The RTA used the upfront payment to recover its development costs and a small part of the subsequent cost increases. Once the cost increases exceeded the total upfront payment, the toll increased so the 'no net cost to government' position could be preserved. This action was endorsed by:
■ the tender review and evaluation panels, the Minister for Roads, Treasury and the Treasurer for the $75 million increase resulting in the change to the toll escalation formula
■ the Minister for Roads, Treasury and the Treasurer for the $35 million resulting in a 15 cents increase in the base toll level. The tender review and evaluation panels had been dismantled by this stage.
There were no clear and explicit directions given in advance on the use of the Business Consideration Fee. It had not been formally approved by the Budget Committee of Cabinet as part of the bidding model. On the three occasions that the CCT project went to the Budget Committee of Cabinet, we found no evidence that there was any specific presentation of the bidding structure, including no mention of the concept of an upfront payment or of a BCF. However, the Budget Committee of Cabinet was made aware in 2000 that a positive payment to government may be possible. But in practice, all the payment was needed to cover the development cost increases, so the RTA received no separate BCF.
For toll projects where the 'user-pays' principle generally applies, it is essential to have guidance on the treatment of cost increases, and effective monitoring and management of costs.
We noted that there was no definition or guidance on:
■ what constitutes a development cost?
■ which cost increases are necessary and directly attributable to the project?
■ who pays for cost increases not directly related to the project?
In fact, both the $75 million and the $38.1 million cost increases captured significant public domain improvements. The Richmond Report also made this observation. We discuss this issue further in Chapter 3.