / GTK driven”.

9210 2014 5 Arrival Roads Signalling Optimisation 50% Train KmThe Consultant has assessed this project as 50% incremental on basis of the WIK assessment for similar projects relating to port

efficiency. The driver is Train Km as this project is signalling, rather than capacity related.

9211 2014 < 1m Hexham to Kooragang Resignalling 50% Train KmThe Consultant has assessed this project as 50% incremental and Train Km driven on basis of the WIK assessment for similar

projects relating to port efficiency.

9224 2014 < 1m Mt Thorley Branch Signalling Enhancement 50% Train KmThe Consultant has assessed this project as 50% incremental and Train Km driven on basis of the WIK assessment for similar

projects relating to the efficiency for entry and exit to the branch line.

Major Capital Allocation Table End

Draft Final Report 20160713 ARTC Independent Evaluation Incremental Costs Attachment 2.Docx 1

Job No: 0074

Job Name: 2014 Compliance Assessment Resubmission

Sub-Task: 30 - Independent Engineering Assessment of Incremental Costs

Document Title: Job No 74 Scope For Independent Evaluation Of Increment Costs.Docx

Author: Paul Bugler

10/06/2016

SCOPE FOR INDEPENDENT ENGINEERING ASSESSMENT OF INCREMENTAL COSTS

1 BACKGROUND

In its Final Decision on ARTC’s compliance with the Hunter Valley Access Undertaking (HVAU) for the 2013 calendar year, the Australian Competition & Consumer Commission (ACCC) determined that it was necessary for ARTC to account for its infrastructure maintenance and capital expenditures as having an incremental and fixed component for use in on-going compliance assessments.

In reaching its decision, the ACCC commissioned a German firm WIK-Consult (WIK) to advise on the proportions of each cost type that should be deemed incremental or fixed. In addition, WIK nominated an appropriate allocation method that should be applied to each element of cost. The resulting report provided by WIK, and adopted by the ACCC, covered expenditures for the period from July 2008 up December 2013.

While ARTC does not necessarily agree with a number of aspects of the WIK report, the ACCC decision has now been finalised and ARTC is required to adopt the WIK methodology for future compliance assessments at least up to June 2016 and potentially beyond.

2 TASK

As the WIK report only covers up to December 2013, it is necessary for ARTC to evaluate cost elements from January 2014 to at least 2017.

The nature of the task can be considered in three separate categories:

Maintenance activities

Corridor Capital

Major Projects


2.1 PREPARATION

The consultant will be required to consider the WIK report, with a view to understanding the background of this project and the approach adopted by WIK in determining the proportion of activities and projects that are incremental and the method of apportionment.

The consultant will be required to consider the ARTC Hunter Valley Corridor Strategy documents for 2014 and 2015 to gain an understanding of the nature and purpose of the relevant Major Projects during the period being considered.

Electronic copies of these documents will be provided.

2.2 MAINTENANCE ACTIVITIES

ARTC has long identified maintenance activities as having a proportion that varies with traffic and a proportion that is invariant with traffic.

WIK considered 116 different categories of maintenance activity. The WIK report agreed with a large proportion of the “fixed/variable” allocations previously used by ARTC, but amended the proportions for 8 activities. WIK did not consider a number of activities that did not have expenditure during 2013 in the Pricing Zone 1 area of the network, i.e. the portion of the network between the Newcastle ports and Bengalla.

The consultant will be provided with a list of maintenance activities used by ARTC relevant to the Hunter Valley rail network and, for those activities not otherwise considered by WIK, provide an assessment of the proportion that should be considered variable with traffic and the allocation mechanism, either gross tonne kilometres (GTK) or train kilometres (Train Km).

2.3 CORRIDOR CAPITAL

WIK considered a number of activities associated with Corridor Capital (i.e. sustaining or replacement capital) that could be considered as being partly or wholly incremental. The consultant will be provided with a list of Corridor Capital projects and the related activities associated with them. It will be noted that the WIK report was focussed on those projects carried out in Pricing Zone 1. For projects on other parts of the network, WIK generally did not express an opinion, though the activities underpinning the projects tend to be common across Pricing Zones.

The consultant will be provided with a list of relevant activities for the time periods under consideration. As an output, the consultant will, for each Corridor Capital related activity, identify the incremental proportion and allocation mechanism (either GTK or Train Km), applying the outcomes from the WIK report where WIK has made an assessment or otherwise forming an independent assessment.

2.4 MAJOR PROJECTS

The most contentious area considered by WIK is that of Major Projects which are those capital expenditures associated with the construction of additional infrastructure or the implementation of new systems. The identification of the incremental portion and associated allocation mechanism for each project is a complex matter. However, WIK has taken a somewhat simplistic approach that would class any project that was intended directly or predominantly to increase network capacity as incremental. As with Corridor Capital, WIK has focussed on projects within Pricing Zone 1. Unlike for Corridor Capital, each project will need to be considered as a whole and is not related to a particular set of activities. For this consultancy, it will only be necessary to consider projects within Pricing Zone 1.


As an output, for each Major Project in the list provided, the consultant is required to identify the incremental proportion and allocation mechanism (either GTK or Train Km), applying the values from the WIK report where WIK has made an assessment or otherwise forming an independent assessment.

The consultant should be guided by the WIK approach. However, where the consultant forms a view that a project clearly has elements that are provided for other reasons than purely to provide for increased network capacity, then the consultant should identify the proportion of the project that would be more correctly categorised as related to that other purpose and discount the proportion applied as incremental accordingly.

The consultant should consider the relevant documentation (which will be provided) and in the report provide a short assessment of each Major Project with a value in excess of $10m as well as providing the incremental proportion and allocation mechanism (either GTK or Train Km) for all projects where WIK has not otherwise done so from the list provided.

Note that the consultant is not required to consider Major Projects not considered by WIK for the period prior to January 2014.

3 OUTPUT

The consultant will provide a written report in Microsoft Word plus appropriate spreadsheets in Microsoft Excel (or as otherwise agreed) setting out the matters identified in Section 2 with a view to that report being provided to the ACCC at some future point in time as justification for ARTC’s identification of costs as fixed or incremental and the allocation of those costs between different traffics.

4 NOT INCLUDED IN THE SCOPE

The following activities are beyond the scope of this project:

o The consultant is not required to critique the WIK report or consider the actual model created by WIK for the identification or allocation of incremental costs.

o The consultant is not required to gain a detailed knowledge of ARTC’s Hunter Valley Corridor Strategy or the HVAU.

o The consultant is not required to re-evaluate activities or projects already considered by WIK, except to the extent that there is manifest error such that ARTC could reasonably expect to successfully re-present the activity to the ACCC for a future period with a significantly different outcome.

o The consultant is not required to consider projects outside of Pricing Zone 1.

BULL HEAD SERVICES PTY LIMITED 2014 Compliance...Independent Engineering Assessment of Incremental...

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