Sydney's light rail project planning 'was inadequate', leading to $517 million cost blowout, audit finds

An artist’s impression of Sydney’s light rail. Photo: Supplied.

Transport for NSW, the government body in charge of Sydney’s $2.1 billion light rail project, which is already running 5 months behind schedule on George Street in the city, suffers from “many of the same problems” that plague equally contentious infrastructure projects such as WestConnex, and the Albert ‘Tibby’ Cotter Walkway, the NSW Auditor-General had found.

While there have been improvements in monitoring in the wake of earlier reports, the damning report says “there were significant problems” with the way Transport for NSW (TfNSW) managed the project between 2011 and 2014, which contributed to a $517 million jump in the cost.

Among the shortcomings found were:

    * a lack of independence in assurance reviews
    * tight project timelines without justification
    * poor assessment of costs and benefits
    * weak project governance in the planning stages.

While agencies must normally complete two steps before progressing to a final business case, the NSW government didn’t require TfNSW to complete them, the report says.

“These problems increased the project’s complexity and risk, and reduced the value-for-money outcomes” with “the costs are higher and benefits are lower than the approved business case”.

The 12-kilometre line from Circular Quay to Kingsford in Sydney’s eastern suburbs, has already been mired in controversy, with Sydney lord mayor Clover Moore threatening to withhold a $47 million payment to the Baird government over what the city council considers inadequate results involving the landscaping along the CBD route, as well as the 67-metre length of the trains.

Residents also protested the cutting down of dozens of century-old figs along Anzac Parade, near the SCG, to make way for the track.

Meanwhile, the Auditor-General was unsparing of the lack oversight and proper planning during the first four years of the project, saying TfNSW “skipped two mandatory gateway reviews that could have forced it to resolve deficiencies in the project’s governance arrangements and economic appraisal”.

The governance arrangements “did not initially reflect the complexity and significance of the project” and “inadequate planning and tight timeframes meant third party agreements and project scope were not finalised before starting the tender process or before signing the main works PPP contract. Scope uncertainty may have increased bid prices and exposed the project to ongoing cost increases”.

TfNSW planned the project to meet the government’s 2014 deadline to begin work and include a public private partnership (PPP), but “meeting such a tight timeframe meant an inadequate business case, poor governance in the planning stage, and uncertain scope during tendering”.

“The economic appraisal with the final business case underestimated costs and overestimated benefits. It did not adequately account for significant costs and disadvantages,” the report says.

“By the time TfNSW signed the main works PPP contract in December 2014, the capital budget had increased by $549 million to $2.1 billion. Some of this increase was due to scope changes and planning modifications. However, most – $517 million – was caused by mispricing and omissions in the business case.”

It concludes that: “since the Auditor-General’s reports on WestConnex and Large Construction Projects, the NSW Government has strengthened assurance processes for infrastructure projects” adding that “the need to apply the lessons learned from this project to large capital projects in the future”.

The full audit report is here.

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