After my recent post on mega-projects, I came across this excellent presentation, by a Jacobs consultant and an Adelaide University academic, which was delivered to a conference in Adelaide last year:
Jacobs presentation on infrastructure risks and mega projects
The Jacobs consultants highlight the risks of mega-projects and argue for transparency, good governance and the consideration of any cost-effective alternatives, such as smaller projects and transport demand management. The presentation includes analysis of a database of recent Australian mega-projects, and I particularly like this box plot showing the poor demand forecasting record for public-private partnership (PPP) projects:
The presentation includes two points which readers of this blog will be familiar with, as I have made them in previous posts regarding the BaT Tunnel and Cross River Rail:
- a mega-project should have a benefit-cost ratio of at least 1.5 to allow for cost and demand risks; and
- “All business cases should be made public when funded.”
Building Queensland’s current policy of only releasing summaries of business cases should be reviewed, and the full business case for Cross River Rail should be released so it can be scrutinised by external experts and the broader public.
This means of course, that the projects most likely to proceed are ones where before-hand the full cost has been under-estimated, the time it will take is under-estimated, and the final benefit hugely inflated.
Exactly. Very good point. Thanks Katrina!
Every political party believes in the idea of greater transparency. And yet every political party, one in government, fails to achieve greater transparency. Building Queensland is a classic example of a political party talking up a big game then squibbing out on implementation.
I was fortunate enough to print out a hard copy of the Labor Party’s ”Building Queensland, Infrastructure for stronger growth” election commitment before it disappeared from the internet once Labor won the state election. It says quite clearly that policy guidelines for Building Queensland will require that a cost benefit analysis take place prior to any project approval and that this assessment (no, not a summary!) will be released for public consultation. The quote I enjoyed the most was:
“If a project does not stack up, under Labor it will not proceed and the cost-benefit analysis will not be hidden from public scrutiny”. Page 7
Gene, happy to send you a copy of the document to assist you in holding the government to account for its poor policy decisions.
Yes please send me a copy at gene.tunny at gmail.com. Thanks!
In their paper, Elaurant and Louise say, “From this analysis, the first point to make is that the real unit cost of the sampled projects has not varied greatly over time”. They’ve simply escalated the costs e.g. the 10 km Sydney Airport Rail tunnel cost $900 million in 2000 and in 2015 $$, they say, that’s $1,615 million. I very much doubt the line could be built in 2015 for less than $2 billion. Melbourne’s 9 km Metro tunnel is costed at $11 billion. There are differences in scope, geology, etc, but I’m doubtful that merely escalating costs reflects what’s really happened to construction costs.
Thanks Alan, good point about the challenges of getting accurate estimates via escalation.