How $4 billion blowout puts Sydn

How $4 billion blowout puts Sydney's transport plans on the line - SMH - Matt O'Sullivan Feb 8, 2020

Buried deep below Sydney's tallest buildings, giant caverns have been churned out of sandstone and other rock. On the streets above, tens of thousands of people go about their daily lives, oblivious to the work underground on this mega transport project.

Twin tunnels spanning more than 15 kilometres in each direction from Chatswood in the north to Sydenham in the south, link these underground cathedrals. They will become the train stations for the second stage of Sydney’s automated metro train network.

The cost of the second stage of Sydney's metro rail line is now forecast to cost $16.8 billion.

The scale of Australia’s largest transport project is mindblowing.

Unlike Sydney’s troubled light rail line, the City and Southwest rail project has been largely hidden from view, so far avoiding the public backlash from construction disruption.

Yet the metro rail project is at risk of quickly becoming a political and financial headache for the Berejiklian government. A highly confidential budget review, completed more than 18 months ago, forecasts the government's signature public transport project will cost up to $16.8 billion to complete by 2024 – more than $4 billion above what had been budgeted.

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."

Like the light rail and other projects, the tens of billions being used to pay for City and Southwest is from the sale of the state's electricity assets. "I am a bit worried that the money will run out. It is a once-off bonanza," Day says.

The prospect of multibillion-dollar cost blowouts on highly complex mega projects is not unique to Sydney. Delays, contract disputes and blowouts are plaguing projects in Melbourne, too.

The Andrews government's signature rail project, the Metro Tunnel, has blown its budget by $3 billion. And last week, contractors building the $6.7 billion West Gate toll road project tore up their contract, claiming they are not responsible for the unexpected cost of contaminated soil.

On the other side of the globe, the opening of London's first major railway in decades, Crossrail, has been delayed by several years and the project will blow its initial budget by billions of pounds.

Andrew Chambers, a funds manager at investment firm Martin Currie, says cost overruns on projects in Sydney and Melbourne are due to numerous factors, ranging from shortages of skilled labour and building materials to unknowns such as ground contamination and underground utilities. "There are a lot more unknowns when you are tunnelling," he says.

The Berejiklian government has repeatedly pointed to the first stage of the metro network from Rouse Hill to Chatswood, which last year opened $1 billion under budget at $7.3 billion.

Transport experts say Metro Northwest is "very different project", because much of that line was a "greenfield project" through the Hills Shire in the north west.

In contrast, the City and Southwest line involves major work through the heart of the city such as at Central Station, the city’s busiest, and Sydenham, as well requiring the conversion of the century-old Bankstown rail line. Indeed, the leaked budget review shows the cost of the upgrade of Central to accommodate the metro line will rise by almost a quarter to more than $1.2 billion.

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."

While a summary of the final business case for City and Southwest was released in October 2016, the full report containing budget projections has not been made public.

An adviser on transport projects also blames a major shift in recent decades away from documenting a project to the "last nut and bolt" before it is put out to tender. "This is why you have a situation where costs are always going to increase because, in a sense, a project hasn't been designed until it's been built," says the advisor, who requested anonymity. "Asking contractors to take a risk on things they can't measure is in my view a formula for grief."

The government and the state’s transport agency declined to answer specific questions this week about the forecast $4.3 billion blowout, instead citing a record investment in transport projects and stating that City and Southwest is "fully funded".

"Actions speak louder than words and we’re a government that acts on our promises," Premier Gladys Berejiklian told Parliament on Thursday.

But Labor Leader Jodi McKay says the government has a forecast net debt of $41.4 billion by 2023, and the "only way they seem to be planning to get through this is more privatisations".

have been told they are going to lose their homes and businesses to make room for the new Western Sydney Metro.

With Sydney's population forecast to reach 6 million by the end of this decade, the City and Southwest rail line and others planned – including an underground line from central Sydney to Parramatta dubbed Metro West – are critical to the government's plans to expand train services, and relieve pressure on the existing rail network.

There is no doubt City and Southwest will be completed. By September 2024, passengers should be travelling by rail under Sydney Harbour for the first time, and passing through the new stations at Barangaroo, Martin Place and Pitt Street near Town Hall.

The fear is that a major escalation in the final cost of City and Southwest will lead to the government scaling back or delaying its large pipeline of future transport projects.

The second stage of the Parramatta light rail line to Olympic Park at Homebush is already in serious doubt, while construction of the seven-kilometre Beaches Link toll road from the lower north shore to Balgowlah and Seaforth in city's north east has been pushed out.

Mathew Hounsell, a transport expert at the University of Technology's Institute for Sustainable Futures, says demand on Sydney's transport system is already well ahead of long-term forecasts. "The transport system is essential to keeping the city pumping. Without it flowing properly, the transport network will end up clogged and inefficient," he says.

"There is a significant risk that the government will delay the essential projects such as Metro West and the upgrade of the signalling on the heavy rail network in order to keep the budget looking good. But if we don't invest in the transport system, the city will become less attractive and we will lose our global competitiveness. The transport system is the arteries of the city."