Finalisation and publication of the Interim Priority List

4.27  To inform its 1 December 2008 meeting, members of the Infrastructure Australia Council were provided with papers outlining how the Office of the Infrastructure Coordinator had arrived at the:

•  six priority candidates that had been subject to a deliverability assessment;

•  eight priority candidates that were not sufficiently well advanced to be examined in terms of their deliverability risks; and

•  14 remaining High Priority and Medium Priority projects that did not, at that time, have sufficient information to support their nomination as priority candidates.

4.28  More specifically, the papers provided to the Council at its 1 December 2008 meeting comprised:

•  a listing of 94 projects that had been shortlisted for assessment;

•  an assessment of each project's alignment with the profiling criteria set out in the Prioritisation Methodology;

•  an assessment of the economic appraisal information for various projects;

•  a 'Draft Interim Priority Matrix' with a consolidated profiling/economic appraisal assessment for projects judged to have a BCR potentially above 1.5. A total of 37 projects were shown, including 28 in the matrix cells that the Evaluation Plan had indicated would rate as having a moderate, high or very high priority;

•  a draft Interim Priority List comprising the 28 projects indentified in the matrix; and

•  assessments against the Building Australia Fund interim evaluation criteria of nine projects that had been rated as having a robust cost‐ benefit analysis.

4.29  The Minutes of the Council meeting on 1 December 2008 record that questions about national projects, BCR rates and detailed analytical processes were discussed and that details of the 80 projects assessed115 would be provided to the Council members.116 The Minutes do not record that any decision had been taken about whether to endorse the recommendations from the Office of the Infrastructure Coordinator. In this regard, the Office of the Infrastructure Coordinator advised ANAO in April 2010 that:

These papers [referred to at paragraph 4.28] set out the advice from the Office of the Infrastructure Coordinator to the Infrastructure Coordinator and, in turn, to [the] Infrastructure Australia [Council] concerning the formation of an Interim Infrastructure Priority List.

It is important to understand that both the Office of the Infrastructure Coordinator and the Infrastructure Coordinator provided support and advice to [the] Infrastructure Australia [Council]. However, decisions in relation to the Interim (and Final) Infrastructure Priority List were taken by [the] Infrastructure Australia [Council].

[The] Infrastructure Australia [Council] received a presentation on the assessment of proposals at its meeting on 1 December 2008. The Minutes of the meeting record that Infrastructure Australia agreed seven themes that it would build around priority projects, and, amongst other things, that it discussed the assessment of BCRs and details of the analytical process for assessing projects. [The] Infrastructure Australia [Council] was disappointed that additional projects had not made the list, but also reiterated the importance of rigorous project assessment. It agreed to advise the Minister of the outcomes of the assessment process.

4.30  On 5 December 2008, the Chair of the Infrastructure Australia Council wrote to the Minister for Infrastructure, Transport, Regional Development and Local Government providing him with the National Infrastructure Audit and also outlined the proposed approach to finalising the Interim Priority List. This correspondence provided the Minister with the list of '94 projects that have been evaluated by Infrastructure Australia', and advised the Minister that:

within this list of projects, the evaluation to date, which is subject to further consideration by the Infrastructure Australia Council, has identified two classes of projects that may be suitable for funding from the Building Australia Fund. There are 28 projects in these two classes.

4.31  In respect to these projects, the Minister was further advised that:

•  the first class of six projects comprised 'priority projects' that addressed one or more of the seven themes, 'and where the project's initial economic appraisal and alignment with key strategic priorities is generally well documented. Subject to further engagement with project proponents over the next month or so (for example, clarifying aspects of the economic appraisal and project timetable), our expectation is that these projects could proceed to be recommended for funding by Governments, including from the Building Australia Fund'; and

•  a second group of 22 'potential projects' that included initiatives that also addressed one or more of the strategic themes but that some aspect of a project's economic benefits or alignment with strategic priorities remained sufficiently in question such that they could not, at that time, be recommended for immediate inclusion in such a program. A number of these projects were said to be likely to progress to the point where they could be supported with funding from the Building Australia Fund.

4.32  The Council next met on 12 December 2008. The Minutes did not record that a decision had been taken to set aside the Office of the Infrastructure Coordinator recommendations. Rather, the only record that this occurred was found in a draft Evaluation Plan117 for the development of the Final Priority List prepared by the Office of the Infrastructure Coordinator in January 2009. This document recorded that:

Using the Infrastructure Australia - Evaluation Plan for initiatives submitted for inclusion in the Interim Priority List, 94 public and jurisdiction initiatives were evaluated with the outcomes of the evaluation reported as recommendations in a paper to the Infrastructure Australia Council meeting of the 12th December 2008. Key recommendations from the evaluation of the Interim Priority List included that a list of 28 initiatives be further considered by seeking additional information to support and/or confirm appraisal and delivery. At the 12th of December meeting, the Infrastructure Australia Council requested that the Office of the Infrastructure Coordinator seek additional information for all 94 projects that were able to be evaluated and to report back to the Infrastructure Australia Council in January 2009 with the finalised Infrastructure Priority List.

4.33  Accordingly, the Interim Priority List publicly released on 19 December 2008 within the document titled A Report to the Council of Australian Governments was the list of 94 projects shortlisted for detailed appraisal. As such, the Interim Priority List included 34 projects118 (36 per cent) that could have been included on the merit matrix but 60 projects (64 per cent) that did not meet the minimum requirements for inclusion on the merit matrix. Those 60 projects comprised:

•  28 projects119 (30 per cent) where the proposal did not meet the minimum profiling assessment of Basic required for the initiative to be included in the merit matrix as worthy of consideration for the Interim Priority List. In 25 of these 28 instances, the initiative also did not satisfy the requirement for an economic appraisal of Satisfactory or better; and

•  a further 32 projects (34 per cent)120 where, whilst the profiling assessment was Basic or better, an economic appraisal was not undertaken either because the proponent did not submit a BCR for evaluation, or the BCR was below the minimum of 1.5 (see paragraph 3.37).

4.34  As indicated at paragraph 4.27, a key recommendation from the Office of the Infrastructure Coordinator's evaluation of the Interim Priority List was that a list of 28 projects be included on the Interim Priority List. These 28 projects were a subset of the 34 mentioned at paragraph 4.33 that the Office of the Infrastructure Coordinator had concluded could have been included on the merit matrix. In this context, the Office of the Infrastructure Coordinator advised ANAO in May 2010 that:

In practical terms, [the] Infrastructure Australia [Council] decided against focussing only on the 28 projects in the merit matrix. Rather, whilst the 28 projects looked most promising, [the] Infrastructure Australia [Council] wanted to enable proponents of all 94 projects (whether or not their projects were in the merit matrix) to have an opportunity to contribute additional information. Even with the 28 projects in the merit matrix, [the] Infrastructure Australia [Council] indicated that it needed to engage further with the proponents.

4.35  This meant that the Interim Priority List included projects that had not been assessed by the Office of the Infrastructure Coordinator as having passed through each of the published filters (see in this respect, for example, paragraph 3.7 and Figure 3.1). Specifically, some of the projects on the Interim Priority List had not at that time demonstrated their strategic merit and fit, and others had not performed well in terms of their economic appraisal.

4.36  Against this background, in June 2010 the Chair of the Infrastructure Australia Council informed ANAO that the decisions taken by the Council were reached by consensus, were unanimous and had the full support of the Infrastructure Coordinator. ANAO was further informed that:

Featuring on the Interim Priority List was not intended to rule a project either 'in' or 'out' of the Final Priority List. The Interim Priority List was an interim update of possible priorities in light of available information and an interim assessment of that information. As a result, whether 94 or 28 projects were identified at that stage did not have a significant impact on the Final Priority List.

This is because the Final Priority List was developed on the basis of rules - rules which did not include a requirement to feature on the Interim Priority List.

4.37  This approach of including all shortlisted projects on the Interim Priority List had a significant impact on which projects were included on the Final Priority List, and were subsequently announced by the Australian Government as being successful candidates for Commonwealth funding in the May 2009 Federal Budget. In particular:

•  of the six priority projects that were sufficiently well advanced to be examined in terms of their deliverability risks, following the completion of the Final Priority List, three had (as of March 2010) been announced to receive Commonwealth funding. These were the F3 to Branxton Link in New South Wales,¹²¹ the Regional Rail Express Line in Victoria¹²² and the East‐West Rail Tunnel also in Victoria.¹²³ The other three priority projects (Majura Parkway in the Australian Capital Territory, the Northern Connector in South Australia and the Mornington Peninsula Connector in Victoria have not (as at May 2010) been announced to receive Commonwealth funding;

•  five of the 22 projects proposed for inclusion on the Interim Priority List as potential candidates were successful in being announced for funding, namely:

-  two projects that the Office of the Infrastructure Coordinator had concluded were worthy of consideration for private funding (being the Oakajee Port and Common Use Infrastructure initiative submitted by the Western Australian Government and the Port of Darwin Container Expansion initiative submitted by the Northern Territory Government) were instead announced as having had provision made for possible equity injections. 124 Each project had been assessed as Good in terms of the profiling assessment and Strong in terms of their BCR;

-  the Queensland Government's Gold Coast Rapid Transit project was announced as having provision made for an equity contribution of $365 million. The Office of the Infrastructure Coordinator had assessed this project as having a Satisfactory BCR and Very Good in terms of its profile;

-  the Gawler Rail Line Re‐sleepering and Electrification initiative submitted by the South Australian Government was announced to receive $293.5 million over five years-the Office of the Infrastructure Coordinator had assessed the project as having a Strong profile and a Strong BCR but with insufficient information¹²⁵; and noting the BCR was 'based entirely on unconventional benefits'; and

-  the Western Australian Government's Northbridge Rail Link: $236.0 million over six years (towards the sinking of the central city section of the Perth‐Fremantle railway line and construction of a new rail platform to make available new land to develop above the rail line and as the first stage required for the Hub urban redevelopment project), which had been assessed as having a Basic profile but a Strong BCR but with insufficient information, with the Office of the Infrastructure Coordinator. noting the BCR was 'based entirely on unconventional benefits'; and

•  five projects that had either not met the information requirements for the development of the Interim Priority List, or that had been assessed as having insufficient merit to be included on the Interim Priority List were subsequently announced for funding. These are identified in Table 4.6.

Table 4.6  Projects announced for funding in the May 2009 Budget that had been assessed as deficient against the Interim Priority List evaluation methodology

Source:  ANAO analysis of Office of the Infrastructure Coordinator data.

4.38  The Office of the Infrastructure Coordinator advised ANAO in April 2010 that:

The Australian Government's decisions need to be viewed in the context of the Government's overall response to the global financial crisis, rather than as a reflection on Infrastructure Australia's processes. In the context of the stimulus efforts, none of the project proposals submitted to Infrastructure Australia was 'shovel ready.' There was a recognition by Infrastructure Australia that the Infrastructure Priority List was going to play a more significant role in:

•  supporting national development in the medium and long‐term; and

•  providing an on‐going stimulus measure, that is, if the global financial crisis proved to be long lasting, and there was a need for further stimulus measures after the initial measures had been implemented.

Having regard to the purpose of the Infrastructure Priority List, no funding decisions were taken by Governments as a result of the Interim Infrastructure Priority List. However, as at early 2009, further funding decisions (notably the allocation of funds from the Building Australia Fund) were still in prospect. In this context, the Infrastructure Coordinator and Infrastructure Australia continued to evaluate the project proposals through the first quarter of 2009 to compile a final Infrastructure Priority List.

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115  The Minutes referred to 80 projects as having been assessed.

116  The Minutes of the next Council meeting, on 12 December 2008, record that: '[One Council Member] gave a positive report on the Infrastructure Australia assessment and prioritisation process noting lack of detail from proponents. [This Council Member] indicated he had visited the Infrastructure Australia offices and spent some time reviewing the documentation.

117  The Office of the Infrastructure Coordinator advised ANAO in May 2010 that the draft Evaluation Plan for the Final Priority List was not finalised

118  The difference of six initiatives between this number and the 28 recommended by Infrastructure Australia as worthy of consideration for inclusion on the Interim Priority List related to six of the nine No Priority projects in Table 4.4 that had a Basic profiling assessment and a Satisfactory economic appraisal.

119  This comprised: 15 projects where a profiling assessment had not been completed; 10 projects where insufficient information had been submitted for a profiling assessment to be undertaken; and three projects where the profiling assessment was that the initiative was Weak. The minimum profiling assessment to be ranked in the merit matrix was Basic.

120  Including those instances where a profiling assessment was also not completed or the profile was assessed as Weak, there were 57 initiatives in total where, in respect to their economic appraisal alone, the project was below the standard required for inclusion on the merit matrix.

121  Specifically, $1,451 million over six years (including $158.0 million in 2008-09 and $162.0 million in 2013-14) towards the construction of 40 kilometres of dual carriageway for a project now referred to as the Hunter Expressway.

122  Specifically, $3,225 million over six years towards the separation of V/Line (regional) and metro rail services between West Werribee and Southern Cross Station via Sunshine.

123  Specifically, $40 million over two years from 2011-12 for preconstruction work towards a rail tunnel from Dynon to St Kilda Road.

124  A media release dated 12 May 2009 by the Minister for Infrastructure, Transport, Regional Development and Local Government (Investing in the Nation's Infrastructure Priorities) states that the Government would contribute $339.0 million for an equity injection into the Oakajee Port Common User Facilities and $50.0 million for Darwin Port Expansion, with the money to be set aside subject to further work and consideration by Infrastructure Australia.

125  This BCR was subsequently revised several times by the applicant.