Wednesday, December 09, 2015

Road to nowhere

The Victorian Auditor General's Office is an independent body charged with providing oversight of the Victorian government's handling of the state's finances. Today it released its report into the scrapping of the East West Link toll road.

The report summary reads as follows:

"This audit examined whether the state had effectively managed the East West Link (EWL) project by assessing the total costs of the project, appropriateness of advice supporting key project decisions and the lessons for future major projects. The audit included 10 government agencies.

The EWL project was terminated in June 2015 with more than $1.1 billion paid, or expected to be paid, by the state for little tangible benefit. This cost includes expenditure on the planning, development, procurement and termination of the project and will be partially offset by future proceeds from the sale of properties acquired for the project which the Department of Treasury & Finance estimates at $320 million.

The audit found that the EWL business case did not provide a sound basis for the government’s decision to commit to the investment and that key decisions during the project planning, development and procurement phases were driven by an overriding sense of urgency to sign the contract before the November 2014 state election.

Advice to government in the lead up to signing the contract did not sufficiently assess the benefits of delaying contract signing to mitigate risks posed by the unresolved legal challenge to the project planning approval decision. Signing the contract in these circumstances was imprudent and exposed the state to significant cost and risk.

The amount payable by the state under the termination settlement was substantially lower than the cost of terminating under the project contract. However the decision to terminate was made without full consideration of the merits to completing the project.

Over the life of this costly and complex project, advice to government did not always meet the expected standard of being frank and fearless. This highlights a risk to the integrity of public administration that needs to be addressed. The report makes recommendations to the Department of Treasury & Finance to provide guidance for development and delivery of major projects and for the Department of Premier & Cabinet to emphasise requirements for frank and fearless advice from the public sector." 

One thing is clear. Neither the former or current Victorian state governments handled this project well. The road will eventually need to be built. When it is built, it will probably cost more than what it did had construction proceeded as planned.

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