1 Introduction

Public Private Partnerships (PPPs) appear to have become the contractual model of choice for the delivery of new major rail systems in Australia. Recent examples include the Sydney Metro Northwest and light rail projects on the Gold Coast, in the Sydney CBD and in Canberra. The PPP model was also considered for the Parramatta light rail project.

In each case, it is expected that the system will be extended during the term of the PPP contract. Indeed, the first extension of the Gold Coast light rail project is already under construction, an extension to the Sydney Metro project is currently in the procurement phase, and a business case for the second stage of the Canberra light rail project is currently being prepared.

But the PPP model is known to be inflexible when it comes to making changes to a project. It is inflexible because PPP contracts are long term in nature, and involve many more parties than more traditional publicly funded contract delivery models.

On each of the projects previously referred to, customers will want the extension to be operationally integrated with the part of the network covered by the PPP contract. Customers will not want to switch vehicles at the point where the extension joins on to the network covered by the PPP contract. To achieve this outcome, the relevant government must secure the agreement of the multiple parties involved in the PPP. This creates some very significant challenges for government, which can impair government's ability to obtain value for money on the extension.

This paper unpacks the challenges associated with extending a rail network that is being operated under a PPP contract. It considers the measures that governments can implement in response to these challenges, and their likely effectiveness. The paper also considers whether alternative contractual models might provide better value for money over the longer term, once the cost of extensions are taken into account.