Pipeline projects

59.  The concept of a project pipeline had been contemplated by the Office of the Infrastructure Coordinator in the approach it had taken to preparing recommendations on the Interim Priority List. In particular, the Office of the Infrastructure Coordinator had identified both priority projects and those with potential for the Interim Priority List. For the purposes of the Interim Priority List, to be recommended by the Office of the Infrastructure Coordinator for inclusion as a pipeline project with potential:

•  the project submission was required to be supported by sufficient information for the Office of the Infrastructure Coordinator to scrutinise the profiling for the project, with the Office of the Infrastructure Coordinator's assessment then concluding that the project was, as a minimum, a good strategic fit; and

•  there needed to be indications that the BCR for the project was likely to be at least 1.5, but sufficient information had not yet been provided to support the proponent's economic appraisal.

60.  However, the pipeline projects included in the Final Priority List reflected less stringent criteria (see Table S2). Whilst a small number of the 28 pipeline projects34 had not been assessed as demonstrating a fit with Infrastructure Australia's strategic priorities, the most significant difference between the priority projects and those included on the pipeline in the Final Interim List related to their economic appraisal. In particular:

•  13 of the pipeline projects did not have a BCR, whereas all priority projects had a BCR of 1.3 or higher35; and

•  for the remaining 15 pipeline projects that had a BCR associated with them, the Office of the Infrastructure Coordinator's assessment had been that there was insufficient evidence to support the economic viability of the project. In some instances, this was because the BCRs were assessed as out of date by the Office of the Infrastructure Coordinator. In other instances, the economic analysis was assessed as preliminary or inadequate.

Table S 2  Criteria for including projects on the Final Priority List

Source: ANAO analysis and advice from the Office of the Infrastructure Coordinator.

61.  Infrastructure Australia's May 2009 document incorporating the Final Priority List stated that the 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. Infrastructure Australia reported that this was because:

•  there was insufficient information to make a robust assessment at this stage, and/or

•  the quality of analysis was not robust enough to form a solid basis for judgement, and/or

•  there was a timing issue.36

62.  The further project development and analysis was to occur as part of Infrastructure Australia updating the Final Priority List, expected to be issued on 30 June 2010. However, by May 2010, before Infrastructure Australia had come to any conclusions about whether funding should be recommended in respect to the 28 pipeline projects, the Government had announced funding for 10 of the pipeline projects (see also Figure S1). Specifically:

•  prior to the Final Priority List being published, the Government had committed funding in relation to two of the pipeline projects;

•  a further six pipeline projects were announced in the May 2009 Budget to receive funding; and

•  another two pipeline projects were announced in the May 2010 Budget to receive funding.

63.  In this context, the experience with the NSW Government's West Metro project highlights the increased risks that are involved in funding projects that have not yet demonstrated their economic viability. The May 2009 Budget had included $91 million towards engineering and design work to further develop the West Metro project. Together with the CBD Metro project, the West Metro project had been included as a pipeline project in the Final Priority List notwithstanding that the Office of the Infrastructure Coordinator's final assessment was there were 'substantial questions' about the economic viability of both projects, given that neither had a claimed BCR above 1.0.37 In February 2010 the New South Wales Government announced that construction would not proceed in respect to either the CBD Metro or West Metro projects.

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34  Ten of the pipeline projects had not been included in the Office of the Infrastructure Coordinator's list of 28 projects recommended for inclusion on the Interim Priority List. However, despite not providing any further information to inform any change to the Office of the Infrastructure Coordinator's December 2008 assessment that they were not sufficiently well advanced to meet the established criteria for inclusion on the Interim Priority List, they were included in the Final Priority List as pipeline projects.

35  Three of the 13 projects involved Infrastructure Australia incorporating one or more elements of applicant submissions into a broader 'project', and did not, as a result, have a proponent-submitted BCR, although some of the individual elements of the 'package' created by Infrastructure Australia did have a BCR. Project applicants did not provide BCRs in their submissions for a further ten projects on the pipeline list.

36  Infrastructure Australia, National Infrastructure Priorities: Infrastructure for an economically, socially and environmentally sustainable future, May 2009, pp. 8 and 9.

37  In each instance, the assessment noted that there were also questions about the way in which the BCRs had been calculated, such that the claimed BCRs may have been overstated.