Less than a year ago, the former Liberal Victorian Government signed the infamous East-West Link project deal, representing arguably one of the worst cases of infrastructure malinvestment in the state’s history.
To understand just how bad the deal was for Victorians, it is worth recalling the history of the debacle.
First, the Full Business Case for the East-West Link Project, which used Infrastructure Australia’s cost-benefit methodology, showed that the project would return a paltry 0.45 cents for every dollar invested – a negative return for Victorians. The Business Case also showed that the project would take an estimated 56 years to pay-off – significantly longer than previous road projects such as CityLink (eight years) and EastLink (20 years).
Knowing that the returns from the project were so low, the former Victorian Liberal Government then chose to keep the Business Case secret from Victorian taxpayers on “commercial-in-confidence grounds”.
Then, knowing full well that the project was a stinker, the former Victorian Liberal Government decided to proceed with building the toll road anyway with the assistance of $1.5 billion in federal funding, which also ignored the poor cost-benefit analysis result.
Finally, knowing that the East-West Link project was unpopular amongst Victorian voters, and that an election was due in November 2014, the former Victorian Liberal Government rushed to sign the contracts to build the toll road just prior to entering caretaker mode, and also signed a side letter with the consortium partners agreeing to pay both their bid costs and “opportunity costs” even if the contracts were declared illegal, invalid or unenforceable.
The rest is history. Labor won the state election and then negotiated with the consortium partners to cancel the project at a cost to taxpayers of around $420 million.
Given the sorry history of East-West Link, you would have hoped that both sides would have learned that sound infrastructure investment requires following due process, namely transparent cost-benefit analysis, the weighing-up of alternative investment proposals, and choosing projects that provide the greatest net benefits to taxpayers.
And yet, here we are less than a year down the track, and it looks as if the new Labor Government might repeat the same mistakes all over again. From The Age:
The Andrews government will not release the business case justifying a $5.3 billion toll road that Transurban wants to build through Melbourne’s west until it enters final negotiations to build the project.
In a move branded “gross hypocrisy” by the opposition – which faced ferocious criticism from Labor over its failure to release the East West Link business case – Treasurer Tim Pallas has said “a detailed description” of Transurban’s Western Distributor will be released only once a final stage of agreement to build the road is reached…
Labor has so far released only limited financial detail about Transurban’s plan.
But the toll road operator would, in return for building the road, get to extend its contract to charge tolls on CityLink by up to 15 years until 2050.
This, the government has disclosed, is likely to earn Transurban up to $2 billion from motorists…
Mr Pallas also said that “community consultation” over the road would only commence once the final stage of agreement to build the road had begun…
Mr O’Brien [Liberal] pointed out that there was at least a business case in existence for the East West Link.
“The government wants to sign up Victorians to 15 years of extra tolls on CityLink yet those same road users aren’t being shown a business case or any further details about this road,” he said.
Those that ignore history are doomed to repeat it.
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***Updated***
Victorian Treasurer, Tim Pallas, has today confirmed that the proposed Western Distributor would be subject to transparent processes at the end of phase three of the project:
He said the Government still had not decided if it would go ahead.
“We promised that we would release this material and we will,” he said.
“Until we’ve concluded a process of analysis and assessment, then we won’t start negotiating with Transurban.
“Whether or not this is a valuable project to proceed with should be part of a genuine public engagement.
“We’re not afraid of that. That’s what we promised and that’s what we’ll deliver.”
Great news.
