East-West Link deal stinks by any measure

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The Australian: East-West Link deal stinks by any measure John Durie 16 Apr 2015

The politics of Victoria’s $10.7 billion East West project was bad on both sides, but the dumbest part of the saga was the way the public- private partnership deal was written to front-load commissions on work that wasn’t planned for years.

At a time when government and industry are jumping all over upfront commissions for life insurance agents and financial planners, they are happy to let the rort continue for investment banks and financiers behind government infrastructure projects.

At the very least, the assumption that all PPPs should work on a set formula under which taxpayers are up for $420 million is plain dumb.

The East West project was a big political issue heading into the Victorian election, but just three weeks before going into caretaker mode, the Liberal government was happy to sign a contract on a $10.7bn project, knowing that if it lost the election the new government planned to scrap the project.

At the very least the deal could have been signed with a break fee — just in case government changed. That’s how companies would have entered the deal, but not state governments.

The total cost for Victorian taxpayers excluding any government costs was $420m, which includes $81m on a $3bn loan facility, $160m to cover design and construction costs and $179m in fees going to the gladhanders who put the deal together and promised funds even though none of the above would have raised a sweat on the deal for years.