The $38.1 million cost increases identified at the amending deed stage were legitimate and were the responsibility of the RTA, not CCM.
After the contract was signed, new costs arose, totalling $38.1 million. The RTA accepted responsibility for these costs. It funded $3.1 million from the upfront payment, and CCM carried out the remaining $35 million worth of work. The RTA compensated CCM by allowing an increase of 15 cents in the base toll of $2.50 (in 1999 prices). The change was formalised in the First Amendment Deed (FAD), signed in December 2004. This is the only variation to the original contract.
The 15 cents base toll increase was an appropriate amount to reflect the net present value of the $35 million of work that CCM undertook. It will result in a 5.6 per cent increase in toll revenues to CCM.
The 15 cents base toll increase and the change to the toll escalation formula have a major and continuing impact on the toll:
■ the 15 cents increased the base toll for the main tunnel by 6.0 percent, and for the shorter run (vehicles from the east exiting at Sir John Young Crescent) by 13.6 per cent. The RTA did not apply a pro rata increase
■ the change to the escalation formula has the biggest influence on the tolls; an increase of around $1.12 for the main tunnel by 2018. Adding the 15 cents to the base toll brings that up to around $1.43. Together, this means the toll would be 35 per cent higher than originally planned by 2018
■ the effect of the two changes is more severe for the shorter run, with an increase in the planned toll (base toll plus CPI) of 44 per cent by 2018.
There was a total of $110 million of extra project costs ($75 million at the Supplementary EIS stage resulting in changes to the toll escalation, and $35 million resulting in the 15 cents increase to the base toll). These were separate and additional to the upfront payment. If the Government had contributed this $110 million rather than pass it on to the users, the tolls could have been 51 cents lower on tunnel opening and more than one third lower by 2018.
The RTA obtained proper approval for the amending deed and instituted procedures to manage the works covered in the deed. But the handling of the amending deed is open to criticism:
■ it was not made public, amidst lack of clarity about whether the RTA was required to publish a summary, until late 2005
■ there is still no clear breakdown of the costs available publicly
■ it was entered into after all the protective structures set up to ensure fairness around the contracting process had been dismantled
■ the Treasurer's consent to the amendment was sought in a short timeframe, which may have worked against full analysis of the issues.