Kiwirail

Acquisition of Electric Train Fleet for KiwiRail

Cranleigh provided KiwiRail with commercial advice and whole of life financial modelling for the purchase of 57 new electric trains costing over $500 million.

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Background to the Role

KiwiRail is a State Owned Enterprise and the backbone of New Zealand's integrated transport network. KiwiRail is currently in the process of electrifying Auckland's rail network. This will mean quieter and more reliable train services, allowing rail to take a more prominent role in the region's transport mix.

The Business Need

In order to implement its electrification aims, KiwiRail needed to replace the ageing diesel train stock in Auckland with modernised electric trains. These trains are more efficient and reliable, which is hoped will translate to improved service. KiwiRail went to market seeking expressions of interest for the supply and maintenance of new trains.

KiwiRail received bids in from potential tenderers but had no method to determine the competitiveness of each bid. Given the complicated pricing strategies and variances between proposed train models, KiwiRail believed it would be difficult to decide on the best proposal for implementation in the Auckland rail network.

The Cranleigh Solution

Cranleigh recognised the importance of establishing a benchmark to determine what a reasonable cost of services would be. This benchmark model appreciated that price alone could not be the determining factor and that the services were important as the contracts were large-scale and long-term. Using this benchmark model, Cranleigh was able to determine which bids were too high or too low in price and quality.

Cranleigh also helped to develop the request for proposal documentation that was the second stage of the tender process. The documentation that was developed helped to ensure that information received back from tenderers was comparable and relevant to both each other and the benchmark.

Finally, Cranleigh developed a whole-of-life costing model for each bid. This helped to determine the costs of each model and was of vital importance in comparing bids against each other and the benchmark. This costing model allowed Cranleigh to identify bids with not only a reasonable price for services, but also compared against various other factors, including a sensitivity analysis over the life of the project.

The outcome of Cranleigh's expert advisory assistance was the procurement of 57 new electric trains offering a faster and more frequent service and helping to greatly improve the efficiency of the overall Auckland rail network.