Special deals can be bad deals for Government – my comments in today’s Courier-Mail re. Maryborough trains contract

The Queensland Government is facing big questions over the closeness of two prominent lobbyists to the highest levels of government in the state (e.g. see this Brisbane Times report). I don’t necessarily have a problem with lobbyists, so long as:

  1. they operate within the law, as both lobbyists appear to be doing, and
  2. any representations they make on behalf of their clients are rigorously assessed by the state Treasury and relevant line agencies.

Of course, given the state government has a culture of secrecy and weak Right-to-Information laws, we’ll never know to what extent the latter is the case (e.g. check out my post Hollywood subsidies by Qld Gov’t kept hidden – Qld Right-To-Info process a huge joke).

I was actually quoted by Courier-Mail investigative journalist Kelmeny Fraser today in an article mentioning one of the prominent lobbyists currently in the spotlight:

Conflict-of-interest questions over role of Evan Moorhead in Downer EDI trains pledge

Here’s the lead from the article:

Taxpayers will likely never know how much extra they will pay for new trains promised under a $600 million build-it-at-home election pledge benefiting a client of a Labor-linked lobbying firm.

The story relates to a pledge from the Premier during the middle of the election campaign to have new trains built in Maryborough, meaning she effectively awarded a contract to local train builder Downer EDI without a competitive tender process. For the sake of appearances, the Government will run a tender process, but according to Rail Express:

Queensland Transport and Main Roads Minister Mark Bailey said the tender process would require the trains to be built in Maryborough.

So, in my view, there is effectively no competitive tension in the procurement process and Downer is guaranteed the work, which I’m guessing the workers at Downer in Maryborough understood when the Premier made the announcement at their workplace in October (also check out this Facebook post).

Later on in her Courier-Mail article Kelmeny Fraser quotes me on the economics of regional industry assistance of this nature. I accept that there could be a legitimate regional economic development objective for doing a special deal, as otherwise the workers could end up long-term unemployed in a high unemployment region, which we know the Wide Bay Burnett is. But we should rigorously assess the merits of awarding contracts outside of competitive tender processes, as the Government would very likely end up paying more than otherwise, to the detriment of Queensland taxpayers. Here’s how Kelmeny summarised my views:

Economist Gene Tunny was doubtful a full cost-benefit-analysis showing the extra cost of stipulating local production for the number of jobs created by the train building project had been done.

He said the best deal for taxpayers was where trains were built to the quality and specifications needed for the lowest cost, but the project was more a political decision than about efficiency.

“It’s almost guaranteed not to be the lowest cost solution to getting the purchasing outcome we want, which is to get these trains. But does it meet some other legitimate policy objectives? Quite possibly? But then you have to ask a question is that the best way to do it or are there other ways to do it. I would argue there are other ways to do it.”

The Courier-Mail article is an excellent piece of investigative journalism. Keep up the good work, Kelmeny!

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