The Law of Large Numbers – How much does it cost to stop a freeway?
Honest figures about cancelling East West Link, with an attempt to include everyone else’s time and expenses.
Inside Story: The Law of Large Numbers by James Murphy (2 July 2018)
If, like me, you’ve been following the fallout from Melbourne’s East West Link freeway fiasco, you will have noticed that the bill for the Andrews government’s decision to stop the project somehow keeps growing. In April 2015, cancelling the contracts was going to cost the state $339 million in compensation. In December 2015, the ABC reported that the price tag had risen to $1.1 billion. Last week the Age had the cost reaching $1.3 billion.
Victorians will be relieved to hear that the real number is nothing like $1.3 billion. Publicly available information shows that the cost directly incurred by cancelling the contracts was $527,600,000 — a lot of money, but less than half the Age’s figure. That’s $339 million in compensation to the private sector for costs incurred (including compo for losing bids to build it); $81 million in bank fees for a facility set up for the project; $217 million in losses on swaps and other hedges; $600,000 spent by the government on legal and consulting fees to get out of the thing; and subtract from that $110 million in cash returned to state coffers. The figure has shifted a little — some of the bank fees and swaps have fluctuated in price or been repurposed for other projects — but it has remained well short of the billion-dollar mark. Read more