Victorian government failed to prove case for east-west link, infrastructure umpire finds

The Age: Victorian government failed to prove case for east-west link, infrastructure umpire finds. January 25, 2014. Josh Gordon and Nick Toscano

The state government failed to submit a ”robust” business case for independent scrutiny to justify the east-west road link, according to Australia’s major projects umpire.

Infrastructure Australia has singled out the controversial $6 billion to $8 billion road as a key example of why the public are cynical about about ”big-ticket” infrastructure announcements.

In a strongly worded submission to a Senate inquiry examining government plans to overhaul of the advisory body, Infrastructure Australia national co-ordinator Michael Deegan warns that big spending promises are being made without proper scrutiny.

”This is a particular problem during election periods where commitments are often made, although robust business cases have not been prepared, let alone independently reviewed,” he says.

The submission directly contradicts claims by the federal and state governments that the project has been backed by a robust business case submitted to Infrastructure Australia.

The government has long maintained that the benefits of the 5.5-kilometre road connecting the Eastern Freeway to the Tullamarine Freeway will far outweigh the costs.

It has claimed that every $1 spent will return $1.40 worth of benefits.

A draft communications strategy prepared by the state government in May 2012 appears to suggest that it had expected the positive benefit-cost ratio before any such analysis was completed.

It said the community ”will require reassurance” that the project can deliver value for money.

”A benefit cost ratio evaluation for the project will be undertaken for the business case,” the strategy says.

”Communications will make it clear that the benefits of the project are expected to far outweigh the cost.”

The government has refused to publicly discuss how it arrived at the figure, arguing that this would compromise commercial negotiations.

A spokesman for the government hit back at the claim, denying that the business case lacked rigour.

The government’s business case is believed to rely heavily on the assumption of a large benefit of what economists call an ”agglomeration effect”, in which population and economic clusters in cities lead to efficiencies.

But the calculations do not comply with Infrastructure Australia’s ”stock-standard” benefit methodology.

This is designed to compare and rank projects.

It is particularly concerned about changes proposed by the Deputy Prime Minister, Warren Truss, which will give the federal government discretion to ring-fence some projects from independent scrutiny.

Mr Deegan warned that any such change would ”exacerbate” the problem of projects being presented to Infrastructure Australia ”with limited or questionable business cases”.

Prime Minister Tony Abbott, who is opposed to Commonwealth funding for public transport projects, has pledged $1.5 billion for the east-west project, with the rest coming from the state government, which will collect toll revenue, and the private sector.

Federal opposition infrastructure spokesman Anthony Albanese accused the government of preparing to return to the days funding decisions based on politics rather than economics.

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