Dec 9, 2015

East West debacle highlights need for proper cost-benefit analysis

A damning audit report into the former Victorian Coalition Government’s mishandling of the flawed East-West Link toll road proposal sends a clear warning to Canberra that major infrastructure projects must not be funded without proper cost-benefit analysis to ensure they represent value for money.

A Victorian Auditor General’s report issued today found that when Victoria’s former Napthine Coalition Government rushed into contracts to build the $22.8 billion East-West Link  just weeks prior to the 2014 state election, it relied on a business case which “did not provide a sound basis’’ for its construction.

The report said the decision was “imprudent’’ and exposed Victoria to “significant cost and risk,’’ culminating in the incoming Labor Government having to spend public money to get out of the contracts.

While the report focuses on the actions of the Victorian Government, the Federal Government was complicit in this debacle.

It handed the Napthine Government $1.5 billion in advance payments toward the East-West Link in the 2014 Budget without insisting on a proper cost-benefit analysis.

And it funded the contribution by cutting investment in projects including the Melbourne Metro, the M80 upgrade and the Managed Motorways program – all of which had been assessed and approved by Infrastructure Australia as representing value for money.

The Australian National Office of Audit is conducting a separate investigation into the Commonwealth’s involvement in the East West affair.

While that report is pending, the Victorian report provides ample evidence about why the Commonwealth should start listening to Infrastructure Australia, which was created by the former Labor Government to assess independently evidence for and against major projects.

The process was designed to ensure that the government had reliable evidence upon which to base investment decisions, ensuring that scarce public money would be used to its best effect.

But for the past two years the Coalition Government has ignored this process.

Federal Labor has already released infrastructure policies for the next election, including a clear commitment to return Infrastructure Australia to the centre of government, where it belongs.