5.81 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:
for these 28 projects, further project development and analysis is required before Infrastructure Australia can make a final recommendation, because:
• there is insufficient information to make a robust assessment at this stage, and/or
• the quality of analysis is not robust enough to form a solid basis for judgement, and/or
• there is a timing issue.
Infrastructure Australia recommends that these 28 projects form a "pipeline" of projects for further analysis and consideration. Infrastructure Australia will now work intensively with proponents to develop robust economic and delivery analysis. This further work is required before Infrastructure Australia can provide definitive funding assessment advice. A number of projects need to be taken to the next stage of business case and detailed design development before Infrastructure Australia can make a more definitive and robust economic and delivery analysis of these projects. Governments and private investors need to undertake more detailed design and feasibility assessment before definitive funding decisions can be considered by governments and private investors.
5.82 However, prior to the Final Priority List being published, the Government had committed funding in relation to two of the pipeline projects included on the Final Priority List. Specifically:
• in December 2008,189 the Government announced $45 million towards Phase 2 of the ARTC's Advanced Train Management System, involving a trial of the technology on a section of track in South Australia; and
• the May 2009 Nation Building for the Future document announced that the Budget funding:
builds on the Government's commitments, through the Nation Building Program, to expand capacity and relieve bottlenecks around New South Wales export infrastructure by investing $300 million to develop an inter-modal terminal at Moorebank in south-west Sydney.190
5.83 In addition, six of the 28 pipeline projects were announced in the May 2009 Budget to receive funding (see Table 5.4). With the exception of the West Metro project (see paragraph 5.78), the Budget Papers did not suggest that these projects had been recommended for funding by Infrastructure Australia.
Table 5.4 Pipeline projects announced for funding in the May 2009 Budget
Project | Budget Funding | Infrastructure Australia evaluation |
Cooroy to Curra component of the Bruce Highway Corridor (Brisbane to Cairns)-Queensland Government | $488 million over four years towards the duplication of a 12 kilometre section between Cooroy and Curra to provide a four-lane divided highway. |
|
| $236 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 so as to make new land available to develop above the rail line as the first stage required for The Hub urban redevelopment project. | |
| Provision for possible $339 million equity contribution in relation to development of common use port components, including maritime and land-based facilities such as the breakwater, turning basin, channel, navigational aids, and port administration offices. | |
| Provision for possible $50 million equity contribution for land reclamation, a second rail dump and a new berth, ship loader and conveyor equipment, to deliver improved traffic management to the Port of Darwin and the Alice Springs to Darwin railhead. | |
|
| There were 'substantial questions' about the economic viability of the project given: the proponent had claimed a BCR of 1.0; and Infrastructure Australia had raised questions about the way in which the BCR had been calculated. |
|
| The scope of Inner City Rail Capacity in the submission to Infrastructure Australia was the future construction of two rail tunnel corridors. The projects were at a stage where funding was sought for a detailed feasibility study, planning and land acquisition. As no BCR information was submitted, Infrastructure Australia did not undertake an economic appraisal. |
Source: ANAO analysis of Budget Papers and Office of the Infrastructure Coordinator data.
5.84 Further funding for pipeline projects was announced in the May 2010 Budget. Specifically, the Final Priority List had also included two pipeline projects relating to rail line construction works submitted by the ARTC (specifically, the 'East‐West Rail Freight Corridor' and 'North‐South Rail Freight Corridors (including Northern Sydney Freight line and various rail deviation projects'). The May 2010 Budget included equity funding of $996 million over three years to the ARTC for:
a package of productivity enhancing projects across Australia that will help strengthen the interstate freight rail network and secure its competitiveness over the longer term. Work will include providing stronger steel rail, more concrete sleepers, upgrading rail bridges and culverts, new passing loops and other associated rail infrastructure works.
These projects will help improve the reliability, performance and capacity of ARTC's network to deliver significant productivity benefits and improve safety on the interstate network. The regional areas through which the network travels stand to gain significantly through the creation and support of local jobs and economic activity.
The package will deliver improvements for freight rail infrastructure on the North‐South and East‐West rail corridors, which are national infrastructure priorities.191
5.85 The inclusion of pipeline projects in the Final Priority List meant it was important the advice to the Government provide sufficiently clear advice on Infrastructure Australia's recommendations as to the further action that was needed before funding should be considered. For example, the Budget announced that provision for equity injections in relation to the projects at Darwin and Oakajee ports had been made 'pending recommendation of the projects by Infrastructure Australia, negotiations with the project proponents and the establishment of an appropriate equity vehicle'. A recommendation from Infrastructure Australia was necessary for these two projects as the Budget announced that funding would come from the Building Australia Fund. In February 2010, Infrastructure Australia advised ANAO of further work it was undertaking to assess each of these two projects:
• the assessment of the Oakajee Port Development - Common Use Infrastructure proposal will be continued when the Western Australian Government provides Infrastructure Australia with a copy of the 'bankable' feasibility study that was being finalised; and
• for the Darwin Port expansion, assessment of the proposal was continuing with updated information having been received from the Northern Territory Government, although Infrastructure Australia had not been advised of the source of the balance of funds required for the project (being some $275 million).
5.86 Similarly, the Budget funding announced for the West Metro project was for engineering and design work to further develop the project and the funding for the Brisbane Inner City Rail Capacity component of the Brisbane's Future Public Transport Network was to go towards a feasibility study. By way of comparison, without any further assessment being required from Infrastructure Australia, the Budget included construction funding for the Cooroy to Curra component of the Bruce Highway Corridor (Brisbane to Cairns) project192 and the Northbridge Rail Link in Western Australia.
5.87 In addition, the experience with the West Metro project highlights the increased risks that are involved in funding projects that have not yet demonstrated their economic viability. In this respect, the project summaries provided by the Office of the Infrastructure Coordinator to the Council at its 30 January 2009 meeting recorded that the New South Wales Government's CBD Metro and West Metro projects had both been assessed as Very Good in terms of their strategic fit but that there were 'substantial questions' about the economic viability of both projects given neither had a claimed BCR above 1.0.193 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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189 Nation Building: Rail, Road, Education & Research and Business, Statement by the Honourable Kevin Rudd MP, Prime Minister, the Honourable Julia Gillard MP, Deputy Prime Minister and Minister for Education, Employment, Workplace Relations and Social Inclusion, the Honourable Wayne Swan MP, Treasurer and the Honourable Anthony Albanese MP, Minister for Infrastructure, Transport, Regional Development and Local Government, 12 December 2008, p. 49.
190 The May 2010 Budget included $70.7 million over two years for the development of comprehensive business cases, designs, approvals and an implementation strategy for the development of an intermodal transport hub at Moorebank, and the relocation of the Department of Defence's School of Military Engineering from Moorebank to Holsworthy. The Budget Papers stated that the $70.7 million would come from funds already set aside in the Nation Building program for NSW for the development of an intermodal terminal precinct at Moorebank.
191 Budget 2010-11, Skills and Infrastructure - Building a Stronger and Fairer Australia, Statement by the Honourable Julia Gillard MP, Minister for Education, Minister for Employment and Workplace Relations, Minister for Social Inclusion and the Honourable Anthony Albanese MP, Minister for Infrastructure, Transport, Regional Development and Local Government, 11 May 2010, p. 28.
192 The Office of the Infrastructure Coordinator's December 2008 evaluation for the Interim Priority List had rated this project as having a Poor BCR. No additional information was submitted to Infrastructure Australia in January 2009. In terms of its inclusion on the project pipeline, in February 2010 the Office of the Infrastructure Coordinator advised ANAO that: 'Infrastructure Australia has announced its intention to develop a National Freight Network Strategy. The Bruce Highway has the potential to be part of a long-term east coast road freight network. However, the Bruce Highway Upgrade (Cooroy to Curra) proposal was assessed as not being sufficiently developed to meet the criteria for recommendation as being "ready to proceed". It was however assessed as having sufficient potential merit to warrant further consideration, following the development of the business case. As a result, it was included in the "priority pipeline".'
193 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.