Are recent developments with Sydney’s Metro railway straws in the wind or embers heralding an infrastructure inferno?
Readers of Pearls etc. following the Sydney Metro saga know the strategic problems it creates such as reducing Western Sydney’s access to opportunities. These stem from its permanent incompatibility with the existing transport network – via e.g. small tunnels – and unsuitability for commuters due to few seats. A formal inquiry into the mess is needed.
At present there is an Upper House Inquiry into one aspect of Metro – a take-over of a commuter line from suburban Bankstown to Sydenham (near the city). It has been told Metro is motivated by bureaucratic infighting – rather than public policy considerations.
Premier Berejiklian kicked off Metro when Transport Minister. She has a well-deserved reputation of wasting fortunes on white elephants like Sydney Light Rail, WestConnex and a fleet of trains too wide for tunnels. She ordered demolition of the perfectly good Sydney Football Stadium so it could be rebuilt.
Yet her main problems aren’t squandering tens of billions of dollars or the by-now usual multi-billion-dollar blowouts. The real damages are: her projects leave Sydney worse off; dishonesty about projects is leading to a loss of public trust in institutions.
Some who hoped Sydney Metro would be an exception were buoyed by its first stage being $0.9billion – 10% – below budget. This distracted from the Government’s stark failure to publish any ‘business case’ or benefit:cost assessment – what should be an absolute minimum prior to commitment of $9.0billion or so of your money – for the project. However, since its opening – after the March 2019 State election – even the small hopes of it ‘beating the budget’ and working well have been dashed.
This first stage has been plagued by frequent, prolonged breakdowns. The promise of greater reliability due to automation and a single line – rather than (the silly claim of) Sydney Trains’ ‘tangled network’ – was false. A delay on the line impacts all Metro trains because a bypass is unavailable. The absence of train drivers turns minor mishaps into major delays.
The system appears under-designed – shown when one of its tunnels flooded due to rain, stopping services for days. The Government’s explanation – flooding was due to challenging terrain – was contemptible. It was as if railway design doesn’t take terrain into account. More likely, the flooding is related to the underspend.
Metro’s second stage -the under-construction Metro extension to Bankstown – will double its length, amplify technical problems and add many more. The cost of this stage was set at $11.5-12.5 billion. Or so the public was led to believe, including throughout the 2019 State election campaign where the Premier promised NSW can ‘have it all’.
In early February 2020, the Sydney Morning Herald put the cost at $16.8 billion. Among the causes for the $4.3-5.3billion increase were misspecification of the project – fleet, stations etc. The Herald claimed its source to be a budget review by the Metro operating agency (part of Transport for NSW) written 18 months ago – well before the State election.
The Government is not suggesting the blowout – 34% to 46% – might influence wider Metro plans it had costed at $66.0 billion. In this, it might be taking a cue from Infrastructure Australia – which (uniquely) recommended the stage without knowing its cost. With such a cost increase, the already highly dubious – overstated – benefit:cost ratio estimate for the project of 1.3:1.0 is more like 0.9:1.0. The project certainly lacks economic merit even were its grave strategic flaws – mysteriously overlooked by Infrastructure Australia – ignored.
The Government might also be taking a cue from ‘influential’ Mr Tony Shepherd AO, former chair of WestConnex, current chair of the SCG Trust. After the Herald’s revelation, he said governments should not inform the public – too early – of project costs because blowouts are likely. In any event, people aren’t interested in costs (i.e. how their money is used). He advised governments to work harder at having good relationships with infrastructure contractors.
With respect, such views need to be challenged. Government always plays some role in major infrastructure – usually by conferring privilege on infrastructure builders, operators or owners. In a properly operating democracy, a Government does so only on behalf of the public. That public must be able to hold its Government to account at the ballot box, but will be unable to do so unless it knows the costs and benefits of, and the arrangements its Government has made for, infrastructure. Failure for the public to be properly so advised corrodes trust in institutions, weakens democracy and creates an environment conducive to corruption. The public must be told about the costs, benefits and consequences of infrastructure projects – and especially about cost overruns – irrespective of opinions about their ‘interest’ in those matters. To delay advising the public on those matters would be disturbingly anti-democratic – even more so if an election was held while information was withheld.
Last week, the Transport Minister said the Metro cost overrun was just $3.0billion. He said ‘sorry’ and the cause is general construction cost pressures. He claimed to be ‘absolutely not’ aware of the blow-out until after the State election – even though the election was many months after the estimate was revised.
The Premier was also asked about the cost blowout. Her first response was she’d rather talk about bushfires, but later said: ‘hand on heart’ every issue talked about during the election campaign was with honesty and integrity.
Such hand on heart honesty and integrity has been on display before. One case is denial of a ‘legislative’ restriction on Newcastle Port containers – preventing urgently needed port diversification and the subject of court case about breaching competition laws.
Another case is Sydney Light Rail. In response to a question about its cost the Premier said: “I can hand on heart say the government’s working day and night to bring this project to completion”. She probably meant it had been working tirelessly to use your money to keep the infrastructure club busy. The $1.6billion project ended up costing $3.0billion. Its flawed original business case had a benefit cost ratio of 2.5:1.0 – most likely inflated. A quick recalculation of those numbers suggests it should have been below 1.2:1.0 i.e. not worth the risk.
Included in the light rail costs was $0.6billon to settle the builder’s lawsuit for being misled by the Government. That case was in train before, but settled after, the election – as was the project’s cost. And, like Metro, light rail has suffered operating problems since opening – also after the election.
The Sydney Football Stadium has similar pre- and post- election form. The ‘builder’ started demolition during the election campaign, but after the election – and destruction – walked out saying not enough money was available for construction. This project, often promised to be ‘on-time on-budget’ was, after the election, revealed to be at least a year late and $100million or 14% over budget. A new design excludes the ‘curtain’ which was the key to gaining political support from sport associations who wanted to disguise the normal paltry attendance at games. Its original business case had a benefit:cost ratio of 0.9:1.0 i.e. economic loss. A quick recalculation including the now-evident higher costs shows this to fall to 0.8:1.0 – i.e. greater economic loss.
Back to the claim the Minister and Premier didn’t know about the Metro project’s real cost until after the election. Readers who were/are public servants might gasp. Those who read ALEX MITCHELL: Ex-NSW Premier Barry O’Farrell quits for India on NSW Government integrity might consider it another bald-faced lie.
However, it might be true. It, and apparent lack of consequence for – sacking of – public servants who didn’t pass on the news, fits the Metro-as-bureaucratic-warfare hypothesis. Was a naive new Transport Minister hoodwinked – in 2011 – into taking a (wrong) side in the war? Did the Minister – now Premier – have so much at stake that Metro must continue however high the cost and low the benefits? So much that nobody gives the Government real news? Like Sydney Light Rail is Metro a ‘vanity project’ but on a destructive epochal scale?
This should be considered by the Upper House Inquiry, due to report in March. However, the Inquiry will find it difficult to discern the essential truth from strange comments of Government ‘witnesses’ – whose evidence is troubling, not just for being implausible but for being distracting.
Yet the Inquiry has achieved one thing – reversing the plan to needlessly stop current trains to (and abandon) nine railway stations west of Bankstown – towards Lidcombe and Cabramatta, near the centre of the metropolitan area. That there was such a plan to further degrade Sydney Trains – a secret to many including top railway staff and no doubt to project assessment – supports the bureaucratic warfare thesis.
With the gulf between pre-election promises and post-election results, questions about whether the public was misinformed at the election, infrastructure assessments not worth the paper they are written on, projects causing substantial economic losses, a multi-billion-dollar Metro cost blowout (so far), no change to Metro plans and the only working hypotheses for its idiotic projects being a cohort with virtually no respect for the public, public funds and institutions – and/or Vanity – the Inquiry will need to do plenty more to avoid becoming the first witness at the inevitable Royal Commission. Wish them well!
John Austen is a happily retired former NSW and Commonwealth official living in Western Sydney.
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John Austen is a happily retired former senior official of Infrastructure Australia living in Western Sydney. Details are at thejadebeagle.com.
Comments
4 responses to “JOHN AUSTEN. Sydney Metro developments”
I feel I must protest at some of the blame being laid at the feet of the NSW Premier here for cost overruns. I do that, not because of any desire to defend her, but because on the face of it, the details and overall costs, right from estimates to final cost are the responsibility of those in the responsible agency, TfNSW.
Now, if TfNSW had been accurate in their costing, and the Premier had ploughed on with a $3bn tram, your ire would be justified.
Further, there are a number of technical questions about the choices of track design made. Apart from the short section mandated by the Sydney City Council, just about every technical aspect of this project has involved technical alternatives that multiplied the cost. Surely the obvious questions should be asked of TfNSW. Why did TfNSW adopt the most expensive options in a very large number of cases? Why did TfNSW adopt the most time consuming options? Why did TfNSW not ask those with up to date knowledge of trams from Melbourne for advice?
Now, depending on the answers to those, the question might rather be whether TfNSW was doing as well as it could…to whether it was deliberately sabotaging the elected government. Now, that last possibility is extremely serious. However, given the almost unidirectional selection of the most expensive technical items, why should it be discounted?
It is easy to take a slap at the Premier, but if there’s an issue of her possibly being poorly advised, or even sabotaged by the public service, then that’s a far more serious issue for sites like this to consider.
I’m happy to expand on the technical issues should you wish, but would rather not obscure the need to ask TfNSW some hard questions.
Thanks. Apologies in advance for the length of this reply.
I think we differ on this.
My reading is: you are concerned about the causes of the (light rail) cost blow-out. Depending on cause you feel Ms Berejiklian may be less or not blameworthy.
My concern is quite different. It is the fact of a far larger Metro cost blowout. Especially that fact not being publicly disclosed for 18 months, during which time an election occurred, which is an affront to democracy. For which the Minister and Premier are blameworthy.
Transport for NSW is the Department of Transport. Transport Administration Act s.3B has Transport for NSW under the control and direction of the Minister. The title of that section is ‘Ministerial Responsibility and Delegation’. It means actions of Transport for NSW are actions of the Minister. Ms Berejiklian was Transport Minister for the period April 2011 to April 2015.
The democratic scheme in NSW is that the Minister accounts to the public via Parliament. Transport for NSW accounts to the Minister. Information provided to the public by Transport for NSW is taken as coming from the Minister. Actions by Transport NSW are taken to be actions by the Minister. The Minister is responsible to the public and at law for the accuracy of costings from Transport for NSW.
For the public, the person responsible for infrastructure (cost blowouts) – and the by far more serious matter of the public not being advised of this until well after the election – is the Minister and / or Premier as the head of Government.
The decision to go ahead with Sydney Light Rail was reported in December 2012 and a contract for construction was signed in December 2014. A month earlier it was reported the cost had increased from $1.6bn to $2.2bn. On December 2 2014, Transport for NSW quoted the Minister explaining scope changes, but not referring to cost. If this was an excuse for the cost overrun, it was later at least partly contradicted by the Audit Office (in 2016).
On top of that overrun was a $576m payment from the Government to the builder in 2019 – to settle court action for misleading or deceptive conduct relating to the contract.
Neil Douglas has explored some lessons of, and reasons for cost overruns, of Sydney Light Rail. http://wellington.scoop.co.nz/?p=114464
https://wp-cilt.dotnous.com/wp-content/uploads/2018/11/Neil-Douglas-LRT-presentation.pdf
Although the sums involved are large, light rail is essentially a sideshow to e.g. Sydney Metro. The key Metro decisions – small tunnel diameters and CBD route – and the context e.g. State Government opposition to a 2nd Sydney airport, were determined while Ms Berejiklian was Transport Minister. Public warnings from the pre-eminent experts about the gravity of these matters could hardly have failed to reach a competent Minister’s notice. My previous posts go into some of this incredible story.
The central matters raised in my recent post were:
a. a Metro cost blow-out of $4.3bn to $5.3bn, reportedly identified in a paper by a Government agency months before the State election;
b. this not being brought to the attention of the public before the State election – similar to some other matters like light rail;
c. the Premier’s claim of ‘honesty and integrity’, and the Minister’s claim he didn’t know of the blow-out until after the election.
Possibilities include:
i. Information about the blowout was withheld from the Minister and/or Premier until after the election, at the volition of public servants or contractors etc.; or
ii. Information about the blowout was withheld from the Minister and /or Premier at the request of themselves or their offices; or
iii. Information about the blowout was provided to the Minister and/or Premier before the election; in which case the reports indicate a lie and deception.
Possibility (i) is the one most favourable to the Government.
Many former and present public servants would consider this possibility (i) – concealing a multi-billion-dollar cost blow out from the Government and therefore Parliament and the electorate until after an election – inconceivable. Such withholding of a matter – which could be considered likely to influence the election – would be tantamount to unelected officials subverting electoral proceedings and of the utmost gravity.
You suggested a possibility of officials deliberately misleading or ‘sabotaging’ a Minister or the Government. That also would be a very serious matter and similar to (i) – although without the potential electoral consequences.
Both possibility (i) and your suggested possibility may involve corrupt conduct within multiple provisions of the Independent Commission Against Corruption (ICAC) Act e.g. s.8(1)(a)(b)(c) and (d) and 8(2)(a) (k) and (x).
That Act creates a duty for Ministers to report to ICAC any matter that on reasonable grounds may concern corrupt conduct (s.11 (1), (2)). That would seem to include (i) if it occurred – unless, for example, it is considered reasonable for the responsible Minister not to be relevantly told of a $4.3bn-$5.3bn (34% to 46%) cost blowout in a single project etc.
My posts in Pearls etc and articles at the jadebeagle.com draw on material in the public domain. In some of the posts I point to information prepared by the bureaucracy which is likely to mislead Ministers and politicians – high speed rail, road reform and western Sydney rail are examples. However, arguably none have been immediately and highly relevant in the political sphere.
I am unaware of any evidence of what and when the Minister and Premier were told of the cost blow-outs and have no interest in looking at anything about this which is not in the public domain. There is a Public Service Commission and ICAC with relevant powers to ascertain the facts. Solid evidence of misconduct that is not in the public domain should be given to the Commission and ICAC.
To summarise: the Minister / and or Premier are legally and electorally responsible for the conduct of their agencies. This includes Transport for NSW. They direct and control such agencies. They also are legally responsible for drawing suspected illegal actions of those agencies or public servants, e.g. corrupt conduct, to the attention of the relevant authorities e.g. ICAC.
Whatever the source, or reasons for such cost blow outs, Government Ministers are responsible to the electorate. Those sources and reasons – no matter how good – can never be an excuse for Ministers.
Ministers also are among those responsible for the properly informed workings of democratic processes which here demand the public knew about such issues prior to the election. In this case a slap in the direction of Government Ministers is not only easy and necessary but an absolute minimum.
Thank you and best wishes
Hi John, and thanks for the reply.
I don’t think there’s anything I would argue about in your description of Ministerial responsibility and accountability. However, my reasons for looking at the light rail/tramway are also contained in your reply.
First of all, let me suggest a hypothetical with some resemblance to the metro case in order to clarify my point.
The Minister, accepting responsibility for a metro project, rises in Parliament and announces a large cost overrun due to an unforseen and unforseeable geological problem. Responsibility accepted. The Minister then accounts for the overrun by pointing to the unforseen and unforeseeable conditions. Of course, the Parliament may decide to censure the Minister. However, given the propensity of major projects to overrun, and the frequency at which they do, the history of such things is that the responsible Minister will not even get a slap over the wrist with a wet tram ticket. Further, where’s the argument that the Minister should? If every project with a major overrun caused a Minister to be penalised, there’d be no infrastructure Ministers left in the country.
In addition, I would suggest in this hypothetical a Minister would conclude their accounting by suggesting that they were wise, very wise indeed to select a small diameter tunnel, since a larger diameter tunnel cost would have blown out in cost by far more.
The metro proves popular with electors, and the Government and Minister are returned.
I see no elements of Ministerial responsibility, or accountability overturned here.
Now, with that simplified hypothetical, the only means I could see of using the metro to criticise the Government would be to be able to demonstrate that the causes of the cost overrun should and could have been knowable in advance, or at a point in the project where they could have been countered to good effect.
With all that in mind, and with the quite proper restriction of knowledge in the public domain, I see nothing that says the cost overruns of the metro could have been avoided, nor which would not have had a worse impact on a larger diameter standard heavy rail tunnel.
In summary, I believe the Minister has a good case to argue that they have accepted their responsibility, have accounted for themselves adequately, and have selected the option which in any event would cost much less than the alternative.
Now, with the tramway, the difference is this: with publicly available documentation, one can readily argue that the cost overruns were forseeable, preventable, and easily so. Further, the Minister cannot point to any proposed alternative as being more expensive.
So, which project should one focus on if one believes the Minister is not being held to account?
The metro, with the claim of unforseen and unforseeable conditions and a more expensive rejected alternative? Or the tramway, where publicly available documentation can show that the project was needlessly expensive?
Mr Skinner:
Thanks for those interesting comments, allow me to clarify my views a bit further.
In the hypothetical case of the Minister informing Parliament in a timely fashion of a cost overrun, I agree there is no accountability problem.
However, that hypothetical differs from the case at hand in all respects critical to accountability.
The aspects critical to accountability are (the reported) facts:
a. a Government agency documented a $4.3bn to $5.3bn cost overrun months prior to an election;
b. the public was not informed of this until months after the election;
c. The Minister subsequently said, and the Premier led the public to believe, they were unaware of the overrun until after the election.
As well as (a. and b.) being a problem for democratic accountability (see end comments) these give rise, on my reading, to legal accountabilities.
Matters a. and c. suggest the possibility of serious criminal offences on the part of public servants. It entails perhaps the most serious charge that can be made against public servants – behaviour and nonfeasance aimed at influencing an election.
If so, it would be a disgrace that public servants so involved should continue to be employed in that capacity. In my view the Minister and / or Premier, if they have made such allegations, would have a responsibility to dismiss those involved, to satisfy proper public expectations about the public service.
Irrespective of that, the Minister and Premier have a legal duty to advise and provide relevant evidence of their claim (of not being informed) to at least the ICAC and the Public Service Commission. Probably also the electoral commission and the police.
On top of these legal accountabilities, is electoral or democratic accountability. Re the cost overrun this cannot now be adequately discharged via the ballot box.
Hence the principled position is for the Minister and / or Premier to resign in the stead of the electorate having a say on such a significant matter.
Further, their claim of being uninformed is tantamount to the Minister and / or Premier admitting to not exercising appropriate control of Transport for NSW i.e. in permitting this nonfeasance. That should also be a resignation / dismissal matter.
Of course, the above presumes the Minister and Premier were truthful in this matter.
In this I have not mentioned the causes of the cost overrun, whether or not they were avoidable or foreseeable, who caused them, the name of the project, or the merits/concerns about the project. This is because none of those matters are relevant to the democratic or legal accountability described. None could possibly excuse withholding the information.
Hence it is not using Metro to criticise the Government. It is using the Government’s behaviour in relation to Metro – and other projects – to reflect on the Government.
We may differ on views about public information. I do not accept that ‘commercial’ or ‘cabinet’ classifications are a ‘proper restriction of knowledge in the public domain’. I have written on this previously https://www.thejadebeagle.com/commercial-in-confidence.html.
To oversimplify, the Government is not spending its money, but the public money provided to it by Parliament. It enters contracts honoured by current and future Governments and therefore Parliaments. In these matters, the Government acts on behalf of – as agent for – Parliament (and indirectly the public). This is responsible government – a point I made to Mr Shepherd’s argument.
An agent must not unilaterally decide to withhold information important to its principal from its principal. It is up to the principal to decide what information the agent provides it. It is up to the principal, not the agent, as to what is made public.
Implying the Government must not determine what of its arrangements with other parties is made public. At the least that is a matter for Parliament. The main exceptions relate to the safety and security of the population and preservation of institutions.
A further implication is a (State) Government need not be limited to ‘investing’ in particular projects, projects identified by ‘independents’ or certain processes, or even spend money efficiently. It can undertake needless or wasteful projects.
However, all such decisions should be open to Parliamentary scrutiny, which is generally public and therefore meets democratic accountability. However, this is only the case when Parliament (and the public) know of the matters in sufficient time so they can make a decision informed by the facts.
A matter in the public domain is available to Parliament. Therefore, such a matter is not a Parliamentary accountability problem – no matter how objectionable the facts might seem. It might be another problem – like internal administration, or efficiency – but that is not my concern here.
If it is considered Parliament is not adequately ‘holding the Minister to account’ on publicly available facts – that is a matter to be taken up with Parliament. It is not a democratic accountability problem, because there is nothing to prevent Parliament dealing with the Minister.
An example of this might be light rail. What was undisclosed about light rail during the election was the progress with negotiation of a settlement for litigation involving a contractor claim of $1.2bn. The fact of negotiation of a settlement was known and reported. If there was a problem, it was not institutional accountability but failure of the Opposition to prosecute its case.
In contrast, a major matter withheld from the public domain over, perhaps even due to, an election – say a cost overrun of $4.3bn to $5.3bn – is an accountability problem. The secrecy prevents Parliament from dealing with the Minister. It prevents the public exercising its accountability function of influencing Parliament via an election. Reasons and foreseeability of a cost overrun are irrelevant to that. The only relevant matter is that the overrun was not disclosed. That is a grave issue.
Best wishes