More details have emerged about the questionable dealings over Victoria’s East-West Link toll road, with The Age revealing today that the consortium partners (East West Connect) drafted the letter specifying that the Victorian Government would pay the consortium compensation, even if a court declared the project contract illegal, invalid or unenforceable:
Senior sources close to the project have confirmed the Napthine government was so keen to reassure East West Connect it would get its money following a Labor promise to scrap the project it asked the consortium to draft a so-called side letter guaranteeing taxpayer-funded compensation even in the absence of a valid contract.
The revelations came as Treasurer Tim Pallas accused the former government of needlessly bringing forward a multibillion-dollar deal to finance the project to deliberately sabotage Victorian taxpayers…
The Age revealed in September that the side letter had been hastily signed by Mr O’Brien after East West Connect threatened to walk away after Labor claimed the contract was not worth the paper it was written on.
It is clear the former Victorian Liberal Government acted poorly on East-West Link.
First, it failed to disclose the facts from the full business case to the public before the construction contracts were signed. Had it done so, the public would have discovered that the project delivered a benefit to cost ratio of just 0.45, and would have taken an estimated 56 years to pay-off – significantly longer than previous road projects such as CityLink (eight years) and EastLink (20 years). They also would have discovered a note to cabinet observing that a full submission of the business case to the independent umpire Infrastructure Australia disclosing the low benefit-cost ratio “may be used as a justification for not supporting the project”.
Second, the Liberals should never have rushed to sign the contracts on the project to beat the artificial November election deadline, and then agreed to compensate the consortium partners for both their bid costs and “opportunity costs” even if the contracts are declared illegal, invalid or unenforceable.
Now Victorian taxpayers are facing two painful alternatives:
- Proceeding with the project at great cost and receiving negative returns; or
- Abandoning the project but paying massive compensation to the construction consortium.
Some choice! You would be hard pressed to find a worse example of infrastructure incompetence than the East-West Link project. Those involved within the former Government should hang their heads in shame.
