Booz Allen Hamilton report recommends major reforms to how NZ Railways Corporation operates

In 1984, the international management consulting firm Booz Allen Hamilton (BAH) released a comprehensive report on the financial, operational, governance and capital position of the New Zealand Railways Corporation. The report was commissioned to identify what NZRC needed to do to respond effectively to the deregulation of land transport (removal of the 150km limit of competition between rail and road).  It compared NZRC to other railways globally and modelled various scenarios as to what it would take to make NZRC financially self-supporting (independent from subsidies for urban public transport operations).  The recommendations were far reaching.  The article below contains some major points from the report including NZRC's response to the report.  At the time NZRC had 19 975 staff (Kiwirail has 4 500 staff today).

The BAH report was a groundbreaking study that informed the transformation of NZRC in the following years, more detail of the report will be published in a later post, but this article reported on the findings in early 1984 (this was in the final months of the Muldoon Government, but the Lange Government allowed NZRC to proceed with the recommendations as it saw fit). 

The key motivation was to survive intense competition particularly from road freight, but also interisland ferry services.  

 Key points were:

- Staff to be cut by over 6000 over five years, of which around 500 a year will be through natural attrition (BAH recommended 8000 be cut)

- Guards vans expected to be removed from trains along with locomotive assistants (the latter cost $20m a year essentially to provide train drivers with a companion), reducing staffing of most freight trains from three to one (three being a legacy of the steam age)

- Train lengths to be increased (noting train lengths in NZ are relatively modest by global standards) with increased drawgear (coupling) capacity, including introduction of automatic couplers (most couplers at the time needed manual hooking - unhooking adding considerable costs to shunting)

- At least one of the five workshops to close (BAH recommended two, ultimately three were closed).  Although employees were hard working in workshops, work methods and machinery used were antiquated and labour intensive

- Ferries to be staffed on a volume-variable basis, whereby staffing was based on need due to demand, rather than the same staff regardless of numbers of passengers, rail and road vehicles per crossing.  Ferries performed well but were generally over-staffed and had poor cost control

- Road Services bus operations needed to be better co-ordinated with rail.  Long distance coaches were substandard in terms of reliability, performance and passenger amenity. Curiously the consultants said personnel were "unusually friendly and helpful" (which may reflect culture)

- Restructuring into business units, away from input based units. Three units were freight, passenger and property. Previous structure had separate divisions for locomotives, rolling stock, track infrastructure, stations, ferries, Road Services and catering.  Freight will be responsible for infrastructure and ferries. Passenger will include Road Services and catering. 

- Consolidation of freight stations (significantly reducing the number of stations which will handle freight into fewer major customer or regional centres)

- Increasing weekend operations (for better utilisation of rolling stock) 

- Modernising the wagon fleet (bogie wagons to replace 4-wheeled wagons)

- Options for long distance passenger trains were presented, with the preferred one being for main trunk trains to be upgraded by refurbishing the mothballed Silverstar to be a single daylight and overnight train (half sleeper/half seated) for Auckland-Wellington to replace Northerner and Silverfern services, with the Silverfern railcars to operate Picton-Christchurch-Dunedin. No comment was made of regional services, but it was expected no service would operate to Invercargill.  Ultimately, the Lange Government did not fund the Silverstar refurbishment, and instead provided a capital injection for NZRC to restructure long distance passenger rail to be financially sustainable.

- New Deputy General Manager to be Bob Henare. 

- NZRC's 1984 financial year to end in a modest profit but under $24m, which for assets worth around $1b was not seen as sufficient

- Overall revenues were expected to decline 25% due to competition.

- Condition of plant (infrastructure and rolling stock) was considered good, but plant replacement was considerably over levels needed

- Unions exercised significant power over operational policy.

Note: I worked for Booz Allen Hamilton and its then successor firm outside the US, Booz & Co, from 2005 until 2013. Booz & Co was purchased by PWC, and subsequently Booz Allen Hamilton expanded internationally once more.