Major cost blow-outs, delays mount in crush-loaded Sydney

By Leith van Onselen

The infrastructure being built to fix the problems caused by mass immigration continues to create headaches for Sydney residents.

NSW taxpayers are already facing huge cost blowouts and delays from among other things:

  • a claim worth more than $1 billion from the builders of Stage 2 of the WestConnex ­motorway that links western Sydney with the inner city;
  • a claim of an extra $1.2 billion from Acciona to build the Sydney CBD light rail; and
  • an extra $400 million to $500 million to repair cracked spans relating to the Skytrain for the North West Metro project.

Now, Fairfax reports that the NSW Government’s compulsory acquisition powers are facing legal challenges that risk further cost blowouts and delays for major projects:

A major hospital redevelopment, a new light rail line, road upgrades and the WestConnex toll road are among a long list of projects in Sydney worth billions of dollars that are at risk of significant delays due to serious doubts cast over the state’s compulsory acquisition powers.

The Herald can reveal about 165 acquisition notices handed to landowners for projects such as the Prince of Wales Hospital redevelopment at Randwick and a major road upgrade near the new airport at Badgerys Creek are at risk of becoming invalid or lapsing within weeks.

Doubt has been cast on a further 86 properties that authorities planned to issue acquisition notices for by the end of next week, after property developer Desane won a legal battle in the NSW Supreme Court to stop the state government from forcibly buying land at Rozelle in the inner west for WestConnex.

The above highlights, yet again, why delivering infrastructure projects to keep pace with rapid population growth is so difficult and expensive.

Because cities like Sydney and Melbourne are already built-out, they require costly measures like land acquisitions and tunnelling, which makes projects increasingly costly: basic dis-economies of scale.

Don’t just take my word for it. The Productivity Commission’s (PC) 2016 Migrant Intake into Australia report explicitly noted that infrastructure will have to increase to accommodate a bigger population, and that this infrastructure will necessarily be expensive:

Physical constraints in major cities make the costs of expanding infrastructure more expensive, so even if a user-pays model is adopted, a higher population is very likely to impose a higher cost of living for people already residing in these major cities.

…governments have not demonstrated a high degree of competence in infrastructure planning and investment. Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation…

Whereas, the PC’s recent Shifting the Dial: 5 year productivity review explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:

Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).

Therefore, infrastructure projects will become increasing expensive, with the extra costs borne by existing residents, so long as Sydney adds a projected 90,000 people a year, primarily via mass immigration:

For what? Just so Sydney can grow to the size of London mid-century against the wishes of its residents?

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  1. sydboy007MEMBER

    I think a big part of the cost blowouts is due to the lack of inhouse understanding of these complex projects.

    • StephenMEMBER

      They are being played by construction companies. Also quite likely a few pollies / be bureaucrats on the take…winning the contract is always just stage one in a long game to leech the public purse…

      • ResearchtimeMEMBER

        They are in fact not cost blow-outs at all… there is a fixed component, and a variable component to these contracts… no one can cost them accurately. Thats why they are structured so, otherwise you would never get the requisite debt funding (without a 50-100% margin built in – banks are simply not in the business to lose money).

        The tendering process is transparent, construction companies are clearly not making extraordinary profits – and it costs what it costs!!!

        There is, however, the continual under-quoting trend… which will back-fire on someone one day!

      • This government doesn’t do debt funding, it does “asset recycling”. It attempts to turn a profit by privatizing the asset once built, but to maximize the price it receives it must maximize revenues – usually by creating a monopoly that can charge extortionate fees/tolls.

      • @Researchtime

        There is, however, the continual under-quoting trend… which will back-fire on someone one day!

        It’s endemic. Gaming is most definitely an aspect of this. Get the job first, recover money somehow later.

        It is almost an unavoidable result of government tendering. In many places and for certain industries government is the largest if not the only customer. Not everyone needs a 6 lane motorway to be installed on their property. It results in massive competition to secure an ongoing pipeline of work, which often includes underquoting.

        In The Netherlands one of the main construction companies in this field, Ballast Nedam, nearly went under because they had been too optimistic about costs in an attempt to undercut the competition. It had taken onboard a project involving design, implementation and long-term maintenance but had to accept full risk ownership. In the end a Turkish investor saved the company from bankruptcy but unfortunately it is still struggling.

        These companies are important assets to any nation and the above is a prime example of government using a black and white approach to tendering and commercials doesn’t always yield the outcome you’re after.

        Lots of greys everywhere.

      • ResearchtimeMEMBER

        In my experience, under-quoting is endemic, and increasing, and is very much a deliberate strategy (aka Carillion).

        Truth is, if a bunch of quotes come across your desk, and you are the financial controller, you are never going to pick the higher quote, even though you know deep down they could never build that road, bridge, rail-line for that price. How do you justify to your superior that the contractor is “dreaming…” when they have a bunch of engineers and accountants with way more experience than you, suggesting otherwise!!!!

        The contractors know this, and thats how they game the system. Thinking they can make the difference via the variable component. But in the long-term it never works. See the recent collapse of Carillion – government was still awarding them contracts even though it was clear they are about to enter bankruptcy. The debt burden too great, with too many contracts non-performing. Remember, it only takes one decent contract to blow up, and every contractor you know of, their balance sheet disintegrates.

    • Parliament is full of lawyers and career politicians – look at Wyatt Roy!

      Add finely corrupted onions, some lemons, and bring the potion to a boil.

      • Lawyers’ status in this country is insane. They permeate society and bring with them the only approach they know to solving issues: via more regulation. If things go wrong their go to is conflict and pinning guilt on someone.

        Lawyers have an important role, but they should also have a defined space.

      • yep lawyers are very overrated in this country, basically over hyped leaches, I like to tell them that when they are chasing me

  2. If immigration stopped to 0 today, the infrastructure is still needed. It is about past immigration mitigation, not the future.
    The inapt management of the projects has nothing to do with immigration but rather with home grown and nurtured corruption ( sorry, meant to say “the Chinese” /sarc)

    Bottom line, it is a warped perspective to say that current taxpayers are paying for the future immigrants. It is the new and old *existing* taxpayers overpaying for mismanaged projects. New overcrowding immigrants are here already. With proper management the cost would have been projected correctly and variations would be minimised but not avoided (unless one can rewind the time to 20yrs back)

    • mark777MEMBER

      ANd with this rate of population growth we will continue to lag in infrastructure for decades to come, what a shcity

    • Sydney would have a stable or shrinking population if immigration is cut to zero. Sydney has had an exodus for decades.

      Sydney has a growing population due to the mass importation of 3rd world passport holders who are predominantly male and are not required to get a British/Kiwi/Singapore passport first.

      But you do not want the population of AUS to peak at 25 million – true?

      • Jacob,

        I am not arguing what the excessive immigration will do or what is the arbitrary number of plebes Aus soil can take.

        If immigration goes negative tomorrow and Sydney loses 70000/pa people for the next 10 years perhaps in 10-20 years from now the existing infrastructure may suffice.

        My response relates to this: “For what? Just so Sydney can grow to the size of London mid-century against the wishes of its residents?”
        Infrastructure requirements of today is for immigration of yesterdecade.

  3. Cost blowouts are great because they add to GDP and to private sector profits.

    You don’t want a shrinking GDP (recession) and investors to take losses, do you???

    • Super Phoenix

      And not just ordinary private sector profits – foreign private sector profits that will be repatriated and may or may not flow back here one day.

      Here is the problem for Straya – losing the profit money overseas for good is bad because the local economy will die down. Not losing the profit money overseas for good is also bad because it will bid up local house prices still higher.

      It is called Strayan syndrome – locals will lose no matter which way the chips fall.

  4. hareebaMEMBER

    Am about to drive from Avalon on the Northern Beaches to the Sydney Airport at 7am. It is painful just thinking about it.
    With luck I hope to return by 11am.

    Fingers crossed.

    • Re the Guardian interactive graph
      Migrant intake flat at 190,000…
      But the China & Indian intake is thru the roof at 80,000.. And the overall mix now is 90% third world non English speaking.
      Not ‘multicultural’ at all. Given the demand and potential intake we could have – what is coming is very distinctively biased to be anti western, anti English speaking and non assimilating as intake.

      And in reality 90% unskilled.

      The so called 71% skilled ‘talented’ intake is a farrago of lies.
      Firstly it hides that only 32% or primary are skilled, and many of these with fake qualifications & papers.
      39% are unskilled partners & dependents of the primary. Immediate health & welfare burden.
      Of that 32% primary skilled subset, only 8% are highly & uniquely skilled. So overall – 92% are not.
      Only that 8% subset / only 6% are high income professional skilled.
      And only 3.8% of TR to PR achieve a high income professional uniquely skilled role after a decade.

      Showing what a farce the intake settings are.
      Whether it’s from our so called international education racket. or the skilled sponsor scams – the foreign student or sponsored candidates are plainly the scrapings from the very bottom of the barrel.
      Just adding to the 2.2 million Australians who are unemployed or seeking work.

      Australia has been a target for almost two decades now in China, India, South East Asia & the Middle East to dump their slum clearance, rural poor, vice workers, criminals, misfits & Hiraj jihadists.

      Who formed vast unassimilated migrant slums in our cities / seething with imported social & racial division and hatred of each other / crime, third world squalor, ideological fanaticsm & with a massive welfare, health care & societal burden & impact on Australians.

      It begs the question :
      Why not set the intake at high skilled contributors only.
      That’s 8,000 a year & from all countries in a more multicultural English speaking assimilating balance.

      And the NZ back door* is still masked.
      The Guardian footnotes this. *’excluded from the 190,000 figures is migration of New Zealanders to Australia. New Zealanders enjoy rights to migrate to, live and work in Australia. Their migration is not considered under Australia’s migration program. Typically, the number is about 27,000 a year’.

      It’s about time we saw the ugly truth on the ‘NZ SCV’

      According to NZ stats the NZ born SCV in Australia are less than 400,000 of the 615,000 now exploiting this loophole. The NZ born date from the waves who came in from the early 80’s, and they are either going back to NZ or taking up Aust citIzenship. The NZ SCV numbers are being held up by huge flood of Chinese & Indians or other third world from NZ – who couldnt get into Australia or got kicked out. So they do the NZ backdoor tour, after a short stint get a NZ residency / then get into Australia.

      As Winston Peters said : “NZ only sells two things. Milk powder to Chinese and residency stamps to the third world, so they can get into Australia”.

      The Aust / NZ SCV arrangement should be immediately restricted to only Australian or NZ born.
      The number of NZ SCV would drop to under 400k and the 200,000 plus Chinese, Indians, Bangladeshi, Pakistanis, Nepalese who sneaked into Australia via the NZ Backdoor should have their SCV revoked & be NZ’s problem. Immediate exit.

      And the further 200,000 Chinese & Indians in NZ now queued up to get NZ residency to get into Australia also should be barred from having any SCV.
      That in total is 400,000 Chinese & Indians on China or Indian passports with a ‘NZ residency stamp’ who’s sole purpose was to enter Australia via this back door.

      NZ for a long time had virtually no controls of what was coming in and getting a NZ residency stamp / they didn’t care because they were just a transit stop. This intake is even less skilled, less talented and more criminal than what’s getting in our front door.

      We are now in overshoot with at least 2 million third world unskilled non productive useless migrants – who have filled up our cities in vast non assimilated slums full of migrant squalor, crime & vice.

      Time to dramatically shut down the PR intake & close the NZ backdoor.

  5. J BauerMEMBER

    Sorry for more copy pasting, but in the article after visiting China Einstein says “It would be a pity if these Chinese supplant all other races. For the likes of us the mere thought is unspeakably dreary.” accurate summary of what the Chinese have brought to my neighbourhood. Never say hello, never contribute to preschool events or fund raisers, no sense of community.

    His comments on the Japanese seem accurate “Japanese unostentatious, decent, altogether very appealing, “Pure souls as nowhere else among people. One has to love and admire this country”.

    • StephenMEMBER

      Couldn’t agree more. Lived there, Chinese don’t care about anyone other than themselves.

  6. The Martin North interview posted yesterday was interesting. His guest was saying that (a) the big road projects in Sydney will LOWER house prices, not raise them, and (b) because of all the money wasted on roads, the next NSW government will end up cancelling some planned (and vital) rail projects.

  7. Philly SlimMEMBER

    They just announced the start of the F6 yesterday. $2b for a couple of kilometres of tunnels. But go have a look at the google maps of the area south of the airport to Cronulla. There is a big swathe of green that was the F6 highway reservation 50 years ago. You couldn’t build on it but councils made it parks and sporting ovals. Now the cheaper option would be to claim that reservation and build an above ground road. But you’d lose all the ovals and parks that were only there because it was a road reservation!!! Lack of understanding in the past has caused this. We always knew the F6 needed to be built its just that the politicians don’t have the stomach for the cheaper option.

    Same deal with “Northconnex” which is a tunnel linking the F1 to I think the Hills Motorway. There is a road reservation above ground that people think is a national park. The only reason it wasn’t originally developed was because it was a road reservation. But the politicians decided on the more expensive tunnel option.

    This is where the Govt (and govt departments like RMS) should be more transparent with the population rather than just announcing the “answer”. Show the problem solving and trade-offs which are being made.

  8. This job just posted —

    This newly created role has been set up to report into the General Manager that has been tasked with hiring and creating a dynamic and exciting development team to focus on a range of development opportunities throughout NSW.
    The role will include: assessment, creation and management of demonstration projects to improve housing affordability in NSW.

  9. – Mrs. Berejiklian and her government has some MAJOR problems (as highlighted in this thread). But at the same time the infrastructure cost are rising/blowing out, the revenues of the Stamp Duty tax are falling. I would’t like to be in her shoes.