Article: Auditor hits $2b road project

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From the Melbourne Age click here!

Auditor hits $2b road project

Auditor hits $2b road project
Clay Lucas and Royce Millar
June 2, 2011

A SCATHING critique of one of Victoria's most expensive road projects, the Frankston bypass, has questioned whether it should be being built at all.

The promised economic benefits of the multibillion-dollar freeway may have been overstated and its potential negative impacts ignored, according to a report by the state Auditor-General, Des Pearson.

In a landmark finding, the report criticises Victorian road authorities for failing to take account of ''induced demand'' - the idea that bigger and better roads encourage more traffic - when deciding whether to build new freeways.

''They did not adequately assess the traffic induced by these improvements, communicate the risks, or estimate the impact of the economic benefits,'' the report says.

''These shortcomings create a risk of over-estimating the benefits and giving decision-makers false confidence.''

The report calls for induced demand to be factored into all future road decisions.

Mr Pearson also found that the authority appointed to run the project could not justify commissioning it as a public private partnership (PPP), rather than getting the state agency, VicRoads, to build it. ''Consequently, assurance cannot be provided that the project represents value for money.''

The report reflects mounting concern about the handling of PPPs in Victoria for major projects, which in recent years have included the troubled desalination plant at Wonthaggi and two hospitals - the Royal Children's and Royal Women's.

The Frankston bypass, now known as Peninsula Link, was commissioned by the former Brumby government and is now under construction.

Sydney University transport expert John Stanley said Victorian governments had long failed to understand that bigger, better roads would inevitably lead to more people driving more often, and further.

''If you make it quicker for people to get from Dandenong to the city they will move further out,'' Professor Stanley said. This would eventually require more improvements to freeways as they struggled to cope with ever-increasing traffic.

He said Peninsula Link would inevitably lead to more congestion. ''There is a huge risk it will induce a lot of traffic, and cause a lot of the highly congested parts of the Mornington Peninsula to completely choke up at Christmas time. ''It will become that much easier to get there, so more people will [try] to go there,'' he said.

Conceived during the global financial crisis, Peninsula Link was overseen by the specially created Linking Melbourne Authority. In December 2009, it awarded the $2.3 billion project ($849 million in current dollars) to Southern Way, a consortium made up of the Royal Bank of Scotland, Bilfinger Berger and builder Abigroup.

The private bid was chosen after the authority decided it offered better value than a hypothetical public alternative, by a margin of just 1 per cent.

The Auditor-General's report questions the tender process, highlighting a string of instances where the PPP bid was given advantage over the public sector.

As it was a low-risk road project to be built through

farmland, it would have been a routine job for VicRoads.

However, in comparing the PPP and the public alternative, national road building standards were used - thus failing to recognise both the the low-risk nature of the project, and VicRoads' expertise, it finds.

The report also raises concerns about a late 45 per cent increase in costs attributed to the public sector alternative and changes to the calculations used to translate 25 years of payments into a current dollar figure.

Environment group the Pines Protectors fought to stop the road. Spokeswoman Gillian Collins said she was shocked by the frankness of the audit report. She said it showed the Linking Melbourne Authority had misled people about the need for the road and the cost of the public sector building it.

The report also says two other projects, the $165 million Hallam bypass and $66 million Pakenham bypass, had failed to relieve congestion because they had simply attracted huge amounts of extra traffic.

''Unlike road authorities in the UK and New Zealand, VicRoads does not have adequate guidelines for forecasting traffic in congested areas,'' the report says.

A senior transport authority figure said that with Peninsula Link, ex-premier John Brumby needed a ''shovel-ready'' project to stimulate the economy and to show a PPP could be delivered in a difficult climate.

''It was justified on the basis of his political needs and the GFC. It was never justified on a needs basis, and that's shown by the fact it could never have worked as a toll road, because the demand wasn't there.''

Linking Melbourne Authority chairman David Buckingham, in a response included in the report, said he was confident the project ''represents value for money for the state''.

Department of Treasury and Finance acting secretary Dean Yates said details in the audit report could ''perpetuate public misinformation about the costs of private sector finance'' and sought their deletion. The auditor declined the request.

The Baillieu government has launched an inquiry into PPPs, asking the Public Accounts and Estimates Committee to advise on improving PPP decision-making and oversight.

Read more: http://www.theage.com.au/victoria/auditor-hits-2b-road-project-20110601-1fgpe.html#ixzz1O2wgETUY

Gee, the Victorian Auditor General would have a field day in south-east Queensland ... lol

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^ actually I think He'd have a heart attack when he sees the northern link