There are some kinds of projects that governments want to push ahead with even when the objective evidence says they’re probably a bad idea.
Melbourne’s now-abandoned East West Link is the exemplary case – even a Benefit-Cost Ratio well below break-even (and possibly as low as 0.45) didn’t hold back the former Napthine Government’s unbridled enthusiasm for the motorway.
This week we learned from Infrastructure Australia that the Victorian Government puts the Benefit-Cost Ratio for its $231 million project to remove the Main Rd, St Alban’s level crossing (currently out to tender) at just 0.8 i.e. the expected benefits over the lifetime of the project are only 80% of the estimated cost.
This project undoubtedly has a lot of benefits but the problem is it’s costing a huge amount to build. That’s in part a result of politicians responding to local community expectations about the specification of the project.
Infrastructure Australia declined to include it on its Infrastructure Priority List at this time.
Then yesterday Victoria’s Auditor-General released his report on how well the Government evaluates “high value, high risk” unsolicited projects from the private sector (Applying the high risk, high value process to unsolicited proposals).
His criticism of the way the Government assessed the 23.8 km CityLink -Tulla widening project, which is due to start construction in October, is particularly telling.
The project involves an unsolicited offer from Transurban to spend $850 million to widen 15.8 km of freeway between the Westgate Freeway and Bulla Rd (with the Government funding the widening of the remaining 8 km of freeway to the airport).
The Auditor-General says the project is based on a shaky rationale.
I found weak assurance about the deliverability of the proposal’s benefits, inadequate assessment of the alternative funding options and inadequate engagement with stakeholders about the likely impacts.
He goes on to say he found the business case – finalised in April this year – is “inadequate” in respect of its estimation of benefits because:
- Benefits are presented as aggregate, discounted monetary sums with insufficient detail on the travel time, operating cost, reliability and safety changes underpinning these estimates and the impacts on different stakeholders
- It is unclear how long it is likely to be before rapid traffic growth significantly erodes the travel time and reliability benefits provided by the project
- It does not describe the potential disadvantages of:
- Greater traffic volumes affecting congestion upstream or downstream of the project
- Making commercial vehicles bear the majority of the project cost through increased tolls and how this affects commercial vehicle productivity
- The operation of ramps and junctions with ramp metering and increased traffic.
They’re enormous and damning gaps. But the Auditor-General’s criticisms don’t necessarily mean it’s a bad project; it’s just that, due either to the Government’s strategically cynical approach or its plain slipshod management, we can’t be sure. In fact it appears the Government mightn’t even know.
This case demonstrates the value of the Auditor General; but even so, the business case and the technical documentation aren’t available for public viewing. Nor can an effective office of the Auditor-General always be taken for granted; it can be politically neutered, the number of matters it can address is limited, and it doesn’t always get it right e.g. see Is the Auditor-General on track with cycling?
The public has to be able to look after it’s own interests. This case demonstrates the need for much, much greater public transparency in assessing infrastructure projects.That’s becoming increasingly important because we can’t rely on the mainstream media to keep governments on their toes anymore.
Newspapers don’t have the money – and consequently neither the staff nor the interest – to investigate dull areas of State policy like infrastructure provision. They might go a scandal, but bad policy-making is usually too unexciting.
It seems we can rely on neither governments nor the press to do their jobs properly when it comes to spending billions on infrastructure. As I noted recently, the only reliable defence of the public interest ultimately comes down to transparency and an active and even-handed constituency.