Saturday 18 October 2008

So, how did Costa bugger the railways?

In order to answer this question, we need to scroll back to the first days of the Greiner government.

Greiner inherited a right mess when he became Premier. The state finances were a disaster (as usual, when Labor gets the boot). He setup a Commission of Audit (the Curran Commission), with a remit to look into how the major enterprises of the state were functioning. The Commission looked at electricity, water, the railways and lots of other areas. It is at least 10 years since I last saw a copy of the report, but it went something like this:

State Rail will bankrupt NSW unless it is reformed.

That was about it.

At the time, the SRA had something like $4 billion of debt and was losing money hand over fist. It was borrowing more and more money to cover the losses, and it was clear that it would spiral out of control unless it was stopped. If it kept on losing money the way it was going, it would not be long before it totally wrecked the finances of the entire state.

Griener did a couple of things. He installed an accountant as the new SRA CEO - someone who understood money, rather than bits of track and trainsets. He corporatised the monster, with the aim of reducing political interference - because meddling by Ministers was a big cause of the disaster that the SRA had become. The SRA debt was also handed over to Treasury. All that kicked off a new era of reform.

That reform was of course about as popular with the unions as whaling is with Greenpeace.

The reforms continued after Labor won power in 1995. The railways were now a total mess (rather than an utter disaster), and the introduction of a national competition policy meant that a breakup of the SRA was required in order to provide a level playing field to private sector rail operators.

The SRA was split into four bits. The freight arm was privatised, and later swallowed by National Rail.

The ownership of the track was given to a new company called RAC (the Rail Access Corporation). RAC owned the track, and sold access to any operator that wanted to run a train - the same way that airports sell slots to any airline that wants to land a plane. RAC was also responsible for organising the maintenance of the track, which was generally viewed as a totally inefficient and wasteful operation when performed inhouse by the SRA.

The SRA had long neglected track maintenance, leading to the Granville disaster - the track essentially fell apart under a train, causing it to smack into a bridge, which then collapsed on top of the train.

RAC had this idea that they'd start by contracting 100% of the maintenance to another offshoot of SRA - Rail Services Australia, or RSA. Then, as time went by, they'd put packages of work out to tender, and RSA would compete for the work against private sector companies.

The unions hated that as well, since the RSA lost every tender by an enormous margin. RSA was so woefully inefficient, overstaffed and badly managed that it was at a tremendous cost disadvantage. It was also saddled with a workforce inherited from the SRA that would refuse to work in an iron lung, and equipment that would make a Romanian plumber from Goatfuckistan look like he worked for NASA.

The writing was clearly on the wall for RSA. It employed several thousand staff, all very blue collar, and their jobs were about to disappear up the spout. The unions twisted a lot of arms, and the Labor government caved in - the contracting out of rail maintenance work was halted.

That pretty much cut the rug out from under RAC, since half their job was to try and reduce the cost of rail maintenance. If it cost less to maintain the track, then access would be cheaper, which would make rail more competitive with trucks. Trains are much more fuel efficient than trucks, so the more freight they carry, the less oil is consumed, the less CO2 is produced and fewer noisy trucks go tearing down your street blah blah blah.

But the unions didn't see it that way. They were only concerned with protecting jobs that were seriously featherbedded.

Then RAC really found itself in the shit after the Glenbrook crash, although it really had nothing to do with the crash. RAC was used as a scapegoat by the government, and it was merged with RSA. The result of that merger, which was described as "a merger between and watermelon and a grape" was RIC - the Rail infrastructure Corp.

Althouth the two companies had both been spawned from SRA, but the time they merged again, they had radically different corporate cultures. RAC had eschewed the time-honoured SRA practice of only recruiting from within itself, and had instead brought in people from a wide range of backgrounds. It was lightyears away from your typical grey-cardigan inhabited public service slothpit. RSA had also undergone some reform, but it was over 10 times the size of RAC, and did not have the same freedom regarding whom it could hire. It was essentially lumped with a few thousand SRA rejects, and told to make the best of it.

RAC was dynamic, fast moving, open, informal, unlayered and unencumbered by bureaucratic policies and procedures. Shit happened at RAC.

RSA was hidebound, sluggish, insanely paranoid about security, strictly formal, layered like the tower of Babel and awash with paperwork, policies, procedures and auditors that were out to bust anyone that failed to account for all the pencils in the stationery cupboard. RSA was essentially shit.

What do you get when you merge a small, dynamic organisation with a big, sluggish one? Do you get a big, dynamic organisation?


You get an ever bigger, more dysfunctional and more disillusioned organisation.

In the private sector, mergers are often quick and brutal. If there is one job and two people who can fill it, one person walks out the door very soon after the merger.

With the RAC-RSA merger, it took years to sort that out. The main effect of the merger was to inject an enormous vat of bad blood into an already sullen and angry organisation, along with a huge amount of organisation turmoil. Decision making and reform essentially came to a halt for a few years whilst the mess was sorted out. Instead of pushing further reform, enormous turf wars broke out as managers tried to protect whatever turf they had left, and people jockeyed for jobs. Hatred, jealousy, gossip, payback, undermining and backstabbing were the order of the day.

That was not Costa's fault.

What Costa though did was to take RIC and then merge it with SRA.

Now if you think that the RSA was the worst example of unreformed, sullen blobs of discontent, think again. It was nothing compared to the stinking corpse that the SRA had become. The kicker was that Costa decreed the merger just as RIC was emerging from the horror years of the last merger, and was actually getting its act together.

Imagine kicking a man in the balls.

He curls up on the floor for a while, puking and crying and thrashing around, and then as the pain recedes, he starts to uncurl and stand up - shakily at first - but eventually he is able to stand up straight and walk away.

Just as RIC started taking those first steps, along came Costa's boot again. The outcome of that merger was RailCorp, but the inside joke was to call it RailCorpse.

Costa thought that the merger would create efficiencies and reduce duplication and waste, and make it easier to drive reform, because there would be one company to deal with instead of two.

Instead, all he got was more inefficiency, triplication of functions, waste like you've never seen before and many of the reforms of earlier years thrown into reverse. RIC had at least moved into the 21st century when the merger occured on 1 Jan 2004. The SRA was still stuck back in the 1950's. The effect of the merger was to catapult RailCorp on 1 Jan 2004 back into about the year 1956.

I think it was at that point that Costa learned to never listen to the unions ever again. 1956 was a sweet time for the unions, but not such a great place for commuters and taxpayers to be.

Since 2004, RailCorp has been painfully dragged into about 1985. However, Rees came along the other day and turned it back into an authority, which will simply return it to the bad old days of ministerial interference, which is what got it into the shit in the first place. It is now stuck in about 1972, and probably going backwards at a rate of knots.

The railways. Going back to the future.


Anonymous said...

I think it was at that point that Costa learned to never listen to the unions ever again.


Margo's Maid said...

A useful potted history, BOAB. I have a terrible confession, however - I think I am starting to like Costa. He is not afraid to tell it like it is.

Thanks for the tip on the SAS book, too - I will check it out.

Anonymous said...

Thanks for the account. In case anyone doubts its veracity:

Rees puts rail workers on notice

"The reliability rates for the publicly done maintenance are far worse than they are for the private sector," Mr Rees told reporters.