Letter to Anthony Albanese 20 Jan 2023    Terms and Documents     Discussion Paper    Annexure A    Annexure B  

Chronicled Evidence of Wasteful, Reckless Major Infrastructure Projects with Material Cost Blowouts and/or Substantial Completion Delays and/or Usage/Patronage Paucity

Extracts from The huge $28 billion cost of transport infrastructure cost blowouts  -  Grattan Institute - Marion Terrill - 24 October 2016

"Premature announcements are the biggest cause of cost blowouts. When ministers and oppositions announce a new highway or metro line before a formal funding commitment, these early cost estimates often turn out to be spectacularly wrong. Western Australia’s Forrest Highway between Perth and Bunbury cost nearly five times, and New South Wales’ Hunter Expressway cost nearly four times, the amount initially promised."

Extracts from The rise of megaprojects: counting the costs  - Grattan Institute  -  Marion Terrill, Owain Emslie and Greg Moran  -  8 Nov 2020

"Australian governments are fast-tracking their transport projects, hoping for an infrastructure-led recovery from the pandemic-induced recession. But those ‘infrastructure pipelines’ are constipated by megaprojects that are too slow to be effective stimulus and prone to mammoth cost overruns. Governments should act now to set current projects on a sounder basis, and take steps to avoid ending up here again.

The era of megaprojects has arrived. It’s 10 years since Australia’s first transport infrastructure project worth at least $5 billion; now there are nine such projects under construction. Before the pandemic, the value of transport infrastructure under construction for Australian governments reached $125 billion for the first time, and two thirds of that work was on projects worth $5 billion or more. Billion-dollar projects are no longer unusual. The 2020 Commonwealth Budget upped the transport spend to one-and-a-half times the usual level.
 

Megaprojects are already breaking records for cost overruns. There’s an overrun so far of $24 billion on just six current projects:

1. Inland Rail was costed at $4.4 billion in 2010; it’s now estimated to cost $9.9 billion.

2. Melbourne’s North East Link was costed at $6 billion in 2008; it’s now expected to cost $15.8 billion, even though the Victorian Government selected the cheapest route.

3. The Sydney Metro City & Southwest was costed at $11 billion in 2015; this year the NSW Government announced the latest estimate was $15.5 billion. 

Even before the megaprojects era, cost overruns were a mega-problem. Over the past two decades, Australian governments spent $34 billion more on transport infrastructure than they first told us they would.

Grattan Institute’s analysis of all projects valued at $20 million or more and built over the past 20 years shows that the actual costs exceeded the promised costs by 21 per cent.

Big projects are particularly risky. More than one third of overruns since 2001 came from just seven big projects. Eighty per cent of the cost overruns came from just 14 per cent of projects; that 14 per cent exceeded their originally promised cost by more than half. Some overruns are the size of a megaproject themselves: for $1 billion-plus projects with an overrun, that overrun averaged more than $1 billion.

Projects announced before governments are prepared to formally commit are also particularly risky. Only one third of projects are announced prematurely, but they account for more than three quarters of the cost overruns. Premature announcements would be no problem if Australia had a robust process for cancelling the duds, but most projects, once announced, are seen through to completion.

Right now, governments are focused on creating jobs and stimulating the economy by spending money quickly. But spending big on transport projects makes little sense, because even before the pandemic, the Prime Minister, Treasurer, and state infrastructure ministers were worried that there weren’t enough workers, materials, and machinery for the massive construction workload. When there are already bottlenecks, racing to build projects dreamt up before the pandemic just pushes up prices. Governments would get bigger bang for taxpayer buck by instead spending more on upgrading existing infrastructure, and on social infrastructure such as aged care and mental health care.

Governments should rethink major projects that have been promised or are under construction, particularly those announced without a business case. Governments should continuously disclose to Parliament material changes to expected costs and benefits, as listed companies do to the stock exchange. To avoid ending up here again in future, governments should collect data on and learn lessons from past projects. Megaprojects should be a last, not a first resort.

Extracts from Decade in power: How risks are rising for Sydney’s mega rail projects  - SMH - Matt O'Sullivan  -  March 22, 2021:

"The second stage of Sydney’s emerging metro network will comprise a line from Chatswood, under Sydney Harbour to the CBD and onto Sydenham and Bankstown. Internal documents have shown the cost of the Metro City and Southwest line, which is due to open in 2024, risks blowing out to as much as $16.8 billion, more than $4 billion above what had been budgeted.

Yet it is the third stage from central Sydney to Parramatta that is the most costly. Unlike the first two, the government has never put an official price tag on Metro West, which will be built in two parts because of its size.

The Transport Minister says cost estimates for the 24-kilometre line have not been released because the government is still working through the scope of the project. “It’s a bit hard to put a final cost estimate for internal budgeting purposes on a project until you actually have that work complete,” Constance says. “Anyone can pluck a number, which is why I’ve been very disciplined around cost ranges because that helps with competitive tension.”

More than four years after committing, the government is still to finalise parts of Metro West, including a turn-back for trains beneath central Sydney and the exact location of a CBD station. Constance says the train turn-back has to be “decided in the next six to 12 months”.

Internal forecasts have estimated the second stage of Sydney’s metro rail network will cost up to $16.8 billion

Leaked internal documents have revealed Metro West could cost almost $27 billion and be opened as late as 2033.

Labor transport spokesman Chris Minns says a leadership vacuum could be costly for taxpayers. “It’s probably the worst time in the last 10 years to be unilaterally sacking your Transport secretary with so many projects on the run. You are dealing with very savvy private sector operators that move around the world, and experience can save hundreds of millions of dollars,” he says. “We would like to see more transparency from the government in relation to these multibillion-dollar projects – it is unclear what they will cost and it is unclear when they will be completed.”

But Constance refutes suggestions of a leadership vacuum and says he is on the cusp of appointing a Transport for NSW secretary. “We’ve got competent people in our agency and the beauty is that the agency’s dependency in terms of its direction is not down to two people,” he says.

Regardless, the bureaucracy faces ambitious time frames. The state government – in concert with the Commonwealth – has committed to build an $11 billion metro line from St Marys to the new Western Sydney Airport at Badgerys Creek by 2026, in time for the first planes taking off from the curfew-free airport.

Even before earth-moving equipment and tunnel boring machines start, the justification for the airport line has been savaged by Infrastructure Australia, which has warned the cost will far outweigh the benefits. The airport line is forecast to deliver 82 cents in benefits for every dollar spent building it, compared to $1.34 and $1.70 in benefits for every $1 spent constructing the Metro West and the City and Southwest lines respectively. A risk is that any blowouts in the budgeted costs of building the lines will further erode their forecast benefits when compared with their cost, at a time when the long-term consequences of the pandemic on travel demand are unclear.

The Grattan Institute’s transport and cities program director, Marion Terrill, is urging the state government to press pause on its mega projects. “It is a time of high uncertainty, so forging ahead with these projects that had been predicated on strong population growth doesn’t seem to make sense. The other thing we don’t know is whether these changing patterns of work and travel [due to the pandemic] ... are going to be sustained long term,” she says.

Extracts from Taxpayers lose out when governments rush transport projects   SMH   Marion Terrill and Lachlan Fox  -  July 6, 2021

"Australia’s state and federal governments have developed a costly habit of rushing major transport projects to market. The premature decisions are often made for political purposes, but invariably the taxpayer is left to pick up the tab.

Grattan Institute research shows that 28 per cent of major infrastructure projects – those valued at $1 billion or more – end up costing more than governments claimed when contracts were signed, and when they do the average blowout is more than $600 million. The price of a quick political win is often a long, slow and unnecessary budget sink.

When governments pursue risky infrastructure projects, they must at least set themselves up for success by doing adequate planning and discovery. Failing to do so only leads to expensive mistakes that could have been dealt with far more cheaply at the project’s conception.

Governments rush projects for various reasons. Winning votes is certainly one. In the case of the commuter carpark funding, the decision was made the day before the 2019 federal election was called, and the money was overwhelmingly directed at Liberal or marginal seats.

But governments also rush projects in the pursuit of the image that they “gets things done”, and because they cannot tie the hands of future governments. If a government fails to get a pet project started within its term of office, there’s every chance the next government might cancel the project altogether.

Whatever the reason, as the commuter carpark scheme reminds us, a decision to rush only leads to hurt in the long run. The scheme has already blown out by $20 million before construction has even begun on three of the four projects.

This example of rushing projects instead of scoping and planning is not an isolated incident.

The West Gate Tunnel project has had significant delays and cost increases.

The Victorian government failed to notify utilities of the West Gate Tunnel project’s status under the Major Transport Projects Facilitation Act 2009.  The result has been significant delays and cost increases, which have led to arbitration between the government, Transurban and the construction consortium.

In Sydney, the NSW Auditor-General criticised the CBD and South East Light Rail project’s “inadequate planning and tight timeframes”, after the construction company claimed the government failed to pass on crucial information about underground conditions. In June 2019, the NSW government paid the contractors an extra $576 million in compensation.

The Queensland government rolled out its New Generation Rollingstock trains in Dec 2017, to meet a timetable dictated by the 2018 Commonwealth Games. It was too hasty: the trains failed to comply with the government’s own disability legislation, and ultimately required refitting, at a cost of $361 million.

Governments sometimes suggest that if they didn’t move quickly, nothing would ever get built. But when governments rush to market it’s often unclear whether there is a genuine imperative to build the project

Cost increases caused by rushing to market may mean that the cost-benefit equation used to justify building the project in the first place no longer stacks up. As Grattan Institute has shown, cost overruns are far more likely than cost underruns, and this is particularly the case when projects are rushed.

What can be done to break this costly habit of rushing megaprojects to market? Instead of grasping for votes, governments need to assess projects on their merits and only fund those that can withstand scrutiny. Problems often arise due to site conditions, such as contaminated soil. Governments should do better discovery of underground conditions prior to building, and should certify these results to potential bidders. Where it is economical to reduce future risks and costs, governments should also conduct more early work on sites.

Governments have a responsibility to spend public money wisely. Rushing into political projects or “nation building” megaprojects neglects this responsibility. To get value for money on transport projects, we need governments to go back to basics – to plan, prepare and justify before a shovel even hits the dirt.

Extracts from Billion dollar blowouts in major projects predictable - and avoidable - Grattan Institute  Marion Terrill  - August 11, 2021

The West Gate Tunnel project has blown out by a further $3.3 billion, and we taxpayers are being asked to help pick up the tab for what’s become a $10 billion project – so far.

The West Gate Tunnel started out as a $5.5 billion project, when the new Andrews government in April 2016 signed an in-principle agreement with Transurban for a 5 km toll road linking the West Gate Freeway at Yarraville with the Port of Melbourne and CityLink at Docklands. It was a market-led proposal – Transurban put the plan to the government, not the other way around.

Extracts from Another cost blowout for Gawler train line upgrade  - InDaily - Jemma Chapman – 24 Jan 2022

"Transport Department chief executive Tony Braxton-Smith told parliament’s budget and finance committee this morning the latest updated project cost was now $842.43 million. 

The 127 million increase is principally due to COVID-19 impacts,” he told the committee."

Andrew Constance