The legitimacy of the upfront payment from the successful bidder to the RTA has been widely questioned. However, we found that the upfront payment was legitimate and was an explicit part of the bidding process. Its key strength was that it made it easy to compare bids, but its key weakness was the risk of increasing the toll.

We consider that the risks of this approach should have been explicitly notified and discussed at an appropriately senior level of government. That discussion should have canvassed how to handle any amounts above project development costs and what delivering the project at 'no net cost to government' meant.

The RTA's view is that it was expected to deliver the project at no cost to government and this meant no cost to its own capital budget. It achieved this by passing on all costs to motorists through higher tolls. The costs included public domain improvements not directly related to the tunnel.

CCM offered the RTA an upfront payment of $100.1 million for the winning bid. The offer comprised a Development Fee of $54 million (for the RTA's initial estimate of its project development costs), and a Business Consideration Fee (BCF) of $46.1 million.

We found that:

■  the RTA sought an upfront payment in other recent projects, but this was the first project where the upfront payment included a BCF, that is an amount to be paid on top of the RTA's estimated development costs

■  the upfront payment was a point of competition between bidders and therefore was a decisive criterion in the assessment of bids

■  other aspects, including affordability of the tolls for motorists and how achievable the patronage projections were, received less attention than the upfront payment

■  CCM's bids offered the only positive upfront payments: other proponents instead sought a payment from the RTA

■  the RTA faced costs of $110 million beyond what it thought could be covered from the $97 million upfront payment. It financed $75 million by negotiating a deal with CCM, which changed the way the toll escalates. It financed a further $35 million by another deal that increased the base toll by 15 cents.