Last Thursday morning I attended an excellent breakfast seminar on infrastructure organised by the French-Australian Chamber of Commerce and Industry (FACCI) and hosted by Holding Redlich Lawyers in their Queen St, Brisbane CBD offices. The seminar featured highly informative and engaging presentations by Building Queensland CEO David Quinn and Keolis Downer Gold Coast (GC Light Rail operator) CEO Campbell Mason (presentations available for download at bottom of post).
Building Queensland is a statutory authority established by the Queensland Government to provide independent expert advice on infrastructure, which is a worthy mission, given the risks to the budget and economic development posed by poorly conceived or executed infrastructure projects. CEO David Quinn gave a very good account of Building Queensland’s mission and agenda, but I was somewhat concerned by one of the points made in his presentation, that Building Queensland would only publish, and only every six months, “Cost benefit analysis summaries of the projects it leads.” (see “Transparency” slide from Mr Quinn’s presentation reproduced below). Summaries only, that is, not the full cost-benefit analysis reports.
In question time, I asked Mr Quinn about this, expressing my concern that this is an insufficient level of transparency. In reply, he noted the oft-expressed concern about commercial-in-confidence matters, the disclosure of which might compromise the negotiating position of project partners, which may include the government and private sector players. So Mr Quinn would not commit to releasing full cost-benefit studies, but did promise that cost-benefit analysis summaries would be substantial and would not simply be one-page summaries. While I was somewhat pleased with this response from Mr Quinn, I still think it would be highly desirable for full cost-benefit studies of proposed infrastructure projects to be released.
In its 2014 report on public infrastructure, the Productivity Commission called for full disclosure of cost-benefit studies for projects which receive public support, rejecting the claim that commercial-in-confidence information should be protected:
“It is sometimes argued that there are commercial-in-confidence reasons for not making cost–benefit analyses public. Typically such analyses are done prior to the procurement process commencing and so the data used are unlikely to be commercially sensitive. Accordingly, the Commission is not convinced that there are valid commercial-in-confidence reasons to withhold the release of full cost−benefit analyses. Even where data are provided by private participants, the normal presumption of transparency should prevail as a condition of involvement in government-backed projects.” (from p. 105, volume 1)
I fully agree with the Commission on this point, as taxpayers, whose money is at stake, deserve full disclosure from governments and project proponents.
I have made the presentations from the breakfast seminar available for download:
Presentation by David Quinn, Building Qld
I agree entirely here. While BQ’s transparency (summaries once every 6 months) is better than nothing, it is only slightly better than nothing.
I’ve been doing cost-benefit analysis for government and private clients for over 20 years. The devil is always in the detail (assumptions on input values, scope of benefits and costs included, valuation techniques, discount rates etc.) and it is easy to make subtle changes to assumptions that change the bottom line considerably. This would never be known if only short project summaries are released. Furthermore, delays in releasing reports provides another opportunity to manipulate transparency and politicise project evaluation.
I don’t really buy Mr Quinn’s commercial-in-confidence rationale for limiting transparency, particularly for government projects. Don’t taxpayers have a right to know their taxes are being invested wisely? Furthermore, cost-benefit analysis is intended to assess investments (should the project proceed or not?), whereas most commerce-in-confidence issues usually relate to the financing transaction (where do we get the money from?). They are different, but related, things. Maintaining commercial-in-confidence issues is rarely a valid reason to stop releasing a full cost-beenfit analysis.
Great point about how important it is to know the assumptions in CBA, and I agree regarding C-in-C considerations. Thanks for the comment, Jim!
Given the challenges in undertaking CBA and the well-documented scope for ”optimism bias” you would think that the work of Building Queensland could only benefit from more ‘sunlight’ rather than less. Such transparency would not only improve the likelihood that the best project gets implemented but would also increase understanding and acceptance by the community.
Absolutely, Frank! I’m a great believer in sunlight. Thanks for the comment.
Gene I think some infrastructure spending is in many cases now nothing more than a social equalisation tool of government. Nothing will change in the future either, across all levels of government our tax take in Australia is so high it impacts the discretionary spend of individuals, society then looks to govt to ensure a return of the taxes paid by demanding infrastructure spending at a local level, this then leads to political parties manipulating that to ensure a return at the ballot box.
Thanks for the comment, Glen. I’m a little bit more optimistic but certainly politics does affect decision making to a large extent.
Thanks for posting Gene and including the presentations.
While there may always be scepticism in relation to government spending (how much is spent, on what and over what timeframe), The establishment of an expert body (external to the departments) to advise, guide and assist departments across all steps of a project – from conception to realisation (proposal development, project assessment, business case development, project prioritisation, procurement and delivery) is a step in the right direction,
Given CBAs are generally never released by government, the release of CBA summaries (especially detailed summaries – as Mr Quinn indicated in his response to you) is an improvement.
We’ll have to wait and see….baby steps…
Yes, certainly an improvement, from a very low base, though, as you note. Thanks for the comment, Chris.
RACQ has called for the publishing of full CBA’s of proposals and alternate options and consider this the most important reform required in infrastructure provision. The CBA’s need to be made public before any procurement process so the community and advocates can scrutinise the assumptions, etc and form a view of project merits. At this early stage of the process, there is no rationale to use commercial in confidence to hide any details.
Thanks Michael. That’s good to know.