Schedule of ARTC documents reviewed · construction of the flyover had commenced as planned, the designers indicated that construction procedures relating to both the temporary rail

INDEPENDENT PRICING AND REGULATORY TRIBUNAL OF NEW SOUTH WALES

FINAL REPORT

REVIEW of ARTC CAPITAL EXPENDITURE

for the

SANDGATE RAIL GRADE SEPARATION PROJECT

NEWCASTLE

HIMARK CONSULTING GROUP PTY LTD

August 2008

TABLE OF CONTENTS

Executive Summary 1

Report 1. Introduction 9

2. Extent of Brief 11

3. Report Methodology 12

4. The Sandgate Flyover Project Description & Construction Issues 13

5. Project Chronology of Relevant Events 18

6. Pre-construction Identification & Resolution of Project Site Issues 20

7. ARTC Project Construction Management & Consultation Processes 21

8. Review of ARTC Document Progress Report to RIG July 2006 22

9. Identifying the Asciano Raised Issues 24

10. Project Contractual Issues Encountered 28

11. Project Major Cost-Over-run Issues 28

12. Other Issues including Compliance with NSW Rail Access Undertaking 31

13. Review Conclusions & Recommendations 31

Appendices

Appendix A - Schedule of Relevant Documents Reviewed 35

Appendix B – Deleted (confidential information claimed by ARTC 38

Appendix C – Asciano Submission to IPART: Review of ARTC Compliance with the NSW Rail Access Undertaking 2006/07, 12 February 2008 39

Appendix D – Sandgate Flyover; Construction Costs 40

Appendix E - ARUP Presentation – Sandgate Rail Grade Separation project – Bypass tracks Formation Design Presentation, December 2005 (CD separate). 44

ARTC – SANDGATE RAIL GRADE SEPARATION PROJECT REVIEW – FINAL REPORT

EXECUTIVE SUMMARY

The Sandgate Rail Grade Separation project for which this Report has been prepared can be described as a bridge or viaduct structure allowing trains to pass/cross one above the other (grade separation) without affecting the operation of trains on the other tracks. These types of track separated crossings are quite common in high trafficked rail areas exampled by those between Central and Redfern in Sydney and also by a grade separated crossing about 3kms east of the Sandgate site for coal and other freight access to Newcastle’s Port Waratah terminal at Hanbury Junction.

The Sandgate Rail Grade Separation (Sandgate Flyover) structure is an important operational component for the Hunter Valley Coal Rail Strategy to allow coal trains access to the Kooragang Bulk Coal Terminal rail lines without affecting train operations on other lines. The Kooragang lines currently connect to the north from the Newcastle to Maitland mainlines and hence a crossing of these mainlines is required from the coal lines which are located on the southern side of the rail corridor. The mainlines carry mostly passenger trains between Newcastle and Maitland (Telarah) and other destinations on the North West and North Coast lines and some freight services.

In 2005, 42 coal trains paths daily (each way) crossed the mainlines at grade to Kooragang Island which affected the operation of the 51 passenger train and 6 freight trains paths which operated each way daily on the main line between Newcastle and Maitland. By 2012, the number of coal trains accessing the Kooragang Island Terminal daily has been estimated as being of the order of 60 each way (each at some 1.5kms long) as contained in the Hunter Valley Coal Strategy 2008-2012 report.

This Report has been prepared at the request of the NSW Independent Pricing and Regulatory Tribunal (IPART) following a Submission dated 12 February 2008 made by Asciano Limited (owner of rail operating business Pacific National (PN)) which operates approximately 85% of the coal and other freight trains that will make use of the grade separation of the Sandgate Flyover. This Asciano Submission questions ARTC’s Compliance with the NSW Rail Access Undertaking 2006/07 in nominated relevant processes in relation to the over-run in costs of the construction of the Sandgate Flyover.

This Report has identified the issues raised by Asciano, investigated the reasons for the cost over-runs and the Contractual and Project Management Processes undertaken by ARTC prior to and during the construction of the Flyover and the Stakeholder Consultation Process associated therewith.

The findings of this review can be summarised in general chronological order, as follows;

• The site of any option for the grade separated structure over the applicable 4kms section of the Main Northern Line from south of the Kooragang Island rail turnout triangle near Warabrook to the Ironbark Creek bridge towards Hexham would be located on a very flat, flood prone ground with a high water table containing saturated clay/silt soils and having environmental issues including SEPP 14 Wetlands (including Market and Hexham Swamps) at each end, RAMSAR Hunter Estuarine Wetlands, Sandgate Cemetery and the Sandgate residential area. In addition, this section also contains man-made issues including Sandgate railway station, the Wallsend Road Bridge over the railway corridor, industrial sites adjoining the rail corridor at Sandgate

HIMARK CONSULTING GROUP PTY LTD AUGUST 2008 Page 1


and near the Kooragang Island rail turnout triangle, with the former Newcastle City Council waste disposal/landfill area located on the western side of the rail corridor between the wetlands and the corridor.

• The Main Northern Railway Line corridor through Sandgate was built some 150 years ago with the line opening to Maitland in 1857 over the easiest terrain available using rail construction techniques of those days. The Kooragang Island branch line connecting to the Main Northern south of Sandgate opened in 1984. From the Main Northern rail corridor formation history as was provided to ARTC, no major failures in this section have been recorded although it is known that two (2) 30 and 40 metre deep paleo river channels are located overlain with soft clays, one at the southern end nearer the Kooragang Island branch triangle and the other near the location of the proposed Sandgate Flyover site.

• To determine the least problematic location and to identify issues for the Sandgate Flyover, ARTC commissioned a number of studies including a Feasibility Study, Geotechnical Study (with historical geotechnical records from previous studies for other infrastructure), an Environmental Impact Study and community consultation with adjoining residential and industrial stakeholders and relevant Local, State and Federal Departments, Agencies and instrumentalities.

• ARTC then addressed all of the identified issues in determining the possible Options for the location to build the Flyover which would be operationally acceptable to rail operators as well as being environmentally responsible to the sensitivity of the community and the natural habitat in which the Flyover would be constructed and operated.

• ARTC recommended and it was agreed by the Stakeholders that as the Flyover could be constructed completely in the rail corridor without having to acquire adjoining land (which would trigger State Planning Constraints associated with the environmental habitats adjoining) the ‘Sandgate’ site was the preferred site Option for the flyover.

• ARTC consulted with its Stakeholders (rail operators PN and QRN) regularly at Rail Infrastructure Group (RIG) meetings on a monthly basis from 2004 onwards regarding project status and with the Hunter Valley coal mining companies on major issues associated with the Sandgate Flyover during the planning phase in 2005 seeking agreements and concurrence with the actions being taken.

• ARTC followed the commonly undertaken standard major contract works procedures by calling Expressions of Interest and following reviewing those received, invited four (4) approved contractors to tender. Only two (2) tenders were received, with the higher of the tenders received being some $25 million above the other; the lower tender having considerable conditions relating to risk enunciated therein.

• Prior to entering into the contracts for construction, ARTC undertook exhaustive negotiations with the preferred contactor to ensure a detailed understanding of the risk and operational requirements for the works, including requirements relating to the environmental, operational and geotechnical conditions that that may be encountered.



• Following these contractual negotiations, ARTC, prior to awarding the contracts considered the adequacy of the proposed 10% contingency on the contract amount and were satisfied from the historical geotechnical data that this was suffice.

• With the contracts about to be awarded for construction, ARTC advised the RIG Stakeholder members on 4 August 2005 that “The forecast cost based on the tenders received and negotiated is $60.7 million plus 10% contingency (not including GST)” to which the parties signed off. Construction completion was scheduled for opening of the Flyover in mid November 2006.

• As an integral part of the Design & Construction contract for the bridge, track and civil works, the Contractor is required to develop a design which can be optimised but sustainable over a period of operation, nominally having a life of some 100 years. During the period September and October 2005, while the design of the Flyover had commenced as planned, foundation designs identified the risk concern of deep circular slip failures in the highly saturated soils supporting the rail track formation adjoining the flyover structure; the risk was considered too great to ignore regarding future sustainable operations and accordingly required a design more robust than envisaged at the tender stage.

• In a report prepared by the Contractor’s designers dated September 2005, while the construction of the flyover had commenced as planned, the designers indicated that construction procedures relating to both the temporary rail deviations required during construction and permanent track formation could not meet standard ARTC (and formerly RIC) design requirements due to the potential risk of slip movement in the undersurface saturated soils and alternative site location and construction methods required consideration. The proposals provided were assessed by ARTC and as the bridge structure was underway, it was agreed to continue at the Sandgate site and construction modifications were negotiated to minimise potential risk of formation failure in both the long and short terms.

• With the formation design parameters agreed, construction of the excavation of the poor soils for the formation commenced only to encounter contamination of the soils from seepage from a number of adjoining properties, including Council’s landfill, miscellaneous industrial wastes, from the wetlands and the Sandgate Cemetery. This contamination disallowed dumping of the soils locally as proposed and required certain contaminated soils to be transported to various specific dumping sites as far away as Wollongong.

• ARTC then were confronted with contractual issues whereby anticipated quantities of items covered by Provisional Sum Work schedules (as identified at the time of tendering and included in the 10% contingency) were being exceeded and upon which penalty contractor ‘mark-up’ rates were applicable. ARTC and the Contractor negotiated around this issue and determined a ‘Schedule of Rates’ alternative (becoming Variation Orders) for major items within the Provisional Sum work using only the Contractor’s original base ‘mark-up’ percentage with regard to the track formation work. These negotiations realised a calculated saving to ARTC in excess of some $2 million as was indicated in ARTC’s Progress Report to RIG of July 2006.



• The Sandgate Flyover was constructed to the revised design for trackwork formation and was opened to the original contract timing date of mid November 2006. This additional cost directly and indirectly escalated the construction cost to its final amount of $79.50 million with the additional formation construction, monitoring and project management costing $12.73 million.

• Asciano Limited, as owners of RIG Stakeholder train operator Pacific National, after being asked by IPART of its opinion and satisfaction of the processes undertaken by ARTC for the Sandgate Flyover replied by a Submission dated 14 February 2008 that while it was satisfied with ARTC’s Stakeholder Consultation process, it (PN) “has declined to endorse the cost of the Sandgate project in excess of the amount signed-off prior to construction and believes that it appropriate for IPART to consider whether the additional amount has been prudently incurred in the circumstances”. PN believes that there was a specific value of $60.7 million plus an allowance of 10% for contingencies and “that ARTC (as the appropriate body) should bear the construction risk” (Asciano Hunter Valley Coal Network: Investment Issues November 2007) and accordingly should bear any over-run in costs.

• Asciano has further requested as a Stakeholder under ARTC’s NSW Rail Access Undertaking requirements that IPART assess whether the construction costs over-run for the Sandgate Flyover were ‘prudently’ justified and whether such costs should be included in the Roll-Forward Asset Base (RAB) for the Hunter Valley Coal Network.

This Report presents, on behalf of IPART, an independent and thoroughly considered review and assessment of whether the construction of the Sandgate Flyover has been carried out by ARTC in a planned and contractually acceptable manner and where the cost over-runs where prudently spent in undertaking the said construction for both the temporary and permanent provision of passenger and freight rail services in accordance with ARTC’s NSW Rail Access Undertaking. Within this context, in the undertaking of this Report, the following findings are provided to IPART for IPART’s further determination;

1. ARTC Decision making: ARTC’s processes for decision making at the time of pre-construction and during construction were decisive in that all available information was thoroughly researched and from that information, options or decisions were made based on comparative operational, cost management and time comparative assessments and safety issues all of which were agreed to by ARTC executive management before these comparative options and recommendations were brought to the RIG and other Stakeholder meetings for final endorsement.

2. Cost Estimate Reviews: The tender price submitted by John Holland was competitive and some $25 million lower than the other tender received for the bridge, civil and track works and therefore on this basis the original tender costs were acceptable. The signalling and communications by US&S was tendered on a combined lump sum and unit rate basis as a preferred tenderer doing similar work for ARTC in the Hunter Valley and elsewhere. The methods of assessment of the additional costs for the design, monitoring and construction of the formation work have been reviewed in some detail including the request for Variation Orders (#54) from John Holland and the unit rate ‘mark-up’ percentage formula negotiations



undertaken by ARTC and John Holland have been assessed as being an acceptable methodology for the provisions of such a contract.

3. Causes and Prudency of the Cost Over-runs: These have been addressed and summarised in the ARUP presentation1 of December 2005. Such geotechnical issues could not have been anticipated in the pre-construction assessments and accordingly the necessity of their becoming Latent Conditions under the Contract was the route taken to resolve the issue of the undertaking of the work causing the cost over-runs. The timing of the undertaking of this additional work concurrently with the construction of the Flyover as was managed by ARTC was prudent in the time management in that no change had to be made to the completion date.

4. Management of Issues being the cause of the Cost Over-runs: Consideration of the abandoning of the construction of the Sandgate Flyover was reviewed by ARTC as a result of the geotechnical issues initially identified within the first months of the 15 month contract, but as all other location Options over the relevant 4km length of track had been canvassed previously and again reviewed in August/September 2005, it was anticipated then that the same type of geotechnical issue would be encountered at the other locations and as John Holland was established on-site at Sandgate with early track deviation and bridge design works commenced, continuation of construction at Sandgate should be maintained.

5. Review of the Submission made to IPART and comment: The Asciano Submission of 12 February 2008 has been reviewed in detail in this Report and the following comments are made;

• Asciano’s understand of the wording of the endorsement of 4 August 2005 differs from that of ARTC with regard to “specific” or “forecast” future costs and there appears to be a misunderstanding regarding this,

• Asciano’s indicated that they were satisfied with ARTC’s performance with regard to Stakeholder consultation and the overall regular RIG meetings, and

• Asciano indicated in their Appendix A to the Submission, that due to the extraordinary circumstances surrounding the cost over-runs encountered and if IPART was satisfied that the cost over-runs were prudently expended that this item could be included in the RAB additions for the Hunter Valley Coal Network.

6. Review Cooperation by ARTC: In the undertaking of this review and in the preparation of this Report, the cooperation of the relevant ARTC Newcastle personnel and their consultants has outreached all expectations. The information sought has been readily provided diligently and the document availability was open and transparent as was all the record keeping regarding the Sandgate project. The answers by ARTC personnel to questions asked were always detailed and candid about what happened and what was known at the time, including some environmental constraint anecdotes that could have immediately stopped construction progress at the time, if followed, but with the endeavours of the project staff all issues were resolved.

1. 1 Refer to Appendix E of this Report



7. Review of NSW Rail Access Undertaking: Asciano has indicated that consideration should be made to the inclusion of the term “reasonably foreseeable” with regard to capital works cost over-runs into the ARTC Undertaking. This has been considered as a part of this review and it would appear that any inclusion of such restrictive wording will further reduce ARTC’s flexibility in managing major projects possibly where approvals by other than RIG Stakeholders are required. In addition, due to the differing types, locations and conditions of projects undertaken by ARTC, each project should be taken on its merits at the time with, possibly an independent arbiter appointed should any disputes or otherwise occur, or in accordance with the Undertaking as it currently stands.

8. Obligation under NSW Rail Access Undertaking: In conclusion, this review considers that with regard to the cost over-runs associated with the construction of the Sandgate Rail Grade Separation project, to the best of our understanding, ARTC have fulfilled their obligations under the NSW Rail Access Undertaking Schedule 3 clause 3.2 Hunter Valley Coal Network and other relevant sections regarding stakeholder consultation in section 8 thereof.

The following recommendations are made to IPART;

a) That IPART should receive this Report in its full content, and

b) That IPART should include the quantum of the cost over-runs into its Roll-Forward Asset Base (RAB) for the Sandgate Flyover as a part of the Hunter Valley Coal Network.



Photo 1: Sandgate Flyover – Aerial View under Construction Source ARTC

Photo 2 : Sandgate Flyover - Before Opening 14 November 2006



Photos 3 & 4: Sandgate Flyover – Opening Day November 2006



1. Introduction

1.1 Historic Background The Hunter Valley rail mainline corridor between Islington and Hexham in the western suburbs of Newcastle, where the Sandgate Flyover is located, was originally determined over 150 years ago for the Newcastle to Maitland section of the Main Northern Railway opened in 1857. This original, now double track, mainline is located on very flat, flood prone land and today runs through swampy and low lying industrial areas and wetlands.

The rail access branch line from the mainline to the Kooragang Island terminal is located about 1.5kms east of the Sandgate Flyover and is again also located on very flat, swampy and flood prone land and was opened in 1984.

The additional 3rd and 4th coal tracks between Maitland and Islington were constructed by NSW Rail Infrastructure Corporation (RIC) since 1984 to meet capacity requirements being placed on the rail infrastructure from coal being delivered by rail to the coal terminals at Port Waratah and Kooragang Island.

Photos 1 to 4 indicate the Sandgate Flyover, its structure and its use for trains to pass each other safety and unconstrained. These photographs are sourced from ARTC’s “Hunter Valley Corridor 2007-2012 Capacity Strategy” Report.

Photo 5 (sourced from Sandgate Flyover EIS Report) is an aerial photograph of the area of the Sandgate Flyover and its adjoining land use including the Kooragang Island rail branch line turnout triangle, the wetland areas on both sides of the mainline and also on both sides of Sandgate Station, the industrial areas, the Wallsend Road overbridge, Sandgate Cemetery and the former Newcastle City Council waste disposal area on the south side of the Sandgate Flyover.

1.2 Planning of the Development of Sandgate Flyover RIC, some years ago, had identified the lack of an adequate crossing across the mainline from the coal lines to access the Kooragang rail triangle as a constraint on the operation and expansion of the Kooragang Terminal and accordingly the Hunter Valley coal operations to the port. RIC originally proposed a site for the mainline flyover adjoining the Kooragang Island triangle where the actual flyover crossed over the arms of the rail triangle.

By 2004, with ARTC having taken control of the Rail Access Undertaking for the Hunter Valley Coal and Interstate operations, undertook a Feasibility Study of the possible locations of a flyover with considerations associated with;

• meeting stakeholder concerns enabling increasing coal capability to Kooragang,

• rail operational issues during construction,

• land and property requirement issues,

• the close proximity to State Environmental Planning Policy (SEPP) wetlands, and

• be able to bring a crossover into the rail system without delays from external requirements.



By April 2005, ARTC having a completed Feasibility Study2, Geotechnical Information3 for the relevant section of track under consideration and an Environmental Impact Statement4 continued their analysis of the preferred location of any grade separated rail structure for connection to the Kooragang Island lines. ARTC’s major concerns related to

• the close proximity and the potential disturbance of the SEPP 14 wetlands within and adjoining the rail corridor on the edge both Hexham and Market Swamps,

• disturbance of secondary habitat for Green and Gold Bell Frogs,

• all works to be undertaken above the ground and above the high water table, and

• property resumptions which would trigger further environmental requirements associated with previous and/or current land use (former garbage disposal area, cemetery, existing road, accesses and industrial land ownership)

and accordingly reviewed the previous work undertaken by RIC and assessed alternative sites suitable for construction of the crossing structure.

This ARTC review culminated in the ARTC Presentation made to the Hunter Valley Mineral Council Coal Company Stakeholders5 on 3 May 2005 where 8 options (including sub-options) were considered over a length of some 4kms of the track from south of the Kooragang Island line turnout towards Hexham. All attendees and other Coal Stakeholders operating in the Hunter Valley received a copy of a CD of this Presentation for their future reference.

1.3 Stakeholder Participation in Determination of Flyover Location From the Presentation and feedback therefrom, the options were reduced to 5, with the advantages and disadvantages of each using the operational, environmental and land requirements criteria as espoused at previous stakeholder meetings forming the basis of the selection process. These were further discussed at the Rail Infrastructure Group (PN & QRN) (RIG) on 28 June 2005 and RIG supported the process demonstrated to receive the result to date. The final concurrence from Stakeholders was received at the Final Stakeholders Consultation6 on 4 August 2005.

The recommended option adopted was Option 6B, located generally north of the current Sandgate station which allowed all construction to be undertaken within the current rail corridor, no land was required to be purchased outside the corridor, no SEPP 14 Wetlands nor frog habitats required disturbing, a rail operation plan during construction was achievable and the deep fills under the proposed Flyover were known from a geotechnical perspective and could be allowed for in the tender process. Some offsets were required and could be allowed for regarding cost in the tender process. This is the Sandgate Flyover Option that was constructed and is in operation today.

2. 2 Hexham Rail Grade Separation Feasibility Study, Final Report, GHD, September 2004 3. 3 Sandgate Rail Separation Geotechnical Information, GHD – Longmac, 11 February 2005 4. 4 Sandgate Rail Grade Separation Environmental Impact Statement, GHD, March 2005 5. 5 ARTC Sandgate Rail Grade Separation Presentation to Hunter Valley Coal Stakeholders, Customs

House, Newcastle, 3 May 2005 6. 6 Sandgate Grade Separation Final Stakeholder Consultation, 4 August 2005



1.4 Pre-Construction Process

Concurrently with the Feasibility Studies and Options being assessed, ARTC called for construction contractor Expressions of Interest and from these prepared a short list of preferred contractors followed by the calling of tenders for the works required. When the preferred Option was determined, ARTC was able to insert this layout into the tender documents for the Design and Construct tenders for the bridge (flyover), civil, track works and associated communication and signalling works.

The Sandgate Flyover has been constructed and was completed and became operational in mid November 2006 and is the subject of the IPART Brief to which this Report has been prepared.

2. Extent of Brief

The Independent Pricing & Regulatory Tribunal of NSW (IPART) by letter dated 26 May 2008 requested Himark Consulting Group Pty Ltd to review certain documents provided and meet with Australian Rail Track Corporation (ARTC) to form a view of ARTC’s undertaking of the planning, management and construction of the Sandgate Rail Grade Separation (Sandgate Flyover) project. This review is to provide an assessment and to detail independently including the provision of reasons thereto as to whether the cost over-runs incurred during the construction of the Sandgate Flyover project were prudently incurred, as required by the NSW Rail Access Undertaking.

In conducting this review, consideration of ARTC’s decision-making at the time of the cost over-run and throughout the Sandgate Project is to be assessed and particularly: • review the cost estimates provided at the time to ensure they were consistent with

information reasonably available and sound professional advice; • review the causes and prudence of the cost over-runs; • review the management of the cost over-runs, including whether at any point it

would have been prudent to abandon on redesign the project given commitments already entered into; and

• review any submissions received by the Tribunal or made to the Rail Infrastructure Group from Access Seekers and ARTC for the purposes of this review.

In conducting this review, assessment of the following should be undertaken: • understand ARTC’s decision-making over the course of the Sandgate Project; • understand the objective of the Sandgate Project; • consider any other options actually considered or reasonably open to ARTC at the

relevant times; and • consider any analysis that was undertaken by ARTC at the relevant times to

identify whether the Sandgate Project was the most prudent project to achieve the objective.

If required by the Tribunal, a briefing to the Tribunal on its Draft Report may be required.



3. Review Methodology The methodology used to undertake the assessment and review of the ARTC’s Newcastle Sandgate Rail Grade Separation project’s cost over-run will be similar to the methodology used in undertaking an audit of any project’s failure to enable completion, cost, time or extent of work over-run and especially when these appear to be outside that which is expected by the client(s) or stakeholder(s) anticipated outcomes whether the non-completion has occurred or whether or not the over-run had been earlier been formally approved or guaranteed or otherwise where applicable to each individual case, namely

1. Determine and understand the nominated Extent of Works relating to the project,

2. Ascertain any options or alternatives that may have been considered in the planning phase for the project,

3. Understand the reasoning that determined the final agreed option to undertake the design, cost estimation, construction methodology and time,

4. Review any relevant planning or other reports that may have been prepared relevant to this or other adjoining projects or relevant projects in close proximity, including; • Site and geotechnical studies, • Environmental Impact Reports (both during and post construction), • Reports on statutory planning or development obligations, • Development option or alternative planning/design reports, • Stakeholder or community assessments or consultation advices (if

appropriate), • Other development reports to ensure no conflict of intent, • Reports prepared associated with Site Operations and/or Workplace

Health & Safety issues (both during and post construction), and • Relevant economic studies undertaken in relation to the project,

5. Assess whether the construction methodology used for the project was an appropriate one and how is risk management shared or proportioned,

6. Assess whether the method used in undertaking the tendering process and awarding the tender and the contents of the contractual documentation were appropriate and without conflict of interest,

7. Ascertain the successful contractor’s understanding of the project and contract by reviewing the conditions imposed by the contractor and accepted by the principal, eg Latent Conditions qualifications,

8. Review cost and time schedules in relation to staging, as applicable, of the project and in relation to the project as a whole,

9. Ascertain the actual construction time line in relation to work completed and payments made and variations approved especially relating to Prime Cost type items and works undertaken under Latent Conditions,

10. Ascertain reasons for variations, documentation of these and if the appropriate approvals have been received to allow work to continue or delays incurred (as appropriate),




11. If applicable, determine and report on failures of process or application where these have not been undertaken or responsibility has not been established and recommend improvements in reporting or redress where required,

12. Prepare Report covering the applicable items under audit. It is pleasing to report that in relation to all aspects indicated above for the Sandgate Flyover project, ARTC, it’s staff and consultants have provided all documentation requested and have been completely open and transparent in all their communications and in the provision of access to all documentation.

4. The Sandgate Flyover Project Description and Construction Issues

4.1 Project Description The Sandgate Flyover project can be summarised as having the following components;

• A reinforced concrete bridge type structure nearly 1km in length located on concrete piles driven to bedrock or equivalent,

• Rail tracks (2) crossing from the existing coal lines on the southern side of the mainlines under the structure to the northern side of the mainlines and continuing about 1.5kms to connect into the Kooragang Island lines at the triangle,

• Relocation of the mainline tracks (2) onto the Flyover,

• Relocation of cross-over tracks north of the Flyover between the mainlines and the coal lines,

• Relocation of the R&H Transport (Toll) rail siding connection to the mainline and the branch sidings thereto,

• Alterations to the Sandgate Station platforms to cater for the additional lines,

• Alterations to the Wallsend Road overbridge to cater for the additional lines,

• Provision for service alterations and drainage due to the adjoining high water table and the very poor drainage characteristics,

• Provision of the necessary signalling and communications required for the full length of the construction site with connection to the Hanbury signal box and the Broadmeadow Train Control Centre,

• Provision of bi-directional signalling on all mainlines and cross-overs,

• Environmental considerations with regard to the RAMSAR & SEPP 14 wetlands adjoining, the former Newcastle City Council Waste Landfill area, the Sandgate Cemetery and the Astra Street residential area,

• Other ancillary works required to complete the project or as required by the planning conditions imposed.

Source GHD Environmental Study



Figure 5: Aerial Photograph Main Northern Line – Kooragang Island Rail triangle to Ironbark Creek including the Sandgate Flyover site


It should be noted that the actual Sandgate Flyover construction site was in excess of 3 kms long and fully over the width of the rail corridor with full train operations continuing during construction.

The integration of train control and works construction management over the entire site was paramount to the safe working conditions on the project, rail operations safety and enabling the various trains (especially coal and local passenger trains) to traverse the construction site and to reach their destinations to the designated timetables.

4.2 Approvals Received and Tenders Called In December 2004, ARTC called Expressions of Interest (EoI) from interested contractors for the construction of a double track rail crossing structure and ancillary civil and track works in the general vicinity between the Kooragang Island triangle and Ironbark Creek bridge north of Sandgate. EoIs were received and after assessment thereof, ARTC, in March 2005, selected four (4) preferred contractors to tender as a Design and Construct Contract on the proposed flyover and associated works. Tenders were received for the bridge, civil and track construction from only two (2) contractors on closing in June 2005 with the difference in price being of the order of $25 million. The lower of the tenders was highly qualified with regard to risk allocation associated with potentially unknown conditions applicable to the final detailed flyover location which was still to be finally approved.

By August 2005, with the Stakeholders agreeing to the Sandgate site for the flyover and the form that it should take, a series of approvals was sought including ARTC Board, DIPNR/Ministerial Consent, site possession and train management planning during construction. These were all given at the end of August/early September 2005.

By the end of August 2005 with regard to the bridge, civil and track works contract, ARTC had held extensive tender negotiations with John Holland on both the technical and legal aspects of the contract. As part of this process, it was agreed that the formation earthworks below the capping layer would be paid as a Schedule of Rates item and excluded from the lump sum contract. This recognised the risk involved with this aspect of the work and sought to provide an equitable solution whereby the project could move forward within the required timeframe and the contractor would be paid costs plus a reasonable profit. Contractually, this was controlled through Provisional Sum provisions. These were later migrated to Variation Orders in agreement with John Holland, once quantities exceeded those anticipated at the time of tender, to reduce the markup paid to the Contractor.

ARTC advised the Stakeholders on progress at the relevant meetings including the Major Works updates provided at the monthly RIG meetings. ARTC’s construction plan in August 2005 as presented to the Stakeholders was to have the Sandgate project completed and commissioned by November 2006.

When the necessary approvals were received, Design & Construct Contracts were awarded to John Holland Pty Ltd7 (Civil, Rail & Bridge Works) and to Union Switch & Signal Pty Ltd8 for (Signals & Communication Works) in September 2006. At this time, ARTC’s

7. 7 ARTC Project Contract No. CW-NSW-29; Sandgate Rail Grade Separation Project (Bridge & Civil Works)

between ARTC and John Holland Pty Ltd, dated 24 October 2005 8. 8 ARTC Project Contract No. CW-NSW-30; Sandgate Rail Grade Separation Project (Signalling &

Communication Works) between ARTC and Union Switch & Signal Pty Ltd, dated 14 December 2005



Forecast Final Cost was announced to the RIG Stakeholders as $60.7 million plus 10% Contingency with completion being mid November 2006 which confirmed earlier advice relating to the project extent, forecast costs and time schedule.

4.3 Geotechnical Issues Identified North of Wallsend Road With the early works planning and design for the structural piling and foundation works for the bridge structure proceeding in September 2005 to the originally confirmed geotechnical profiles for the site including the 40 metre deep old paleo river channel below the bridge structure, risk concern remained with regard to the stability of the proposed formation to carry the temporary tracks placed as a deviation around the bridge construction to maintain rail operations. Several meetings were held between ARTC and John Holland to resolve these issues. The outcome was a preferred solution that envisaged a bridging layer being formed by "pushing" boulders and crushed rock into the soft soils to form a suitable track formation. The excavation of material, other than the top layer of vegetation, was not considered necessary. As identified by John Holland’s consultants, this method did not conform to ARTC’s track standards and a variation was sought by John Holland from ARTC to cover the proposed method of construction under these conditions.

It should be noted that during August/September 2005, consideration was given by ARTC to relocating the construction to an alternative site, abandoning work altogether or to redesign the existing works to cater for the in-situ formerly unseen geotechnical considerations. In consultation with the RIG stakeholders, it was agreed to proceed and redesign to cater for the movement of the soft clays9.

Following further geotechnical investigations and design by Arup in September / October 2005, the issue of a deep circular slip failure was raised. Geotechnical consultants Robert Carr & Associates was engaged to provide an independent review and it was concluded that conventional soil mechanics analysis would not provide a solution with an acceptable Factor of Safety. Holland’s consultants developed a complex finite element computer model to predict the changes in water pressure within the soil matrix (pore water pressure) and concluded that an acceptable solution could work with a more extensive track foundation and wick drains that would allow soil water pressures to dissipate.

Further professionals were engaged to review the design methodology proposed including engineering experts from engineering consultants GHD and Arup, Geotechnical Consultants Coffey Geosciences, Douglas Partners, Arup Geotechnical UK, University of Wollongong and Robert Carr & Associates and the proposed methodology was agreed and confirmed, although it was then outside of ARTC’s track formation standards.

This solution developed was adopted as the only viable option. It differed from the pre-contract options in that it involved excavation of soft material and the inclusion of wick drains. The excavated soft soils were also found to be contaminated, resulting in high disposal costs to Council’s waste management facility at Summer Hill and in some cases, for higher waste classification, to disposal facilities near Ununderra, outside Wollongong.

9. 9 Refer to Appendix B in this Report; ARTC Sandgate Rail Grade Separation Progress Report to RIG, July

2006.



In December 2005, Holland’s consulting engineers Arup made a number of presentations10 on the track formation’s inability to carry load after being disturbed to the project’s Stakeholders, RIG, RIC and RailCorp and other professional bodies interested therein. The presentation is included (as a CD) in Appendix E to this Report.

In conclusion, the area involved in this redesigned formation north of Wallsend Road bridge required continual dewatering using wick-drains, considerable additional excavation, the provision of heavy grade geotextiles to reduce water penetration and the provision of a 750mm deep thickness of ‘bridging layer’ over the soft material which consists of heavy rock to distribute the weight of the formation over a larger area and to bridge areas that remained relatively wet and weaker. This is standard good engineering design practice for an occurrence where wet and soft soils require bridging. --------------------------------------------------Confidential information claimed by ARTC--------------------------------------------------------------------------------------------------------------------------------------------------------. Addition track monitoring of the formation through this section was then required, which had not been allowed for in the original tender and this additional cost amounted to some ---------- over the remaining 12 month construction period.

4.4 Geotechnical Issues Identified South of Wallsend Road

While undertaking the rail formation preparation (both for the temporary diversion works and for the final track alignment), the material under the rail formation to the south of the Wallsend Road overbridge between there and the Kooragang Island triangle, near the area known as Market Swamp also was analysed to show potential movement under train load. It should be noted that trains have passed over this section now for some 150 years since the railway was opened in 1857 with no unexplained sign of excessive movement has been recorded thereat.

But with the potential movement encountered further to the north and the resolution required to address these geotechnical issues, it was thought prudent and was agreed that with the very high water table encountered in the area and as both short and long term rail safety management was paramount, some type of formation stabilisation was required. ------------------------------------------------------------------------------------------------------------------------------------------------Confidential information claimed by ARTC----------------------------------------------------------------------------------------------------------------------------------------------------.

4.5 Additional Costs as a Variation under the Contract It is considered by ARTC that both of the above described occurrences which were not foreseen prior to construction and were not identified in the historical geotechnical data obtained should be included as a part of the allowance for undetected geotechnical issues as a Provisional Sum in the tender documentation for the Civil, Rail & Bridge Works as undertaken by John Holland. The formula in calculating the cost extension for Provisional Works as included in the Contract exceeded the extent of Provisional Works reasonably included within the Holland contract required a renegotiated thereof downward to provide a fair and equitable cost variation (by use of Variation Orders) for the additional works

10. 10 Refer to Appendix E in this Report; ARUP Sandgate Rail Grade Separation project; By-pass Tracks

Formation Design Presentation, December 2005.



undertaken. ARTC has estimated that a saving of some $2.0 million was achieved through these negotiations.

Other than these major geotechnical issues and their consequences with regards to other works requiring redesign, relocation and works rescheduling, no other unexpected works occurred during the construction process and the Sandgate Flyover was opened to rail traffic in mid-November 2006 as originally programmed.

5. Project Chronology of Relevant Events

For reference, the following generalised Sandgate Flyover project chronology has been developed (some items carried over adjoining months) to enable the understanding of the planning and contract processes undertaken by ARTC:

April 2004 Feasibility Study for Rail Grade Separation of coal and mainline tracks to access Kooragang Island completed for RIC

Sept 2004 Final Feasibility Study for Rail Grade Separation of coal and mainline tracks to access Kooragang Island completed for ARTC

Dec 2004 Expressions of Interest called for the Design & Construction of a rail overpass between Kooragang Island triangle and Ironbark Creek bridge

Feb 2005 Geotechnical Information Report together with Historical Geotechnical details Reports completed for ARTC

March 2005 Environmental Impact Study completed for ARTC. Selective Tenders called for Design & Construction of a rail overpass between Kooragang Island triangle and Ironbark Creek bridge

April 2005 ARTC prepares Synopsis Report summarizing conclusions of the Studies undertaken for RIG Stakeholders

May 2005 ARTC presents the Synopsis Report and available Flyover Options to coal company and operator Stakeholders and seeks feedback

June 2005 D&C Tenders close (2 received with difference in price $25 million). Analysis and preliminary costs of feasible Options under preparation and review; program prepared for approvals, rail operation scheduling reviewed for construction

July 2005 Analysis of tender received for D&C Tenders undertaken. Analysis and preliminary costs of feasible Options completed, program prepared for approvals, rail operation scheduling reviewed for construction; contract negotiations and documents preparation, legal and technical negotiations with preferred tenderer

August 2005 Legal and technical negotiations with preferred tenderer continuing; final Stakeholder Consultation for agreed option and program, RIG, Stakeholder and ARTC approvals sought and received;



Sept 2005 Ministerial approval received; Contract with John Holland awarded; Early works and design commences; identification of formation capacity issues and resolution sought; further geotechnical investigations and analysis undertaken; Contract with US&S awarded; issues status reported at RIG meeting

Oct 2005 Formation capacity issues continue and methodology resolved; construction of track deviations commences, construction status reported at RIG meeting

Nov 2005 Bridge construction commences, track deviations continue, formation issues in design phase (north of Wallsend Rd Bridge), status reported at RIG meeting

Dec 2005 Flyover construction continues, ARUP gives presentation on potential formation geotechnical failure mechanism and resolution, redesign of formation continuing, status reported at RIG

Jan 2006 Flyover construction continues, revised construction process for formation works implemented, geotechnical investigation adjoining Market Swamp undertaken, (south of Wallsend Rd Bridge), status reported at RIG meeting

Feb 2006 Flyover construction continues, revised construction process for formation works implemented, redesign of Market Swamp formation undertaken, status reported at RIG meeting

March 2006 Flyover construction continues, revised construction process for all formation works implemented, status reported at RIG meeting

April - June Flyover construction continues, revised deeper construction process for signals cabling implemented, status reported at RIG meeting

June 2006 Sandgate Project receives State endorsement & included in ARTC’s NSW Rail Access Undertaking

July 2006 Flyover construction continues, ARTC makes presentation to advise RIG of the cost over-runs occurred with the additional formation works required

July/August Additional works at Ironbark Creek and bi-directional signalling endorsed

July – Oct Flyover construction continues, status reported at RIG meeting

Nov 2006 Sandgate Flyover completed and opened to rail traffic, works under maintenance responsibility of Contractors

December 07 Bridge & Civil Works conclude maintenance period

January 08 Final Payment made to John Holland

February 08 Asciano issues Submission to IPART under NSW Rail Access Undertaking concerning cost over-runs of Sandgate project

April 2008 Finalisation for final contract payment to Union Switch & Signal.



6. Pre-construction Identification and Resolution of Project Site Issues

In late 2005, ARTC engaged its consultants, GHD Pty Ltd to undertake Geotechnical and Environmental Impact Studies to ascertain what ground conditions that may be expected and project approval conditions that may be imposed by external approval Authorities.

The land adjoining the entire proposed site contained known wetlands, the site is flood prone and very flat11 and the geotechnical and historical reports, amongst other issues, identified certain soft clay soil overlays to deep paleo river channels at certain locations. The location of the deep former channel near Sandgate was addressed by the Contractor in preparing the tender through the piling schedule for the bridge structure. It also had been observed by ARTC (and their predecessor RIC) over a number of years that there had been little subsidence, if any, by loaded coal and other heavy freight trains moving over this section of track. It therefore, could be assumed by all the parties involved, ARTC, John Holland, the consultants, RIC, approving authorities, etc that the track formation would be retained in its current state with little disturbance from the driving of piles and other works undertaken on the site. To assume otherwise would required an extensive geotechnical investigation including pre-construction site drilling, laboratory testing and design analyses to ascertain the soil characteristic changes under the site disturbances.

The risk management of the occurrence of finding unidentified poor ground was identified by both ARTC and John Holland during the tender process and the existence of such occurrences were accordingly treated as being covered as a Latent Condition under the Contract for which payment is made as Provisional Sum work (as allowed) or a Schedule of Rates item (Variation). This process is both fair and reasonable to both the Principal and Contractor and is covered by the certainty provided under the Latent Conditions clause.

The Latent Condition clause in the John Holland contract states:

“Latent Conditions

Means any ground conditions at the Site:

(a) excluding ground conditions resulting from inclement weather wherever occurring which differ materially from those which should have been anticipated by a prudent, competent and experienced contractor if it had done those things which the Contractor is deemed to have done under clause 7.1; and

(b) including any ground condition that requires a total length, number or type of piling greater than that described in Schedule 16.”

This Latent Condition clause in the Contract is the method used to address the previously unidentified poor soils found on the site which are the reason behind the preparation of this Review Report.

As identified previously in this Report, by the cooperation of the parties (ARTC and John Holland) in addressing the issues encountered enabled the entire Sandgate Flyover project

11. 11 Refer ARTC website www.artc.com.au for the longitudinal profile of the Main Northern Line through

Sandgate


http://www.artc.com.au/


to be completed and being operational within the time schedule originally nominated at the Tender stage, ie in November 2006. This program was undertaken with time prudence in mind providing both the coal rail operators PN and QRN a scheduled program which enabled them to improve the efficiency of their rail operations and increase the volumes of coal hauled over the construction period to Kooragang Island terminal.

The performance of ARTC in the undertaking of the planning and project management of construction, in this Consultant’s professional view, has met that which is expected from such a professional service organisation and it is therefore considered that the additional cost of the project delivery on time to the benefit of all stakeholders involved with the Hunter Valley coal operation has been prudent and such additional cost should be included in the Capital Expenditure (RAB) arrangements for the rail infrastructure within the Hunter Valley.

It must be remembered that the prudent undertaking of this addition formation stability work to enable the construction deviations to be operational during construction followed by the permanent formation works will remain a legacy to reduce the on-going potential maintenance costs which could have been anticipated in future years through the areas of high water table and potential flooding. The additional formation stabilisation works as undertaken can definitely be considered as an economic advantage for the future operations of coal and other trains through this section of the Hunter Valley network.

This review considers that the actions of ARTC are fair and reasonable and were undertaken with the long term view of the Hunter Valley rail operations being maintained in a Safe Working condition at all times allowing freight to reach its destination without impediment by the movement of track formation through this section.

7. ARTC Project Construction Management & Consultation Processes

From the review of the documentation in the ARTC Sandgate Flyover files and from interviews held with senior ARTC personnel at ARTC’s Hunter Valley operations office at Newcastle, ARTC had a Senior Project Manager, a Project Manager and a consultant Project Manager together with appropriate support and field staff allocated solely to the Sandgate project for the full tenure of pre-construction, construction and for some months after opening (generally from early 2005 to mid 2007).

The Senior Project Manager was responsible the strategic and overview issues, including the preparation and presentation of reports to ARTC Board and Management, RIG meetings and other Stakeholders and was responsible for program coordination with the consultants and contractors. The Project Manager, reporting to the Senior Project Manager, was responsible for the day by day negotiations with the contractors on behalf of ARTC, procurement of ARTC supplied materials, monitoring of formation movements under train operations and construction progress and for the certification of variation and payment schedules on an ongoing and monthly basis.

The consultant Project Manager from GHD, reporting to the Senior Project Manager, was responsible for contractor design coordination and approval, coordination with external authorities and management of other site technical personnel. On-site and office support



personnel were responsible to the Project Manager for the day by day coordination with the contractors, construction scheduling, detailed monitoring of formation movements, environmental monitoring, on-site safety and materials and storage provisions all on behalf of ARTC. The support personnel included a cost clerk, schedulers, works inspectors, rail operations and safety personnel and administration staff.

All the ARTC consultation processes with Stakeholders and others was undertaken by the Senior Project Manager supported by ARTC experts or consultants in the disciplines required. The Senior Project Manager and Project Manager responsible for the Sandgate project are those ARTC staff with whom meetings have been recently held with regard to this review.

The Project Managers’ detailed involvement with the project and the documentation thereof is evidenced by the ease of procurement of documentation when requested. In addition, ARTC’s consultants GHD Pty Ltd have provided detailed documentation including records of design and contractual issues and coordination between the Contractor’s design consultants and on-site personnel, as and when requested by ARTC to support the overall ARTC documentation process.

The level of available documentation and the ease of its procurement is evidence of ARTC Project Managers being aware of all project issues as and when they occurred and the positive responses applied to those issues.

8. Review of ARTC Document Progress Report to RIG, July 2006

This ARTC Progress Report was prepared at the instigation of ARTC to explain ARTC’s technical issues encountered with regard to the unknown geotechnical problems found, the potential track formation movement identified and the implementation of design solutions to resolve these issues which were the reasons for the cost over-runs that occurred. The document was prepared and presented to both the ARTC Management for concurrence and the RIG Stakeholders in July 2006 when the formation works had been completed and a full reconciliation of their cost affects on the project had been made.

While this Progress Report is basically a generalised technical summary describing what occurred and what the cost implication were, the contents clearly explains and confirms that at all relevant times, ARTC was aware and informed of the design and construction status and progress which was passed on to the RIG Stakeholders at their monthly meetings.

It has been acknowledged by Asciano in their Submission, that Asciano is satisfied with the communications by ARTC of construction progress and issues with RIG Stakeholders.



Figures 6 & 7: Sandgate Flyover – trains passing as designed, 12 June 2008



9. Identifying the Asciano Raised Issues

Confidential information claimed by ARTC

Asciano goes on in their Appendix A to this Submission extracted from a previous Asciano paper on this issue entitled Investment Issues, November 200712, as follows;

“In the absence of any other guidance, Asciano’s view is that risk should lie with the party that is best able to manage it. Clearly, for any costs associated with the construction of an asset, the party responsible for managing the project would best be able to manage those costs in the normal course of events. On that basis, it would appear that ARTC ought to bear the risk for the construction costs. However, where costs are incurred due to matters that were unforeseeable, then it could be argued that these are costs that would fall under a different category. For clarity, it

12. 12 Asciano Issues Paper: Hunter Valley Coal Network: Investment issues November 2007, Section 7

Construction & Post Construction p41. HIMARK CONSULTING GROUP PTY LTD AUGUST 2008

Page 24


would be expected that any project would be subject to a modest level of unknowns and that a reasonable allowance for contingencies should be always recognised in any project endorsement. Where a particular matter is subject to a higher level of potential variation, eg where foundations might have a wide range of possible costs, there are various mechanisms that could be employed to reduce the uncertainty (eg by geotechnical survey) or through adopting a larger contingency for that particular component. Such matters ought not to be considered unforeseeable. By unforeseeable, this is intended to mean those costs that, despite ARTC undertaking all reasonable care and exercising due skill and experience in the preparation of project plans, cost estimates and preliminary work, a substantial cost is incurred through a circumstance that could not have reasonably been anticipated prior to commencing construction. Such a cost, by definition, would be beyond ARTC’s management.

“The intention that ARTC bear construction risk is that it can and should manage these risks. As unmanageable construction risk is not amenable to this discipline, Asciano is of the view that this falls beyond construction risk as it was intended and that therefore ARTC should be compensated for such additional costs, provided they are incurred prudently, by allowing their inclusion in the regulatory asset base.13 …….”

The Asciano statement and analysis of construction risk above is valid and which is one totally accepted by the construction industry and by owners and managers of assets and in the context of the Sandgate Flyover is also totally appropriate. However, in analysing the events and preliminary investigation analyses undertaken by ARTC prior to commencement of construction, it would appear that from a project management viewpoint, at that time, ARTC had adequately considered all aspects of the project and what was required by the contractor to undertake the construction of the Sandgate Flyover on the basis of it being a Design and Construct Contract. From the investigations undertaken, ARTC knew that whichever Option location was used for the flyover;

• there were 30-40m deep paleo river channels overlain with saturated soft clays under the proposed flyover locations,

• geotechnical survey works undertaken along the rail corridor (for the flyover and other previous projects) found that the soils in the area were soft and saturated clays, indicating that for works other than for the flyover structure pile driving to a suitable bearing material, all earthworks construction undertaken should be above the existing rail formation,

• there were SEPP 14 and RAMSAR wetlands adjoining the rail corridor,

• construction of the flyover must be within the railway corridor, otherwise this would trigger additional environmental and planning approval constraints being imposed which would cause additional substantial expense and time lost,

13. 13 Asciano Sandgate Overpass; Submission to IPART – Review of ARTC Compliance with the

NSW Rail Access Undertaking 2006/07 Appendix A, 12 February 2008 HIMARK CONSULTING GROUP PTY LTD AUGUST 2008

Page 25


• historical track records had indicated that while the area was flood prone, no substantially track formation failures had occurred through this section (including the more recent 2 tracks for the coal lines), and

• there were various industrial and residential developments adjoining the rail corridor and the Wallsend Road bridge, all of which appeared stable even through founded on similar saturated soft clays to that of the railway formation.

With all the above information available to the tenderers, ARTC’s construction risk analysis indicated that as detailed geotechnical surveys along the existing tracks were impractical prior to construction commencing, due to the requirement for the continual train operations over this section and that as there was some uncertainty, in geotechnical detail, within the track area of the rail corridor, an allowance under Earthworks Provisional Sum Works was included in the Design and Construct Tender Price. The successful tenderer included an amount of some $2.4 million for such works.

What ARTC did not know prior to letting the Contracts and for which the Provisional Sum Works had been allowed (if required) were;

• the extent of the shallower saturated clay soils and their lack of capacity to carry the proposed track formation without slip failure, especially those relating to both the temporary track deviations and the permanent track alignment both of which required extensive provision for formation dewatering and bridging to reduce long term settlement of the tracks under the train loads to be applied thereto, and

• the extent and type of contaminated soils exposed within the railway corridor with such contamination emanating apparently from the former waste disposal area adjoining the wetlands, other industrial operations adjoining and from the Sandgate Cemetery.

In terms of Asciano’s construction risk management understanding as indicated above, these two items should be considered as “unforeseeable” items, and should be treated as such.

The statement that the potential failure of the track formation by the existence of this type of soft clay soils in their saturated state is “unforeseeable”, is supported by the fact that ARTC and the Contractor both required expert geotechnical advice outside their expert consultants’ knowledge as the type of failure mechanism being experienced in the design models had not been found previously under rail or similar formation loadings and had not occurred previously along this section of track.

The investigations undertaken by ARTC using definitive project geotechnical and environmental studies and the results from previous studies undertaken for some adjoining existing projects, indicates that ARTC, with it’s existing project management structure, has the ability and can manage construction risk on a shared basis with the contractor should this be the contractual mechanism adopted. When a construction contract is undertaken and all the facts of the project are available and the design is in accordance with ARTC standards, then it is normal practice for the contractor alone to accept the construction risk.

It must be recognised that ARTC is not a contractor but a services facilitator and a regulated operator and is not a business which can cover risk, per se, in its normal



commercial operations; hence it should not be expected to accept the responsibility for construction risk when it falls outside the area of ARTC’s ability to manage that risk.

Asciano in the Appendix A to its 12 February 2008 Submission14 has acknowledged the there could be unforeseeable circumstances that surround the reasons for the cost over-runs for the Sandgate project and now require endorsement from IPART that the over-run costs were prudently expended.

In addition, Asciano continues in Appendix A as follows;

“Consistent with this, it is Asciano’s view that the ARTC Undertaking provide explicitly for ARTC to accept construction risk for any capital project. As a consequence, the value to be included in the regulatory asset base should be the actual cost of construction up to the value of any endorsement from the participants in the RIG process where that endorsement is for a specific project scope and cost. The ARTC Undertaking should allow for ARTC to seek the inclusion of amounts in excess of the endorsement where it can demonstrate that the additional costs were reasonably incurred to overcome circumstances that were not reasonably foreseeable at the time of endorsement. To obviate any disputes over what constitutes “reasonably foreseeable”, the ARTC Undertaking should clearly define this term.”

While Asciano, in theory, has a point, the proposal suggested in practical terms is inherently hard to manage and potentially costly. Any ‘reasonably unforeseeable” situation that may occur as indicated by Asciano would require, in principle, a RIG approval to proceed which in contractual terms is both time and cost consuming for the construction aspects, but as this is an operating railway any time lost in construction would also have economic consequence to the rail operations, possibly to a greater extent than the additional construction costs. In the case of the Sandgate Flyover, if rail operations had been delayed outside the nominated construction time and the Flyover had needed a RIG approval to find an alternate site or to cover the additional costs, a number of months may have been the time delay for completion causing additional inconvenience to the rail operations in the Hunter Valley and delays to both the coal and passenger operations thereon. It should also be remembered that the other ARTC Stakeholder QRN has signed off the additional expenditure as being fair and reasonable under the circumstances.

While the Port of Newcastle capacity currently controls rail capacity, this is not a problem for ATRC not the RIG Stakeholders considering delay or similar time related issues but should the reverse had happened while the Sandgate Flyover was under construction and delays occurred, the economic loss to the coal industry would have been severe and ARTC’s reputation also damaged, at no “reasonably foreseeable” fault of ARTC.

While the inclusion of a definition of “reasonably foreseeable” covering the above indicated stated capital expenditure cost over-runs in the ARTC Undertaking may be considered, if included could apply further regulatory control over ARTC’s capital program in time and cost which does not allow the flexible operation of a professional project management facilitation company undertaking capital rail works in various locations, terrain and conditions. This inclusion may also be detrimental to the economic operations

14. 14 Reference Appendix E to this Report



of the rail network in both the short and longer terms if endorsement was required to proceed should a future cost over-run occur on another project.

This should be resolved by IPART as to the inclusion of the words, or not.

10. Project Contractual Issues Encountered

This review has searched all contractual correspondence, relevant meeting minutes, the numerous Variation Orders and Payment Certificates pertaining to the Bridge, Civil and Track Works Contract and it was found that the relationship between the Principal (ARTC) and Contractor (John Holland) appeared to be professional and amicable at all relevant times. In fact, during negotiations on costs both before the Contract was awarded and in relation to the additional formation works which exceeded that allowed in quantum for Provisional Sum Work classes before a penalty cost increase occurred against the Principal under the Contract, the Contractor was prepared to alter the methodology in relation to payment whereby the penalty cost was deleted and the cost of additional formation works was treated as a variation under a Unit Rate Schedule by Variation Order(s) which contained only a base Contractor’s Profit item for work carried out and saving the Contract an estimated $2 million (as identified by ARTC’s Consultants).

This again highlights the situation that ARTC appears to have carried out it’s duties as Principal and Project Manager professionally, diligently and prudently in accordance with the requirements contained in the NSW Rail Access Undertaking to which it is a party.

11. Project Major Cost-Over-run Issues

The major cost over-run issues have been identified in the ARTC Progress Report15 to RIG of July 2006 and which have been subsequently reviewed as a part of this Report.

It is not easy to dissect exactly what items were included in the original tender of John Holland as this was a D&C Contract covering overall items not quantities with Provisional Sum Work classes covering works with potentially unknown definite quantities until work is completed (which was allowed for by the contingency). For the Union Switch & Signal Contract this is easier as it covered items required to be applied to meet a location Performance Specification and hence the additional work required related directly to the works varied on site, additional works ordered, eg Bi-directional signalling or that affected by the John Holland’s Contract.

In summary form, although ARTC has provided spreadsheets covering all items under the Original Tender and those of the Preliminary Work Schedules, at the time of tender, the variations agreed subsequently have been applied as a Schedule of Rates after the costs contained in the Preliminary Works Schedules have been expended. In relation to the works undertaken associated with the stabilisation of the track formation and those works associated with the disposal of contaminated materials and the monitoring of potential track

15. 15 refer Appendix B of this Report



movement, these can be easily identified where a quantity and unit rate have been applied to the variation as Variation Orders (VO). These are all detailed for both Contracts in Appendix D to this Report.

There are also a series of items of ‘ARTC supplied materials’ as well as those items included in the construction during its progress with the knowledge of the RIG Stakeholders or approved by ARTC management for the appropriate cost to be applied as an offset against other projects and a credit to Sandgate from where the required materials were obtained or disposed of. Without a detailed audit of each and every one of the 54 VOs in the Holland Contract and the 53 VOs in the US&S Contract, it is not possible to identify the accuracy of each VO for cost or quantum of materials or labour, but it would appear within the review that each VO lodged by both Contractors has been denied, varied or approved by ARTC with appropriate notations made on each and with such outcomes accepted by the parties to the Contracts. Accordingly, the process of project cost control and verification appears to have been carried out strenuously by ARTC during the entire construction period and thereafter.

To quantify the above VOs, ARTC has provided Payment Schedules and Variation Orders for each of the 2 Contracts together with the ARTC Consultants on-site Project Management Contract and for other external consultants’ inputs that were received.

It should be noted that ARTC were able to reduce the cost by negotiating Variations with John Holland and not following the principles included in the Contract whereby ARTC were to be charged a penalty when the percentage of Provisional Sum work exceeded a specific level above the original contract sum. As previously indicated, this is estimated to provide a saving (not included in the above Project Cost) of some $2.0 million.

Without separation of the individual contracts but addressing the Sandgate Flyover as a whole, the Original Forecast Costs plus Contingency can be compared with the Actual Project Costs as at 30 June 2008 and are summarised as follows;

SANDGATE FLYOVER TENDER AMOUNTS – August 2005 Civil Works – John Holland Pty Ltd; original contract sum $ 45.60 million

Signalling Works – Union Switch & Signal; original contract $ 11.37

Project Management – GHD, original contract sum $ 1.30

Land Acquisition – ARTC Management, original contract sum $ 2.43

Original Contract Total $ 60.70 million

ARTC Supplied and Negotiated Items (allow 10%) $ 6.07 million

ARTC Forecast Cost - August 2005 $ 66.77 million



SANDCATE FLYOVER PROJECT COSTS as at 30 June 2008 a) John Holland Pty Ltd; original contract sum $ 45.60 million

Approved Variations

Trackworks & other works -----------------

Formation - north of Wallsend Road -----------------

Formation - south of Wallsend Road -----------------

Track monitoring, etc -----------------

Schedule of Rates Adjustments ----------------- $ 13.66 million

b) Union Switch & Signal; original contract amount $ 11.37 million

Approved Variations

Variations from original tender, etc ------------------

Bidirectional signalling Kooragang Is ------------------

Additional works approved ------------------

Schedule of Rates Adjustments ------------------ $ 1.57 million

c) GHD Pty Ltd, Project management - original contract sum $ 1.30 million

Approved Variations

Variations from original -----------------

Contamination Studies -----------------

On-going management -----------------

Concept Designs ----------------- $ 2.38 million

d) Miscellaneous Labour/Plant Costs $ 0.80 million

e) ARTC Supplied Materials $ 5.68 million

f) ARTC Acquisition Land Management $ 1.37 million

g) ARTC Offsets/Refunds

Signal Box Rationalisation ------------------

Bidirectional Signalling ------------------

MPM Rail Sleeper Program ------------------

PRE Transfer to Newdell ------------------

Removal of Sandgate Bypass ------------------

Scrap from Sandgate ------------------

Sierra Sun Siding ------------------

Offsets to other Projects ------------------ $ (4.66 million)

h) Miscellaneous Outstanding Items $ 0.43 million

PROJECT COST AS AT JUNE 2008 $ 79,498,192



The variation cost over-run is identified as three (3) items from the John Holland Pty Ltd contract as earlier discussed together with the additional GHD Project Management required in relation to the formation works extended proportionally, namely

• Formation - north of Wallsend Road -----------------

• Formation - south of Wallsend Road -----------------

• Track monitoring, etc -----------------

• GHD Project Management -----------------

TOTAL Difference $ 12.73 million

The Project Cost as at 30 June 2008 has been reduced from the earlier projection by the Offset/refunds of materials used elsewhere from the Sandgate Flyover Project by about $1 million.

The cost over-run amount of approximately $ 12.73 million is solely due to the aforesaid formation issues

12. Other Issues including Compliance with NSW Rail Access Undertaking

Asciano in their Submission of 12 February 2008 indicated that ARTC may not be in compliance with the NSW Rail Access Undertaking. As previously indicated, while Asciano agrees that ARTC has provided an acceptable level of Stakeholder consultation which is the major requirement of the NSW Rail Access Undertaking, the only other issue is whether the cost over-runs were not undertaken prudently.

This Report has investigated this issue and finds that where cost over-runs occurred, these have been carried out prudently and within the time frame originally established enabling the coal rail operators PN and QRN to improve their operational efficiency and accordingly able to move more coal product without the delays which occurred prior to the construction of the Sandgate Flyover.

In addition, by undertaking the stabilisation of the formation works over the length of track identified as requiring this work, there will be an economic advantage to the rail operators by the potential reduction in any track settlement through this section of the coal and mainlines over the longer term whereby providing greater opportunity to provide more services to meet demand when and as required.

13. Review Conclusions and Recommendations

From the foregoing the following conclusions are provided to IPART;

1. ARTC Decision making: ARTC’s processes for decision making at the time of pre-construction and during construction were decisive in that all available information was thoroughly researched and from that information, options or decisions were made based on comparative operational, cost management and



time comparative assessments and safety issues all of which were agreed to by ARTC executive management before these comparative options and recommendations were brought to the RIG and other Stakeholder meetings for final endorsement.

2. Cost Estimate Reviews: The tender price submitted by John Holland was competitive and some $25 million lower than the other tender received for the bridge, civil and track works and therefore on this basis the original tender costs were acceptable. The signalling and communications by US&S was tendered on a combined lump sum and unit rate basis as a preferred tenderer doing similar work for ARTC in the Hunter Valley and elsewhere. The methods of assessment of the additional costs for the design, monitoring and construction of the formation work have been reviewed in some detail including the request for Variation Orders (#54) from John Holland and the unit rate ‘mark-up’ percentage formula negotiations undertaken by ARTC and John Holland have been assessed as being an acceptable methodology for the provisions of such a contract.

3. Causes and Prudency of the Cost Over-runs: These have been addressed and summarised in the ARUP presentation16 of December 2005. Such geotechnical issues could not have been anticipated in the pre-construction assessments and accordingly the necessity of their becoming Latent Conditions under the Contract was the route taken to resolve the issue of the undertaking of the work causing the cost over-runs. The timing of the undertaking of this additional work concurrently with the construction of the Flyover as was managed by ARTC was prudent in the time management in that no change had to be made to the completion date.

4. Management of Issues being the cause of the Cost Over-runs: Consideration of the abandoning of the construction of the Sandgate Flyover was reviewed by ARTC as a result of the geotechnical issues initially identified within the first months of the 15 month contract, but as all other location Options over the relevant 4km length of track had been canvassed previously and again reviewed in August/September 2005, it was anticipated then that the same type of geotechnical issue would be encountered at the other locations and as John Holland was established on-site at Sandgate with early track deviation and bridge design works commenced, continuation of construction at Sandgate should be maintained.

5. Review of the Submission made to IPART and comment: The Asciano Submission of 12 February 2008 has been reviewed in detail in this Report and the following comments are made;

• Asciano’s understand of the wording of the endorsement of 4 August 2005 differs from that of ARTC with regard to “specific” or “forecast” future costs and there appears to be a misunderstanding regarding this,

• Asciano’s indicated that they were satisfied with ARTC’s performance with regard to Stakeholder consultation and the overall regular RIG meetings, and

16. 16 Refer to Appendix E of this Report HIMARK CONSULTING GROUP PTY LTD AUGUST 2008

Page 32


• Asciano indicated in their Appendix A to the Submission, that due to the extraordinary circumstances surrounding the cost over-runs encountered and if IPART was satisfied that the cost over-runs were prudently expended that this item could be included in the RAB additions for the Hunter Valley Coal Network.

6. Review Cooperation by ARTC: In the undertaking of this review and in the preparation of this Report, the cooperation of the relevant ARTC Newcastle personnel and their consultants has outreached all expectations. The information sought has been readily provided diligently and the document availability was open and transparent as was all the record keeping regarding the Sandgate project. The answers by ARTC personnel to questions asked were always detailed and candid about what happened and what was known at the time, including some environmental constraint anecdotes that could have immediately stopped construction progress at the time, if followed, but with the endeavours of the project staff all issues were resolved.

7. Review of NSW Rail Access Undertaking: Asciano has indicated that consideration should be made to the inclusion of the term “reasonably foreseeable” with regard to capital works cost over-runs into the ARTC Undertaking. This has been considered as a part of this review and it would appear that any inclusion of such restrictive wording will further reduce ARTC’s flexibility in managing major projects possibly where approvals by other than RIG Stakeholders are required. In addition, due to the differing types, locations and conditions of projects undertaken by ARTC, each project should be taken on its merits at the time with, possibly an independent arbiter appointed should any disputes or otherwise occur, or in accordance with the Undertaking as it currently stands.

8. Obligation under NSW Rail Access Undertaking: In conclusion, this review considers that with regard to the cost over-runs associated with the construction of the Sandgate Rail Grade Separation project, to the best of our understanding, ARTC have fulfilled their obligations under the NSW Rail Access Undertaking Schedule 3 clause 3.2 Hunter Valley Coal Network and other relevant sections regarding stakeholder consultation in section 8 thereof.

The following recommendations are made to IPART;

a) That IPART should receive this Report in its full content, and

b) That IPART should include the quantum of the cost over-runs into its Roll-Forward Asset Base (RAB) for the Sandgate Flyover as a part of the Hunter Valley Coal Network.



APPENDICES



APPENDIX A SCHEDULE OF RELEVANT DOCUMENTS

REVIEWED

1. NSW Rail Access Undertaking, Rail Infrastructure Corporation, Rail Corporation New South Wales, Australian Rail Track Corporation pursuant to Schedule 6AA of the Transport Administration Act 1988 (NSW)

2. NSW Transport Administration Act 1988, Schedule 6AA, notice of Approval of

Variation to the NSW Rail Access undertaking, inclusion of the Sandgate Project, 28 June 2006

3. Hexham Rail Grade Separation Feasibility Study, Final Report, GHD, April 2004 4. Hexham Rail Grade Separation Feasibility Study, Final Report, GHD, September

2004 5. Sandgate Rail Separation Geotechnical Information, GHD – Longmac,

• Volume 1 Report, 11 February 2005 • Volume 1 Appendix D1 Geotechnical Information, 11 February 2005 • Volume 2 Appendix C Historical Data, 11 February 2005

RTA Reports, new Rail Overbridge, April 1990 Ironbark Creek (URS report for RIC), September 2002 Astra Street Landfill Report Wallsend Road Bridge geotechnical report Newcastle – Tomago 330kV Towers geotechnical report

• Volume 2 Appendix D1(original Appendix C Historical Data September 2004) reproduced 11 February 2005

• Volume 2 Appendix D2 Preliminary Geotechnical Design Report, 11 February 2005

• Volume 2 Appendix D3 Wallsend Road Geotechnical Investigation & Pavement Overlay Design, 3 March 2005

• Volume 2 Appendix E1 Preliminary Drawings (for Design & Construct Specification), 14 February 2005 issued for tender; 14 March 2005 reissued for tender

• Volume 2 Appendix E2 Site Information (for Design & Construction Specification), March 2005

Survey NSW Railways Standards, drawings Hunter District Water Board specification R&H Transport site layout.

6. Sandgate Rail Grade Separation Environmental Impact Statement, GHD, March

2005 • Volume 1 Main Report • Volume 2 Appendices



7. Sandgate Rail Grade Separation Project Synopsis, ARTC, 15 April 2005 8. ARTC Sandgate Rail Grade Separation Presentation to Hunter Valley Coal

Stakeholders, Customs House, Newcastle, 3 May 2005 9. Sandgate Grade Separation Final Stakeholder Consultation, 4 August 2005 10. ARUP Consulting; Sandgate Rail Grade Separation Final Design Report – Volume

1 for John Holland Group, Rev B; September 2005 11. John Holland/ARTC Contract Negotiation/Issues Status Spreadsheet for period

August to end September 2005 12. ARTC Project Contract No. CW-NSW-29; Sandgate Rail Grade Separation Project

(Bridge & Civil Works) between ARTC and John Holland Pty Ltd, dated 24 October 2005

13. ARTC Project Contract No. CW-NSW-30; Sandgate Rail Grade Separation Project

(Signalling & Communication Works) between ARTC and Union Switch & Signal Pty Ltd, dated 14 December 2005

14. ARTC Coordination Agreement, Sandgate Road Separation Project, ARTC & John

Holland Pty Ltd & Union Switch & Signal Pty Ltd, dated 20 December 2005 15. Sandgate Rail Grade Separation Project, Formation Design Presentation, ARUP

(visual presentation to Stakeholders, RIG, RIC, RailCorp), December 2005 16. Sandgate Rail Grade Separation, Rail & Bridge design drawings and documentation

‘For Construction’ issue, John Holland Pty Ltd/Arup Consulting, 14 December 2005 (107 drawings)

17. ARTC Minutes of Rail Infrastructure Group Meetings, ARTC Newcastle, monthly

from September 2005 to April 2006 (in attendance ARTC, PN, QRN) 18. Sandgate Rail Grade Separation, Formation amended design drawings ‘For

Construction’ issue, John Holland Pty Ltd/Arup Consulting, 3 March 2006 19. Sandgate Rail Grade Separation, ‘Market Swamp’ formation design drawings

amendments ‘For Construction’ issue, John Holland Pty Ltd/Arup Consulting, 23 June 2006

20. ARTC Sandgate Rail Grade Separation Progress Report to Rail Infrastructure

Group, July 2006 21. ARTC Sandgate Rail Grade Separation (Civil & Bridge Contract) John Holland Pty

Ltd – Variation Orders Nos 1 to 54 inclusive, August 2005 to January 2008



22. ARTC Sandgate Grade Separation Project Endorsement Amendments • Bi-directional signalling, 6 July 2006 • Ironbark Creek Underbridge Walkway, 3 August 2006

23. ARTC Progress Report to Rail Infrastructure Group (RIG), July 2006 24. Sandgate Rail Grade Separation, drawings and documentation ‘As Constructed’

issue, John Holland Pty Ltd/Arup Consulting, March 2007 25. ARTC Sandgate Rail Grade Separation (Communications & Signals Contract)

Union Switch & Signal Pty Ltd – Variation Orders Nos 1 to 53 inclusive, November 2005 to March 2007

26. ARTC Progress Report to Rail Infrastructure Group (RIG), June 2007 27. ARTC Sandgate Rail Grade Separation Contract CW-NSW-29 John Holland Pty

Ltd; Payments Schedule, 2 January 2008 28. ARTC Sandgate Rail Grade Separation Contract CW-NSW-30 Union Switch &

Signal Pty Ltd; Payments Schedule, 3 January 2008 29. Asciano Sandgate Overpass; Submission to IPART – Review of ARTC Compliance

with the NSW Rail Access Undertaking 2006/07, 12 February 2008.


ARTC – SANDGATE RAIL GRADE SEPARATION PROJECT REVIEW


APPENDIX B

Confidential information claimed by ARTC



APPENDIX C ASCIANO SUBMISSION TO IPART, 12 February 2008 Refer to Asciano Submission to IPART – Sandgate Rail Grade Separation Project – Review of ARTC Compliance with the NSW Rail Access Undertaking – Review for year 2006/07 ASCIANO LIMITED; 14 February 2008



APPENDIX D SANDGATE FLYOVER – CONTRACT

COSTS A. JOHN HOLLAND PTY LTD CONTRACT No. CW-NSW-29 (Bridge, Track

& Civil Works)

1. ORIGINAL TENDERED VALUE • Fixed Amount, design, bridge & track items $ 41,403,564 • Provisional Item Amounts – General 1,761,535 • Earthworks Capping & Geotextiles $ 1,243,592 • Earthworks Acceleration Costs 286,271 • Direct Costs margin (10%) 152,986 • Other Earthworks Provisional Items 750,000 2,432,849 TENDER AMOUNT $ 45,597,948

2. VARIATIONS (as negotiated) • Changes to western boundary fence $ 3,362 • Reuse Ballast from Mainlines (12,750) • Monthly Video of site & photos 4,582 • Clean-up coal from coal spill 2,834 • Site signage re protestors 649 • Glennies Creek turnout materials 78,317 • Forklift & driver hire; sleeper placement 3,047 • Monitoring track alignment – bypass 469,026* • Pre-rodding container shelves 3,457 • Arup additional formation design 156,840* • Monitoring track alignment – flyover 319,113* • Deep soil mixing 2,871,164* • Replace Giesmar track superelevation 1,245 • ARTC supply 3500 dogspikes (3,500) • Ballast under signal conduit 1,120 • Addit’l formation excav, slope stability 5,395,395* • Deletion Sandgate stn, stairs & ramps (905,300) • Excess pile lengths & relaxation 699,000 • Track earthworks to underside of ballast 2,492,158* • Recycled Ballast delivery to toll siding (13,887) • 185A point motor bearers 1,097 • Additional Geotechnical instruments 42,835* • Relocation turnouts in Toll siding 7,158 • Sandgate station fencing 26,698 • Market Swamp weir structures 2,460 • Addit’l paths/handrails to embankments 11,990



• Increase boundary fencing Sandgate stn 2,250 • North fork crossing reinstatement 8,697 • RCA review of acid sulphate soils 5,273 • Removal of GIJs 118,564 • Eclip replacement with Fastclip 18,369 • New fence at mt Sandgate 3,079 • Supervising US&S OOH work 14,300 • New block screen to Sandgate stn 14,450 • New fence at R&H siding boundary 29,553 • Reconstruct new wall at Sandgate Cem 5,518 • Deletion of rail grind (76,300) • ARTC supply grout for G/R sleepers (7,963) • ARTC costs for opening Cemetery 9,715 • Track settlements in Nov06 possession 90,391* • Remove tyre from mt Sandgate 2,572 • Northern turnout design review (23,000) • Removal of exist stairs ex Sandgate stn 35,000 • Upgrade WRB barriers to med strength 8,200 • Track monitoring 19,629* • Speed signs (700) • Replace Waratah coal up track 19,368 TOTAL VARIATIONS $ 11,955,076

3. SCHEDULE OF RATES QUANTITY ADJUSTMENTS From Tendered Provisional Items $ 1,707,564 TOTAL CONSTRUCTION COST $ 59,260,588

4. VARIATION COSTS ALLOCATED TO WORKS

• Track, turnouts and sidings $ 136,496 • Sandgate station works (798,250) • Miscellaneous site works required 91,279 • Flyover pile lengths & relaxation 699,000 • Formation works north of Wallsend Rd

including contaminated soil removal 8,302,386* • Formation Works south of Wallsend Rd 2,716,397* • Track monitoring 807,768* TOTAL VARIATION COSTS $ 11,955,076

Note: Items shown thus (*) are directly or indirectly related to additional formation protection works required for track stability.



B. UNION SWITCH & SIGNAL PTY LTD CONTRACT No. CW-NSW-30

(Communication & Signals Works)

1. ORIGINAL TENDER VALUE A Beresford, Tarro, Hexham $ 1,256,517 B Sandgate – New North Fork 6,813,551 C Sandgate Flyover 1,277,550 D Temporary Bypass 950,000 E Hanbury Junction 292,156 F Waratah 271.578 $ 10,861,352 Price escalation 2005-2006 (Provisional Sums Sched 2) $ 513,212 CONTRACT AMOUNT $ 11,374,564

2. VARIATIONS (as negotiated)

• Temporary by-pass cabling $ 25,753 • Hexham fibre investigation 8,219 • Fibre optic replacement under by-pass 121,000 • Adjustment to Early Works (449,996) • Addition to Shunt & Auto Signals 24,652 • Change of power supply arrangements 120,000 • Change in point machine type 6,000 • Pulsing of turnout repeaters 49,021 • Split of axle counter sections 25,000 • Change in axle counter CPU boards 2,000 • Civil enabling works 60,000 • Addition fibre optic cable at Hexham 110,048 • PSTN comms link back-up 7,000 • Removal of existing signals C/M105.7 6,405 • Relocation of new signal NFD1 2,279 • Removal of signals C106.0/M106.0 17,844 • Relocation of new signals 125m south 18,693 • Bi-directional sigs Kooragang departure 434,685 • Design review of north fork turnouts 23,927 • Secure storage US&S cables 9,000 • Worksite protection to completion 46,500 • Additional cable route 185A points 6,000 • ARTC labour support costs (4,940) • Changed installation of signal bases 6,000 • Additional cable route Kooragang 91,357 • Changes temporary by-pass construction 91,157 • Site contamination 39,942 • Design changes for 30m points relocation 16,320 • Temporary signals ladder 2,177



• Removal of temp cable south of Wallsend Rd 8,000 • Add’l fibre optical cable on by-pass removal 79,428 • Add’l resources for Nov 06 possession 178,000 • Security for Sandgate extra agreement 16,042 • ARTC purchase CSEE track leads (20,000) • ARTC supply of transformer (10,000) • ARTC labour support costs Nov 06 poss (57,000) • ARTC supply materials for Mar 07 poss (10,000) • ARTC labour resource for Mar 07 poss (10,000) • Reimbursement for Crimper from ARTC (200)

TOTAL VARIATIONS $ 1,090,313

3. SCHEDULE OF RATES QUANTITY ADJUSTMENTS Schedule of Rates Work $ 481,454 TOTAL CONSTRUCTION COST $ 12,946,331

4. VARIATION COSTS ALLOCATED TO WORKS

• Additional for temporary works $ 41,842 • Reloc/alterations from original tender 109,271 • Miscellaneous cable works required 91,279 • Formation including contaminated soil 99,942 • Additional works/bidirectional signalling

For Kooragang Island line 549,969 • Additional works Hexham 111,168 • Addition resources for possession 86,842 TOTAL VARIATION COSTS $ 1,090,313



APPENDIX E: ARUP FORMATION DESIGN

PRESENTATION, December 2005 Refer to CD of ARUP PowerPoint Presentation – Sandgate Rail Grade Separation Project – By-Pass Tracks – Formation Design Presentation ARUP; December 2005