China Scores Another Rail Contract


China has won another NZ rail contract and KiwiRail CEO Jim Quinn says on price, the Hillside bid was about 25% more expensive than the China CNR tender.

It’s to produce 300 new container flat top wagons for KiwiRail.

Today KiwiRail announced that a $29 million tender for 300 rail wagons has gone to China CNR Corporation. KiwiRail’s Hillside workshops tendered for the deal but lost out. The future looks bleak for Hillside to supply any of the remainder of the 3,000 wagons needed, except perhaps to assemble from CNR components. KiwiRail has also ruled out their own workshops building or assembling any more locomotives.

Rail and Maritime Transport Union General Secretary Wayne Butson said his union sees it as a further vote of no-confidence in the local  rail industry and its workforce.

KiwiRail CEO Jim Quinn says on price, the Hillside bid was about 25% more expensive than the CNR tender.

“But the CNR bid was superior on non-financial considerations as well. The wagons are needed by mid-2011 so that we can meet increasing customer demand and retire wagons that in some cases are more than 30 years old and prone to mechanical failure.

“The evaluators considered Hillside would not be able to deliver the wagons in such a short time-frame. In their view, Hillside would not be able to create the capability required to produce the wagons to meet the delivery time required by the market.

“The decision reflects KiwiRail’s need to get the best possible value for the limited money we have to rebuild our business and to apply that money to the projects that will improve our relevance to our customers.

“You will be interested to know that the tender process has raised the possibility of Hillside being able to import components and assemble wagons for KiwiRail’s future requirements. Work will begin in the New Year on examining options for local assembly in the future. However, again this will need to close the gap significantly if it is to be an option we will pursue.

“We have also reviewed our costs to build locomotives against a re-checked price from CNR our current supplier for the DL Locomotives. That review has shown that our workshops would be around 70 percent more expensive supplying locomotives. We will not be pursuing local build or assembly for future locomotive orders as this shows that the gap is simply too great to close.

“Improving the quality of rolling stock is essential for KiwiRail to improve service for its freight customers and deliver on the KiwiRail Turnaround Plan commitment to double freight revenue in ten years. This is a huge challenge, but I believe with the combination of the new rolling stock, network improvements, new technology and a greater focus on customer service, it is achievable.

“CNR is a proven supplier to the rail industry in New Zealand. The company built 100 IM wagons which went into service in late 2008. Its Dalian plant has been building KiwiRail’s 20 new diesel electric locomotives.

“We are now getting a sense of what work our workshops will and will not be doing as we look ahead. In the New Year we will complete our search for wider engineering work, complete the review of the approach that we can take for the future wagon needs and based on all of those inputs we can plan the future shape of the mechanical support required for KiwiRail.

Rail and Maritime Transport Union General Secretary Wayne Butson said “Rail workers were keen for the work to be done at the Woburn and Hillside workshops, where many similar wagons have been built previously. “Either New Zealand has a well trained rail workforce or it doesn’t.  Moves like these risk sending more skilled trades people overseas.”

“Rail workers who negotiate in good faith for their terms and conditions at KiwiRail are now effectively being told that their wages are the main barrier to New Zealand getting its own rail manufacturing work.

“Of course New Zealand workers will never be able to compete on cost with China but our quality of work is second to none. We have always said it is nonsensical for KiwiRail to tender a job from one part of its business, that it comfortably has the capacity to carry out within another business unit. What needs to change is KiwiRail’s tendering rules, and this change needs to come from Parliament, to make it clear for crown entities like KiwiRail that buying local must always be the first option where possible.”

This comes as a number of bidders have withdrawn from the tendering process for the Auckland’s electric units amid widely held speculation that the deal will go to a Chinese company, favoured to help growing trade links between NZ and China.

Bill Rosenberg, CTU Economist and Policy Director said: “The work that unions and Dunedin City Council commissioned from BERL regarding the Auckland commuter rail rolling stock earlier this year showed significant benefit to New Zealand from building them here. It created skilled jobs, increased the tax take and reduced New Zealand’s international debt. It also built a base for possible diversification and exports.”

Hillside is experienced in building wagons, but this decision puts the viability of the workshops in doubt.

“It is crazy to put hundreds of skilled jobs at risk by this narrow approach to purchasing,” said Rosenberg. “Sensible government procurement arrangements which are used widely internationally would use this kind of purchase to build local industry and skilled jobs.”

The government also announced today that the transnational Serco has won a tender to manage the two Auckland prisons, the brand new Mt Eden and the Auckland Central Remand Prison (ACRP). “Internationally this kind of step has led to loss of jobs and lower pay,” says Rosenberg. “That is how the contractors lower costs. Labour costs account for most of the costs of running a prison.”

“Even then, we have yet to see whether there will be lower costs to the public purse. PPPs have a record in the UK of being a huge waste of public money.”

In the UK basic pay is 8-44 percent lower in the private sector than the public sector, and on top of that, private sector prison officers get fewer benefits such as superannuation and holidays. Staffing levels are also lower. A study of Scottish prisons concluded that private sector cost savings are also made by employing staff with less skills and experience.

“Once again, the government is showing no faith in publicly run operations, and is cutting jobs at a time of high unemployment.”




  1. John Dalley says:

    Might be time for a closer look at Pansy Wong and Jenny Shipley’s involvement.

  2. Matt L says:

    Apparently there are serious quality issues with the new locos that are coming from CNR, hopefully these can be easily fixed but I do wonder if these these sorts of things will cost us more in the long run.

  3. tim says:

    What an embarrassment, maybe KiwiRail should outsource and get the chinese to maintain its wagons and locos as well as run its freight, infrastructure and other operations


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