The Spencer Street Station (now known as Southern Cross Station) re-development project was the Victorian Government's centrepiece of a $700 million plan (Kestigan 2005) intended to transform the existing railway station and bus terminus into a "world-class inter-modal transport facility" (Victorian Auditor-General 2007a: p. 37), capable of managing 15 million commuters a year (Brumby and Batchelor 2002) and increasing to 45 million passengers annually by 2020 (Kestigan 2005). The station serves metropolitan, regional and interstate rail and bus passengers.
Specifically, the Government's objectives (Department of Treasury and Finance in Victorian Auditor-General 2007a: p.37) were to:
- Minimise public funding over the long-term with regard to construction, upkeep and operation (with the State investing $300 million of the $700 million total) into this enterprise, with the consortium paying $100 million in maintenance fees over the life of the contract (Brumby and Batchelor 2002);
- Transfer risk to the private partner, where it represented VfM, such as the bulk of design, construction, finance and operational risks for the transport interchange and commercial development, as well as risks relating to the construction of the rail and signalling network (Victorian Auditor-General 2007a: p.40);
- Allow for cost-effective growth in patronage and new services for transport and infrastructure (such as the proposed $5 billion regional train connection that would provide a link between Melbourne and the western suburbs (The Age 2012); and
- Deliver the project using a transparent and accountable approach including upholding highest standards of integrity.
During 2000, the Southern Cross Station Authority, a statutory body established to represent the Victorian State Government (until it was wound up during 2009 with its statutory powers transferred to the Department of Transport, V/Line and MetLink), was charged with managing the procurement and delivery phases of the Station re-development (Southern Cross Station Authority 2008: p.10) and overseeing its operations. For this project, continuing operation of the existing station during construction was essential. In 2002, a private sector consortium, Civic Nexus Pty Ltd, signed a Services and Development Agreement with the Authority to design, build and then take operational responsibility for the Station over a period of 30 years (Victorian Auditor-General 2007a: p.35).
The consortium was made up from the following companies (Partnerships Victoria 2003b: p.16):
- ABN AMRO, the project financier;
- Leightons Contractors, contracted to re-build the station and up-grade the station's rail infrastructure;
- Nicholas Grimshaw and Partners (in association with Daryl Jackson Architecture), engaged for architectural design;
- Honeywell Limited, contracted to provide asset management services; and
- Delaware North Australia, for providing operation and maintenance services.
Construction of Southern Cross Station commenced during 2002 (Partnerships Victoria 2003b: p.15) with work scheduled to be completed by April 2005, at which time, the management of the Station's operations would be handed to the consortium (Victorian Auditor-General 2007a: p.38). In 2006, however, operational management of the Southern Cross Station was transferred to Civic Nexus Pty Ltd (Victorian Auditor-General 2007a: p.53) e.g. due to delays and contractual disputes (Victorian Auditor-General 2007a: p.38; Tomazin and Myer 2006).
During hand-over, the Southern Cross Station Authority had responsibility for oversight of the Services and Development Agreement. Its key deliverables therefore became: monitoring and assessing the consortium's management and operational delivery (based on agreed KPIs), managing a number of capital projects within the precinct and assuming its obligations relating the land it owns within the broader station precinct (Victorian Auditor-General 2007a: p.53).