The Age: East West Link cost to taxpayers should be released: experts. November 19, 2014. Royce Millar and Ben Schneiders
Infrastructure experts have called on the Napthine government to release the cost to taxpayers of the first stage of the East West link, dismissing government claims the figures would jeopardise competition for the second stage of the controversial toll road.
Last week Treasurer Michael O’Brien refused to release details of the government’s payments to the East West Connect consortium after a group of 10 transport academics estimated the total cost of the first stage of the road to Victorian taxpayers at up to $17.8 billion.
They estimated the government’s quarterly payments to the Lend Lease-led consortium, at $12.5 billion over 25 years. Mr O’Brien insisted publication of the figures would compromise competition on the second and more expensive stage which would extend the link to the Western Ring Road.
But Mr O’Brien’s rationale for secrecy is under challenge on two fronts. Lend Lease has confirmed it may bid for the second stage itself, in which case it would have exclusive knowledge of the government payments – a situation clearly at odds with competition.
The case for secrecy has been challenged by Melbourne University infrastructure expert Colin Duffield, one of the few Australian academics to have made a detailed study of the economics of public private partnerships (PPPs).
“East West stage 1 is a done deal,” said Associate Professor Duffield, a supporter of PPPs who is not a member of the group of 10 academics who who called for the project to be scrapped last week. “The winning Lend Lease-led consortium know the figures. I am confident the losing bidders would have a fair understanding of the figures. Why shouldn’t the public know? It is the public paying for it after all.”
Associate Professor Duffield said the government payments to the Lend Lease consortium on the first stage of the project would have little relevance for the second stage, which is now in the planning phase.
“In keeping with Treasury policy on such projects, stage 2 will have its own budget and no doubt will be structured to maximise efficiencies for the community. The logic for not releasing the availability payment figures on stage 1 is not self-evident. It is a mystery to me.”
One leading infrastructure industry insider said it was likely consortiums including Lend Lease, builder Leighton and toll road specialist Transurban, would bid for the second stage project. The source said that, despite Mr O’Brien’s comments, detail of the availability payments would have to be released ahead of bidding. “It’s only a matter of when,” said the source.
Mr O’Brien did not answer directly when The Age put the problem of Lend Lease’ insider knowledge to him. Rather he restated his earlier general claim: “Disclosure of quarterly service payments on stage 1 would only benefit companies looking to bid on stage 2 at the expense of the Victorian taxpayer,” he said.
Infrastructure industry insiders told The Age that, having the logistics and machinery in place for the first stage of the road, Lend Lease would be in a plum position to tackle the second stage of the project.
In a written statement Lend Lease confirmed it would consider a bid for the East West second stage. “If the government takes more infrastructure projects to the market, we will consider them in due course.”
Last week’s report by the 10 academics from three Melbourne universities concluded the East West price tag would be “comparable” with the Wonthaggi desalination plant, the cost of and secrecy around which contributed to the defeat of the Brumby government in 2010.
The report estimated the large annual payments to the private operators to be about $400 million in the early years after construction is complete, and the road is being used. The Napthine government has also refused to release detail of tolls to be charged on the East West first stage.