Yesterday, the Queensland Government sent the Federal Government the business case for the $5 billion Cross River Rail (XRR) project, but alas it has only provided the public with an inadequate, opaque four-page (not counting the cover page) summary of the business case (available from the Building Qld website). This is not good enough and is terrible from a transparency perspective.
The reported XRR benefit-cost ratio of 1.12 to 1.21 (i.e. benefits likely only exceed costs by 12-21% over the project life-cycle) does not give us much comfort that the project stacks up, particularly when one considers the huge risks of cost blowouts and demand shortfalls common with mega-projects (see my post from May).
From the inadequate summary, it is unclear what sensitivity tests were conducted to generate the benefit-cost ratio range of 1.12-1.21. Did the analysts consider a truly pessimistic scenario? What about if the mysterious “other benefits”, representing 13% of benefits, do not materialise? Were there any scenarios in which XRR did not stack up? The business case summary is completely inadequate in allowing us to assess the robustness of these results.
XRR is a $5 billion project with a huge opportunity cost. How many schools and hospitals could that fund, for example? Independent experts and the public should be allowed to judge the merits of XRR by being allowed to review the full business case. At this feasibility assessment stage of XRR, I doubt there would be any genuinely commercially sensitive information in the business case, so even the weak defence of “commercial-in-confidence” would not really apply here.
While in opposition, the Government set a high standard for transparency in infrastructure decision making, noting in its Building Queensland policy document on p.7:
“The policy guidelines for Building Queensland will require that a cost-benefit analysis and assessment of value for money take place prior to any project approval and that this assessment be released for public consultation. Only infrastructure projects that can demonstrate a clear economic, fiscal or service delivery benefit, including regional significance, will be considered. 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.”
The Government was right to include this statement in its policy document. It now needs to follow through and publish the full XRR business case.
Why just a summary? Economists are keen to read the full business case
Spending billions of dollars and pouring lots of concrete is one way to cut peak demand. That seemed to be the approach when Qld was running out of water – billions were spent on infrastructure that is now barely used, and as I understand it, insufficient consideration was given to demand-side options such as rising block or seasonal tariffs.
A less glamorous but possibly better value option here might be to use a fraction of the cash to significantly increase bus, ferry and train services at peak times to increase supply. If employers embrace flexible working hours (and gov’t should lead the way) and off-peak fares were further cut to push non-essential travel to off-peak times, peak demand be spread over a longer period and may even fall.
Agree with you on the lack of info published, hard to think much is sensitive at the scoping stage of a project. Surely scrutiny at this stage, from people without confirmation bias, is highly desirable – Government can get a free peer review!
Sorry, meant to say ‘meet’ peak demand rather than ‘cut’.
Thanks for the comment, James. Very good suggestions for alternatives that should be considered as well.