19. Infrastructure Australia was established to improve the quality of infrastructure planning and investment strategy, and to identify those investments expected to make the biggest impact on Australia's economic, social and environmental goals for least cost to the taxpayer. Accordingly, it is a goal of Infrastructure Australia that infrastructure funding decisions will be taken following careful planning and rigorous assessments that are based on sufficient evidence.
20. Consistent with sound practice, Infrastructure Australia published guidance on its audit framework and on its prioritisation methodology, although the prioritisation methodology was released relatively late in the submissions process due to a range of demands on the Office at the time.
21. The published National Infrastructure Audit framework was sound. In conducting the Audit, the Office of the Infrastructure Coordinator relied on a range of material, although the short time available to conduct the Audit meant that most reliance was placed on submissions received from the States and Territories. The Audit identified a range of 'challenges' at the national and location‐specific levels and Infrastructure Australia formulated seven themes in response to these challenges.
22. Infrastructure Australia's methodology provided a robust framework for the development of the Interim and Final Infrastructure Priority Lists. This was reinforced by the Office of the Infrastructure Coordinator taking a rigorous approach to assessing candidate projects including by: scrutinising the claims made by proponents in their submissions; seeking further information where it was needed; and engaging advisers to assist it in deciding whether the BCR submitted by the proponent could be relied upon, or required moderation.17
23. The Interim Priority List, published in December 2008, comprised 94 projects. During November 2008, these 94 projects had been evaluated by the Office of the Infrastructure Coordinator, with 28 projects being recommended by the Office of the Infrastructure Coordinator as meriting further consideration. Consistent with its statutory role, the Council (with the support of the Infrastructure Coordinator) took a different perspective, and included all 94 shortlisted projects on the Interim Priority List. This decision, and its reasons, were not documented in the records of the relevant Council meeting. In June 2010, the Chair of the Infrastructure Australia Council informed ANAO that the Council and the Infrastructure Coordinator had agreed that further information should be requested from all 94 projects to allow for:
• additional evidence to come forward before the original deadline for the completion of the Final Priority List; and
• the Office of the Infrastructure Coordinator's assessment to be updated given the initial assessment by the Office of the Infrastructure Coordinator reflected the available information and time available for assessment.
24. Further information was provided in respect to some projects, and some project assessments were updated but, in the main, the December 2008 request to proponents of all 94 projects on the Interim Priority List that they provide further information was unsuccessful in significantly improving the information available to inform the development of the Final Priority List.
25. The Infrastructure Australia Council gave the Office of the Infrastructure Coordinator guidance on its overall approach and tested the Office of the Infrastructure Coordinator's conclusions in relation to specific projects. The Council also asked for further information on some projects, particularly those the Council considered to be of demonstrable national importance or projects seen to have particular sensitivities. The Chair of the Council informed ANAO that this iterative process was intended to ensure that the Council's understanding of the projects was complete, as well as to enable the Council to refine its understanding and assessment of the proposals that had been submitted for its consideration. The Final Priority List was published in May 2009. It comprised:
• nine 'priority' projects18 that had been assessed as meeting the tests outlined in the published Prioritisation Methodology, including having a BCR greater than 1 such that the project offered net economic benefits; and
• 28 'pipeline' projects,19 largely comprising projects which either had not submitted a BCR for the Office of the Infrastructure Coordinator's evaluation, or where the Office of the Infrastructure Coordinator's evaluation had identified shortcomings in the BCR.
26. When published, the Final Priority List outlined the criteria that had been applied in deciding upon both the priority projects and the pipeline projects. The criteria applied to identifying the nine priority projects were consistent with those outlined in the published Prioritisation Methodology, and the Office of the Infrastructure Coordinator's analysis was that these criteria had been met by each of the nine priority projects.
27. Whilst the nine priority projects had demonstrably satisfied the tests set out in the published Prioritisation Methodology, this was not the case for the 28 pipeline projects. In particular, whilst the published Prioritisation Methodology had outlined a range of factors that would be taken into account, it stated that BCRs would be used as the 'primary driver' of decision‐making and did not contemplate that a project without a robust economic appraisal would remain a candidate for inclusion on the Final Priority List, or outline any criteria that would be applied to such projects in lieu of their BCR being used as the primary driver of decision‐making. Further, there was no clear record maintained of the reasons for the Council deciding which projects were to be included on the Final Priority List, and those projects that were to be excluded.
28. Infrastructure Australia's May 2009 document incorporating the Final Priority List stated that the 28 pipeline projects had not yet demonstrated their economic viability (through the economic appraisal process including having a BCR above 1) nor had they demonstrated robust delivery mechanisms that would ensure they could be successfully implemented. Accordingly, the May 2009 document advised that further project development and analysis was required before Infrastructure Australia could provide definitive funding assessment advice to the Government.
29. Once it has published its Priority List identifying projects that merit being considered for funding and those that are worthy of further development and analysis, Infrastructure Australia does not have a role to play in allocating funding for infrastructure projects. Rather, decisions about which projects were to receive Commonwealth funding were made by the Government in the context of economic stimulus spending (two pipeline projects) as well as subsequently in the Budget context. In this latter respect, funding for seven (of the nine) priority projects and six pipeline projects was announced in the May 2009 Budget, with funding for a further two pipeline projects announced in the May 2010 Budget.20
30. The Infrastructure Australia Council is responsible for developing Lists that prioritise Australia's infrastructure needs and, in discharging this role, has the capacity to look beyond the initial information submitted to it by project proponents and assessments prepared for it by the Office of the Infrastructure Coordinator. The Council adopted such an approach in the development of its first Infrastructure Priority List on a consensus basis.
31. A clear strength in the processes employed in developing the first Infrastructure Priority List was the rigorous approach adopted to analysing proponent submissions against the published criteria. The published criteria themselves set a high standard, with a strong focus on the economic appraisal of candidate projects. However, whilst all shortlisted projects were considered against the same criteria, the pipeline projects did not pass the tests set out in the published Prioritisation Methodology. The criteria applied to distinguish between priority and pipeline projects were outlined in the May 2009 Final Priority List but they were not reflected in the Prioritisation Methodology published in September 2008, and have not been reflected in the guidelines for making submissions to Infrastructure Australia's infrastructure planning process published in October 2009.
32. Recognising the value to long term infrastructure planning from the development and ongoing update of a pipeline of nationally significant projects, there would be benefit in Infrastructure Australia setting out its methodology more clearly to inform project proponents and other stakeholders of its approach. In addition, there would be benefit in better records being made of the reasons for Council decisions on the composition of project Priority Lists given the significance of the advice being provided and Infrastructure Australia's goal of promoting evidence‐based public investment decisions.21
33. Inevitably, there will be experience gained by any new organisation with such a critical role that will result in some modifications or streamlining of approaches. To build on the solid methodological base that Infrastructure Australia has developed, ANAO made three audit recommendations designed to provide greater transparency in the project prioritisation process and enhance the reporting of the prioritisation results.
__________________________________________________________________________________
17 In particular, the analysis examined the robustness of the demand forecasts, the robustness of the proponent's costing, key methodological questions and benchmarked the figures used by the proponent.
18 See Paragraph 13 for description of 'priority' and 'pipeline' projects
19 These 28 projects are a different set of projects from the 28 projects recommended by the Office of the Infrastructure Coordinator referred to in paragraph 23, although there is some overlap with individual projects.
20 See further at paragraphs 5.78 to 5.80 in respect to the priority projects, paragraphs 5.83 to 5.84 in respect to the pipeline projects and Infrastructure Australia's comments on Government funding at paragraph 5.89.
21 Under the legislative arrangements, the Council was empowered to decide which projects should be included on the Final Priority List; and there was no requirement for the Council to document the nature and extent of any inquiries undertaken, or to record the reasons for decisions taken.