Letter to the Prime Minister, Anthony Albanese, dated 20 Jan 2023    Letter to Chair of the Productivity Commission dated 20 Sept 2023    Letter to Mr Chris Barrett,  Chair of the Productivity Commission dated 8 Aug 2023  

Response Letter from Alex Robson, Acting Chair Productivity Commission dated 22 Sept 2023    Defined Terms and Documents     Discussion Paper     Annexure A    Annexure B          

Discussion Paper -  Australia's Six States should be legally bound to submit a Conforming Cost-Benefit Analysis to the Commonwealth Productivity Commission for appraisal at arm's length for all proposed future infrastructure projects with forecast Capex that exceeds $20,000,000  -  initially limited to proposed future rail infrastructure. Then broadening the scope to States being required to submit a Conforming Cost-Benefit Analysis to the Commonwealth Productivity Commission for all proposed future road, communications, waste/recycling and water infrastructure projects.

SECT 51(i) and SECT 51(xxxiv) and SECT 98 of the Australian Constitution behoove the Commonwealth Govt to enact legislation to 'Centralise' responsibility for appraisal of a required Conforming Cost-Benefit Analysis upon the most skilled Commonwealth Govt agency at evaluating 'what is and what is not a cost-effective infrastructure project', because Annexure A chronicles chronic waste by the majority of Australia's State Govts during recent years, largely because State Govt agencies are no longer equipped to identify at arm's length cost-effective infrastructure projects that evidence a quantifiable Business Case.

In Aug 2009 the Productivity Commission offered to take carriage for ''systematic auditing of cost–benefit analyses .... by being a centre of excellence or reference for cost–benefit analysis within the Australian Government."

Thereby 'Centralise' responsibility to the Productivity Commission to evaluate/audit (at arm's length) each Conforming Cost-Benefit Analysis for each future material State infrastructure project where the Productivity Commission draws upon expert determination by Accredited Tunnelling and Traffic Patronage Consultants as required. 

Annexure A evidences that by engaging Australia's 'productivity experts' that make "un-conflicted" determinations at arm's length will save two to three billion dollars circa annually of the Commonwealth Govt's Public Purse 46% circa contribution within three years, such has been the horrendous waste in recent years, ostensibly due to announcements of new infrastructure projects that were based upon political sway and a misunderstanding of Keynesian economic theory, coupled with not expertly appraised bang for buck decision making explained in Nine Steps of Cost-Benefit Analysis.  

"What we need is fundamentally better processes for developing and discussing transport planning." (Comment from former top NSW rail executive, Dick Day - Dec 2017)

(This Discussion Paper has been prepared by Philip James Johnston, Sydney NSW, hereinafter the Writer - Click on the myriad of embedded threads in coloured or underlined text herein)

============================================
 

Commonwealth Govt "effectively supports about 46% of the six States expenditure" and is obligated/responsible under the Australian Constitution to ensure that those Public Purse fundings are expended cost-effectively

A seminal 2009 publication "6.  Evaluating major infrastructure projects: how robust are our processes? - Henry Ergas and Alex Robson - 2009 (largely republished on the Productivity Commission website shortly thereafter as THE SOCIAL LOSSES FROM INEFFICIENT INFRASTRUCTURE PROJECTS: RECENT AUSTRALIAN EXPERIENCE - PRODUCTIVITY COMMISSION ROUND TABLE - 17-18 Aug 2009) -

a)    explained that State Govts were no longer equipped (ostensibly due to out-sourcing) to adequately identify cost-effective robust infrastructure projects with a positive NPV that will save taxpayer dollars; and

b)    inter alia proposed (at bottom of page 162) that the Productivity Commission effectively takes carriage for the below two bullet point responsibilities "to be a centre of excellence or reference for cost–benefit analysis within the Australian Government".

*   This Discussion Paper recommends that each of the six States must submit (to the Productivity Commission at least six weeks prior to Financial Close) a Conforming Cost-Benefit Analysis for each proposed infrastructure project with forecast Capex that exceeds $20,000,000 because SECT 51(i) and SECT 51(xxxiv) and SECT 98 of the Australian Constitution behoove the Commonwealth Govt to enact legislation to 'Centralise' responsibility upon the most skilled Commonwealth Govt agency at evaluating 'what is and what is not a cost-effective infrastructure project'.

*   For those proposed infrastructure projects with over $100,000,000 forecast Capex, the Productivity Commission would, at arm's length, allocate and publish a score out of 100 points based on the Nine Steps of Cost-Benefit Analysis prior to Financial Close.

============================================

Prior to retirement, Philip James Johnston, hereinafter the Writer, worked for CBA for 37 years; the latter half in Infrastructure Finance. 

'Annexure A' provides an embarrassment of 'critical reports' and 'fault finding newspaper articles' that chronicle that around four billion of taxpayer funded dollars have been squandered annually on poorly planned and inexpertly appraised infrastructure projects resulting in cost blowouts, completion delays and usage/patronage paucity.   Trains, pains and Berejiklian - The Monthly - Paddy Manning - March 2019 provides a damming account of conflicts of interest by vested interest infrastructure groups to the material detriment of  "....public investment, commuters and passengers....":

1.   Central Business District and South East Light Rail (CSELR) project cost double the initial provision/construction forecast and took a year longer than predicted with lengthy disruptions to local small businesses that successfully litigated the NSW Govt due to lost sales

Central Business District and South East Light Rail (CSELR) project involved constructing a 12km, 19 stops, light rail service from adjacent to Circular Quay Station along George Street passing Wynyard and Town Hall stations to outside Central Railway Station, through Surry Hills to Moore Park, then branching to:

• Randwick via Alison Road and High Street  - L2. or
• Kingsford via Anzac Parade  -  L3

Conventional trains have run between Circular Quay station and Central station for eons of Sydney's history (since 1964) that adequately satisfied patronage demands.  Why did TfNSW duplicate that existing train service over the 3.5km from Circular Quay station passing by Wynyard station and Town Hall station to outside Central Railway station?  Simply, why did TfNSW build a parallel, juxtaposed train line that involved one of Sydney's most famous roads, namely George St Sydney, being lost to NSW Govt buses?  George Street’s car-free zone extended to near Circular Quay.

Whatever Cost-Benefit Analysis that TfNSW undertook failed to identify that beneath George St was ladened with vital functioning utilities (ostensibly electricity cables but also water, sewerage, drainage, gas) that needed to be relocated.  Prima facie the cost to lay tram tracks adjacent to the existing train lines between Circular Quay station and Central Railway station was $1,000,000,000 circa.  (For those non-mathematical, a billion dollars is one thousand million dollars.) 

“It’s a toy,” the former chief executive of Infrastructure NSW, Paul Broad, declared of the tram line he had campaigned against in government.  On 3 June 2019, TfNSW settled a claim by ALTRAC Light Rail (the operating company responsible for delivering, operating and maintaining CSELR) of misleading or deceptive conduct due to the manor/detail that TfNSW failed to provide information on how to manage electricity cables under George Street.  TfNSW agreed to pay ALTRAC an additional $576,000,000. 

In Nov 2013 the NSW Government announced the business case details for CLSER, with an estimated cost of $1.6 billion, and purportedly almost $4 billion worth of benefits.  The NSW Auditor-General Report dated 11 June 2020 estimated total cost to be $3.147 billion - virtually double the original cost forecast as in November 2013, the project business case summary estimated the CSELR would cost $1.6 billion.  Legal battles cost NSW Govt to settle with the Spanish contractor, Acciona, an additional $576 million. CSELR was completed a year late causing significant traffic disruption to businesses and residents.  $60 million was paid out for the small business assistance package due to extended disruption.  Refer History of CSELR cost increases and construction delays. 

The 120 tonnes CSELR trams are 67 metres long - amongst the longest trams in the world and almost four times as long as a bendy bus. Consequently, there are less than half the light rail station stops that were provided by previous Govt buses. Hence, passengers walk further to their final destination on their way to work and walk further from their office to catch a light rail on their journey home during late afternoon.

The Writer estimates that even before COVID (late 2019), under TfNSW slogan, Turn Up and Go, over 80% of daily CSELR tram trips were less than 20% occupied and that the frequency of these lengthy trams were double what was required across each working day.  Yet even under COVID (from Feb 2020), TfNSW  failed to materially reduce the frequency of services.  Creditworthy investigations, from within Australia, the USA and Europe, on the relative cost-effectiveness of buses/light rail/heavy rail, conclude that buses are more frequent, materially cheaper and more flexible to tailoring to public transport demands.

• "China dominates the electric bus market, but the US is getting on board"

•  NSW to roll out 120 electric buses in 2021 ahead of full transition

Materially cheaper demand responsive transportation modes for the CBD South East Light Rail (CSELR) were available, most notably diesel and/or electric buses that -

i)       run on 'rubber tyres';

ii)      did not necessitate closing off George Street, Sydney to Govt buses because of tram tracks with external electricity overhead cables or a third electrified tram rail; and

iii)     whose supply frequency can be readily tailored according to passenger demand, eg. reduced demand due to COVID.

Casual empiricism suggests that public transport usage (over the next 50 years) between both Randwick and Kingsford to/from Central Railway station, and onto Circular Quay, could have been provided for 10% circa of the $3.147 billion tram set, plus 50 years of the 120 tonnes, 67 metres long light rail operating costs, had George St been restricted to Govt diesel or electric buses (not inflicted with a light rail network). There were double the bus stops than the light rail stations, hence passengers have to walk further to/from their work office. Significantly, unlike these heavy trams, electric buses do not require external electricity supply.

2.    Commonwealth Govt contributed 46.4% of the six States annual fiscal expenditure in 2020-21.  The Australian Constitution behooves the Commonwealth Govt that those Public Purse fundings to the States are expended cost-effectively

Australian Government financial payments effectively support about 46.4 per cent of Australia's six states' annual fiscal revenue expenditure.  "In aggregate, the states were estimated to receive Australian Government payments of $127.4 billion in 2019–20."

If the above rudimentary analysis of one of the smaller recent light rail fiascos, namely Sydney's CSELR, did not concern the then Federal Treasurer, Josh Frydenberg, that funded the States $127.4 billion in 2019–20, under Commonwealth obligations pursuant to SECT 96 of the Australian Constitution, then perhaps nothing will:

+       The Productivity Commission asserted in 2009, the Little–Mirrlees rule suggests that the value of proper project appraisal is at least 10 per cent of the value of these projects. 

++     The Commonwealth Govt has obligations for State railways under SECT 51(i) and SECT 51(xxxiv) and SECT 98 of the Australian Constitution - explained in Section 4 below.

Relying on SECT 98, $3 to 4 billion circa of the Commonwealth's Public Purse can be saved annually (in the immediate years thereafter) by the Commonwealth Govt Centralising responsibility for evaluating, measuring, ranking and scoring proposed larger future rail infrastructure projects (>$100 million) to Australia's specialist Yield-Efficiency expert, namely to the Productivity Commission.  The benefits of so doing would be exponential as the Productivity Commission enhances its -

A.      infrastructure project evaluation expertise; and

B.      passenger usage/patronage forecasting proficiency. 

Chapter IV. Finance And Trade of the Australian Constitution, in particular SECT 96 'Financial assistance to States', authorises the Australian (Commonwealth) Parliament to "...grant financial assistance to any state on such terms and conditions as the Parliament sees fit."

In recent years State rail infrastructure funded partially from fiscal grants from the Federal Government under SECT 96 'Financial assistance to States' have evidenced many billions of dollars of cost blow outs/completion delays.  Ipso facto obligations under SECT 51(i) and SECT 51(xxxiv) and in particular SECT 98 of the Australian Constitution (explained in Section 4 below) compel the Commonwealth Govt to enact new laws to 'Centralise' an arm's length responsibility to the most skilled Commonwealth Govt agency at evaluating what is and what is not a cost-effective infrastructure project, by legislating that the six States must submit a Conforming Cost-Benefit Analysis that inter alia addresses each of the Nine Steps of Cost-Benefit Analysis (to the Productivity Commission at least six weeks prior to Financial Close) for each future infrastructure project with projected Capex that exceeds $20,000,000, initially restricting that obligation to proposed rail infrastructure only.

Enacting new laws to 'Centralise' an arm's length responsibility to a Gatekeeper, namely the Productivity Commission, will -

a)      save the various States Public Purse at least $3,000,000,000 (in agg.) annually in the immediate years from implementation, and

b)      materially reduce embarrassment that befalls State Premiers, Deputy Premiers and Transport Ministers when significant cost blowouts and project delays (Annexure A) are exposed in Australia's free press.

The below comments made by the then NSW Premier in Feb 2020 (when CSELR was finally fully operative) to a journalist from The Australian in article Light rail’s online, but more to come for Sydney - NSW Premier Gladys Berejiklian reveals how light rail will unlock Sydney’s spectacular future add weight to the Productivity Commission being the Centralised body to evaluate the utility of proposed State Govt. major infrastructure projects, particularly as a lot of the Public Purse expended comes from the Feds:

"I love walking down to George Street and seeing everyone taking selfies,” says the now Premier of NSW. “It has become the nation’s best boulevard. It’s a modernisation of our city. It is creating a future. You have the beauty of boulevards that Europe has and how the cities are really places people come to enjoy, and you also have the ability to move a lot of people in mass transit.”

“I remember feeling so liberated when the Olympics were on and George Street [was temporarily pedestrianised] and you could go anywhere,” recalls Berejiklian.  “But the Olympics was just a short spurt of what we want to feel all the time.  What we are building is forever; it is not a moment, it is building us for the future. It is putting us out there as a global city.” 

But Berejiklian believes the light rail and the pedestrianisation of George Street will attract more people into the city beyond the traditional nine-to-five hours...............

Why are the former NSW Premier's above noted intangible values/attributes to warrant a $3.147 billion light rail of concern?  The fundamental goal of state transport infrastructure is to gain maximum buck from minimum spend of the Public Purse because of the welter of other social priorities not limited to aged care, child care, youth allowance, nursing, flood relief, road repairs.  It is long accepted that most public transport runs at a huge loss with 80% circa of transport services less than 25% patronised/occupied.  Because some of the States have Boondoggled Billions of the $120+ billion annual Federal Govt funding in recent years on rail infrastructure projects, often with deep unfamiliar tunnelling, and the former NSW Premier was intent upon continuing to, when a Conforming Cost-Benefit Analysis will often identify and quantify materially $$$ cheaper public transport alternatives that will satisfy associated public transport needs, thereby ensuring the $120+ billion annual Federal Govt funding to the six States in recent years gains maximum buck.

Looking back at an earlier Sydney light rail effort, the NSW government approved TNT HarbourLink's eight stations, 3.6 km loop, Monorail proposal.  Despite government approval, opponents protested in Sydney against the monorail construction.  Actual costs turned out to be AUD$50 million.  It opened in July 1988 and closed due to inadequate patronage in June 2013.

"Once seen as the public transit system of the future, Sydney's monorail is now a thing of the past."

 

"It was always more of a novelty rather than an actual transport purpose," Transport Minister, Gladys Berejiklian, told the Telegraph. "That was one of the reasons why we discontinued it."

Monorail: build it and they will come, except they didn't  -  SMH - Linton Besser - Jan 9, 2012.

NSW government told in 2012 light rail project would waste hundreds of millions  - 7.30  Greg Miskelly  14 Sep 2018

3.   Former NSW rail authorities et al have expressed concerns about the economic logic of recent rail projects

Below is an extract from SMH article 29 June 2018 "How did Gladys make such heavy work of light rail?" that inter alia acknowledges that State Govts no longer possess the engineering expertise to cost-effectively appraise, prioritise and administer major infrastructure projects:

"When did it all go wrong?

One theory about what went wrong relates to the way in which the project was contracted.  Mehreen Faruqi, who has a doctorate in engineering, has argued extensively there has been a hollowing out of technical know-how in the public service.  The end result is more time and money trying to fix design changes. “I am hugely concerned about the deliberate de-engineering and politicisation of the public sector and the immense over-reliance on outsourcing,” says engineer, Mehreen Faruqi. “This has led to a diminished capability to establish accurate scope and cost in the first place, followed by a lack of capacity to properly scrutinise design, procurement and delivery from private contractors and consultants.”

A similar perspective is provided by former director of Professionals Australia, the union representing many transport engineers. “If you don’t have the expertise to get a technical result, you leave it up to the lawyers to resolve,” says Paul Davies.  Rather than directly engage contractors to perform specific works, a government wraps up an entire project into one large contract, with risks provided for in the details of that contract.  “Hopefully you build contracts that are robust enough to protect the taxpayer, but that’s never going to work entirely, and certainly not in this case.”

Below are concerning extracts from How $4 billion blowout puts Sydney's rail transport plans on the line  -  SMH - Matt O'Sullivan - 8 Feb 2020:

"Former top NSW rail executive, Dick Day, says building a fully automated rail line under the heart of Australia's biggest city is a hugely complicated and expensive proposition. "When you put in new technology, it makes life harder," he says. "A metro line in a city like Sydney is an incredibly expensive and difficult project to build. There have been some considerable costs involved because of the new technology ... and those stations are very expensive.

The budget review forecasts the construction bill for a new metro station at Martin Place alone will top $630 million, a figure that does not include $200 million to excavate the underground site.

The five other new stations along the line each range in price from almost $220 million at Barangaroo to about $530 million at North Sydney.

Day, who was one of four former rail executives to raise concerns about the project several years ago, says it is not unusual to get cost overruns for large transport projects but he questions whether the metro line will give the state value for the billions of dollars being poured into it.

He laments a lack of sufficient planning for projects before commitments are made to build them. "That worries me because you can end up spending a lot of money and not getting what the politicians were promising," he says. "What we need is fundamentally better processes for developing and discussing transport planning."

Below is an extract from Trains, pains and Berejiklian - The Monthly - Paddy Manning - March 2019 that provides a damming account of conflicts of interest by vested interest infrastructure groups to the material detriment of  "....public investment, commuters and passengers....":

"Transport planner Dr Michelle Zeibots, a research director at the University of Technology Sydney, is a former member of the state government’s expert advisory panel and believes there is a deeper malaise in New South Wales. Transport projects are being designed and commissioned, she says, for the benefit of construction contractors and private investors, rather than the public.  Zeibots goes on to say that when Berejiklian was transport minister she promised to put customers at the centre of everything, but Liberal Party heavyweights like former premier Nick Greiner and former Business Council chief Tony Shepherd strongarmed the Coalition into projects such as WestConnex.

“The desires of the construction sector were put front and centre, leaving Berejiklian’s customer service vision to wither.  Most of the big-spend transport projects are about feeding industry, not serving customers and the community.  People can feel this.  The big spending has become an insult to most people’s intelligence … Adding insult to injury, Australians are paying three times more for comparable infrastructure projects than other industrialised nations.  And for all the public investment, commuters and passengers get poor outcomes

Below is an extract from an article in the SMH (25-Mar-21) by Percy Allan, visiting professor at the University of Technology Sydney and a former secretary of the NSW Treasury and a former chair of the NSW Council on the Cost and Quality of Government.

"One reason might be that agencies (Govt. departments) have lost much of their core policy thinking role to external consultants who are not only expensive, but don’t embed their experience. Furthermore, basic policy-crafting instructions and training seem to be missing.  These things are not hard to fix, but need the will to do so."

Below is an extract from Fixing climate change, poverty and ocean plastic requires a 'Moonshot' approach - ABC Radio National  - 2 April 2021.  Esteemed English economist, Professor Mariana Mazzucato, asserts that British Govt civil service depts no longer enjoy the synergies and economies of scale attainable from long term employment of specialist skilled personnel.  Rather the British civil service is bereft of 'high skill level expertise and experience' and relies upon external consultants that "...don’t embed their experience..." within the civil service:

"The NASA moon landing project was defined by ambitious leadership, clear goals, experimentation, and the public sector interacting with companies such as Honeywell, General Electric and Motorola, Professor Mazzucato says.

"The reason I think it worked is because NASA was very confident," she says.

NASA had clauses in its procurement contacts that prohibited excess profits and provided incentives for innovation.

It paid close attention to the skills of its own staff, encouraging training and learning, and didn't rely on external consulting firms to do any project management.

Professor Mazzucato contrasts this with modern governments, where consultants are thick on the ground.

She points to the UK, where Cabinet Office minister Lord Agnew accused the British civil service of becoming "infantilised" by an "unacceptable" reliance on expensive consultants.

He said public servants were being deprived "of opportunities to work on some of the most challenging, fulfilling and crunchy issues".

4.   The Australian Constitution -
►   provides for the Australian Parliament to make laws regarding States expenditure on "...railways the property of any State"; and
►    requires the Commonwealth Govt to evidence that  'Financial assistance to States' is expended cost-effectively.   

Below are the two aforementioned sections of the Australian Constitution (SECT 51 and SECT 98) that obligate to the Commonwealth Govt to enact new laws to 'Centralise' responsibility to ensure that all future major State infrastructure projects are robust and cost-effective and do not waste the Commonwealth Govt's Public Purse:

SECT 51(i) of the Australian Constitution enables the Parliament of Australia to make laws with respect to:

        "trade and commerce with other countries, and among the States;"

SECT 51(xxxiv) of the Australian Constitution enables the Parliament of Australia to make laws with respect to

        "railway construction and extension in any State with the consent of that State;"

The meaning of trade and commerce is clarified in the below extract of SECT 98 of the Constitution includes navigation and State railways:

        "The power of the Parliament to make laws with respect to trade and commerce extends to navigation and shipping, and to railways the property of any State."

Below is an extract from Section 6.4 Conclusions (bottom of page 162) of a paper written by two eminent economists for the Productivity Commission titled "6.  Evaluating major infrastructure projects: how robust are our processes? - Henry Ergas and Alex Robson - 2009:

".................. three changes would have merit:

•         a requirement for all cost–benefit analyses to be disclosed that would also highlight which projects had not been subjected to economic project evaluation.

•         far greater and systematic auditing of cost–benefit analyses, both at the stage of the financing decision and post-project completion. In contrast, there is little or no such audit currently, and in many instances, cost–benefit analyses are not even -
*        updated,
*        maintained; or
*        properly archived after the initial ‘go/no go’ decision is taken.

•        the establishment of a centre of excellence or reference for cost–benefit analysis within the Australian Government, preferably in an independent entity, such as the Productivity Commission.

Significantly, the afore-mentioned pivotal research paper by Henry Ergas and Alex Robson - 2009 offered for the Productivity Commission to be 'a centre of excellence for cost–benefit analysis'. 

Messrs Ergas and Robson's below noted concerns of insufficient attention to the project evaluation process and the blurring of responsibility for financing infrastructure as between the public and private sectors have both occurred (refer Annexure A), LIKELY more so than their below concerns expressed 12 years ago:

"Overall, our review suggests the following conclusions:

•      Insufficient attention is paid in the evaluation process to options that would avoid investment, or, more broadly, that would focus on securing greater efficiency from the existing capital stock. Simply put, infrastructure investment appears to be viewed as a benefit, rather than a cost.

•      The distortions arising from this undesirable narrowing of the range of options considered are then compounded by evaluations that are too vulnerable to ‘fudge factors’. In a Gresham’s law of evaluation, bad evaluations (often by consultants) can drive out good, given that they trade at equal values.

In our view, these outcomes are driven by governments that see little real value in major project evaluation. They may see merit in evaluation of essentially routine decisions (such as the decision to place a new roundabout or improve a road surface) or in cost-effectiveness analysis of the options available for meeting predetermined goals (such as improving bus transit in a congested area), but not in the full analysis of objectives and options (including the option of not spending taxpayers’ money). This, we argue, reflects the impact of a perception (initially due to strong economic growth, and then to a belief that the global financial crisis justifies greatly increased outlays) that public funds have a negligible opportunity cost. This perception has been accentuated by the growing blurring of accountability in the Australian federation, which reduces the budget disciplines on the States, and the blurring also of responsibility for financing infrastructure as between the public and private sectors (which, whatever its other merits, increases the return to rent-seeking deals between governments and private infrastructure developers). Together, these trends risk making cost–benefit analysis merely a box to be ticked, rather than an exercise that has real value, not least to government itself."

In July 2014 the Productivity Commission published "Productivity Commission Inquiry Report into Public Infrastructure" with recommendations to bringing down costs of infrastructure projects and minimise delays.  The report highlighted that whilst efficient infrastructure provides services which both improve productivity and quality of life; poorly chosen infrastructure can reduce productivity and financially burden the community for decades. A key message of this Productivity Commission report was that there is a need for a complete overhaul of poor processes currently used in the development and assessment of infrastructure investments. Reviewing a wide range of economic public infrastructure projects, the Productivity Commission found many examples of where inadequate processes and project governance have led to costly outcomes to users and taxpayers.

The Commonwealth Productivity Commission possesses the requisite -

*        Core Functions, 'output streams' and Cost-Benefit Analysis Knowledge and Expertise; and

*        would operate at arm's length with unbiased impartiality, particularly as its input would be on the public record.

The Productivity Commission would draw upon Expert Determination by Accredited Tunnelling and Traffic Patronage Consultants as required. 

The Commonwealth Govt. should legislate that -

A.      State Government depts/agencies, hereinafter Agencies, must -

          i)        submit (to the Productivity Commission) at least six weeks prior to Financial Close a Conforming Cost-Benefit Analysis when expending more than $20,000,000 on any proposed infrastructure project; and

          ii)       place each such Conforming Cost-Benefit Analysis in the public domain oodles before Financial Close to enable Community Consultation; and

B.      Core Functions of the Productivity Commission that includes 2.  Performance monitoring and benchmarking and other services to government bodies be broadened to include the Productivity Commission auditing each submitted Conforming Cost-Benefit Analysis for each State Governments' proposed infrastructure project over $100,000,000 in Capex at least three weeks prior to Financial Close and allocate a score out of 100 points.

State Govt. Agencies do not possess the specialist Cost-Benefit Analysis Skills/Experience that the Productivity Commission presently possesses and would enhance over time.  These Agencies too often learn from their mistakes which have collectively cost four billion dollars circa annually.  Those billions can be saved by Centralising responsibility to the Productivity Commission, enabling material synergies that ensure the integrity of the documentation chain, including a genuine system of post-completion cost-benefit reviews that addresses deficiencies/failed forecast outcomes.  Such reviews would, in effect, benchmark State jurisdictions to more effectively learn from prior mistakes.

Below is an extract from How $4 billion blowout puts Sydney's transport plans on the line - SMH - Matt O'Sullivan  Feb 8, 2020:

"Transport director at think-tank the Grattan Institute, Marion Terrill, says part of the reason project costs are frequently over running their original budgets is that governments are committing to them before they have been fully evaluated and decision makers have an accurate idea of what they will cost. "Pre-mature announcements cause larger cost overruns," she says. "Governments shouldn't be able to commit public money until they have done proper evaluations and tabled the business case in Parliament.  The projects are getting bigger and so [the blowout] is more startling."

6      Centralising Cost-Benefit Analysis audit responsibility to the Productivity Commission will evidence valuable synergies from concentrating knowledge, collaboration, economies of scale and rigid disciplines.

7.    Keynesian economic theory of Govt initiated public works programs to stimulate a flagging economy was predicated upon a robust positive NPV

British economist John Maynard Keynes' publication in 1936 The General Theory of Employment, Interest and Money is likely the most influential/practical/useful publication in the history of modern macro economic theory.

Probably COVID driven, Govts have recently been spruiking the Keynesian remedy of new Govt infrastructure projects to create employment, which is sensible provided that such new infrastructure projects are cost-effective; meaning profitable or less costly than existing services, with a robust positive Net Present Value.  If it ain’t broke, then don’t tamper with it.  The Writer supports the longstanding John Maynard Keynes economic logic provided the cost-benefit analysis for each proposed infrastructure project is demonstrably positive (or less costly than existing comparable social infrastructure) and robust as quantified in a Conforming Cost-Benefit Analysis.  Unfortunately some infrastructure projects prove to be vastly cost in-effective.  Sadly, there is precious little accountability for State Govts wasting the Public Purse which is a poor reflection of Commonwealth Govt's adherence to SECT 51(i) and SECT 51(xxxiv) and SECT 98 of the Australian Constitution .

Governments like to announce transport infrastructure projects to voters that governments profess will reduce travel times, be more frequent and/or lower fare costs, particularly those projects that appear large, shinny, and brightly coloured.  Unfortunately, a lack of 'due diligence' of all the associated costs, but also complimentary synergies that could be incorporated with better planning and appraisal, too often renders the finished project grossly cost-ineffective, because build it and they will come, and a turn-up-and-go public demand did not eventuate to cover Capex and administration/operating costs.  As asserted by Dr Michelle Zeibots in Section 3 above, some infrastructure decisions are overtly influenced by vested interest groups, often construction companies seeking to be awarded the D&C contract. 

A creditable First World Country should have disciplines/protocols legislated that are above reproach to protect not only taxpayers, but also the integrity of the elected governments, because as can be evidenced at Infrastructure Australia (federal agency established in 2008 to provide independent advice to governments on infrastructure) contractors want to build, build, build and some gullible bureaucrats want to advance their careers by fostering a new infrastructure project, albeit often with precious little infrastructure risk management expertise, as patently evidenced by inter alia the costly/dragged-out Sydney CSELR fiasco (see Section 1 above).  Restricting George St (in Sydney's CBD) to State Govt. bus services would have satisfied patronage demands for the next 50 years at 10% circa of the Public Purse cost of CSELR.  Utilising electric buses on the two CSELR routes to Randwick and Kingsford over the next 50 years would have cost 10% circa of the $3+ bil to lay tram tracks and 50 years of operating costs of those overly frequent, heavy trams, that now have advertising stickers over the windows to conceal their emptiness within.  The previous bus services had almost double the amount of 'bus stops' (than the heavy trams) which was a patent benefit to bus commuters. Those whopping 120 tonnes 67 metres long CSELR trams don't run on the smell of an oily rag. 

Research Paper no. 17 2007–08: Specific purpose payments and the Australian federal system by Bennett and Webb (14 Jan 2008) explains that Specific Purpose Payments (SPPs) to the States and Territories inter alia provide an opportunity for greater scrutiny by the Commonwealth of how successfully each payment is expended.  Below are two brief extracts:

• "Problems associated with SPPs include a lack of accountability, duplication of administration, and blame-sharing. One estimate has the fiscal cost of these problems at $9 billion annually.
• Numerous proposals have been advanced to improve the operation of SPPs but few have been implemented."

*    Infrastructure Australia board members step down ahead of review  - SMH -  July 22, 2022

*    Infrastructure Australia’s narrow remit is distorting cities - Australia’s independent infrastructure advisory body is fixated on transport projects - bad news for good urban planning.- 9 Feb '22

An Assessment of Australia’s Future Infrastructure Needs - The Australian Infrastructure Audit 2019 is a 640 pages PDF that pitches all sorts of infrastructure opportunities from energy, water, telecommunications, to social infrastructure such as hospitals, schools and parks, and access to goods.  In promoting Infrastructure Australia's wares, the word ‘profitability’ appears only three times in 640 pages.  The three words ‘cost benefit analysis’ appears only twice in this voluminous marketing paper.  Patently, the entity that published a 640 pages document in 2019 professing to be an Australian Infrastructure Audit, has no focus, or places no importance, on the profitability/utility of "infrastructure opportunities from energy, water, telecommunications, to social infrastructure such as hospitals...." and is not focused on 'value for money'.  Hence, Infrastructure Australia is not equipped to, or interested in, appraising the cost-benefit of major infrastructure funded from the Public Purse.  However, it is an ideal platform to assist State Govts prepare a Conforming Cost-Benefit Analysis for appraisal at arm's length by Australia's time-honoured productivity experts that would draw upon  Expert Determination by Accredited Tunnelling and Traffic Patronage Consultants as required.

8.    Where is the forecast numeric patronage evidence from State Govt accredited Traffic Forecast Usage/Patronage Consultants that support the NSW Government's effusive, bullish assurances regarding its huge rail infrastructure projects seemingly relying on build it and they will come and Turn Up and Go

The Australian article (Feb 2020) Light rail’s online, but more to come for Sydney - NSW Premier Gladys Berejiklian reveals how light rail will unlock Sydney’s spectacular future evidences that the THEN NSW Premier believed that her Government's massive outlay on single floor light rail infrastructure was/is cost-effective, meaning the Net Present Value of fares revenues attained say over 20 or 30 years of Operations will exceed the monumental construction/operations costs and be cheaper than alternative transport modes.

Below are two divergent views/concerns extracted from How risks are rising for Sydney’s mega rail projects - SMH - March 22, 2021:

A decade after securing power, the Coalition has made clear it will not press pause on rail projects which it has cast as central to plans to revive the economy. “Public transport into the future is going to come back. It will come back very strongly once the vaccine is rolled out,” Constance says.

"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."

 

"As Transport Minister, Andrew Constance wasted billions of taxpayer dollars on transport projects that were delayed, over-budget and totally unnecessary, which wouldn’t have been needed if it wasn’t for his government’s obsession with the world’s highest per capita mass immigration program."

Concerningly, the former NSW Transport Minister, Andrew Constance's enthusiasm for rail infrastructure projects, specifically “We’re building an entire network ........ It’ll drive us out of recession”, ignored the first rule of Keynesian Economics that Govt initiated public works programs to stimulate a flagging economy, namely that the (published) Cost-Benefit Analysis must evidence a robust business case.  In laymen's language, if you expend $10,000,000,000 over say three years to build a new rail network, and Operating/Administration costs over say 30 years are $3,000,000,000, then the NPV of future fare revenues less costs needs to exceed $13,000,000,000.  Not a massively negative NPV because of horrendous capital expenditure to build the tram line and double the operating costs of the previous buses, amidst featherweight patronage.

9.    Winners and Losers

The biggest Winners from the Commonwealth Govt legislating that each of Australia's six States submit a Conforming Cost-Benefit Analysis for all proposed infrastructure projects with forecast Capex beyond $20,000,000 to the Productivity Commission to audit, relying ostensibly upon SECT 51(i), 51(xxxiv), SECT 96, SECT 97 Audit and SECT 98, would be the State Premiers, Deputy Premiers, Transport Ministers, the Federal Treasurer and Australia's taxpayers.  The biggest Losers would praesertim be the major transport construction infrastructure companies that have been the beneficiary of billions of dollars of work due to the majority of State Govts too often charging into misdirected transport expenditure where expending Big (Other Peoples) Bucks have been the norm based on irresponsible NSW State Govt shallow Catchcries of build it and they will come, and turn-up-and-go.

State politicians would be less likely to make premature announcements until their Conforming Cost-Benefit Analysis, supported with a Base Case Financial Model not overtly reliant on Blue Sky patronage forecasts, was robust because the Productivity Commission would opine on it and likely assist the pertinent State embellish it or identify a less costly transport alternative.

10     Questions:

1.      How many of the $120 billion p.a circa that the Commonwealth Govt has funded more recently to the States annually would have been better expended, had the Commonwealth Govt. accepted back in 2009 the Productivity Commission's offer to be 'a centre of excellence for cost–benefit analysis' by passing requisite new laws, pursuant to SECT 96, SECT 97 Audit and SECT 98 of the Australian Constitution?  Because the Commonwealth funds 46% of the State's expenditure.

2.       Had the Productivity Commission been so appointed, would it have -

           i)       challenged the rationale/economics/logic of providing a juxtaposed rail system between Circular Quay and Central Railway (adjacent to the existing heavy rail service) that cost $1,000,000,000 circa?  CSELR was completed a year late causing significant traffic disruption to businesses and residents.  A $60 million small business assistance package was paid out due to extended disruption;

           ii)      recommended that George Street be restricted to Govt buses only by diverting all cars etc to nearby roads, seemingly at about 10% of the cost of the CSELR light rail provision and operating costs over the next 50 years; and

           iii)     asked TfNSW to provide the annual patronage forecasts (at least over the initial 20 years of Operations) that calc'd that CSELR would achieve "...almost $4 billion worth of benefits"?

11.   Initially saving the Commonwealth Govt's Public Purse approaching $3 billion each year.  Thence larger annual savings when the requirement to submit a Conforming Cost-Benefit Analysis is extended to road, communications, waste/recycling and water infrastructure projects, and as Australia's six State's learn the ropes.

As identified herein, the Australian Constitution, not limited to SECT 98 "to make (new) laws", behooves the Federal Government to enact new laws that obligate Australia's six State to provide a Conforming Cost-Benefit Analysis (supported with a robust Base Case Financial Model) to the Productivity Commission starting with all future rail infrastructure projects with forecast Capex >$20,000,000, to avoid a continuation of the financial waste and reckless mismanagement all too evident in Annexure A - seemingly in the pursuit of buying votes relying upon slogans not limited to build it and they will come, and turn-up-and-go. 

Upon the above legislation being passed by the Federal Govt, the six States would be legally obligated to submit a Conforming Cost-Benefit Analysis to the Productivity Commission at least six weeks prior to Financial Close for each proposed new infrastructure project with a forecast Capex that exceeds $20,000,000  -  initially limited to rail infrastructure projects for say 12 to 18 months, then broadening the scope to road and communications, thence also including waste/recycling and water infrastructure.

One example of this gross waste and negligent mismanagement is the NSW Govt's CSELR.  TfNSW constructed a 12km, 19 stops, light rail starting adjacent to Circular Quay Station south along George Street passing Wynyard and Town Hall stations to outside Central Railway Station.  Thence south east through Surry Hills to Moore Park.  Then branching to:

• Randwick via Alison Road and High Street  - L2. or
• Kingsford via Anzac Parade  -  L3

It ultimately cost double the initial provision/construction forecast and took a year longer than predicted with lengthy disruptions to small business. 

Conventional trains have run between Circular Quay Station and Central Station for eons of Sydney's history (since 1964) that adequately satisfied patronage demands.  Hence, why did TfNSW build a parallel, juxtaposed train line that involved one of Sydney's most famous roads, namely George St Sydney, being lost to NSW Govt buses?  Little wonder that former NSW Transport Minister, Andrew Constance, left the NSW State Liberal Party in the hope that voters in the South Coast electorate of Gilmore at the Federal level had short memories.

Whatever Cost-Benefit Analysis that TfNSW undertook failed to identify that beneath George St was ladened with vital functioning utilities (ostensibly electricity cables but also water, sewerage, drainage, gas) that needed to be relocated.  The Spanish contractor, Acciona, that successfully litigated the NSW Govt for an additional $576 million knew that a welter of utilities would need to be relocated. Sadly TfNSW did not, at least not so in associated legal contracts, which patently evidences the incompetence of the O'Farrell, Baird, Berejiklian governments re recent rail transport projects.

The NSW Govt. could have commissioned electric or diesel buses on the two CSELR routes starting from Circular Quay station on to Randwick and Kingsford (continuing to use the once famous George St between Circular Quay station and Central station) over the next 50 years at 10% circa of the $3+ bil that it cost to decommission George St and lay 12km of tram tracks and the monstrous operating cost over 50 years of those overly frequent, heavy, long and more often almost empty trams, that only offered approx. half of the pick-up/put-down points that buses previously did. 

Annexure B contains the 'Four Pertinent Sections in the Australian Constitution relied upon in this Writer's Discussion Paper.

Philip James Johnston (the Writer)