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Rural and Regional Affairs and Transport Legislation Committee
INFRASTRUCTURE AND REGIONAL DEVELOPMENT PORTFOLIO
Department of Infrastructure and Regional Development
- Committee Name
Rural and Regional Affairs and Transport Legislation Committee
Sterle, Sen Glenn
Edwards, Sen Sean
Gallacher, Sen Alex
Cameron, Sen Doug
Rhiannon, Sen Lee
ACTING CHAIR (Senator Sterle)
Rice, Sen Janet
Seselja, Sen Zed
McLucas, Sen Jan
Back, Sen Chris
Brown, Sen Carol
Heffernan, Sen Bill
Ludlam, Sen Scott
Bullock, Sen Joesph
Peris, Sen Nova
Cash, Sen Michaelia
- Sub program
- System Id
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Rural and Regional Affairs and Transport Legislation Committee
(Senate-Tuesday, 24 February 2015)
INFRASTRUCTURE AND REGIONAL DEVELOPMENT PORTFOLIO
Department of Infrastructure and Regional Development
Senator CAROL BROWN
ACTING CHAIR (Senator Sterle)
Australian Rail Track Corporation
Civil Aviation Safety Authority
Surface Transport Policy Division
Australian Maritime Safety Authority
National Capital Authority
Policy and Research Division
Australian Transport Safety Bureau
- Department of Infrastructure and Regional Development
- INFRASTRUCTURE AND REGIONAL DEVELOPMENT PORTFOLIO
Content WindowRural and Regional Affairs and Transport Legislation Committee
INFRASTRUCTURE AND REGIONAL DEVELOPMENT PORTFOLIO
Department of Infrastructure and Regional Development
Department of Infrastructure and Regional Development
Senator STERLE: Is the department aware of when the National Infrastructure Committee of cabinet meets?
Mr Mrdak : Yes, as with all cabinet committees, there is a forward agenda of meetings. At this stage, that committee meets at least quarterly.
Senator STERLE: What involvement does the department have in these meetings?
Mr Mrdak : It is a cabinet committee. The committee is supported through the normal arrangements of the cabinet office. The department provides draft submissions for the minister if there is an item on the agenda which relates to the minister's portfolio. The department provides briefing, assistance and advice to the portfolio ministers who are attending the meetings.
Senator STERLE: How many meetings of this committee have been held since it was formed?
Mr Mrdak : I would have to take that on notice. I do not have that specific detail with me.
Senator STERLE: While you are taking that on notice, can you also advise the dates the committee has held meetings since it was formed?
Mr Mrdak : Yes, I will take that on notice too.
Senator STERLE: Which ministers are members?
Mr Mrdak : The membership of the cabinet committee has been publicly announced. It is chaired by the Prime Minister. The ministers attending the meetings are the Treasurer, the Deputy Prime Minister and the Assistant Minister for Infrastructure and Regional Development. That is essentially the core attendance. Other ministers are co-opted as required.
Senator STERLE: Can you tell the committee how many of those meetings Minister Truss has personally attended?
Mr Mrdak : To my knowledge he has attended all meetings of the committee.
Senator STERLE: Can you tell us how many of those meetings Assistant Minister Briggs has personally attended?
Mr Mrdak : To my knowledge, Assistant Minister Briggs has attended all meetings of the committee.
Senator STERLE: And the Treasurer?
Mr Mrdak : Again, to my knowledge the Treasurer has attended all meetings, but I am happy to take that on notice.
Senator STERLE: While we are at it, can you tell us how many meetings the Prime Minister has personally attended?
Mr Mrdak : To my knowledge, the Prime Minister has chaired each meeting of the committee.
Senator STERLE: How many reports has the committee made to the full cabinet since it was formed?
Mr Mrdak : I do not have that information. I am happy to take it on notice to talk to the Department of the Prime Minister and Cabinet to see what assistance I can provide on that.
Senator STERLE: With these questions on notice, I know the chair and committee will set a date and time—which we have not but it will not be far away—but if, for any of the easier ones, you can come back and respond after each session, it will take the workload off your department and makes it easier for us. I know that is the way you usually work, Mr Mrdak, so thank you for that. While you are at it, could you tell us on what dates did the full cabinet have a report from this committee on its agenda?
Mr Mrdak : Again, I will take that on notice.
Senator STERLE: Okay. In a written answer, No. 24, to October estimates—I am talking about market research here—is it correct that the department has spent $228,000 to date on market testing for livery for the Western Sydney airport project?
Mr Mrdak : I will just check those numbers for you. It is not for livery. It involves a range of communications and market-testing tasks, including the development of a community engagement strategy for the community. As you are aware, the development of the Western Sydney airport at Badgerys Creek is a very detailed project for which the community is seeking information. The work involves a consultancy which we have let to a firm to provide services which are more than just livery. It is a whole community strategy of information and the like which will be available, including information which will be available through the environmental impact statement process which is now underway. I will just get Mr Wilson to confirm that number.
Mr Wilson : That is correct.
Senator STERLE: So the $228,000 is total? That is the community engagement and everything, not just livery?
Mr Mrdak : That is a consultant that we have engaged for a period of time to undertake a range of activities around community information, yes.
Senator STERLE: Is that information publicly available—and the break-up?
Mr Mrdak : We can certainly provide for you on notice the details of the contract.
Senator STERLE: I would appreciate that. Could the committee have the whole break-up: who got what, what it was spent on, how much was livery—
Mr Mrdak : Certainly.
Senator STERLE: exactly what you talked about. Is that a—
Mr Wilson : There was no expenditure on determining livery associated with the project.
Senator STERLE: Great. Can we just have a breakdown of the $228,000 on the market research. Thank you for that. Mr Mrdak, can you indicate whether any of the following acts have been accounted for as delivering savings to industry within the department or its portfolio agencies? I will go to the Omnibus Repeal Day (Spring 2014) Act 2014.
Mr Mrdak : No, I do not believe we had any portfolio acts in that omnibus bill.
Senator STERLE: What about the Amending Acts 1970 to 1979 Repeal Bill 2014?
Mr Mrdak : We will have to take that on notice. I do not believe so, but I will take that on notice for you.
Senator STERLE: No worries. While I am at it, what about the Statute Law Revision Bill (No. 2) 2014? I am looking for the nods behind.
Mr Mrdak : I will just get the responsible officer to the table.
Senator STERLE: Great, thank you.
Ms Spencer : Again, we would have to take that particular one on notice. They are all coordinated through the Department of the Prime Minister and Cabinet.
Senator STERLE: That is fine. If those bills were passed unamended, that would be helpful too. That was painless. I am finished. I am done.
Senator EDWARDS: Can I talk about asset recycling here?
Mr Mrdak : Certainly.
Senator EDWARDS: Okay, great. Have you had any discussions with the South Australian state government around the asset-recycling scheme?
Mr Mrdak : Yes, the South Australian government has been involved in discussions. As you are aware, all of the states and territories signed an agreement in May last year in relation to the Asset Recycling Initiative. South Australia has put an indicative proposal of some asset-recycling options around the further investment in the South Road project arising from its promised disposal of assets.
Ms O'Connell : All states and territories have signed the National Partnership Agreement on Asset Recycling. It is administered through the Department of the Treasury. This department portfolio does play a role in terms of providing an assessment on the particular projects that are put forward by the states and jurisdictions. To date, my understanding is that there is one state for which an announcement has been made, and that is the ACT. A number of states have put forward proposals, and we provide some assessments on those proposals.
Senator EDWARDS: What are the assets that the South Australian government has talked to you about?
Mr Mrdak : In terms of the asset that they propose to dispose of?
Senator EDWARDS: Yes.
Mr Mrdak : I will just get that detail for you.
Senator EDWARDS: You might, while we are just getting that detail, think about this. You say you go through an assessment process. What do you actually assess? Do you provide recommendations for them?
Ms O'Connell : In terms of the asset sales, we do not enter into discussions with the jurisdictions about what assets they are selling. That happens with the Department of the Treasury, who are overall responsible for the Asset Recycling Initiative. What we do is an assessment, according to particular guidelines that were set as part of that National Partnership agreement. We do an assessment of the proposed projects that the money is going to be spent on, which is the funding that the federal government is providing in terms of the 15 per cent incentive on top of the asset sales. So ours is not on the proposed assets for sales but on the asset to be invested in, in terms of its strength as an infrastructure asset. That is the advice that we provide to the Treasurer through the Deputy Prime Minister on the Asset Recycling Initiative.
Senator EDWARDS: You say you have looked at a number of targets for moneys to be expended in South Australia.
Ms O'Connell : As proposed, South Australia has written to the Treasurer proposing some asset sales in keeping with the partnership agreement.
Senator EDWARDS: Did they name those assets?
Mr Mrdak : I do not think we have the details with us.
Ms O'Connell : We do not have it with us, and we do not look at the assets that are proposed for sale.
Senator EDWARDS: I understand that.
Ms O'Connell : We only look at what the spend is.
Senator EDWARDS: Did they name the assets that they were looking at selling?
Mr Mrdak : I believe they have, but we do not have the details with us. I will try and get those for you this morning.
Senator EDWARDS: It would be great if we could detail those assets. What are the projects that they are proposing for the money to go into in this?
Mr Mrdak : The South Australian government's initial proposal is for any asset recycling moneys to be reinvested in the Torrens to Torrens and the Darlington projects to essentially accelerate them.
Ms O'Connell : The Darlington project involves the South Road.
Senator EDWARDS: Have they not been funded already?
Mr Mrdak : They have, and we have some concerns with the South Australian proposal as to whether it meets the government's criteria of effectively driving further productivity and economic reform. The South Australian proposals essentially seek to return to the completion date that we thought had already been agreed.
Senator EDWARDS: Wow! So the South Australian government is proposing to sell an asset and use the recycling money on a project that is already funded to pay for something that may not happen.
Mr Mrdak : In essence, the South Australian government has indicated there may be some slippage in the program. That has been agreed.
Senator EDWARDS: Slippage?
Mr Mrdak : In which case, they have indicated that they may be able to return to the original program if the asset recycling funds were available for that project. We have questions as to whether that meets the federal government's intent.
Senator EDWARDS: I am sure they are very big questions.
Mr Mrdak : They are considerable questions in relation to whether that is an appropriate use of the asset recycling moneys to effectively provide additional funding to a project that the Commonwealth has already provided substantial resources to.
Ms O'Connell : I think the guidelines for the asset recycling are clear about it being a new piece of infrastructure. So it is difficult to see that it would fit that criterion.
Senator EDWARDS: That clearly does not fit that category. How far is this down the track, because. at first brush, even here in the three minutes that we have been talking, this just does not pass the pub test or the smell test or whatever test you would like to apply?
Mr Mrdak : At this stage, as Ms O'Connell has indicated, the South Australian government has written to the Treasurer, putting forward this proposal. We have provided advice to our minister. The Australian government is now considering its response to the South Australian proposal. I think, informally, indications have been made to the South Australian government that we do not believe that that is an appropriate investment for the type of program we have put forward.
Senator EDWARDS: So now they are racing around to try and find somewhere else to burn the money.
Mr Mrdak : I do not know about that. I think we are waiting to see whether they have other proposals.
Senator EDWARDS: Do you remember the $41 million that they forgot to spend on the electrification of the Gawler train line? They forgot to give you the money back when they did not do it. They actually forgot to tell you that they were not going to do it. Are we going to see a repeat of that?
Mr Mrdak : We would certainly hope not.
Senator EDWARDS: You have got your eyes on this government in South Australia, have you?
Mr Mrdak : It was, as you know, a protracted process to get those funds returned to the Commonwealth. We would certainly not want to see a replication of that.
Senator EDWARDS: Yes, because that was just a pea-and-thimble trick, wasn't it? I will be very interested to see what proposals they come up with for the asset recycling bonus. Thank you.
Senator GALLACHER: Mr Mrdak, or any of the officers, where does road-tolling fit in the federal sphere on these projects, given South Australia's position on no tolls?
Mr Mrdak : Where does road-tolling fit in?
Senator GALLACHER: Are you trying to drive road-tolling on these projects?
Mr Mrdak : We are not, of itself, trying to drive road-tolling. We are trying to ensure that projects are financed. Obviously, one of the means of financing, particularly a number of large urban projects, is to provide user charges or tolls in relation to that to provide a means of funding the projects.
As you know, one of the greatest issues of governments of all persuasions around the country is, in the future, how we fund some of these major infrastructure projects in the absence of revenue streams like tolls. We do not then otherwise have the revenue streams to support private finance.
Senator GALLACHER: Given the South Australian government's position with respect to road tolls—a very broadly supported position—is that a difficulty that is driving this asset recycle.
Mr Mrdak : No, the Australian government has never set a requirement that projects be tolled as part of receiving Commonwealth moneys. Clearly, on some projects where there is an advantage and where projects can be funded and financed through revenue means like tolls, we would support that. But it has not been made a mandatory condition of any Commonwealth project assistance.
Ms O'Connell : It is fair to reflect that the Productivity Commission reported, in its recent report on infrastructure, that user-charging plays a significant role in funding and financing infrastructure assets. So, clearly, where there is tolling there is an ability to invest in more pieces of infrastructure as a result.
Senator GALLACHER: You are saying that if there was road tolling it would attract more investment from the federal government. Is that what you are saying?
Mr Mrdak : No, Senator. I think what Ms O'Connell is indicating is that in the absence of revenue streams from road-user charging, it is often difficult for governments to find the funds to invest in the sorts of large-scale urban infrastructure at the costs involved. So in many situations the community is faced with a choice. In the absence of user chargers infrastructure would not be available—certainly in the foreseeable timeframe and in the absence of private financing.
Senator GALLACHER: So these projects that we talk about—Darlington and Torrens—will go ahead without road tolling?
Mr Mrdak : They are commitments by the governments to proceed with those projects. Yes.
Senator GALLACHER: And there will be no road tolling—
Mr Mrdak : That does not form part of it.
Senator GALLACHER: demanded by the federal government or anybody else.
Mr Mrdak : The proposals do not involve road tolls for those projects.
CHAIR: We will move on to Infrastructure Investment Division.
Senator CAMERON: In October 2014, the opposition asked questions about traffic modelling by RB Consulting for WestConnex stage 2. Do you recall that?
Mr Mrdak : Yes, Senator.
Senator CAMERON: The work was not finished then. Is it finished now?
Mr Mrdak : I will just get that information for you.
Mr Jaggers : Work is ongoing with that consultant.
Senator CAMERON: Work is ongoing. What does that mean? How long has this work been ongoing?
Mr Mrdak : The consultant provided an initial report to us, which was subsequently provided to the WestConnex Delivery Authority. That report outlined a number of issues, where our consultant thought there needed to be further work done in relation to patronage forecasts. New South Wales have been undertaking that work. As that work is completed by New South Wales I would expect our consultant will then look at the results of that work and provide further advice to us. We still have that consultant engaged by us.
Senator CAMERON: Is that Jacobs SKM?
Mr Jaggers : No, this is the RB consultant.
Senator CAMERON: The RB consultant. But you indicated in your answer to question 93 from October last year that Jacobs SKM were doing additional traffic modelling for the New South Wales government, stage 2.
Mr Jaggers : If I could clarify, there were consultants employed by the New South Wales government through the WestConnex Delivery Authority. The Australian government has also employed a consultant to provide advice to us on patronage. Our consultant is reviewing the work that has been undertaken by New South Wales.
Senator CAMERON: Just let me get this clear. The New South Wales government is doing work on traffic modelling.
Mr Jaggers : Yes.
Senator CAMERON: What model is that? What company is doing that?
Mr Danks : We believe Jacobs SKM are continuing to be engaged. There has been some in-house capacity that WestConnex Delivery Authority has been able to generate over time. They have also taken on a bit more of the modelling work.
Senator CAMERON: Jacobs SKM are doing that modelling. You indicated they were doing additional traffic modelling. Is this one project they are involved in?
Ms O'Connell : No. Perhaps it is easier to explain that the WestConnex Delivery Authority is part of the New South Wales government and is responsible for doing the modelling. What we have done is arrange peer review or scrutiny of that modelling through our consultancy, which raised a number of questions in areas that needed clarification. The New South Wales government has taken those suggestions and comments on board and is revising its current traffic modelling.
Senator CAMERON: Who did the Commonwealth modelling?
Mr Danks : The Commonwealth has not done its own modelling. It has been peer reviewing the work that the New South Wales government has done.
Senator CAMERON: Who is doing the peer review?
Mr Danks : RB Consulting is our adviser.
Senator CAMERON: When I asked earlier about traffic modelling by RB Consulting and WestConnex too, that is the Commonwealth.
Mr Jaggers : That is correct.
Ms O'Connell : Just to clarify, it is not that RB are doing the modelling, they are peer reviewing it.
Senator CAMERON: They are doing the peer review, I think you described it as. They found some issues with the WestConnex or New South Wales government modelling. Is it WestConnex modelling or is it the New South Wales government? I just want to get it clear.
Mr Mrdak : It is modelling undertaken by the WestConnex Delivery Authority.
Senator CAMERON: On behalf of the New South Wales government
Mr Mrdak : The New South Wales government, yes.
Senator CAMERON: If we say 'New South Wales government modelling' that would be okay.
Mr Mrdak : That is right.
Senator CAMERON: RB Consulting raised issues about the modelling.
Mr Mrdak : Yes.
Senator CAMERON: What were those issues?
Mr Mrdak : I will get Mr Danks to provide you with that information.
Mr Danks : I will take the actual details on notice. The overall finding at the time was the modelling was sound; however, there are some issues around the edges we needed to work on. The New South Wales government has undertaken to look at those issues and that is what we are currently working through at the moment.
Ms O'Connell : I would just add that in terms of peer reviewing of patronage, risk forecasting is a good healthy practice to have. The expectation is that most models should be tested with different, separate eyes and it builds what is basically a better model, as a result. That is the intent and aim.
Senator CAMERON: The City of Sydney has also done some modelling; are you aware of that?
Ms O'Connell : The City of Sydney?
Senator CAMERON: The City of Sydney.
Mr Mrdak : I saw media reports this morning of work undertaken by the City of Sydney but we have not had a chance, to my knowledge, to see that work. I will check with my officers—no, we are not familiar with the work that was reported in the media this morning.
Senator CAMERON: You are not aware of the City of Sydney modelling that has been done in cooperation with WestConnex or whether it is separate modelling. Are you aware?
Mr Mrdak : We are not aware of it. I presume it has been done separately, but I can take that on notice and come back to you.
Ms O'Connell : We first became aware of it this morning in the paper report; we have not been asked about it or been involved in it.
Senator CAMERON: Will you be peer reviewing the City of Sydney modelling?
Mr Mrdak : If the City of Sydney were to put that to us we would be happy to have a look at that.
Senator CAMERON: Why do we have the reactive position from the Commonwealth? If there is modelling out there on a multibillion dollar project that we are engaged in, why would you not just have a look at it?
Mr Mrdak : We would be happy to. If what is in the public arena is the full modelling, then we would be happy to do that. As you know, sometimes analysis has a proprietary element to it. That would depend on the authorisation of the City of Sydney. They would have to initiate that with us. I presume that following this morning's media reports the WestConnex Delivery Authority would be similarly seeking that detail from the City of Sydney to enable that work to be done.
Senator CAMERON: Why would you not be saying to the City of Sydney, 'We have seen reports about modelling; we have skin in the game; can you show us what you have done?'
Mr Mrdak : I am very happy to do that. I read the article literally an hour or so ago. We would be very happy to contact the City of Sydney and were they prepared to provide us with the full details we would be happy to have a look at it.
Senator CAMERON: Good; that is fine. That is different from what you said earlier. You said if they gave it to you, you would have a look at it.
Mr Mrdak : As I said, we are happy to make the approach but, at the end of the day, they have to initiate it, to us, providing us with the level of detail we would require.
Ms O'Connell : It is also our expectation that the WestConnex Delivery Authority would be having a look at City of Sydney's modelling as well. We would have a look as well. I am not sure we would go to necessarily the expense of a full peer review, depending on what that initial look revealed.
Mr Mrdak : It is important to recognise that our work is around the Commonwealth's loan, our concessional loan arrangement. Responsibility for the full modelling of the project is with the WestConnex Delivery Authority.
Senator CAMERON: The loan gives the Commonwealth skin in the game, doesn't it?
Ms O'Connell : Absolutely; we have skin in the game in the project.
Senator CAMERON: We would have to be concerned about any modelling that has been done that might be in opposition to what is already on the public record or raising concerns about it, surely.
Ms O'Connell : Absolutely. We will be looking at it, in the same way that we have gone through a fairly rigorous peer review of the initial work done. If there is any other modelling out there that raises some questions or concerns, we will be having a look at it and will be in discussions with the WestConnex Delivery Authority.
Senator CAMERON: You have looked at the New South Wales traffic modelling. Will you be releasing that for the Senate? Can you provide details of your peer review of the New South Wales traffic modelling?
Mr Mrdak : I will take that on notice once that work is completed. I do not forecast a situation where we would not be able to provide it, but let me take that on notice and, particularly, find out what the timetable is for that work to be completed. Our interest is ensuring that the Commonwealth loan can and will be repaid in accordance with the proposed loan agreement.
Senator CAMERON: That is a bit different from the answer you gave in October last year for question on notice No. 94. You said it was commercial-in-confidence and would not be released. That is the New South Wales traffic modelling.
Mr Mrdak : You asked me for our modelling.
Senator CAMERON: But your modelling will go to aspects of—you have the new South Wales modelling, do you not?
Mr Mrdak : That is correct.
Senator CAMERON: I am asking for that to be released.
Ms O'Connell : That is a different question.
Senator CAMERON: Let us finish on the first one. On notice, you will take the issue of releasing the peer review of the New South Wales traffic. Just to get it clear, you will take on notice the proposition of releasing the peer review of the New South Wales traffic modelling.
Mr Mrdak : That is correct.
Senator CAMERON: You said you cannot see any reason that it would not be released but you are taking it on notice.
Mr Mrdak : We will take that on notice to ensure there is no commercial information that would otherwise be compromised by that release. In principle, I do not see an issue.
Senator CAMERON: I want to come to this commercial-in-confidence issue. You have in your possession the New South Wales traffic modelling, and you will not release that based on commercial-in-confidence. Is that right?
Mr Mrdak : That material is the property of New South Wales. That would be a matter for them to release that information. To this point, New South Wales has requested that information not be publicly released.
Senator CAMERON: Once they gave you that they made a request for it not to be released. There is now a document in the possession of the department. It becomes, basically, a Commonwealth document.
Ms O'Connell : No. For all matters in relation to, for example, freedom of information, the originator of the document—the author of it, which is the New South Wales government in this instance—retains the right to make a decision about whether we release it or not. We must request their permission to release it.
Senator CAMERON: Would you be in a position to request release for the Senate?
Ms O'Connell : We could request the New South Wales government's agreement to release it. We cannot release it.
Mr Mrdak : We cannot unilaterally release it.
Senator CAMERON: I am just trying to come to the technicalities of this. If we have got skin in the game, we are basically a partner in this project?
Mr Mrdak : Yes.
Senator CAMERON: So it is partly a Commonwealth project?
Mr Mrdak : The Commonwealth is providing a substantial funding contribution, yes.
Senator CAMERON: So it is partly a Commonwealth project. You have documentation that goes to one of the key aspects of this project. What is our investment in this project overall?
Ms O'Connell : It is $1.5 billion as a grant fund, and the loan.
Mr Mrdak : And the $2 billion concessional loan.
Senator CAMERON: So all up, how much Commonwealth money, in one way or another, is involved?
Mr Mrdak : The total, with the loan and the grant, is $3.5 billion.
Senator CAMERON: So we have $3.5 billion worth of Commonwealth money in this project; you have in your possession, as a partner in the project, New South Wales government traffic modelling. That is the factual situation?
Mr Mrdak : We have access to that traffic modelling, yes.
Senator CAMERON: My view, and what I am putting to you is: given that we are a partner in the project, given that it is partly a Commonwealth project and given that you have a document relating to a Commonwealth project, then I am seeking release of that document to the estimates committee. You either release it or you have to—you cannot just claim commercial confidentiality. You know that, don't you?
Mr Mrdak : Yes, Senator. I am well aware of the orders of the Senate.
Senator CAMERON: Are you claiming commercial confidentiality?
Mr Mrdak : No, what I was indicating to you was that the New South Wales government has made clear the basis on which we have been provided with the information. I am happy from today to take on notice the question you have asked in relation to the release of the material we have from New South Wales. I cannot at this stage give you a commitment that I will, or can, release that at the moment, but I am happy to take that on notice.
Senator CAMERON: We have $3½ billion worth of Commonwealth money in this project and you are haggling with the Senate estimates committee about releasing one of the key aspects of this project—one of the aspects that could make or break this project.
Mr Mrdak : I do not know how you would express our conversation as 'haggling'. What I have indicated to you is that I will take on notice the basis on which the information has been provided to us. I will come back to the committee with advice as to the status of that and New South Wales's view on the release of that material to the committee.
Senator CAMERON: Unless you are claiming—unless the minister has to claim—or unless the minister is claiming commercial confidentiality, that document should be tabled.
Senator Cash: Chair?
Senator CAMERON: That is where you are haggling.
Senator Cash: No, Deputy Chair—just to be very clear, because obviously there seems to be, Senator Cameron, a slight misunderstanding. The officers at the table have given a very clear explanation as to why they have taken the question on notice. The question has been taken on notice. They will now go back and do whatever they need to do by way of process to see whether or not they can acquiesce to your request. In the event that they can they have said they will; in the event that they cannot they will provide an explanation. But at this particular point in time, with all due respect, there is no haggling. The secretary has clearly stated that he has taken the question on notice to ensure that he goes through the proper process. That is it.
Senator CAMERON: And I am drawing your attention, Minister, to proper process under Senate estimates.
Senator Cash: Yes, and proper process is that once that question is taken on notice, Senator Cameron, the question is taken on notice. The officer has taken the question on notice.
Senator CAMERON: No. The argument that has been put up is that it is a commercially confidential document. I am indicating that unless you can make that out to the estimates committee, then the document should be tabled.
Senator Cash: And the officer has taken the question on notice. He is not at this present point in time seeking to make that out to the estimates committee. He has taken the question on notice. Should you get to that stage further down the track, then your arguments will be enlivened. But at this particular point in time the secretary has clearly stated that he will take it on notice and have a look at it for you.
Senator CAMERON: Let me take you to the standing order. It says:
The Senate and Senate committees shall not entertain any claim to withhold information from the Senate or a committee on the grounds that it is commercial-in-confidence …
That is clear.
Senator Cash: That is not the ground upon which the secretary is claiming—
Senator CAMERON: Well you did raise commercial-in-confidence.
Senator Cash: He raised it but he did not claim it.
Senator CAMERON: If you do not claim it, table the document.
Senator Cash: That is not how it works, Senator Cameron. You and I have both been here long enough to know that you are entitled to take a question on notice. We do it all day every day in Senate estimates committees.
Senator CAMERON: This is not so much a question; it is asking for the tabling of a document. It is not a question.
Senator Cash: But the officer has responded that he will take it on notice. It would be improper to release a document that the officer does not have authorisation to release.
Senator CAMERON: From whom?
Senator Cash: Clearly the officer has already outlined that process.
Senator CAMERON: So, Mr Mrdak, are you claiming that with up to $3½ billion of skin in the game you cannot release a copy of this modelling because the state government is saying it wants it kept secret?
Mr Mrdak : What I have said to you is that the state government has indicated that some of the output of their traffic modelling they regard as commercial-in-confidence. I have not made any comment in relation to your request apart from, as the minister has outlined, my view that we can take on notice what can be provided and what will be provided to the committee once I have gone back, as the minister has indicated, and checked the material provided to us by the state of New South Wales.
Senator CAMERON: Can that be done today?
Mr Mrdak : I will try to do it today.
Senator CAMERON: Can that be done by lunchtime today? Can you have one of your people start to look at that now?
Mr Mrdak : My officers are here with me this morning. Once we have completed the hearings with the committee we will make contact with the state of New South Wales and start the process. I will endeavour to do that as fast as possible but it would be disingenuous of me to say I can complete that today. I will make every effort.
Senator CAMERON: That is fine, but I just want it clear that I am not asking a question; I am simply asking for the release of a document.
Mr Mrdak : I understand that.
Senator CAMERON: Then if you are not prepared to release the document you have to give us a reason—you know that.
Mr Mrdak : We have been very careful in our response to you, fully understanding that.
Senator RHIANNON: Chair, I seek some clarification. All we are asking for is for a document to be released. Is there a time frame here? Normally with other committees they are released fairly quickly.
ACTING CHAIR ( Senator Sterle ): Senator Rhiannon, the secretary has said he will take it on notice. He gave Senator Cameron a commitment that he will do the best he can, without committing. We do not have a set time. Normally this department get back to us ASAP. This department is one of the better ones—although answers to questions on notice can be a bit sloppy, not from the department but from ministers. We do not play this silly game about 'you must be back at nine o'clock'. But I know where you are coming from. Senator Cameron is relaxed; he has asked the question and we will rely on the goodwill of the officers to get back to us ASAP.
Senator RHIANNON: Thank you, Acting Chair.
Senator RICE: Is this document we are discussing the government's peer review or the New South Wales modelling?
Mr Mrdak : I understand Senator Cameron has asked for the New South Wales government traffic modelling that we have. Part of the reason I am being cautious is that it may not simply be a single document. There are outputs of a series of models that have been undertaken and I will need to go back and check. To my understanding Senator Cameron is asking for a copy of the New South Wales material provided to us.
Senator CAMERON: Can I clarify that I also asked for the peer review.
Mr Mrdak : And I previously—
Senator RICE: Have you taken the peer review on notice as well?
Mr Mrdak : Yes, I have. I have indicated to Senator Cameron that my intention would be that, wherever possible, I would release the material in the peer review.
Senator RICE: But you cannot commit to doing that now, even though that is your document?
Mr Mrdak : Again I will take it on notice, simply because I need to check the status of the document and what material it contains.
Senator CAMERON: The Commonwealth paid $25 million to the New South Wales government for planning of the WestConnex project. Has that $25 million been expended?
Mr Mrdak : That is my understanding. I will just check that with my officers. That was paid—
Mr Jaggers : Yes, the funding has been paid, and my understanding is that that money has been expended.
Senator CAMERON: What was that expended on?
Mr Jaggers : The funding was provided on 7 March 2013 to assist the New South Wales government to advance planning and develop a business case for WestConnex. That funding went into funding the business case in 2013.
Senator CAMERON: So it was to develop the business case?
Mr Jaggers : Yes.
Senator CAMERON: Have you seen the concerns of the New South Wales Auditor-General in relation to the business case?
Mr Jaggers : Yes, I have seen those.
Senator CAMERON: Have you or anyone from the federal government raised the issue of the problems with the business case, given that we funded the thing? What have we done about the concerns of the Auditor-General on the business case?
Mr Jaggers : We have had discussions with the New South Wales government through the WestConnex Delivery Authority. We have talked to them about the findings of the Auditor-General's report. We are involved in project steering committees in relation to the project, where the issues that have been raised have been discussed. We have talked to New South Wales about the governance arrangements that they have in place, including the WestConnex Delivery Authority board, which is providing oversight of the project. That WestConnex Delivery Authority board has also ensured a number of robust gateways as the project has been proceeding. We have been tracking that process. Of course, we have had discussions with New South Wales about the Auditor-General's report.
Senator CAMERON: So we paid $25 million, and we get an unsatisfactory—we do not have a business plan, do we?
Ms O'Connell : There is a completed business case for WestConnex.
Senator CAMERON: A business case.
Ms O'Connell : Yes.
Mr Mrdak : Yes.
Mr Jaggers : A business case has been developed and a summary of the business case has been released. A lot of the documents contained within that business case were released to the New South Wales Legislative Assembly.
Senator CAMERON: I will come back to this. The $25 million has been provided, and the Auditor-General in New South Wales has raised these concerns. Ms O'Connell, what have we raised with the New South Wales government in terms of the criticism of the New South Wales Auditor-General? What have we raised with them?
Ms O'Connell : We are in discussions with New South Wales on addressing the concerns raised by the Auditor-General. The New South Wales government, I think, has accepted the comments made by the Auditor-General and is putting in place a number of measures to deal with the issues raised by the Auditor-General. We are involved closely with New South Wales in making sure those issues raised are addressed.
Mr Mrdak : In essence, if I might add, the Auditor-General, in my understanding, raised questions around the project assurance arrangements that had been put in place inside the WestConnex Delivery Authority, not so much questioning the work that had been done but to ensure the level of detail and the transparency about some of the material that had been provided. My understanding is that New South Wales has accepted those recommendations and the WestConnex Delivery Authority has actually made arrangements—I will check this—to satisfy the requirements of the Auditor-General in terms of those quality assurance processes. They do not go to the heart of the issue of the business plan per se; they go to project assurance quality around delivery mechanisms. That is my understanding.
Senator CAMERON: Okay. I am going to come back to this. I have a fair bit to do.
CHAIR: Senator Cameron, could we just rest you for a second and give Senator Rhiannon a go.
Senator CAMERON: I would rather not. I have not even started. I need another—
CHAIR: That is what I am worried about. Some of these other senators have to go to other areas. You are here for a good while, aren't you?
Senator CAMERON: I am the same. I am trying to work between committees as well.
CHAIR: Righto. But when you get a chance and you want to have a breather and a cup of tea or a gentleman's break, you might just give Senator Rhiannon the call.
Senator CAMERON: I will try to get through this as quickly as I can. Mr Mrdak, are you aware of Minister Truss's answer to Mr Albanese's House question on notice No. 555, dated 30 January 2015, where the minister indicated that payment milestones for WestConnex are yet to be determined? I assume that you assisted with that answer.
Mr Mrdak : I am aware of that answer, yes.
Senator CAMERON: I assume that information is correct. It is only three weeks since the minister's answer.
Mr Mrdak : That is correct.
Senator CAMERON: Can you list what the milestones are that we are supposed to be achieving.
Mr Mrdak : Certainly. I will ask my responsible officers who have been working on this project to answer.
Mr Foulds : The milestones will be determined once the project proposal report has been received from New South Wales. A draft has been received and is currently being assessed. The milestones that are—
Senator CAMERON: I am sorry to interrupt you, but I just need to understand. You do traffic modelling. You do a business case. What is a project proposal report? Where does that fit?
Mr Foulds : Under the national partnership agreement between the states and territories and the federal government, and under the act, there is the requirement for projects to have a proposal report put to the federal government for approval. That proposal report details essentially business case information on a project. Once approved, the project is then approved under the National Land Transport Act and is eligible to be funded. The funding is then made against a range of milestones. Those milestones are agreed between states and territories by project.
Ms O'Connell : It is really a technical document solely in relation to release of Commonwealth funds. It is not for the general project like a business case is. It is just for the release of Commonwealth funds.
Senator CAMERON: It might be a technical document, but surely we do not do it for nothing.
Ms O'Connell : No, that is right. I am just pointing out that it is specifically related to the Australian government funding, not the project overall.
Senator CAMERON: So you are saying, Mr Foulds, that before the funding is released we have to have the project proposal report. That project proposal report includes the business case. Does that have to be an approved business case?
Mr Foulds : It does not necessarily include the business case but it is informed by the business case. It is provided by the state or territory concerned. The format for the project proposal report is outlined in the national partnership agreement and in the notes that accompany that. Every state and territory applies that. They provide the project proposal report in accordance with that document.
Senator CAMERON: To use layman's terms for this, they are checks and balances for the Commonwealth's investment in a project to make sure things are going okay.
Mr Foulds : It certainly includes checks and balances.
Senator CAMERON: We do not have a final business case, do we? The business case is still being done, isn't it?
Mr Foulds : The New South Wales government made clear late last year that they are updating the business case to include the northern and southern connectors and the commitment by New South Wales to look at a new harbour tunnel. As a result, they are conducting that work to update the business case. That is due to be presented to the New South Wales government sometime mid this year.
Senator CAMERON: Before the money goes in, are we complying with all the issues around the project proposal report? Are we satisfied that we have met all of our legislative requirements before handing money over?
Mr Foulds : We will provide advice to the minister based on that project proposal report.
Senator CAMERON: No, that is not what I am asking. I am asking whether the department is satisfied that the legislative requirements under the Land Transport Act are being met in relation to this project before money is spent.
Mr Foulds : That would be part of the advice.
Senator CAMERON: What do you mean 'that would be part of it'. This is not advice to the minister; this is the estimates committee of the Senate trying to make sure that Commonwealth money is spent appropriately. This is not about advice to the minister; this is about your responsibility to advise the estimates committee of the proper expenditure of estimates.
Mr Mrdak : To cut to the chase—
Senator CAMERON: I am very unhappy about this. Can you tell me where this is heading?
Mr Mrdak : The department's view is that the project is proceeding and is in accordance with the national Land Transport Act.
Senator CAMERON: That is your formal position?
Mr Mrdak : Yes.
Senator CAMERON: It would have been nice to have that response first up. How much has the Commonwealth paid to the New South Wales government for WestConnex so far?
Ms O'Connell : The Commonwealth government, consistent with its election commitments, has provided $500 million to the New South Wales government for WestConnex. And the $25 million previously talked about from some years earlier—that was planning money; I am excluding that. I am talking about the money to construct.
Senator CAMERON: What are the projections for expenditure this year by the Commonwealth? How much money are you handing over to the New South Wales government this financial year?
Mr Jaggers : We are projecting $250 million this financial year.
Senator CAMERON: I want to come back to the milestones. You are saying milestones are in place?
Mr Foulds : The milestones which have been discussed and will be agreed are along the lines of completion of the concept design for a particular stage, awarding shortlisting of expressions of interest, commencement of work. And then there will be some others which will be developed—when a definitive piece of work is completed; it might be a bridge, a culvert or a particular period. Those will be developed with an expenditure profile, so that when that milestone is reached at that point the funds will flow for having achieved that milestone.
Senator CAMERON: But you indicated some are still being developed.
Mr Foulds : The project is a 10-year project. The first construction project is the M4 widening, which is due to commence construction in April this year. The detailed milestones for that project will be worked out once the PPR is finalised. It is along those lines.
Ms O'Connell : There are three full stages of it. Stage 1 is obviously the first stage to get going. There has been a contract awarded for the M4 widening and there are milestones associated with that. The difficulty is that the project is a long-term project and there will be milestones set for stages 2 and 3 later on, but stage 1 is clearly underway with a contract set for the M4 widening. With the contract established for the M4 widening, the actual physical construction work will be starting very soon.
Senator CAMERON: Do you have the milestones for stage 1?
Ms O'Connell : I think Mr Foulds has said that we have some milestones suggested by New South Wales and we are in discussion with them to finalise those milestones.
Senator CAMERON: So you have not finalised milestones even for stage 1?
Mr Foulds : No, we have not.
Senator CAMERON: You have not finalised milestones and you have paid $500 million to this project without milestones. How does that comply with the government's obligations under the act?
Mr Mrdak : The act is triggered by virtue of the processes we discussed earlier with project proposal reports and the like. The government had an election commitment and, in the budget process last year, took the decision to make an advance payment.
Senator CAMERON: This is an election commitment, is it?
Mr Mrdak : There is a government commitment to provide funding for this project. In the budget last year the government made the decision to make a payment of $500 million to New South Wales.
Senator CAMERON: The government made a decision to pay $500 million without any milestones being in place?
Mr Mrdak : They did so to accelerate the project to provide underlying funding—
Senator CAMERON: No, just answer the question. The $500 million has been paid with no milestones in place. Is that correct?
Mr Mrdak : Milestones, as under the act. That is correct.
Senator CAMERON: So the act has not been complied with? You told me earlier that the act had been complied with.
Mr Mrdak : No. The act has been complied with. The government has made a budget decision to make a payment to the state of New South Wales for this project.
Senator CAMERON: How can the act be complied with, if there are no milestones?
Mr Mrdak : The act specifically relates to a certain process by which the project proceeds. The act has been complied with. The government, through a separate budget decision, decided to make a payment to the state of New South Wales.
Senator CAMERON: What was the basis of this extra funding? I am not asking you what advice you provided government, but was there advice to government on the expenditure?
Ms O'Connell : It is not extra funding. That $500 million paid is part of the government's overall commitment of $1.5 billion in grant funding for WestConnex.
Senator CAMERON: It is the political commitment, isn't it?
Ms O'Connell : It was an election commitment of the government to fund $1.5 billion for WestConnex. The $500 million was a commitment made in the budget last year—consistent with the election commitments—and the objective was to expedite the major delivery of the project.
Senator RHIANNON: Is it stage 1 and stage 2, or just stage 1?
Mr Mrdak : It is for the overall project.
Senator RHIANNON: I am talking about the $500 million.
Mr Mrdak : It goes to the whole project. Senator Cameron, you asked: was there advice? Yes, there was advice provided.
Senator CAMERON: Okay. I can assume that the advice was that you should comply with the act, but never mind.
Senator Cash: You should not assume—
Senator CAMERON: I can certainly assume a lot of things on this. $500 million has been handed over with no milestones in place. That is the bottom line.
Ms O'Connell : We did have an MOU in place with New South Wales prior to the payment. The MOU specifically goes to the project, the delivery arrangements and the funding arrangements. An MOU was put in place with the New South Wales government prior to the funding being provided.
Senator CAMERON: Who determined that the payment would be made?
Mr Mrdak : That is a decision of the government.
Senator CAMERON: Who had responsibility for signing off on this $500 million from within the government?
Mr Mrdak : It was undertaken as part of the budget process.
Senator CAMERON: So the Treasurer?
Mr Mrdak : At the end of the day, senior ministers and the Treasurer.
Senator CAMERON: So the Treasurer signed off on a $500 million commitment of federal government money, based on an election promise, without any milestones?
Ms O'Connell : With an MOU in place.
Mr Mrdak : As Ms O'Connell indicated, the MOU is designed to support the progress of the project and to bring it forward, and the M4 widening is the first stage of that.
Senator CAMERON: Is that MOU a public document?
Mr Mrdak : I do not think so.
Ms O'Connell : I do not think so.
Senator CAMERON: Can you table the MOU?
Mr Mrdak : I will seek to table the MOU. I will take that on notice.
Senator CAMERON: What is in the MOU? Tell us about the MOU.
Mr Mrdak : As Ms O'Connell indicated, it basically sets out the nature of things like the establishment of the delivery authority, the way in which the project will progress and the operating arrangements for the Commonwealth provision of funding.
Senator STERLE: If there are no commercial-in-confidence issues, what is the trouble with tabling it now, Mr Mrdak?
Mr Mrdak : I do not have a copy with us.
Senator STERLE: Is Ms O'Connell passing you something? Have you got it, Ms O'Connell?
Ms O'Connell : No, Senator. It is just a note giving me the date and the general description of what is in it. It is not the MOU itself.
Senator STERLE: For the purposes of Senator Cameron's questioning, could we have that tabled within the next couple of minutes? Is it in the back room there?
Mr Mrdak : I do not think we have it with us, Senator. I will seek to do that. Again, I will take that on notice and I will seek the advice of the minister in relation to its tabling.
Senator CAMERON: I would just like to backtrack a little bit. How much was the 2014-15 payment again?
Mr Mrdak : At this stage we have made no additional payments above the money that was paid last financial year. That $250 million is a forecast based on achievement of the milestones, which we anticipate shortly resolving, for the next stages.
Senator CAMERON: So the $250 million is based on milestones that we have not got to yet!
Mr Mrdak : They are the ones that Mr Foulds described to you earlier, which are now at finalisation. They include the M4 stages 1A and 1B milestone deliveries. Once that is achieved, we will then make further payments.
Senator CAMERON: So this has not been a normal process under the act; this is a process that has been done by political decision.
Mr Mrdak : Sorry, Senator; I am not sure what point you are making.
Senator CAMERON: There is a political decision that has been made to provide $500 million funding, plus another $250 million in 2014-15. That is correct, isn't it?
Mr Mrdak : There is $250 million profiled this financial year on achievement of works milestones, and the government has made a payment of $500 million for the project overall.
Senator CAMERON: Without any milestones being in place?
Mr Mrdak : With the provisions as per the MOU.
Senator CAMERON: But we do not know what it is in the MOU.
Mr Mrdak : I have undertaken to provide that to you on notice.
Senator CAMERON: This is very unsatisfactory.
Ms O'Connell : The practices under the national partnership agreement, with the project proposal report et cetera, are standard practices. It is unusual for anybody to be creating milestones unless there is a commitment to deliver a project. So there is always a commitment in advance by governments to deliver a project and make the appropriate funding available. Then, following that, is the creation of milestones, and the proper work is started to look at the delivery of the project in detail.
Senator CAMERON: Are you aware of the speech by Mr Jamie Briggs in relation to milestones?
Ms O'Connell : Yes.
Mr Mrdak : Yes.
Senator CAMERON: Mr Briggs indicated the importance of milestones, didn't he?
Mr Mrdak : He does.
Ms O'Connell : He does.
Mr Mrdak : He has, yes.
Senator CAMERON: And that that is a key accountability measure.
Mr Mrdak : Yes.
Senator CAMERON: So we have handed $500 million over without these key accountability measures in place.
Mr Mrdak : No. As I indicated earlier, the MOU sets out the conditions of the $500 million payment; and the government, as part of its budget strategy last year, sought to accelerate work on this project and other projects around the country.
Senator CAMERON: I have not seen the MOU, but it sounds more like a heads of agreement than an MOU: this is what we will do, we will set committees up, we will do this. It is not a technical milestone document, is it?
Mr Mrdak : It goes to the overall scheduling of the program but it does not go to individual construction projects. That is correct.
Senator CAMERON: So you would not rely on it for technical accuracy, would you?
Mr Mrdak : It is an agreement between two governments to provide funding based on the project progressing. It also includes provisions that, were the project not to progress, arrangements for—
Senator CAMERON: Have the issues in that MOU been complied with?
Ms O'Connell : Yes.
Mr Mrdak : Yes. In our view, they have.
Senator CAMERON: Let us see what is in it, until we see if it is worth anything.
Mr Mrdak : Certainly.
Senator CAMERON: I now go to the New South Wales Auditor-General's report. Do you have copies of it?
Mr Mrdak : I do not.
Ms O'Connell : We do not.
Senator CAMERON: I table the Auditor-General's report. Can we get some copies? Who in the department has read the Auditor-General's report?
Mr Mrdak : My senior officers at the table.
Senator CAMERON: Mr Jaggers and Mr Foulds, you have read the Auditor-General's report?
Mr Foulds : I have read the executive summary. I have skimmed the rest of it and I have read a brief provided by one of my staff on it—a detailed brief.
Senator CAMERON: Mr Jaggers, have you done any better than that?
Mr Jaggers : Similar to Mr Foulds.
Senator CAMERON: Similar. So the senior officers of the department have a copy of the New South Wales Auditor-General's report that is critical of aspects of this project that we are putting $3½ billion into, and all the department can do is read the executive summary and skim the document? What is going on?
Ms O'Connell : That is not what they said.
Mr Mrdak : I do not think that that is what my officers answered.
Senator CAMERON: That is exactly what they said. You can go back and look in Hansard. Your officers said they had read the executive summary and skimmed the document.
Mr Mrdak : And they had received a detailed briefing note from officers who had been through the full document.
Ms O'Connell : Absolutely.
Senator RHIANNON: When you say detail—
Senator Cash: You may allow officers to represent their evidence to the committee. I am sure that we all understand what the officers have said, as opposed to having them verballed.
CHAIR: Mr Mrdak, do you need to make an explanation or a clarification?
Mr Mrdak : I want to clarify. I think that Mr Foulds's evidence was that officers of my department have read and analysed the Auditor-General's report in detail, for which he has been provided a detailed briefing. He has also explained to the committee that he has personally read the executive summary, skimmed the report, and received that detailed briefing from his officers.
CHAIR: Okay, so is that at odds with what Senator Cameron—
Senator Cash: I think it is being fair.
Senator CAMERON: The only thing it is at odds with is credibility. Here we have the senior officers of the department who have a New South Wales government report which is highly critical of aspects of this project, and we have the decision makers reading the executive summary, skimming the document and getting a report.
Senator Cash: That is an interpretation of the officers' evidence, which, I would put to you, is an unfair interpretation based on the evidence.
CHAIR: Minister, that is called the colour and movement of estimates. You have to interpret the colour and movement. I could add a lot of colour and movement if we need to, on the day!
Mr Mrdak : While I accept that it is colour and movement I will not accept any criticism of the thoroughness with which my officers operate.
Senator CAMERON: Mr Mrdak, sometimes you have got to accept criticism. And sometimes you have to be a bit realistic about what is happening.
CHAIR: Excuse me, Senator Cameron. Order!
Mr Mrdak : I am always happy to accept criticism. In this situation you have impugned my officers and I am not going to accept that.
Senator Cash: Exactly, Chair.
Senator CAMERON: If you think I have impugned your officers because they have read the executive summary, bad luck.
Senator Cash: Can we talk about the NBN now, in terms of whether Senator Cameron sat in the communications estimates hearing—
Senator CAMERON: Let's get back to where we are going.
Senator Cash: and asked questions about the former government's failure to expend taxpayers' money properly. It was $43 billion, $44 billion and came in at $73 billion.
CHAIR: Order! Thank you very much. I wish they would turn the bloody television cameras off. Then we could have a real go! Could we just get back to what this is supposed to be all about. And can we lower the bullshit and the political point-scoring and let's just get to business.
Senator CAMERON: Hear that, Minister! Is the Sydney Motorways Project steering committee still in existence?
Mr Foulds : No, the Sydney Motorways Project office no longer exists. It is now the WestConnex Delivery Authority, and that is the board that oversees the delivery of the project.
Senator CAMERON: The project steering committee was to develop the business case.
Mr Foulds : Correct.
Senator CAMERON: That has now been handed over—
Mr Foulds : To the New South Wales government at the time. And then the New South Wales government in October 2013 established the WestConnex Delivery Authority, which is chaired by Mr Tony Shepherd. That board oversees the WestConnex Delivery Authority, which now is responsible for the delivery of the motorway.
Senator CAMERON: Ms O'Connell, you were on that committee, weren't you?
Ms O'Connell : That is right—not on the WestConnex Delivery Authority but on the steering committee.
Senator CAMERON: Yes, on the steering committee. How many steering committees did you personally attend?
Ms O'Connell : I would have to take that on notice, but quite a few during the early development of the business case.
Senator CAMERON: Can you provide details of where and when that steering committee met.
Ms O'Connell : Certainly. To my recollection they all met in Sydney, in the offices of RMS.
Senator CAMERON: Are there minutes of those meetings?
Ms O'Connell : Yes.
Senator CAMERON: Are they publicly available?
Ms O'Connell : No.
Senator CAMERON: Can you provide the estimates committee with those minutes.
Ms O'Connell : The owner of the minutes is the New South Wales government. I will undertake to ask them if they will release them for this committee.
Senator CAMERON: You were a member of the committee.
Ms O'Connell : Yes.
Senator CAMERON: You would have copies of the minutes.
Ms O'Connell : Yes.
Senator CAMERON: You are a member of that committee because of your position as deputy secretary of the department.
Ms O'Connell : Yes.
Senator CAMERON: These, in my view, are government documents, and we are entitled to see those government documents. I am not going to through the same arguments again. We have been through this. I assume you will take it on notice.
Ms O'Connell : I will.
Senator CAMERON: Let me tell you that I believe that these are government documents and they should be tabled. The secrecy on this project should be ripped apart. The department should not be assisting the secrecy over this—
Senator Cash: Chair, I think that is an unfair reflection on the department. Senator Cameron, you have clearly articulated that it is your opinion that the documents are able to be released and, whilst I respect your opinion, the officials have taken it on notice to ensure that proper process is followed to ensure that if the documents are released there are no repercussions.
Senator CAMERON: Ms O'Connell, did you attend the 16 July meeting that endorsed the WestConnex business case as complete?
Ms O'Connell : On 16 July in 2014?
Senator CAMERON: In 2013.
Ms O'Connell : In 2013? I would have to take that on notice and get back to you. I would say that the steering committee has been superseded for quite some time now, probably over a year since the steering committee got to the point of the business case, and then it has been handed over to the WestConnex Delivery Authority.
CHAIR: Senator Cameron, just by way of fairness, I am going to pass shortly to some other people who would like to ask questions and then come back to you. So make this your last question, and we will move on.
Senator CAMERON: Ms O'Connell, can I draw your attention to page 20 of the Auditor-General's report, where it says that a business case overview was presented. Do you see that?
Ms O'Connell : I have page 20 in front of me.
Senator CAMERON: On 16 July 2013. That does not jog your memory?
Ms O'Connell : I would have to check. I was involved in the development of the business case and the steering committee meetings. You are asking me about a specific meeting on a specific date.
Senator CAMERON: Yes.
Ms O'Connell : I want to go back to my diary records and ensure that I did attend and indeed look at the minutes.
Senator CAMERON: So you are telling me that you cannot remember? This is a meeting that the Auditor-General felt he had to document, and it was a meeting where a decision was made to accept a business case, and you cannot remember?
Ms O'Connell : I am questioning the specific date. I am not questioning that we were involved in the development of the business case and that as that business case was developed we provided comments and, indeed as this reflects here, that the steering committee endorsed the business case. We did do that. I cannot tell you right now whether that was the 16 July or 17 July.
CHAIR: Anyhow, you will go back and check.
Senator CAMERON: I will come back to this.
Ms O'Connell : I will go back to look at my diary for 2013 and check which date it was in July.
Senator CAMERON: Chair, can I ask your indulgence. I have a range of questions—
CHAIR: Yes, I realise that.
Senator CAMERON: on the business case and on this Auditor-General's report that I am really keen to—
CHAIR: I saw the amount of paperwork you carried in.
Senator RHIANNON: We all have lots of questions.
CHAIR: It is just that people were starting to nod off.
Senator Cash: Just before Senator Cameron finishes—
Members of the committee interjecting—
Senator Cash: I need to put something into perspective, given the line of questioning that Senator Cameron has followed. The committee should not forget, Senator Cameron, that the former government—your government—actually committed $1.8 billion to this project. Our commitment is only $1.5 billion.
Senator STERLE: Chair, on relevance. This does not assist. Point of order, Chair.
CHAIR: Yes. Point of order.
Senator STERLE: It does not assist, when senators are lined up patiently waiting—
CHAIR: Well, do not take the bait.
Senator STERLE: and the minister wants to engage in cheap political point scoring.
Senator Cash: I do not want to engage. I just wanted to—
Senator STERLE: We have moved on from that.
CHAIR: Order! Order!
Senator STERLE: and I would ask Chair for you to ask the minister to dutifully respect the—
CHAIR: The culture of this committee is that a lot of bait gets chucked out.
Senator STERLE: We will just stir it right back.
CHAIR: Do not take the bait.
Senator STERLE: They will come from everywhere, and then you will have Macdonald in here, and then all the nutters will follow—
Senator RHIANNON: Can I start?
Senator STERLE: and then it will be an absolute embarrassment to all those poor buggers out there who have to sit there and listen to this rubbish.
Senator RHIANNON: Last night in the public forum in Sydney, hosted by the WestConnex Delivery Authority, the head of the authority, Mr Dennis Cliche, stated that the documents, such as the project's business case and traffic modelling, were being reviewed by Infrastructure Australia. I understand from earlier responses to questions that the traffic modelling is being reviewed, and you have acknowledged that. Is it also the case that the project's business case is being reviewed by Infrastructure Australia?
Mr Mrdak : Yes, my understanding is that Infrastructure Australia has recently completed an assessment of the business case as it stood. My understanding is that Infrastructure Australia recently published its analysis of that business case, but I will ask Mr Foulds to outline again, because as he indicated in his earlier answer, the New South Wales government and the WestConnex Delivery Authority are looking at some additional options for the project, which are necessitating a review of the business case. I think, Mr Foulds, that that is correct, isn't it?
Senator RHIANNON: Could I just ask some other questions that could come into the response. I was interested in how long you we reviewing the documents, in when the review will be completed and in whether it will be made public? Could we start with that please.
Mr Foulds : The New South Wales government announced that it was reviewing the business case for the WestConnex project to take into account the potential for the northern and southern connectors. Those northern and southern connectors, it appears, have a lot of demand. Those could actually be achieved and be economically viable. The business case is, therefore, being reviewed by the WDA. That business case is due to be provided sometime around midyear to the New South Wales government. As for it being made public, the New South Wales government has not made any decision or communicated that at this stage.
Senator RHIANNON: Mr Cliche's comment last night was that it was being reviewed by Infrastructure Australia. So I take from your answer that it is not being reviewed by Infrastructure Australia.
Ms O'Connell : No, it is being reviewed by Infrastructure Australia, and Infrastructure Australia has completed its assessment and review.
Mr Foulds : The current business case has been reviewed by Infrastructure Australia. The current business case is also being reviewed to take into account the potential change scope of a northern and southern connector and the fact that—
Senator RHIANNON: By Infrastructure Australia?
Mr Foulds : Infrastructure Australia, I am sure, will review that when it is provided to them, but it has not been finished yet by New South Wales.
Senator RHIANNON: So this is a second review. In your earlier answer you said that it would be finished by midyear, and you say that then it comes to Infrastructure Australia?
Mr Foulds : I would imagine. You can ask Infrastructure Australia.
Senator RHIANNON: When you say 'imagine', is that a yes?
Mr Foulds : Well, I would expect so.
Ms O'Connell : Yes.
Mr Mrdak : We would expect that would be the case, yes.
Senator RHIANNON: Why do you say you expect? That means that there is not a clear process.
Mr Foulds : Well, it is the normal course of events.
Mr Mrdak : It is the normal course of events if they have updated the business plan. I say that because it will depend on whether the New South Wales government decides to proceed with changes to the design, the reference design, which includes the additional connectors that Ms Foulds has outlined. If they do that, and therefore change the business plan, then they will put that to Infrastructure Australia.
Ms O'Connell : I think that Infrastructure Australia has assessed the current business case for the three-stage WestConnex project. They have.
Senator RHIANNON: Is that public?
Ms O'Connell : Yes.
Mr Foulds : Yes, it is on the website, and it also says that the core benefit cost ratio is very positive, and that is why they have rated it as threshold.
Senator RHIANNON: From your answers today, as well as from previous estimates hearings, we are hearing again about the hundreds of millions of dollars from the Commonwealth to the New South Wales government, but you have been unable to verify the numbers that have been presented. If that is incorrect, can you explain whether the figures relating to the number of jobs created by WestConnex and the traffic analysis have been independently verified? On the two issues of jobs and traffic analysis, have the figures been independently verified and where?
Ms O'Connell : The role of Infrastructure Australia is to assess projects. They have assessed the business case of WestConnex, and that has now been made public. That was not the case, probably, when we met earlier and at the time of our answers to earlier questions on notice, but it is now the case that Infrastructure Australia has assessed the project, has looked at the business case and has published its six-page assessment of it. They have rated it as threshold and with a core BCR of 1.8 to one—that is, a benefit cost ratio of 1.8.
Senator RHIANNON: But it does not include the number of jobs that are going to be created?
Ms O'Connell : I would have to ask Infrastructure Australia if they assessed the jobs. They are appearing later this morning, and we can ask them then to what extent they looked at job numbers. But their main role is looking at the benefit cost ratio of the project.
Senator RHIANNON: If you are putting it out there in the public domain you would try to put forward a positive presentation, and jobs would be a selling point.
Ms O'Connell : It is not IA's role to be selling the project. Certainly the New South Wales government has talked about the number of jobs.
Mr Mrdak : And certainly the Australian government's commitment to this project is very much based on the employment as well as the long-term productivity this project will provide.
Senator RHIANNON: What we are trying to pin down is where you have verified those job numbers and those traffic numbers. We are still not hearing that that is what has happened.
Mr Mrdak : In working with the WestConnex Delivery Authority my officers have confidence in the jobs projections. At the end of the day, there is a relatively standard formula which operates around levels of expenditure for projects like this and multipliers for job creation. In our involvement with the delivery authority, we would be comfortable with the job projections that have been provided.
Ms O'Connell : We do think the job projections are reasonable. We have also looked at the traffic modelling. Part of IA's assessment would have been based on looking at the traffic modelling as well, so they have assessed the traffic modelling.
Senator RHIANNON: Mr Mrdak, you used the words 'comfortable' and 'confident'. Ms O'Connell, you used the word 'reasonable'. Have you done modelling to demonstrate that these figures are correct? Is there something behind your use of these words?
Ms O'Connell : We have done a detailed assessment of traffic modelling. We have raised some questions, as we talked about earlier, about getting peer review of the traffic modelling. Those questions have been answered. We are confident about the traffic modelling because that underpins the business case—absolutely we are. That is now being looked at by IA, who have come out with an assessment that is again strongly supportive, and the traffic modelling would very much, in detail, underpin that assessment. In terms of the jobs numbers, obviously, in terms of investing in WestConnex, it is going to create very significant numbers of jobs. The New South Wales government has made a statement about the number of jobs. We would concur with that statement. The jobs number is an estimate—it cannot be an absolute detailed assessment of numbers. But it is, in our view, a reasonable job estimate number.
Senator RHIANNON: Coming into this project we have had a background of urban motorways in Sydney that in terms of projected figures have been very problematic. The figures for the Eastern Distributor have been highly discredited; the Cross City Tunnel goes belly up twice; you would also know what has happened with the Lane Cove Tunnel. When you come into these projects and you are looking at the investment potential and how it all stacks up, are there lessons that you have learned from those previous projects?
Ms O'Connell : Absolutely. We have done a lot of work in this area, including producing quite a significant document that looked at some of the optimism bias in patronage risk forecasts to date. You have mentioned a number of specific projects where there has been significant optimism bias in the projection of patronage risk. We have worked with all jurisdictions in terms of being very open about the sorts of studies we have done, what they have shown, and how to avoid that bias in the future. We have produced a public document in relation to that optimism bias that lists quite a number of significant issues and how that can be better dealt with. In relation to WestConnex, not only has there been a detailed patronage model done by New South Wales and scrutinised by the WestConnex Delivery Authority, and they have had assistance and expertise in developing that model, but we have also scrutinised that model and engaged somebody else to help us with some peer review of that model and raised a number of questions about it and sought answers on those questions and refinements to some of its assumptions. I have to say they are all based on a model—it is not a precise science but you can certainly get much better forecasting from patronage risk modelling, and we have played a strong hand in advancing Australia's expertise in that area.
CHAIR: I want to go to the modelling, because these are pretty serious questions. Have you ever tramped on an ant bed, to see the activity of the ant bed when you trample on it? They just go mad. Can you explain to me why, in the modelling, in the future there needs to be a CBD? You get lots of people now who go to a central office and who send an email to the desk next door that they could send from home or wherever. You get lots of people working in the bush who have a job in Sydney and do it remotely. In the modelling of the human species' behaviour for 50 years time, do you really think all this infrastructure in a CBD, containerised, is going to be necessary?
Mr Mrdak : There are two trends happening in our cities, and not just in Australia but globally. We do have some disaggregation of employment, but we have actually seen much higher levels of job creation in the CBDs of the major cities as we transition to a service economy. That has been accelerated—
CHAIR: That is because people are living there.
Mr Mrdak : It is that, but also a lot of the job creation is actually taking place in the CBD area. And it comes back to aggregation economics and those sorts of issues, where you find that firms deliberately choose to go back to CBDs, and we have seen that happening in all three of our east-coast capital cities.
CHAIR: Which is why the kids cannot run down to the park and kick a football. Best of luck to the human species.
Senator RHIANNON: Just getting back to WestConnex, will additional traffic modelling work be undertaken in-house by the WestConnex Delivery Authority? And will that be provided to you?
Mr Jaggers : Additional traffic forecasting work is happening within the WestConnex Delivery Authority and using their consultants. We expect to receive the outputs of that model and will have those outputs considered and reviewed by our expert consultant in the area.
Senator RHIANNON: When will that be concluded?
Mr Jaggers : I think that work is ongoing. I would expect a further report from New South Wales within the next two months.
Senator RHIANNON: Will that be made public?
Mr Jaggers : I do not believe it will be made public.
Senator RHIANNON: Will you make public any of your assessments?
Ms O'Connell : We have already said that we will take on notice whether we will be able to make our peer review of the traffic modelling done by New South Wales available to the committee.
Senator RHIANNON: I just want to go back to the issue of payments. The $500 million of the 1.5 has been paid. We will leave the $25 million aside for the moment. At what stage are you expecting to make the additional payment? Can you explain the process there?
Mr Mrdak : As we outlined earlier, at this stage we have a cash flow forecast at $250 million for the balance of this financial year, but, as Mr Foulds has indicated, that will be dependent firstly on the settling of the project proposal report and then the milestones and the achievement of those milestones.
Ms O'Connell : The projected cash flow for the project is, as the Secretary said, $250 million in this financial year, in 2015-16 a further $450 million and in 2016-17 a further $300 million. That is for the grant component, and there are separate arrangements in place in terms of drawing on the loan for stage 2. But that is a loan different to the payments under the grant.
Senator RHIANNON: How many staff of Infrastructure Australia, Infrastructure Investment and indeed the department are now working for the WestConnex organisation?
Ms O'Connell : None.
Mr Mrdak : We do not have staff with the WestConnex development authority. My officers participate in meetings as part of the steering committee and the like.
Senator RHIANNON: No, the question was about people who were staff members of the department and have left and are now working for WestConnex.
Ms O'Connell : I am not aware of any.
Senator RHIANNON: Could you take that on notice?
Mr Mrdak : We are not aware of any departmental staff who have been working for us who are now with WDA.
Senator RHIANNON: But can you take it on notice?
Ms O'Connell : Yes, certainly. Just for clarification, the WestConnex Delivery Authority is a New South Wales government entity.
Senator RHIANNON: I did come in a little bit late, so maybe you covered this. I was after more information about the $25 million—what it actually covered.
Mr Mrdak : Certainly. We did cover it briefly. It essentially provided the development funds, with New South Wales, for the development of the initial business case for the project and enabled New South Wales to set up essentially the project office, which now forms part of the development authority.
Senator RHIANNON: Could you provide a bit more detail? I mean, $25 million is a lot for a project office.
Mr Mrdak : Essentially it funded the initial development of things such as what goes in to a business case, the concept design, the traffic modelling—all the work that feeds in to the development of a business case.
Senator RHIANNON: At that stage, going back to the response Ms O'Connell gave when I asked about the experience you hopefully have drawn from the other controversial urban motorway projects, did that come in to any of this $25 million?
Mr Mrdak : Certainly the expertise and some of the work we have done fed into the project office, which I think it was called at that stage.
Ms O'Connell : That is right.
Mr Mrdak : Our contribution to the work that was being done at that time also built in what we regard as best practice for modelling and also some real-world experience of what actually has happened in Sydney in relation to traffic growth.
Senator RHIANNON: Is that looking at the concept of induced traffic and what that means for surrounding areas?
Mr Mrdak : Yes, it does. The traffic modelling does include, as it should these days, the impact of new developments such as this on induced traffic.
Senator RHIANNON: Is that then about how you modify what you need to do to surrounding roads? Does it go to that point where it is not actually the motorway project but there is a flow-on effect that needs to be managed?
Mr Mrdak : Certainly in the design of this project New South Wales is looking at issues, and Mr Foulds can give you more detail, such as the impact on connecting roads and decisions taken, such as which roads will or will not connect to the motorway and how local traffic will be handled in scenarios or how that then feeds in to the motorway and then what your off ramps do in terms of local traffic impact. They are all factors that are taken into the concept design. Alex, do you want to comment further?
Senator RHIANNON: I will just ask another question, and maybe it can come in to your response. In undertaking all that, have you considered any route alterations? Is that something you feed in to what you get from the New South Wales government and WestConnex? And have you considered the impact that might have on the cost, house acquisitions and that sort of thing? I am trying to see where that analysis of induced traffic and local traffic conditions goes in terms of the feedback you give to the New South Wales government and WestConnex.
Mr Foulds : The responsibility for the planning of the project essentially lies with New South Wales, as you know.
Senator RHIANNON: Yes.
Mr Foulds : In looking at and reviewing their traffic modelling, we would not be seeking to advance a particular route over another, but we would, rather, be working with them to understand why a particular route was favoured over another and asking questions: why should it go there; why not there? But the answer is usually a result of analysis that has been done, and as part of that business case development. So, you have induced demand, where—
Senator RHIANNON: Perhaps I could just ask you to clarify: are you saying you are looking only at the options the government and WestConnex present to you, like route A or route B? You are not saying, 'Why don't you go there?' That was not really clear from your answer.
Ms O'Connell : We would ask questions. The New South Wales government put together a business case based on a reference design. In the end, the final design is a result of post-tender arrangements in terms of looking at how that design can be optimised. So, it is not a single point in time; it is an iterative process, and we have involvement in that iterative process. And we certainly ask questions about options that were looked at, why they were discounted, why certain options were preferred, what that does in terms of benefit-cost and traffic modelling and all those sorts of things. It is not that we come to the position—and this is what Mr Foulds said—with a preferred route in mind and say, 'This is what it should be.' We come to it with knowledge, questions and a point of discussing and ensuring that options are explored with the New South Wales government.
Senator RHIANNON: Is it correct to assume that therefore once you get into the complexity of the project then proposals could be put forward, or options could be put forward, that result in a change in route and different house acquisitions and different flow-on effects?
Ms O'Connell : Absolutely, and that commonly does happen. It has happened in the NorthConnex project, where, as a result of the tender design, there was a slight change. These are not fundamental changes to the overall route, but when it comes down to individual blocks and where an entrance to or exit from the tunnel exists, that can be adjusted in accordance with—
Mr Foulds : And New South Wales does work very hard to look at the property impacts. When there are impacts that they can reasonably avoid, they take a lot of trouble in trying to do that.
Senator RHIANNON: Getting into some of the specifics, have you modelled, or has the material you look at modelled, an extension of stage 1 to the CBD or stage 2 to Port Botany?
Mr Foulds : If by that you mean the Sydney gateway—because currently stage 2 is from the Beverly Hills area through to St Peters interchange; that is the current scope for WestConnex stage 2. And then there are some enhancements in and around that interchange, and from 2019 there is the possibility of the gateway, which is a direct connection to Sydney airport and Foreshore Road at Port Botany. The modelling of that is underway, but I have not looked at that in recent times, so that work is still happening.
Senator RHIANNON: Has it come to you yet, or are you still waiting for it?
Mr Foulds : Not any final version, and I could not be more specific, because I simply cannot remember. The work on the Sydney gateway has not been completed.
Senator RHIANNON: Could you take on notice what work on the gateway—and by the way, the word 'gateway' is confusing for people from New South Wales; there have been so many different versions of this—
Mr Foulds : There is an overview document that New South Wales has provided on stage 2, which actually has a very clear map of what will happen under stage 2, the St Peters interchange, and then, separately, how the gateway will look and how it would be a connection directly to the airport ring road and down to Foreshore Road.
Senator RHIANNON: Is that public?
Mr Foulds : Yes, it is absolutely public.
Senator RHIANNON: That is the map—
Mr Foulds : It is actually a book of maybe 20 pages. It is hardcover.
Senator RHIANNON: Yes, it has the big map.
Mr Foulds : Yes. And the map does show, through colour, what is going to happen by 2019.
Senator RHIANNON: As a question on notice, what I am also trying to understand is where it is up to with you, with the stage 1 and stage 2 gateway—whether you have that information yet to review or when you expect to get it.
CHAIR: Perhaps you could put the rest of your questions on notice, or come back to them.
Senator RHIANNON: Okay.
Senator SESELJA: There are a couple of road projects I want to ask about, and I am not sure whether these have been covered. Majura Parkway: can we get an update on what the expected completion date is? And I have just a few questions around some detail on that.
Mr Foulds : I know it is due for completion in mid-2016. That is the final, with the bridge crossing over the Murrumbidgee. Let me just look it up, but: earlier, the road will be open from the Federal Highway through to basically just beyond Costco—
Ms O'Connell : But the project is tracking well.
Mr Foulds : Fairbairn Avenue—down to Fairbairn Avenue—mid this year.
Ms O'Connell : It is on budget, and it is tracking well in terms of achieving its time lines.
Senator SESELJA: You said that the first stage will be open between the Federal Highway and Fairbairn. When is that?
Mr Foulds : Mid this year.
Senator SESELJA: And it is on track for the mid-2016 completion, is it?
Mr Foulds : Yes, it is.
Senator SESELJA: And a final part of that will be the—
Mr Foulds : That is the crossing of the Molonglo where that bridging is happening. Any time you drive to the airport you will see it. When that bridging is complete, it will then join to the Monaro Highway. That should be finalised by mid next year.
Senator SESELJA: I think the chair's question was relevant. From memory, it was a $288 million project.
Mr Foulds : That is correct.
Senator SESELJA: And it was half ACT, half Commonwealth.
Mr Foulds : That is correct.
Senator SESELJA: Are we on track to come in under $288 million?
Mr Foulds : Yes, we are. And the Commonwealth government's contribution is capped.
Senator SESELJA: So, if it does blow out, it would be the ACT government's—
Mr Foulds : But there is no indication that that is going to happen.
Senator SESELJA: So at this stage it will come in under $288 million. Can you remind me what the benefit-cost ratio for that was.
Mr Foulds : It is 3.32 at a four per cent discount rate.
Senator SESELJA: There was an issue raised with me by some of the local traders—you talked about Costco, but in and around that area there are a number of businesses—about where the off-ramps will be. Has a final decision been taken on those off-ramps? Where are they likely to be at this stage?
Mr Foulds : I would have to take that on notice. I just do not have that level of detail in my head.
Ms O'Connell : But I understand that there has been debate about the off-ramps, access roads et cetera, and there will be the access road of the existing road as part of it. In fact, at the moment, you go onto the new road as part of the current traffic flow in certain sections. My understanding certainly is that the off-ramps have been settled and the access arrangements have been settled, whether you are using the current road as an access road or using an off-wrap. We would have to get that detail from the ACT government to tell you what the final design on that is.
Mr Foulds : But there is no indication that it is an issue or has not been settled.
Ms O'Connell : It has been a subject of debate and, according to our representations made to the ACT government, they have engaged in consultations and come to what I understand to be a satisfactory resolution with the businesses around and it is within the contracted price.
Senator SESELJA: Which businesses? There are differing views amongst some of those businesses about whether not just Costco but also the McDonald's and Woolworths area at Majura Park or the new developments that will be further down the road will be benefited. Do the Commonwealth play a role in that or do you just leave it to the ACT to make a decision on where they are going to put things like the off-ramps?
Mr Foulds : The ACT transport and municipal services, who are running the project, will be conducting those negotiations with the stakeholders, and they do everything from the rifle range further up through to the airport itself and the access arrangements. We would not normally impose or seek to impose a decision on where a particular element of the road was or where an intersection was.
Senator SESELJA: So, even when the Commonwealth are 50 per cent funding, you will completely leave that to the discretion of the ACT government?
Ms O'Connell : The things that are relevant to the overall business case include the selection of the route as a transport route. One of the reasons that the federal government is involved in this particular project and it has a high BCR is that it is a heavy-vehicle route connecting from the Federal Highway straight through. They are the fundamental aspects of the federal government's involvement in the project. With the other arrangements around local traffic and how that is handled, provided that there is a satisfactory outcome negotiated by the state or territory government—ACT in this case—we are satisfied because it will not impinge on the overall design or benefit-cost of the project, or its initial connection point or end connection point.
Senator SESELJA: You say 'satisfactory'. Is any regard given to whether or not there will be an impact on local businesses depending on where you put those off-ramps? That is the concern that has been raised with me and that is why I am putting to you that some of those businesses feel that they will be disadvantaged if it goes too far past those existing businesses on Majura Road.
Ms O'Connell : I think it is fair to say that, with most of the roads we are engaged in, there are differences of view about where the access ramps and those designs should take place. Largely, we leave those to the state or territory government to negotiate and come to a resolution on. We could ask the ACT government where they have landed with those access points and provide that information to you.
Senator SESELJA: I would appreciate that, thank you. Briefly going back to WestConnex, there was some questioning on that and I was not here for all of it. Regarding the benefit-cost ratio and the overall benefits, what are the estimated economic benefits to New South Wales at the completion of that project?
Ms O'Connell : The benefit-cost ratio is 1.8 to one, using a discount rate of seven per cent. If it was a discount rate of about four per cent, which is one of the tolerances we look, that would have an expected higher benefit-cost ratio. In terms of the other benefits, I will ask Alex Foulds to speak to them.
Mr Foulds : In the business case, the anticipated benefits include reducing travel times between Parramatta and Kingsford Smith Airport by up to 40 minutes, halving bus travel times between the inner west and the city, ensuring the environment to create 10,000 jobs during construction, bypassing up to 52 sets of traffic lights, removing 3,000 trucks a day from Parramatta Road, which will trigger the opportunity for neighbourhood revitalisation, improving north-south travel times for public buses, providing the environment for 25,000 new jobs and 25,000 residences to be created over the next 20 years along Parramatta Road and delivering more than $20 billion in economic benefits to New South Wales.
Senator SESELJA: So the jobs you are talking about on Parramatta Road, what is the basis for—
Mr Foulds : No, the 25,000 new jobs is for the entire project and the ongoing benefit with the revitalisation of Parramatta Road—basically, the improvement of that environment along Parramatta Road and the 25,000 residences, et cetera. The 10,000 jobs are the construction jobs. They are related directly and indirectly to the construction of the motorway.
Senator SESELJA: So the estimate is 10,000 direct jobs during construction but then potential flow-on benefits. Does the urban renewal that comes from taking all of the trucks off, or a lot of trucks off, Parramatta Road lead to planning improvements, more residents living there and different types of businesses—that sort of thing?
Mr Foulds : Yes. UrbanGrowth NSW is leading that work on behalf of the New South Wales government. That does precisely what it aims to achieve. The removal of 3,000 trucks and other vehicles from Parramatta Road will allow neighbourhood re-connections and cross-road access, which is currently very difficult.
Senator SESELJA: You talk about relieving congestion on existing roads—and, obviously, there are a lot of intangible benefits of people not being stuck in traffic—but what are the economic benefits there in terms of less congestion? I assume that is part of the $20 billion in benefits?
Ms O'Connell : Certainly, travel time savings is part of the economic benefit ratio. It is a significant benefit in terms of reduced travel time for people using WestConnex.
Mr Foulds : The principal economic benefit is determined through travel time reliability improvements. This means that you would expect the journey to start at the same time and finish at the same time on every day. There are savings in vehicle operating costs. If you have better flows of traffic, your vehicle will have less wear and tear. When you conglomerate all of that you get the benefit. There are reductions in air pollution, greenhouse gas emissions and noise pollution through the free flow of traffic rather than weaving, stopping and starting. There are reductions in road accidents—a road safety component, and that is monetised. And there are reductions in local road maintenance. If you have taken vehicles from the local roads, then they will, by definition, require less maintenance. So that is a lower economic cost. Also, hopefully, the removal of surface traffic will enable improvements to public transport.
Senator SESELJA: Obviously, there is a live debate between the two major parties in New South Wales about exactly the scope of this project. If you were to scale it back, and if you did not do what is there at the moment, presumably some of those benefits would be reduced—there would be less construction jobs and some of that urban renewal may not be possible if you are doing a lesser WestConnex.
Ms O'Connell : That is true. In addition, the benefit-cost ratio of 1.8 that I mentioned earlier has been modelled on the full three stages of the project being delivered. So, if the full three stages were not delivered, that would have an impact on the benefit cost. I am unable to tell you what it would be on a different design scenario. The current scenario is $1.8 billion for all three stages being delivered and that is excluding wider economic benefits. Infrastructure Australia has suggested that with wider economic benefits that BCR could perhaps be about $2.1 billion. That is modelled at a seven per cent discount rate. Traditionally, we have often used four per cent as a tolerance measure. So at a four per cent discount rate, it would have a higher benefit-cost ratio. So if the design changes, that would change that potential benefit to the economy. I cannot tell you what other design options would or would not be but it would be different.
Senator SESELJA: Obviously, it is difficult to say how changes in the design would impact, but you would presume they could impact on that benefit-cost ratio. If you took away a whole stage or significantly scaled back a stage, while you cannot give me the exact cost, the benefits presumably would go down; the benefit-cost ratio would go down.
Ms O'Connell : It would be less, and certainly an expectation that the direct jobs would be reduced.
Senator McLUCAS: I want to ask about the Cape York regional roads package.
Mr Mrdak : I will just get the relevant officers to the table.
CHAIR: There is nothing going on about the Victorian tunnel because the election is over.
Senator RICE: You haven't given me the chance to ask the question yet.
Senator STERLE: Chair, would you like to a $2 scratchie on that?
CHAIR: No, I am just chucking the bait out and they took the bait.
Senator McLUCAS: In October when we talked about the Cape York roads package and you advised us that the early works on the Peninsula Development Road were going to be received imminently. Has that advice been received from Queensland?
Mr Mrdak : Yes, it has and the government has made a decision on it. I will ask Mr Pittar to give you an update in relation to decisions taken and works that are now progressing.
Mr Pittar : The government has agreed funding for the early works package for the Cape York infrastructure package, with early works already commencing on aspects of the Peninsula Development Road.
Senator McLUCAS: In the 2014-15 year?
Mr Pittar : Correct, in the current financial year.
Senator McLUCAS: What are those works?
Mr Mrdak : We can give you a list. There are 11 projects which involve ceiling and upgrading of works on the peninsula road—the Laura and Archer River crossings concept planning; the Rocky Creek to Culburra project, paving and sealing; south of Sudley area, paving and sealing; Kalinga to Healy, paving and sealing; south of Hahn, paving and sealing over NDRA upgrades; Serraous hill, paving and sealing; south of Morehead, paving and sealing; the main deviation, paving and sealing; Coen south; Archer to Warburton, Rio Tinto boundary works, including sealing works; and the area around Musgrave, paving and sealing.
Senator McLUCAS: They are all in the PDR?
Mr Mrdak : That is correct.
Senator McLUCAS: The original works were for a much broader set of activities. These activities are only on the PDR and that will be the $18.4 million—is that right?
Mr Pittar : As mentioned at the beginning, this is for an early works package. What we are expecting to see come from Queensland by about the middle of this year is a proposal for a fuller package of works, which would involve works other than simply on the Peninsula Development Road. That would involve, for example, works on roads to communities, plus works, potentially non-road-related, in some of the communities.
Senator McLUCAS: This early work is the $50 million from Queensland plus our $18 million. Is that correct?
Mr Murnane : No, it is a much larger Commonwealth commitment to this first stage.
Mr Pittar : The first stage involves in the order of—
Ms O'Connell : $107.8 million from the Australian government.
Mr Pittar : Plus commitments from the Queensland government, as well.
Ms O'Connell : $27 million from the Queensland government for the early works package. There are further commitments beyond early works, as we have been through.
Mr Pittar : So the overall package, including Queensland funding, is for a package in the order of $260 million.
Ms O'Connell : Of which the early works is $134 million roughly.
Senator McLUCAS: How does this interrelate with the work the RDA was doing around consulting on the broader package:
Mr Pittar : It relates intimately to that. These works are ones that have been identified through that consultation exercise the RDA in Far North Queensland has been undertaking with the community in Far North Queensland and on the Cape. Through both the Department of Transport and Main Roads up there, and also through the state Department of Aboriginal and Torres Strait Islander and Multicultural Affairs, they have been working closely with communities on the Cape to also look at what opportunities exist for Indigenous business participation, training and education and opportunities to interface with the delivery of infrastructure. As recently as late last week, expressions of interest have been put out seeking input on how providers might link it with delivery of infrastructure and provide opportunities for participation from service providers in that space.
Senator McLUCAS: What role does the federal department play in this expression of interest process?
Mr Pittar : That is being coordinated through the RDA process you were asking about earlier. We are also liaising with our federal Indigenous affairs people, through the Department of Prime Minister and Cabinet. They also have a representative on that RDA taskforce. The objective is to have everyone inside that process so that we can bring federal and state players to bear to have both the infrastructure programs and the Indigenous affairs programs interlinking as part of that delivery process.
Senator McLUCAS: Has the RDA given the federal Department of Transport the report. I remember we had a conversation in October last year, and you indicated it would be early next year. I actually indicated to you that it would probably be after the election, and here we are—it has happened. Have you received the report from the RDA yet?
Mr Pittar : My recollection of the conversation we had in October was that we anticipated that we would have the broader business plan by the middle of 2015. What we expected to have now was the project proposal report for the early works package on the Peninsula Development Road, which would allow the works to go ahead. What we also have now, as you have seen, is the expression of interest for service delivery around training and education and around business development. That is happening. What we are also seeing now is the EOIs going out for actual delivery of the infrastructure on the Peninsula Development Road. Those things are happening to allow that delivery. We have also seen delivery before the wet season on some of the works already on the Cape road.
So that RDA process has resulted in the project proposal reports that we need in order to allow decisions of the federal government to release funding to have occurred to facilitate this process.
Senator McLUCAS: Who is going to sign off on these contracts that were in the paper on Saturday?
Mr Pittar : The Queensland Department of Transport and Main Roads.
Senator McLUCAS: Do you have any role in that?
Mr Pittar : We do not sign off on the contracts.
Senator McLUCAS: Are you involved in any assessment of the applications in any way?
Mr Pittar : We assess the broad project proposal report and provide advice to government.
Senator McLUCAS: Can I get a copy of the project proposal report? Is that a public document?
Mr Pittar : That is not generally a public document. We can take that on notice.
Mr Mrdak : We will take it on notice.
Senator McLUCAS: Could I also get the list of projects for the early works, with figures on how much is allocated to each?
Mr Mrdak : Certainly. We can table that.
Senator McLUCAS: Ms O'Connell, you talked about $107.8 million. Is that the early works package?
Ms O'Connell : That is the Australian government's contribution to the early works. The Australian government is providing $107.8 million of an overall total cost of early works of $134.8 million. The Queensland government is providing $27 million. That is just the early works package.
Senator McLUCAS: The report from the RDA to the federal government will identify other works outside of the PDR proposal. When do you expect to get that, Mr Pittar?
Mr Pittar : We expect the full business case by about midyear.
Senator McLUCAS: Why is it taking so long?
Mr Pittar : Because they are needing to consult and make sure that what they have is robust and effectively represents the views of the community up there.
Senator McLUCAS: I had a funding profile for the Cape York regional package showing $18.4 million in this year, and then 50, 50, 50 and then 40 in the out years. Is that now changed?
Mr Jaggers : I can give you the profile. In 2014-15 we have $58.9 million. This is the overall package, not the early works. In 2015-16, $48 million. In 2016-17, $50 million. In 2017-18, $50 million. In 2018-19, $0.6 million. That is the Australian government contribution to the project profile.
Ms O'Connell : What is missing from that for the overall project is the state government profile of the contribution. We have a total for the state government, which is $52.1 million, but not the profile. That is why there might be some differences.
Senator McLUCAS: When did the profile change?
Mr Jaggers : The profile be more likely to have changed once the business case is received and the final projects and their timing are determined. That is the indicative profile for now. Once final decisions are made on which projects you would probably expect some movement on the profiles.
Senator McLUCAS: I may have some other questions to put on notice, but going to the question of day labour for Cook Shire Council. Thank you for your answer on notice to that. The last sentence is 'No project applications for the cited work have yet been received from Cook Shire Council by QRA.' Has that changed?
Mr Pittar : Sorry, I could not hear the question.
Mr Mrdak : I do not think it has, to our knowledge. But I will check that.
Senator McLUCAS: What I am trying to find out is whether Cook Shire has applied to QRA for any of their day labour works following the cyclone last year.
Mr Mrdak : Not to our knowledge, but I will check that and come back to you as soon as we can.
Senator McLUCAS: The other part of that question is: were any of those works done on roads other than the Peninsula Development Road?
Mr Pittar : I do not know. We will take it on notice.
Mr Mrdak : I do not think so. I think they were all PDR projects, but I will check that and come back to you.
CHAIR: I am going to impose a little discipline now, whether you like it or not. It is time for a break.
Proceedin gs suspended from 11:10 to 11 : 24
CHAIR: We will go to Senator Cameron. Is that what we agreed? And then we are going to the birds. That is not sexist, it is bush. Would sheilas be better?
Senator RHIANNON: It is not only that you know all this; you know the answers to it.
CHAIR: You have to have a bit of fun. We are broadcasting. We will be right without her.
Senator CAMERON: Okay, I am in the chair's hands. Ms O'Connell, I think we left off talking about the project steering committee. Did you raise any concerns about the business case in your time on the steering committee?
Ms O'Connell : I made contributions in terms of what needed to be looked at and areas that needed to be further explored and analysed in the business case. I raised concerns about, certainly, methodologies for forecasts that were being used. I raised a number of concerns whilst I was on the steering committing and identified things that needed to be clarified or have further work done on them.
Senator CAMERON: The traffic analysis was not completed as of 16 July, was it?
Ms O'Connell : We are reflecting on 2013?
Senator CAMERON: Yes.
Ms O'Connell : There was a traffic analysis done at that point in time. It was not as sophisticated as the traffic analysis and traffic modelling that we have been referring to earlier this morning that has been more latterly completed.
Senator CAMERON: We have got a concept of a sophisticated traffic analysis. Are there standards for traffic analysis that the department would expect?
Ms O'Connell : Yes, there are in broad terms.
Senator CAMERON: Did this non-sophisticated analysis meet the standards that the department would require?
Ms O'Connell : There was an early traffic analysis, and we raised a number of questions about that traffic analysis and felt that further work needed to be done on it.
Senator CAMERON: That is consistent with the Auditor-General's view that there were problems with the underlying quality of the modelling. That is on page—
Ms O'Connell : It is in here.
Senator CAMERON: Yes, so you understand that point. That is consistent with what you are saying as well.
Ms O'Connell : Yes.
Senator CAMERON: Despite these concerns by the Auditor-General, despite the poor-quality traffic analysis, did you still sign off on the business case?
Ms O'Connell : This is reflecting on 2013 traffic modelling. We now have traffic modelling of late 2014 and 2015.
Senator CAMERON: I am trying to understand the process that was undertaken in 2013.
Ms O'Connell : Yes.
Senator CAMERON: You signed off on behalf of the Commonwealth. Was that your role?
Ms O'Connell : Yes. I was participating in the steering committee, so yes, I had a role as a member of the steering committee.
Senator CAMERON: You signed off on this project despite the fact that there was poor-quality traffic analysis and modelling and there were a range of issues that you raised. Why did you sign off?
Ms O'Connell : I would characterise it as saying that signing off on the business case set out what those issues were in terms of the traffic modelling that underpinned it. It outlined what the case was, and the assumptions as part of it, and there was commitment to do further work on the traffic modelling, and that is a normal process. A business case is a business case at a point in time. So long as a business case outlines what the issues are, what the assumptions are, then it is a valid business case. That business case was yet to receive, obviously, scrutiny from Infrastructure Australia and other bodies who would also see that material.
Senator CAMERON: Correct me if I am wrong: isn't one of the key assumptions that you need to make that modelling for the traffic flows? If you are building a road, surely traffic modelling and what that road will take, what it will do, how many cars, how many trucks—surely that is a fundamental part of a business model?
Ms O'Connell : Yes, it is.
Senator CAMERON: You did not have that, did you, when you signed off?
Ms O'Connell : We did have traffic modelling when we signed off.
Senator CAMERON: But it was poor-quality traffic modelling, was it?
Ms O'Connell : There were a number of concerns about the detail and the methodology that was to be applied. Notwithstanding that, the business case considered not just a single traffic number but a range of traffic numbers so that there was tolerance at the upper and lower ends. The business case reflected that tolerance. There were concerns about whether it was accurate enough to come to a landing on a better and more precise model. Further work has since been undertaken to get to that more precise model. That further work has since been reviewed by Infrastructure Australia.
Senator CAMERON: You signed off, on behalf of the Commonwealth government, on a business case when a lot of work still had to be done. The fundamental issue of the traffic modelling had not been satisfactorily completed.
Ms O'Connell : No, it was more that we still had some questions about the veracity of the precise detailed traffic modelling—and that further work should be done on that traffic modelling. It was a business case at that point in time.
CHAIR: Senator Cameron does it very gracefully—putting words into your mouth.
Senator CAMERON: The WestConnex Delivery Authority board has basically taken over the role the committee that you were previously on. Is that correct?
Ms O'Connell : That is correct. The delivery authority was established—
Senator CAMERON: Why is there no Commonwealth representation on this?
Ms O'Connell : The WestConnex Delivery Authority is an entity of the New South Wales state government. It is responsible for actual delivery of the project. We are still involved through membership of a group and briefed regularly on the delivery, but the fundamental delivery of the project—and this is consistent with our usual approach with most state governments and territories—now reverts back to the state. It was the decision, recognising the size and scale of the project, of the New South Wales government to create the delivery authority to deliver WestConnex. We remain involved. We remain a funder of the project. The delivery authority provides reports to us on progress of the project.
Senator CAMERON: There is $3½ billion of Commonwealth money involved here and you get second-hand reports from the authority. You have no-one on the authority that is delivering this $3½ billion of our money.
Ms O'Connell : We do not have anyone on the board of the WestConnex Delivery Authority. We are involved in the project delivery mechanisms underneath the board. That is, if you like, a more active involvement. It is with the organisation that is actually delivering—not just the board involvement.
Senator CAMERON: On page 19 of the New South Wales Auditor-General's report, it says:
The preliminary business case had many deficiencies—
this is the business case you signed off on—
and fell well short of the standard required for such a document.
This is the document you signed off on. The report continues:
Further, on our analysis, the business case put to the Government still included some deficiencies that independent Gateway reviews and external assurance arrangements, if they had occurred, should have identified.
You signed off on this business deal, or business case, that had many deficiencies. Why did you not protect the Commonwealth's interests in this by identifying these problems and dealing with them before you signed off on the business case?
Ms O'Connell : As the Auditor-General points out, the business case did identify where further work needed to be done. It was a business case at a point in time. I think you referred to it as a 'deal'. There was no deal. It was a preliminary business case, an early business case, for WestConnex. In my view, as an early business case, it also clarified what additional work needed to be done to further refine that business case—as the auditor pointed out. Subsequently that work to develop a final business case has been done.
Senator CAMERON: Did you have discussions with the New South Wales government or any of its agencies about the recommendations in the Auditor-General's report?
Ms O'Connell : Yes, and there are ongoing discussions with the New South Wales—
Senator CAMERON: Who had those discussions?
Ms O'Connell : I did with, certainly, the chief executive of Roads and Maritime Services in relation to this, also with the chief executive of Infrastructure New South Wales. Subsequent to that, my officials, who are represented on the project control group within WestConnex, have been involved in analysing the issues raised by the Auditor-General and working with New South Wales on rectifying them.
Senator CAMERON: Ms O'Connell, did you read the Auditor-General's report?
Ms O'Connell : Yes, I did, Senator.
Senator CAMERON: From start to finish?
Ms O'Connell : Yes, I did, Senator.
Senator CAMERON: That is commendable. How do we now ensure that that $3.5 billion investment is going to be money well spent, given the concerns the Auditor-General has raised?
Ms O'Connell : Senator, there are a number of measures in place: our ongoing involvement with the project; the revised business case—the more updated, final business case—which takes account of quite a number of the issues that were raised. There is also, on the sign-off in the report, a sign-off from the New South Wales government accepting the majority of the recommendations and working towards implementing those. Can I just refer to the overall conclusions of the Auditor on the project. It talks more about the assurance processes that are in place. It says that they are consistent with key principles underlying New South Wales government major projects assurance frameworks and have been effectively implemented to provide sound, independent insurance to the government and project sponsors.
Senator CAMERON: But that has to be read in the context of the overall critique, surely?
Ms O'Connell : I am reading it from the overall middle part of the executive summary.
Mr Mrdak : If I may, Senator, as Ms O'Connell has indicated, the number of outstanding issues and areas of further work have and are being dealt with.
Ms O'Connell : And have been accepted.
Senator CAMERON: Let me go to that very point, Mr Mrdak. Recommendation 4 in the Auditor-General's report says:
The WestConnex Delivery Authority should develop, by March 2015, a project plan for approval by Infrastructure NSW which:—
in the second dot point—
—provides for the business case to be formally and thoroughly revisited for Stages 2 and 3 of the project as well as any other major changes to the scope.
Has that been done?
Ms O'Connell : The WestConnex Delivery Authority are working with Infrastructure New South Wales in relation to that. The WestConnex Delivery Authority have put forward the business case for scrutiny by Infrastructure Australia, which has now been completed.
Senator CAMERON: Are you confident that there will be a formally and thoroughly revisited plan that takes into account major changes to the scope? Are you confident that will be done by March 2015, which is only weeks away?
Ms O'Connell : Senator, in terms of the WestConnex project and its stages 1, 2 and 3 that has been done, as I have outlined, and has been assessed by Infrastructure Australia. There has subsequently been some additional design elements that have been looked, which we touched on earlier, that have not yet been through the full business case development.
Mr Mrdak : In essence, Senator, I think my officer is saying that it may not be completed by March because of the additional work Mr Foulds has outlined to senators, but we anticipate that those business cases will be completed over the coming months, yes.
Senator CAMERON: How have you become confident that this will be delivered by March 2015 and that these issues will be dealt with? What is the process that you have undertaken to ensure that?
Mr Mrdak : Our officers sit on the project control group. Mr Foulds has already discussed, this morning, some of the additional work that is now happening. I think Mr Foulds might want to reiterate. When I say 'coming months', we are saying by midyear, and certainly by June, that additional analysis of the connectors will be completed, which will enable that final decision to be taken on the scope of the project. Through the project control group and the information we have received through that we are confident that the work is being undertaken.
Senator CAMERON: You are confident that the work will be undertaken?
Mr Mrdak : Yes.
Senator CAMERON: The budget papers said that the concessional loan was to accelerate the delivery of stage 2 of WestConnex.
Mr Mrdak : Yes.
Ms O'Connell : That is correct.
Senator CAMERON: Minister Briggs said that the government was steaming ahead with WestConnex. Is that your understanding? Is it steaming ahead?
Mr Mrdak : Certainly the project is moving, yes, Senator.
Senator CAMERON: Moving? You are steaming ahead?
Mr Mrdak : Work on the M4 widening is about to commence. Work on the subsequent stage 1B, which is the M4 extension, I think, is going out to market or is out to market, and stage 2 is going out to market shortly once the reference design is complete. Mr Foulds may be able to give you an update in relation to the schedule.
Senator CAMERON: That is fine. You can give me that on notice. I am interested in a wider point here. The Auditor-General raised these concerns, Ms O'Connell said that she thinks that those concerns have been dealt with, but you do not know if all the concerns have been dealt with, do you?
Ms O'Connell : No, not at this point in time.
Senator CAMERON: You do not know if all the concerns that the Auditor-General has raised are being dealt with, yet the federal government is putting in a $2 billion loan to fast-track a project with significant problems in relation to the business plan and significant problems in relation to the traffic flow analysis. How can that be justified from the department's point of view when there are no indicators that these things will be fixed? They are still unresolved.
Mr Mrdak : You have used the language 'significant problems'. I do not think that is necessarily shared.
Senator CAMERON: So there are no problems in this project?
Mr Mrdak : There is work ongoing on this project. You have used the words 'significant problems'. I do not know if that the language that ought to be used.
Senator CAMERON: I would have thought that there are significant problems if you cannot get a traffic flow analysis done on a project that is going to have cars and trucks running up and down it. That traffic flow report is fundamental, surely?
Mr Mrdak : Ms O'Connell has given you an update on the work.
Ms O'Connell : We have a satisfactory traffic flow analysis now. We have one.
Senator CAMERON: Okay, so you got it?
Ms O'Connell : Yes, we do.
Senator CAMERON: Is that available publicly?
Ms O'Connell : No, it is not. We took on notice earlier about making that available to you. I also point out that there is assurance on page 5 of the Auditor-General's report, which is the printed response by the New South Wales government, signed by Premier and cabinet, the CEO of Infrastructure New South Wales, the secretary of the Department of Transport, the chief executive of WestConnex, and others such as the head of Main Roads in New South Wales, attesting that they will be dealing with the issues raised by the Auditor-General's report.
Senator CAMERON: Ah, so you have a promise, have you?
Ms O'Connell : Not only do we have a promise, Senator, it is also the case that we have subsequent to that seen some of the later work done on the business case by the WestConnex Delivery Authority and the New South Wales government, and that has led to us having a level of assurance in relation to those matters. It is important to note that the Auditor-General in New South Wales is talking about the business case in 2013, not necessarily reflecting on the 2015 traffic model.
Senator CAMERON: Having seen an Auditor-General's report for how chaotic it was for the 2013 business case, I am not confident that these issues are fixed. You have taken on notice some of the documents that may give us some assurance. Until we see those documents we cannot have any confidence that the problems, which you were well aware of because you on the committee trying to deal with those problems, are not being replicated. In fact the Auditor-General is quite clear about what should be achieved. Mr Mrdak has just indicated probably that that recommendation from the Auditor-General will not be achieved by the time frame.
Mr Mrdak : What I have indicated is that the March time frame, given the additional work that has been undertaken, may not be achieved. Obviously New South Wales is about to go into caretaker, so that will obviously have an impact on sign-off processes within the New South Wales government. Mr Foulds has indicated to you that they are on schedule for the additional work to be completed by June this year.
Senator CAMERON: You are just doling out money. The federal government is just doling out money to this project. The project is changing. There is no analysis being done on the changes. You do not have an overall business case for the whole project. We are taking a lot of this on faith. The payment milestones have not been determined. How can you be putting billions of dollars of Commonwealth money into this project when there is so much uncertainty.
CHAIR: Can I just pause? Senator, your 20 minutes assessment is up. How much longer do you need?
Senator CAMERON: I am okay. I am finished on this one. Can I indicate, depending on what other senators raise, that I have East West in this area.
CHAIR: Do you have questions that you can put on notice for us?
Senator CAMERON: Not on East West, and I have questions for Infrastructure Australia.
Senator BACK: I have questions for Infrastructure Australia also.
CHAIR: We will start with Senator Brown.
Senator CAROL BROWN: I would like to ask some questions about the Tasmanian irrigation scheme. We just had an announcement about funding of $60 million, I think, for five projects in Tasmania.
Mr Mrdak : That is correct.
Senator CAROL BROWN: Do you have business cases for all those five projects?
Mr Mrdak : I will just get the officers.
Ms O'Connell : Senator, I think we probably have this scheduled under policy and research, which is currently scheduled for the 5 pm to 5.30 pm area. That is when the officers who have knowledge on this would be at the table.
Senator CAROL BROWN: If you could let them know that I will ask some questions.
Ms O'Connell : Absolutely, Senator.
Mr Mrdak : Sorry, we just do not have those officers up here at the moment.
Ms O'Connell : It is the policy and research division, Senator.
Senator CAROL BROWN: What about the Tasmanian Jobs and Growth Package?
Mr Mrdak : That is this area.
Senator CAROL BROWN: You kindly provided a project list as of 31 October last year. There are a number of projects still under assessment. Where are they standing now?
Mr Mrdak : Senator, we will give you an update on that. Mr McCormick.
Senator CAROL BROWN: Do you have an update to the list that you provided as of 31 October last?
Ms O'Connell : We could update that for you, Senator. I think we now have 28 of the 31 projects under way.
Senator CAROL BROWN: Yes. That was the situation, I think, the last time we talked. According to this there are three under assessment, so if we could quickly go through where we are.
Ms O'Connell : Two of the three have moved beyond under assessment. They have been assessed and are now in negotiations. There is one remaining under assessment. The other two are under negotiation in terms of finalising the agreement with them.
Senator CAROL BROWN: Mr McCormick, are you providing information?
Mr McCormick : There are three projects still outstanding as at 20 January. We have had 31 approved for funding.
Senator CAROL BROWN: Can you tell me which projects are still under assessment?
Ms O'Connell : Senator, there is one that remains under assessment: Launceston City Council North Bank precinct redevelopment. Last time we reported two others that were under assessment have now moved to negotiation a funding agreement, so the assessments have been completed and are fine and they are now moving to negotiating a funding agreement. Those two are the Tas Gas Networks and the Caterpillar Underground Mining Ltd, Advanced Manufacturing Development.
Senator CAROL BROWN: With the Launceston City Council project, the North Bank precinct redevelopment, when are we looking to move to the next stage for funding?
Ms O'Connell : Sorry Senator, just correcting—there were three projects under assessment and two that have moved to negotiating funding. The other two under assessment are Launceston City Council Macquarie House Innovation Hub and the National Trust of Australia.
Mr McCormick : Senator, the North Bank precinct?
Senator CAROL BROWN: Yes. With the ones that are still under assessment, I am trying to get a time line as to when they will be moving on. Or is there any issue in terms of whether they are meeting the expectations of moving forward? It has been quite a while now.
Mr McCormick : It has. It is moving forward. We are in regular contact with the proponents. We have required further information to be able to make a value-for-money assessment and recommendation on this project. We are still awaiting some further information and are assessing the information that has been provided.
Senator CAROL BROWN: Do we have a time line in terms of when you expect to indicate that they will be moving into signing contracts in terms of funding?
Mr McCormick : With North Bank, if the information provided is all as requested, I would expect that we would be seeking specific approval to enter into funding agreement negotiations quite soon.
Senator CAROL BROWN: With the other projects that have started, can you provide a list of when they are due to be completed? There are no completion dates here, and I know some have been completed. I would like some further information about that. With the ones that you have indicated funding has been approved for—Oak Enterprises, Tas Gas Networks and the Caterpillar underground mining project—I am interested in when those projects will actually commence.
Mr McCormick : Until we actually have a funding agreement signed, we do not have a specific date, because part of the negotiations with the funding agreement is agreement on the actual milestones to be achieved.
Senator CAROL BROWN: Funding was approved as of October last year, so some of them must have—
Mr McCormick : We do. For all of the ones that have been contracted we do have estimated start dates, completion dates and actual dates as well.
Mr Mrdak : We can give you those.
Senator CAROL BROWN: Can you provide that on notice for me. There are no completion dates or estimated completion dates in the information that you have provided.
Mr Mrdak : We will give you an updated table which has got estimated completion dates as per the funding agreement.
Senator CAROL BROWN: Last time when we spoke you told the committee that there was couple of projects that were not proceeding, which left $2 million out of the $100 million jobs package, and you were anticipating that that $2 million would be spent in Tasmania.
Mr Mrdak : Yes.
Senator CAROL BROWN: Do you have a further update as to what is happening with that $2 million? Has it been allocated somewhere else?
Mr Mrdak : Not at this stage, I do not think. It is going to the innovation.
Mr McCormick : Yes; the Innovation and Investment Fund (Tasmania), under the department of industry.
Senator CAROL BROWN: Sorry, can you repeat that.
Mr McCormick : The money has been transferred to the Innovation and Investment Fund (Tasmania).
Ms O'Connell : That is administered by the department of industry, so it will be spent in Tasmania because it has moved to that fund under Industry's stewardship.
Mr Mrdak : We are not aware of funding decisions at this stage specifically in relation to that $2 million, but it has gone into that innovation investment fund which is being administered by that portfolio.
Senator CAROL BROWN: When did that move over? When was decision taken?
Mr Mrdak : That was formally transferred on 15 November.
Senator CAROL BROWN: That is all I have on the jobs and growth plan, but I did want to ask some questions under the freight-rail package.
Ms O'Connell : That is here, Senator. I will ask the officer to come to the table.
Senator CAROL BROWN: When was the freight rail revitalisation package funding available?
Mr Wood : The current profile for that funding is that it is a commitment by the Commonwealth of $119.6 million over the period from the current financial year through to the 2018-19 financial year.
Senator CAROL BROWN: So was funding available from 1 July?
Mr Wood : Funding is available over that period. Funding will be released subject to the National Land Transport Act and approvals required under that act.
Senator CAROL BROWN: And you have a final project proposal from TasRail?
Mr Wood : Yes, we do. We are just finalising our assessment of that, which will be provided to government shortly.
Senator CAROL BROWN: You received that just recently?
Mr Wood : I believe it was in the first week of February, from memory.
Senator CAROL BROWN: Did you receive the funding proposal from the Tasmanian government or from TasRail itself?
Mr Wood : Our formal agreement is with the Tasmanian government. TasRail is the rail authority and effectively, in this instance, the service delivery agent for Tasmania. A lot of our discussions are directly with TasRail, as they have the detailed knowledge, but the project proposal is provided through the Tasmanian Department of State Development. In our formal relations with them, funding is provided to the Tasmanian government.
Senator CAROL BROWN: Did you provide any assistance on that funding proposal?
Mr Wood : I am not sure if 'assistance' would be correct. We certainly had a lot of toing and froing, trying to clarify details, making sure that the information provided was going to be provided in a way in which we could undertake our assessment and due diligence.
Senator CAROL BROWN: So you provided some advice?
Mr Wood : We had discussions with them and provided advice and asked questions to ensure that we had the information we needed to be able to undertake an assessment.
Senator CAROL BROWN: So it was presented in a way that you were able to undertake that assessment?
Mr Wood : That is correct.
Senator CAROL BROWN: Hopefully that funding will be released after a positive consideration of this proposal, but you are not able to give me any time lines?
Mr Wood : That is a matter for the minister once he receives our advice.
Senator CAROL BROWN: Are the milestones that will be required to be achieved for ongoing funding of this nearly $120 million made public?
Mr Wood : Not typically. Particularly with a project of this nature, rather than delivering a big project, a lot of it is going to be minor works across the network, so they are not typically made public.
Senator CAROL BROWN: Is there a construction schedule in the funding proposal?
Mr Wood : A lot of the details of the construction schedule are still being finalised. Because of the particular nature of this project, it is not constructing a new piece of infrastructure; it is really going back and rebuilding culverts, bridges, improving drainage. So a lot of it is going to be at an ongoing level of detail. That will partly depend on how TasRail are able to take the work forward. It may be that, if they are able to develop efficiencies through that program, additional works could be undertaken.
Senator CAROL BROWN: What is the total cost of this revitalisation package, state and federal?
Mr Wood : The governments combined are contributing $239.2 million towards rail in Tasmania. The state government's commitment includes things such as rolling stock which will be used on that. That is the current proposal.
Senator CAROL BROWN: What does 'the current proposal' mean?
Mr Wood : Until something is approved I cannot indicate—
Senator CAROL BROWN: It is envisaged then that it will be a 50-50 split?
Mr Wood : Yes, the funding that is being sought at the moment is for the P50 amount. Essentially you do a probabilistic estimation and there is a 50 per cent chance that the project will be delivered for the amount of funding being sought, which is actually slightly less than the $119.6 million. You would expect that the rest of the funding up to what is called a P90 amount, which is a 90 per cent probability that works will be completed for that amount, is held in contingency and would be released if required.
Senator CAROL BROWN: What is the department's traditional funding split for road and rail projects on the national network?
Mr Mrdak : It varies, Senator. For many projects it is 50-50. For some projects it is 80-20.
Senator CAROL BROWN: Even on the national network it can still be 50-50?
Mr Mrdak : Yes. There are many projects in the current program. It has been a position of the former government and the current government that projects are funded at 50-50. That is our starting position. In some situations we will fund some projects at 80-20.
Senator CAROL BROWN: Since the announcement by the government in December that there would be an 80-20 funding split for new road and rail projects on the national network outside metropolitan areas, are any projects being funded at 50-50 that need the ministers—I think it was Mr Truss and Mr Briggs—
Mr Mrdak : Is this the national highways upgrade?
Senator CAROL BROWN: Yes, the national network new road and rail project. I am just making sure that Tasmania is not short changed.
CHAIR: Before you answer that, can I just draw attention to the fact that your 15 minutes is up. Could you please either put some questions or wait for another round after this question, Senator?
Senator CAROL BROWN: I would just like to get the answer to this question.
Mr Mrdak : That announcement I think relates to the national highways upgrade in relation to the 80-20.
Senator CAROL BROWN: Road and rail funding.
Mr Mrdak : Road and rail. Regarding the bulk of the projects in the current program, 50-50 is the starting position of the Commonwealth right across the country.
Senator CAROL BROWN: On notice, can you give me a list of projects after the announcement by the government on 11 December 2014 that have been funded at an 80-20 split and of any new ones that have been funded on a 50-50 split.
Mr Mrdak : Details of that National Highway Upgrade Program are still being settled with the jurisdictions, but we can certainly provide you on notice with an update of that, following that announcement, yes.
Senator RICE: I want to move on to the East West Link. We have got to discussion so far about WestConnex. Obviously we are in a different era with regard to East West Link than at last estimates, with the business case having been released by the new Victorian government. I would like to start off with lots of good information that the public has made available to the business case. Did the department do an assessment of the business case?
Ms O'Connell : There were a number of business cases that were publicly released. The business case dated March 2013 is the business case that has a BCR of 0.45, excluding wider economic benefits, and 0.04 with wider economic benefits. The department did not do an analysis of that business case, and that business case was not supplied to the department.
Senator RICE: Yes, as we gathered.
Ms O'Connell : A subsequent business case was delivered to the department on—I will just check with Mr Foulds—I think it was 1 November.
Mr Foulds : It was dated June 2013 but delivered in November 2013.
Ms O'Connell : That business case was assessed by the department, and that has a different cost-benefit ratio.
Senator RICE: Mr Foulds, can that assessment be provided to us?
Mr Foulds : Again, it goes to advice to government, but I am happy to take that on notice.
Ms O'Connell : I think that was probably released.
Senator RICE: Given the Victorian government have released the business case, it would seem to be that the assessment of that would—
Mr Mrdak : Our assessment is advice to government, but I will take that on notice.
Senator RICE: Okay. Is there any reason why you think it may not be able to be released?
Mr Mrdak : I will put that to the minister. I cannot give you a position at this stage. There are conventions around provisions of advice. But, recognising Senate orders and the like, I will take that on notice.
Senator RICE: From an answer to a question at last estimates, I understand about the memorandum of understanding that was made between the Victorian and the federal governments. Was there just one memorandum of understanding, or was there more than one relating to the different stages of the East West Link?
Mr Jaggers : There was one memorandum of understanding.
Senator RICE: Did that relate to stage 2?
Ms O'Connell : No. It covered the eastern section and the western section—both those stages.
Senator RICE: The answer to the question on notice was that it would be a matter for both the federal and the state governments as to whether that could be released.
Ms O'Connell : That is correct.
Senator RICE: What is the view of the federal government about the release of that? Is the federal government happy for that memorandum of understanding to be released?
Mr Mrdak : Not at this time. I am happy to go back to the government and seek advice on matters.
Senator RICE: If you could do that, and any reasons as to why that was not able to be released, given the project is now in abeyance, would be good.
Mr Mrdak : We await Victoria's formal advice on their position on the project.
Senator RICE: I am about to get onto that.
Mr Mrdak : They have yet to advise us of their position.
Senator RICE: I was interested in a discussion that came from the New South Wales Auditor-General's report about the steering committee that was established between the state and federal governments for WestConnex. Was there a similar steering committee at any stage that the federal government was represented on?
Ms O'Connell : Yes, there was. There was a steering committee in place for the development of the business case proposal et cetera for the eastern section of the East West Link project.
Senator RICE: Who was represented on that steering committee from the government?
Ms O'Connell : I was represented as the federal government representative.
Senator RICE: And when did that steering committee commence? Has it ceased? Presumably it has ceased operation.
Ms O'Connell : It certainly has ceased operations. I will ask my colleague Mr Foulds if he has got the exact date of when the steering committee commenced, but it had been running for some time.
Mr Foulds : I would have to take that on notice.
Ms O'Connell : It has not met for quite some months, and does not continue to meet at this point in time.
Senator RICE: As was asked for the WestConnex steering committee, would it be possible to get the minutes of the meetings of that steering committee?
Ms O'Connell : I will take that on notice.
Senator RICE: Even if we are not able to get the minutes of the meeting, I would like to have the full details of the operation of that steering committee and who was represented on that steering committee.
Ms O'Connell : Certainly.
Senator CAMERON: Just go up and get the minutes.
Senator RICE: Well, I have asked for the minutes. They have taken the minutes on notice, Senator Cameron. I will move on. Given the current situation with the new government and the East West Link, can you update us on what your understanding is, particularly with regard to the $3 billion of federal funding on the East West Link, given the Victorian government's publicly stated intention of not building the East West Link?
Mr Mrdak : The Victorian government has made their public position, but they are yet to provide any formal advice to the Australian government on their commitment to the project, as required under the memorandum of understanding.
Ms O'Connell : It is also fair to say that if the project does not proceed then the Australian government, under the terms of both the National Partnership agreement and the instrument that was signed and the memorandum of understanding, would be expecting return of the full funds from Victoria.
Senator RICE: Have there been discussions with the Victorian government about the redirection of those funds to other projects?
Mr Mrdak : There have been proposals put by the Victorian government about alternative projects that they would like to see funded. That is as far as it has gone.
Senator RICE: Can you give us the details of which projects have been put forward by the Victorian government.
Mr Mrdak : Some of them have been publicly canvassed by the Victorian government in relation to projects such as their rail level crossings, their alternative proposal for truck access to the port—
Senator RICE: The West Gate Distributor?
Mr Mrdak : That is right, and myriad other small projects through Melbourne. I think they have been publicly canvassed by the Victorian government. It was provided via correspondence from Victoria. I can take that on notice.
Senator RICE: Has the Melbourne Metro rail project been proposed as a project?
Mr Mrdak : I would have to check the details. I do not recall that being on the initial proposal put to the Australian government.
Senator RICE: The managed motorways project? It had been an Infrastructure Australia assessed project.
Mr Mrdak : I do not recall it being on the list that has been provided, so I cannot really talk about it.
Senator RICE: The metropolitan ring road upgrade? That also was an IA assessed project.
Ms O'Connell : The M80.
Mr Mrdak : I do not recall that being on the list submitted by the Victorian government. My understanding is that, essentially, the projects that have been canvassed thus far by the Victorian government relate largely to their incoming government election commitments. I will refresh my memory and come back to you on notice.
Senator RICE: Has the department done any assessment of the projects that have been proposed by the Victorian government?
Mr Mrdak : We have.
Senator RICE: Has the department reached any views about the appropriateness of redirecting the funding to these projects?
Mr Mrdak : We have provided advice to the government based on our initial view. It is fair to say that we would view some of the projects put forward so far by Victoria as being projects that are probably of a lesser priority. They are projects which in our view have less value to long-term productivity and—
Senator RICE: On what basis is that? Have you done a business case assessment or has a business case assessment been provided?
Mr Mrdak : It is fair to say that it is impossible to do a full assessment based on the information that has been provided so far on most of them.
Senator RICE: Have business cases for those projects been provided to you?
Mr Mrdak : No.
Ms O'Connell : In relation to the Victorian government, post election, we have not been given new business cases updated with particular lists of level crossings, for example. Prior to that, some time ago, there was a list of level crossings that had business cases associated with them that had been looked at by Infrastructure Australia. That was some time ago. We have not looked at that list compared to the latest list. I just want to say that there probably are some level crossings that are currently proposed to be treated by the current Victorian government that potentially were the subject of an earlier business case.
Senator RICE: I am interested in fleshing that out. If you have not received new business cases, what has been your criteria or your process for forming a view as to how appropriate those projects are?
Mr Mrdak : I suppose we would say that the paucity of information thus far makes it difficult to assess the projects as being high-value projects.
Senator RICE: So it is basically the absence of information.
Mr Mrdak : We would see that there are far higher priority projects.
Senator RICE: What higher priority projects would you see?
Mr Mrdak : We have in the past seen a strong business case for the M80. That is a project that has been assessed and is generally regarded as being a high-value project. We are not in a position at the moment to say whether the alternative projects put forward by Victoria have as strong a business case as the project they are not proceeding with.
Senator RICE: I will leave it there with the East West Link, but it may be appropriate for Senator Cameron to continue on East West Link.
Senator CAMERON: Mr Mrdak, I was quite interested in your assertion that the projects that the Victorian government are proposing are of a lesser value than the East West Link or some other projects—I think they were your words. Given the returns on the East West Link project, if that sets the bar for the department you would not have to jump very high to get these projects approved, would you?
Mr Mrdak : What I was indicating is we are not in a position at this stage to demonstrate that the alternative proposals are of a higher value than the projects such as the East West. There simply is not that information. Certainly, in previous analysis of the Victorian program we identified projects like the M80, which have a very strong business case, but that does not appear on the Victorian government alternative list.
Senator CAMERON: You also made some comment about projects not being—
Mr Mrdak : As I said—
Senator CAMERON: How did you come to that view if you do not have information?
Mr Mrdak : That is precisely why I cannot give advice to the government that these are high-value projects. That is all I was indicating.
Senator CAMERON: In written answer 105 from October, the department indicated that Infrastructure Australia was still undertaking analysis of the most recent business case provided to it by the Victorian government for the project. Has that analysis been done?
Ms O'Connell : My understanding is that that analysis is still underway with Infrastructure Australia.
Senator CAMERON: So there is no analysis finalised for East West?
Mr Mrdak : My understanding—and Infrastructure Australia will be able to add to this when they appear shortly—is that they have sought additional information. They have yet to complete their analysis.
Senator CAMERON: So you are going to demand a return of funds from the Victorian government based on a project that you have approved with no business plan?
Ms O'Connell : No, Senator. There is a business case. We receive the business case in November 2013.
Senator CAMERON: You have analysed the business case?
Mr Mrdak : We have analysed.
Ms O'Connell : We have analysed it.
Mr Mrdak : Infrastructure Australia is still completing its analysis.
Senator CAMERON: They are the ones who basically determine the value for the project?
Mr Mrdak : They undertake an independent assessment of the business plan, which, as we discussed earlier, for WestConnex has now been completed. On East West it had not been completed at the time of the Victorian election.
Senator CAMERON: Why did you facilitate payment on this project if Infrastructure Australia has not completed their analysis?
Mr Mrdak : The Australian government took the decision to accelerate stage 2 of the project and to meet its election commitment in relation to progressing the first stage—the eastern section—and made those payments.
Senator CAMERON: So it is the same as WestConnex—it is a political decision by the government to move ahead with this project and that is what determined—
Senator Cash: The officer cannot comment on whether something is a political decision, but I am more than happy to step in and provide you with an answer to your question. Senator Cameron, you would know that this is a project that has been considered and on the table for more than a decade. This is not a new project. It was first recommended, I understand, in 2008 in a report to the then Labor government, titled East West link needs assessment. At that time, the project actually received bipartisan support. The current Leader of the Opposition supported the East West Link project. My understanding is that the bipartisan support fell apart when the coalition made it an election commitment in 2013 to provide the money towards stage 1. In terms of the benefits—
Senator CAMERON: It probably fell apart because it was a dog of a project.
Senator Cash: that this project will actually—
Senator CAMERON: That is why it fell apart. It is a dog of a project and you know it.
Senator Cash: Senator Cameron, you are always on the record as saying that you are a senator who has come to this place, unlike those on this side, and are pro-jobs. This will create 7,000 jobs for Victorians. It is a project that, as I said, has had bipartisan support. It has been on the table for 10 years. This is a project that is shovel-ready. The benefits have been concisely outlined over many years. For the life of me, I cannot understand a state government, for purely political purposes, saying to the people of Victoria, firstly, 'We are not interested in the creation of 7,000 jobs.' I would be embracing it and taking credit for it if I were Daniel Andrews. Secondly, wanting to give back to the Commonwealth, or having to, $1.5 billion to not build a road—
Senator CAMERON: Mr Mrdak, we handed over $500 million to the previous Victorian government on 30 June 2014. Is that correct?
Mr Mrdak : It was $1.5 billion.
Senator CAMERON: It was $1.5 billion.
Mr Mrdak : I think the minister has outlined that this was a key part of the government's infrastructure growth package to bring forward stage 2, the Western Link, which, as far as I am aware, has strong support in Victoria, but we are waiting to see the incoming Victorian government's position, as well as enabling the contracting of stage 1, the Eastern Section. As the minister has outlined, it is very much driven by the fact that this would create an immediate employment boost for the state of Victoria. Very much a key part of the government's macro budget investment strategy was the payment of that money at that point.
Senator CAMERON: At what cost are these jobs?
Senator Cash: Seven thousand jobs—that is what it will be at the cost of.
Senator CAMERON: Are you aware that the former Victorian cabinet had looked at this issue? Were you or anyone else in the department aware that the benefit-cost ratio of the project was 45c in the dollar?
Mr Mrdak : We did not receive a copy of that initial business case that was outlined in your comment. As Ms O'Connell has indicated, the first full business case which we received was in November 2013 which had a BCR of 0.8, excluding wider economic benefits, and a BCR of 1.4 with wider economic benefit. That is the business case which the department has worked from. Subsequently, my understanding is that, as the project went to market, the business case grew more favourable. In the end, the tendered price for the project that was contracted was a significant improvement on the business case tendered estimate, which meant that the business case got much stronger. It remains a very strong business case—well above 1.4 in current operation. My colleagues will correct me, but the initial business case was based on a tender price of about 6.4. The final tender price that was achieved was 5.3—
Ms O'Connell : It was 5.6.
Mr Mrdak : which made it a significantly better investment in the end, given the market conditions.
Ms O'Connell : Sorry, you were right: it was 5.3.
Mr Mrdak : A very favourable outcome and, as the minister has outlined, a project that still could start almost immediately.
Senator CAMERON: You said it is becoming more favourable. It is becoming more favourable because the Victorian government had to scramble to try and make it more favourable. They have added—
Mr Mrdak : With the amount of tunnelling involved, the level of competition in the market and the delivery of that quality design, the tendered price, by any standards, is a very good project price. It will be a price which we will not achieve again if this project does not proceed.
Senator HEFFERNAN: That, of course, is based on the fact that the CFMEU will not block Boral Concrete.
Mr Mrdak : I am not sure about the industrial relations assumptions that are built into it. What I can say from seeing prices around the market is that the price achieved was a very good price for that project.
Mr Mrdak : Does that price include adding in public transport improvements and the widening of the Tullamarine Freeway to try and get the BCR up?
Mr Mrdak : No, that BCR is based on the business case of the Eastern Section of that project.
Ms O'Connell : The BCR is the business case for the Eastern Section and the construction price is the construction price.
Senator CAMERON: Are you aware that public transport improvements have been added into this project and the widening of the Tullamarine Freeway?
Ms O'Connell : There are public transport improvements as part of the project. They are genuine public transport improvements as part of the project.
Senator CAMERON: This is to try and drive the business case up?
Mr Mrdak : I do not know what it does for the business case. Essentially, what I think they are trying to do is ensure a full mix of transport operations in the corridor. It is improving the operations of the corridor. I do not think that, of themselves, they add to the business case.
Senator CAMERON: In 2013, were you aware that, even with the federal government grants, there was a $2 billion shortfall in the project?
Mr Mrdak : Sorry, Senator?
Senator CAMERON: A $2 billion funding shortfall, even with the Commonwealth grants?
Mr Mrdak : I am not aware of that.
Senator CAMERON: So you are not aware that the Victorian cabinet had a report to say that there was a $2 billion shortfall? We were just going to pump the money in, whether there was a shortfall or not. We did not even know about that, did we?
Mr Mrdak : What has been released by the Victorian government may not reflect the final position. My understanding is that, when the previous Victorian government tendered and contracted, it was based on the basis that the project would be viable. With respect to the business case—to come back to your earlier point—I am advised that the issues of public transport provision went to the wider economic benefit, which is broader than the initial BCR. The BCR is based essentially on the eastern corridor motorway project.
Senator CAMERON: Are you aware that the information available to the Victorian cabinet was that there would have to be a toll on the M1, the Westgate Bridge, the Westgate Freeway and the Eastern Freeway to make up this $2 million gap?
Ms O'Connell : That was not part of the scope of the eastern section. The western section is the alternative route to the Westgate Freeway.
Senator CAMERON: It is part of the same project, isn't it?
Ms O'Connell : No. The Victorian government contracted for the eastern section. There is the overall project, but it was the eastern section that was contracted.
Senator CAMERON: Neither the secretary nor anyone in the department was made aware that there was a plan to toll the M1, the Westgate Bridge, the Westgate Freeway and the Eastern Freeway? Were you aware of that?
Mr Mrdak : I would have to go to the documents. I am not familiar with that comment that you have just made. I am happy to go back and check that. But certainly the basis on which the Commonwealth entered its arrangement with the state of Victoria was that the state of Victoria would fund the cost over and above the Commonwealth contribution. How Victoria chose to do that was a matter for the Victorian government. With all due respect, I would need to see the documentation which you are referring to to be able to give you a view on that.
Senator CAMERON: I would have thought it would have been of interest to the department that if you sign off on a project, you hand over money on a project, and the other project partner starts putting tolls across Melbourne, as well as raising tolls on the City Link and East Link, it might have been an issue? Would that be an issue for you?
Senator Cash: Chair, to be fair—Senator Cameron, you are referring to particular documents, which the secretary has advised he has not seen. I am sure you are not misquoting from those documents, but the secretary has advised he does not have the benefit of those documents.
Senator CAMERON: Okay. So you are going to have a look at your documents and see whether these issues were there. When you do that, can you look at the fact that congestion on the Tullamarine Freeway and Eastern Freeway would in fact increase as a result of this project and also that it would take 56 years of tolls to pay back the construction costs? There are a range of issues I have raised there. If you can take those on notice.
Mr Mrdak : I am happy to have a look at those issues. Certainly, the Victorian government contribution in terms of how they would structure the payments through the availability payments and the tolling levels were matters for Victoria. It does not go to the issue of the Commonwealth support for this project.
Senator CAMERON: I understand that. The Commonwealth government basically supported this project without any understanding of the cost-of-living implications for Victorians as a result of these increased tolls.
Mr Mrdak : I do not know how you could reach that assertion, but take me through your line of thinking on that.
Senator CAMERON: You are funding the project.
Mr Mrdak : Yes.
Senator CAMERON: The Victorian cabinet had information that for it to properly fund the project—you are the partner—they would have to toll the M1, the Westgate Bridge, the Westgate Freeway and the Eastern Freeway and they would have to raise tolls on City Link and the East Link and there would be increased congestion on the Tullamarine Freeway and the Eastern Freeway, and the estimate was 56 years of tolls to pay back the construction costs. If that is not of interest to the department, if that is not of interest to the government, that is fine. I am just asking you to have a look—
Senator Cash: Senator Cameron, it is not that it is not of interest. Senator Cameron is, allegedly, referring to Victorian cabinet documents. Unless you have them there, Senator, and you would like to table them for the officers to have a look at, the officer has said that he will take on notice what you have said.
Senator CAMERON: I am happy to—
Senator Cash: But to then make the summation that it is not of interest, based on the response given, is completely unfair and unfounded.
Senator CAMERON: Mr Mrdak's response was that these are issues for the Victorian government.
Mr Mrdak : You certainly went to whether we were across the issues of rising costs of living and the like. I do not how you make that linkage, but the benefit of the eastern project was to provide a substantial reduction in travelling times and cost of operations for traffic moving through that segment. You have taken me to a point, which I am not sure how we got to, and you have asked: did we care about cost-of-living issues?
Senator CAMERON: You got to this point because the Victorian cabinet—the coalition government in Victoria—were aware of these issues in 2013. You were a partner in the project. You are telling me that either you are unaware of them or the documents are there and you do not know about them now?
Mr Mrdak : You asked me the question: did we care about the costs-of-living increases?
Senator CAMERON: No, if I did, I withdraw that.
Mr Mrdak : I am happy to leave that one there because, clearly, I do not think you can make that linkage.
Senator CAMERON: My view is that if you are going to give me arguments about the cost benefit of this project, I am entitled to put back to you: have you factored in the issues that the Victorian cabinet were aware of in terms of increased costs to the public, to use transport systems around Victoria, when you made the decision to provide the billions of dollars of support? That is a legitimate question.
Mr Mrdak : The issue is that, to finance any piece of infrastructure, governments have to create funding, either space on budget or through revenue mechanisms like direct charging. There is no other way to pay for infrastructure. Whatever alternative proposals are put forward, they will have to be paid for either by the taxpayer, on budget, or through charges.
CHAIR: Luckily, in Junee, we have only one roundabout and no traffic lights and if you want to commute to Sydney there is only one set of traffic lights between Junee and William Street in Sydney. So there you go. It is much cheaper to live in Junee, Doug!
Senator CAMERON: Magic! Mr Mrdak, when did you become aware that the Victorian cabinet decided, in April 2013, not to submit the business case at that point to Infrastructure Australia?
Mr Mrdak : I became aware of it when I read media reporting of the documents that had been released.
Senator CAMERON: I will just quote this to you. This is from the business case cabinet submission. It says:
… ''the risk associated with this action—
that is, submitting to IA—
is that the lower end range of benefit-cost ratios presented in the business case may be used as a justification for not supporting the project".
"It is proposed to provide updated strategic material … to Infrastructure Australia in April 2013 …
It goes on:
"The Victorian Government can then state that it has submitted updated project information to IA for assessment …
When did the department, separate to Infrastructure Australia, become aware of the business case?
Mr Mrdak : As I indicated, the department received a business case on 1 November 2013.
Senator CAMERON: 1 November 2013?
Mr Mrdak : Yes. I am advised that Infrastructure Australia, and the officers who will appear shortly, received a business case for the eastern section on 7 July 2014, which was, again, an updated business case. There was an initial business case done. A short form business case was provided to IA by the Victorian government, in June 2013.
Senator CAMERON: So there was an update in July 2014?
Mr Mrdak : Which was the detailed business case.
Senator CAMERON: It was updated?
Mr Mrdak : That is right.
Senator CAMERON: In April 2013, the decision was not to put the case forward because it just would not be accepted?
Ms O'Connell : We are not aware of the Victorian cabinet's deliberations at that time. We became aware when the material was made public in December 2014.
CHAIR: I am going to have to ask a favour, to be able to manage the system. Senator Ludlam has been here all morning. He has to go to another committee. This is the new model of estimates, which is not working. Could I seek your indulgence to let him have a few questions, so he can get away to his other committee?
Senator CAMERON: I have got other commitments as well. You have had indicated to you that I had finished this. I have some questions on the Pacific Highway, then I am done. I am in your hands, Chair. You can do what you like.
CHAIR: I just want to be fair.
Senator CAMERON: I just think this is not—
CHAIR: You will go on for another half an hour.
Senator CAMERON: I doubt it.
Senator LUDLAM: Do you want to finish this line of inquiry, then if I can jump in before your Pacific Highway stuff?
CHAIR: Come on, Doug.
Senator CAMERON: It is up to the chair. I would prefer not. I would prefer to get—
CHAIR: You have a crack. Chris, you have a crack, then we will go back to Doug.
Senator LUDLAM: I want to take us to the other side of the country.
Senator Cash: Western Australia.
Senator LUDLAM: Yes, this is an area that Senator Cash will be fairly familiar with as well. It is a similar line of inquiry. It is interesting that we have three urban freeway projects under discussion. On the Perth Freight Link specifically, the budget papers identify $866 million of agreed Commonwealth funding for the project, but media reports are talking up a $925 million figure. I am not asking you to account for what journalists might come up with, but can you help distinguish where that comes from?
Mr Jaggers : The $866 million was new money as part of the infrastructure growth package, but there was already funding in the program for the High Street component which has been subsumed into the Perth Freight Link. That is the reason for the difference.
Senator LUDLAM: That is really useful. I probably should have known that, but thanks. Is the Commonwealth in a position to withdraw its contribution based on any set criteria or is this committed no matter what?
Mr Jaggers : We have a national partnership agreement which has been signed by all jurisdictions. Under that national partnership agreement, there is a separate schedule for the Western Australian program. So we have agreed to provide the funding for those projects and the state has agreed to deliver those projects that are in the schedule, including, obviously, the Perth Freight Link. There are provisions in the agreement if the project were not to proceed because one of the parties wanted to cancel the project, but the national partnership agreement does provide the basis for us proceeding with the project.
Senator LUDLAM: I understand why you would want that continuity. If we have a similar example to what just happened in Victoria, where there was a state election, a change of government and a very dramatic change of priorities, is the Commonwealth going to plough on insisting that its funding was only for the Perth Freight Link?
Mr Mrdak : That would be a matter for the Commonwealth government at the time.
Senator LUDLAM: I guess, but there is nothing in the national partnership agreement that insists that that would need to occur?
Mr Mrdak : The national partnership agreement is between two levels of government and it is open to governments, obviously, to change their priorities. In the case of Victoria, the federal government's position remains that the East West Link project should continue. That is not the view of the new Victorian government.
Senator LUDLAM: I would respectfully disagree with that, but let us keep this in WA. Is Commonwealth funding of the Perth Freight Link conditional on any particular criteria or milestones being met, or is that money going to be handed over no matter what?
Mr Jaggers : We have received a business case from the Western Australians and a summary of that business case has been released. Infrastructure Australia are also considering the business case and will provide advice to government. We will also be considering a project proposal report from the Western Australians, when a final funding decision will be made by the minister.
Senator LUDLAM: So the business case has not been put into the public domain yet, although the summary was released, I think—
Mr Jaggers : That is right: in December the summary was released.
Senator LUDLAM: Late December.
Mr Jaggers : Yes.
Senator LUDLAM: Does this the business case take in the entire catchment? Sometimes I think we are confused with three different projects. There is the 85 kilometres, which is all the way from Muchea down to the port of Fremantle; there is the 6½-kilometre section through the Beeliar Wetlands, which has attracted a lot of interest; then there is the western connection that would take it from the Roe extension all the way through to the container port. Is the business case for that entire link all the way down from Muchea or is it a subset?
Mr Jaggers : The business case considers the entire linkage, but the focus of it is on the component we are calling the Perth Freight Link, which is from the Kwinana Freeway through the Roe 8 extension, Stock Road and High Street through to the port of Fremantle.
Senator LUDLAM: And the funding commitment that has been made is not for any specific piece of that project; it is for the entire extent from the Roe Highway extension all the way through to the port?
Mr Jaggers : That is correct.
Senator LUDLAM: I guess it is Infrastructure Australia's job, then, to go through and interrogate that business case and work out whether it is happy. If you guys are not happy with the assumptions or the models that are used, which are very similar to those that have been used for New South Wales and Victoria, do you have the ability to go back to the state and ask for its homework to be done to a higher standard?
Mr Jaggers : We have certainly been working with the West Australians for some time. We have employed consultants who have done work along the way to provide assurance to us as the business case is being developed.
Senator LUDLAM: Who have you got working on this project in particular?
Mr Jaggers : I do not think we have consultants working at the moment, but we have had during the past year. I can provide details.
Senator LUDLAM: Do you want to table those for us, down the track?
Mr Jaggers : Yes, we can just table them later today, Senator, if you like.
Senator LUDLAM: Thanks. In relation to the traffic modelling that has been provided by the proponent—in this case the state government—the usual justification for this project is to reduce freight traffic, and particularly container traffic, on Leach Highway. Are you aware that the proponent's own modelling shows that this Perth Freight Link will have negligible impact on container traffic on the Leach Highway? Does that disturb you at all?
Mr Jaggers : Senator, I think the business case summary that was released does outline quite a number of the benefits of the project, including reduced heavy vehicle usage of Leach Highway.
Senator LUDLAM: That is not at all what I have got in front of me.
Mr Jaggers : The overview says that it will bypass 14 traffic lights, resulting in less delays and frustration of heavy vehicles. The benefits also include 500 fewer trucks per day on sections of the Leach Highway by 2031—
Senator LUDLAM: Five hundred per day?
Mr Jaggers : Yes; by 2031—reducing noise and increasing mobility, and also improving access to the Murdoch Activity Centre and the Fiona Stanley Hospital.
Senator LUDLAM: The PER—which is what I am drawing my information from, and I can table that after this session, if you like, so that you can have access to what I am looking at—indicated that the daily heavy vehicle flow in 2021 would be about 2,800 without the project, and that it would be about 2,600 with the project. Is that reasonably consistent with the modelling that you are reading from? It does not sound like it.
Mr Jaggers : Senator, that is one year, I presume, those figures.
Senator LUDLAM: It is a 2021 snapshot of an estimate, and that was contained in the PER.
Mr Mrdak : Senator, are you quoting that it is 2,800 in 2021, without; and 2,600 with—?
Senator LUDLAM: Roughly; I am reading off a graph.
Mr Mrdak : And I think what Mr Jaggers has indicated with the 2031 projection is that the 200 less is then 500 less by 2031.
Senator LUDLAM: So it opens up.
Mr Mrdak : It seems to me that we are probably talking about a consistent document.
Senator LUDLAM: It is in the ballpark, isn't it?
Mr Jaggers : Yes. Senator, we might have to take that on notice to provide you with some more detail.
Mr Mrdak : I would have presumed the business case and the PER are consistent.
Senator LUDLAM: Yes, if it is a decade later; and there is kind of a wedge opening up, as traffic moves off.
Mr Mrdak : Yes. Essentially, what you would imagine with projects like this is that your growth will be absorbed by the new route.
Senator LUDLAM: Are those assumptions under any kind of examination or test by the Commonwealth, either for the 2020s or the 2030s?
Ms O'Connell : We certainly look at future freight projections, and do some modelling on future growth in freight. And this is reflecting, obviously, a future growth in freight, so we would check to see that it is consistent with our projected modelling of future freight forecasts.
Senator LUDLAM: That is good to know. What can you tell us in this instance? Do you think the state government's increased freight volume projections are accurate and reliable?
Ms O'Connell : Yes.
Mr Jaggers : Senator, in relation to this project we also did our own modelling of traffic volumes, and that information was shared with Western Australia and used as a comparison point for them in determining their patronage forecast for the project. So we are comfortable with the forecasts that have been included in their business case.
Senator LUDLAM: For a long period of time there have been proposals that have just never quite gotten off the drawing board for a container port in Cockburn Sound, which would either act as a spillover, or to shift some of the container traffic at least, and maybe some of the other freight tasks, out of the port of Fremantle. If that were to come to pass, what impact would that have on this project, which is entirely dedicated to shunting freight in and out of Fremantle Harbour?
Mr Jaggers : I guess there are two points I would like to make in response that. First is that the Perth Freight Link—a large proportion of it, the Roe 8 extension—obviously would assist freight volumes moving to the south as well as to the north towards Fremantle. So there is certainly no redundancy in a large portion of the project. I guess the second point I would make is that there are currently 670,000 containers moving out of Fremantle, based on 2012-13 data, with the port continuing to grow to about 1.2 million FTE per year—
Senator LUDLAM: So a doubling of freight container movements?
Mr Jaggers : I am saying that there is current capacity within the port to move to 1.2 million containers per year. There is certainly significant room for container growth in Fremantle and so the project that we are talking about, the Perth Freight Link, obviously will be supporting that container growth into the future. If a port is opened at Kwinana sometime down the track then obviously a large part of the existing project would also support an outer harbour solution.
Senator STERLE: Mr Jaggers, you just mentioned 670,000 container movements—what about single trailer movements that are not containers? There are heaps of them with all those new vehicles. Have you got those figures as well, because there would be thousands on top of the container movements that you have not counted.
Mr Jaggers : They are not included in that number of containers, but I was commenting just on the growth of the court and whether that is sustainable. Certainly the patronage numbers that have been developed by Western Australia and that we have done on our own take that into account—
Senator LUDLAM: I was only asking about container traffic.
Mr Jaggers : It is, though, important—one of the benefits of the project, by having a heavy vehicle charge on the project, is that it disencourages trucks.
Senator STERLE: There are cattle movements as well; sheep. You are nearly a million.
Senator LUDLAM: I am getting the wind-up because we are getting close to the lunch break. There is a certain amount known, although I still think it is frighteningly ambiguous, about the section that ploughs through the wetlands at Beeliar, but there is much less known about what the footprint of this project is going to look like west of the Beeliar Wetlands as it runs up into Fremantle. What can you tell us about grade separation, overpasses, tunnels—how are you actually going to get connectivity between the Roe Highway Extension and the container port? Or the port in general?
Mr Jaggers : Certainly the community consultation and environmental approvals process is still under way so—
Senator LUDLAM: How can you have funded the project to the tune of nearly a billion dollars while that is still afoot?
Mr Jaggers : There had to be a commitment to the project to move the project forward to this point.
Senator LUDLAM: What is the point of consulting with people after you have made the decision? That is insulting, not consulting.
Mr Jaggers : I think there are a range of options that the Western Australian government is still considering for those intersections and so there has been consulting and talking to businesses, but also to communities, about those options. I think it is still quite an important part of the process and the alignments and the final design are still to be settled for each of those components.
Mr Pittar : The business case summary that was released in December outlines some of the works to the west of the Beeliar Wetlands and around Stock Road. Between Stock Road and South Street will be upgraded to a six-lane highway, with construction of an overpass at the Winterfold Road and a grade-separated interchange at South Street. Local road access between South Street and the Leach Highway will be rationalised and there will be the construction of the new four-lane connection between Stock Road and Leach Highway. That outlines some of the things at a broad level. That is all on the web, too.
Senator LUDLAM: Was the Commonwealth government in possession of the full business case when the decision was made to allocate $860 million?
Mr Mrdak : The government's announcement was conditional on the preparation of the business case.
Senator LUDLAM: The government funded $860 million in a very tight budgetary environment without being in possession of the business case?
Mr Mrdak : The completion of the business case was undertaken post the announcement to commit. Going back to your earlier point in relation to assessment processes, the reality for every project is that unless there is a funding commitment we do not proceed to detailed planning or environmental assessment. That is the reality, because we do not have the funds to proceed. All projects have an initial funding commitment and then proceed through the planning and assessment process.
Senator LUDLAM: That is totally the opposite direction in which public transport projects are funded. In your wildest dreams—
CHAIR: Senator Ludlam, I regret to inform you that your time has expired.
Senator BACK: I want some clarity on a number of projects that would be either underway now or may be near completion, and if they were not undertaken I would like to have some background on them. These were projects that I think were funded for 2009-10. Can you give me some background on where they are, whether a cost-benefit analysis was done et cetera. Let me go through them quickly. In Victoria, there is the Regional Rail Link, $3.2 billion. Did we see a cost-benefit analysis for that, was it released and where are we with that project?
Mr Jaggers : The Regional Rail Link project has an Australian government contribution of $2.718 billion. The project is essentially complete. Construction was completed at the end of 2014.
Senator BACK: Was that project the subject of a publicly available cost-benefit analysis?
Mr Jaggers : No.
Senator BACK: What about the Gold Coast light rail project in Queensland, $365 million. Where are we with that and can you tell us whether we all saw a cost-benefit analysis and a business case?
Ms O'Connell : The project is complete. The light rail is operating. I do not believe there was a publicly available cost-benefit analysis. I believe Infrastructure Australia did review a cost-benefit analysis and made a recommendation on it.
Senator BACK: I will go to South Australia for a couple. We have the Gawler rail line modernisation, $300 million, and the Noarlunga to Seaford rail extension, $290 million. Where are they and did we see a cost-benefit analysis released for each?
Ms O'Connell : The Noarlunga to Seaford rail project is complete and it is in operation.
Senator BACK: And the contributions respectively from the Commonwealth and South Australian governments?
Mr Wood : I will be a moment. I do not have that to hand, given that it is a completed project.
Senator BACK: You might even take it on notice.
Ms O'Connell : You also asked about the Gawler line. There was a commitment to electrify the full line to Gawler. The South Australian government decided not to proceed with the full project.
Senator BACK: Did the funds come back to the Commonwealth, or were they never allocated in the first place?
Mr Wood : The project was substantially complete. It essentially consisted of two parts. Part of it was rebuilding the track—that was part was completed and that included rebuilding some stations. The electrification works were not completed. A portion of funds related to those works were returned to the Commonwealth.
Senator BACK: I will come to WA. There is the Northbridge rail link, $236 million. Would that have been the Commonwealth's contribution or the total? It must be the Commonwealth's contribution.
Mr Jaggers : The Commonwealth's contribution. It is also complete.
Senator BACK: Did we see a cost-benefit analysis for that one come through, and if so who prepared it—the Western Australian government or the Commonwealth government?
Mr Mrdak : There was no business case or cost-benefit analysis, in the formal sense that we now understand for some of the major projects, completed for that.
Senator BACK: What about the O-Bahn track extension, $61 million, in South Australia? Where are we with that?
Ms O'Connell : The project is discontinued.
Mr Mrdak : It did not proceed
Senator BACK: Did the Commonwealth commit money, or did it pay funds to the South Australian government?
Mr Mrdak : It was committed funds But I do not think moneys were paid. The project did not proceed.
Ms O'Connell : I think a small amount was paid for planning work, but that is it.
Senator BACK: There is $1.4 billion for the Hunter Expressway in New South Wales.
Ms O'Connell : That project is complete.
Senator BACK: And there was a contribution by which parties, and did we see a cost-benefit analysis released in advance?
Mr Jaggers : It was all Australian government funding for the project. I am not certain whether there was a business case or not.
Mr Mrdak : I do not think a business case was published for that project.
Senator BACK: Surely the New South Wales government would have had input into it, despite the fact that no New South Wales funds were allocated?
Mr Mrdak : The New South Wales government had responsibility for the development and delivery of the project.
Mr Jaggers : They delivered it. They certainly would have provided project proposal reports but I do not know about a business case.
Senator BACK: In Queensland we have the Ipswich Motorway, $884 million.
Mr Jaggers : There are a number of components of the Ipswich Motorway. I presume you are referring to the Dinmore to Goodna section?
Senator BACK: Yes.
Mr Jaggers : That project is completed.
Senator BACK: And the contribution by each?
Mr Jaggers : I would have to check. I am sorry, I cannot recall.
Mr Mrdak : We will get you those.
Senator BACK: If you would, and do we know whether a business case or cost-benefit analysis was released for that project?
Mr Mrdak : I would have to check. There were certainly a business case and a cost-benefit analysis prepared but I do not know if they were publicly released in full.
Senator BACK: And the Darwin Port expansion—the final one. Who paid up, how much did each pay and did we see a cost-benefit analysis released?
Mr Mrdak : I do not have the details on Darwin Port so we will take it on notice.
Senator BACK: I am keen to know about this process about commitment of funds versus the actual allocation of the funds. I am anxious to know in these instances, please, at what stage in proceedings do we see a commitment of the funding—which presumably would then trigger works to be done but, except for some minor planning funds, the Commonwealth's money is not yet committed or spent.
Mr Mrdak : You are absolutely right. Generally governments commit to projects at the concept or initial design and planning stage. As I was outlining to Senator Ludlam, that then usually triggers more detailed planning and environmental assessment. The Commonwealth will commit finds often at the preliminary design stage or concept design stage but the funds are not actually provided usually until such time as certain milestones have been reached, with the submission of what we call a project proposal report which has the detailed design and construction schedules attached. That is the point at which the commitment translates into a firm funding contractual arrangement.
Senator BACK: I inform Infrastructure Australia people that I will want to talk to them about the Caravel Melbourne University study into project governance when we resume with Infrastructure Australia.
Pro ceedings suspended from 12:59 to 14:00
Senator CAMERON: Mr Mrdak, I want to table a response from the department to a question from Senator Sterle. This is question No. 148. It goes to the range of projects that Senator Back has raised with you. I am a bit concerned that your response was not a full response, in terms of those projects. I just want to bring you back to this answer to the question. On this list we have the Advanced Train Management System, the Hunter Expressway, Ipswich Motorway upgrade, the Gold Coast light rail, Goodwood and Torrens junctions, Gawler line, the Noarlunga to Seaford rail extension and the regional rail link.
When you were asked by Senator Sterle for a list of all the infrastructure projects funded by budgets from 2008 and 2009 that were on the Infrastructure Australia priority list—this is their priority list for doing the project—all of the projects that were mentioned by Senator Back were on the Infrastructure Australia priority list. Is that correct?
Mr Mrdak : I would have to go back and I look at my answer this morning. I think the question I was answering though was: 'Were there published business cases and benefit-cost ratios for each of those projects prior to the government making a funding commitment?' I think that was the question I was answering. A number of these projects certainly were assessed by Infrastructure Australia, some, from recollection, after the government had taken in-principle decisions to fund them. I think I was not asked the question of whether they were assessed by—
Senator CAMERON: For fullness, I am asking the question: of those projects that were dealt with this morning in your response to Senator Back, were they on the Infrastructure Australia priority list?
Mr Mrdak : I think they are. I will have to go back and look at the list. On notice, I will give you a fulsome answer in relation to that.
Senator CAMERON: You could probably just hand me back up what I have given you, because you have answered it in this one. But that is okay, I am happy for you to do that. Those projects had been assessed by Infrastructure Australia.
Mr Mrdak : That certainly looks to be the case, in relation to this. But, again, that is not the question I was asked by Senator Back.
Senator CAMERON: For fullness so that the wrong impression is not given, I am just trying to get you to explain the fullness of the way those projects were funded.
Mr Mrdak : Certainly. From looking at this list, I would say they certainly, being consistent with the answer, have been through the IA process.
Senator CAMERON: They have been through the IA process, okay.
CHAIR: Could you confirm, Mr Mrdak, that the Junee roundabout in Broadway is not included on the list?
Mr Mrdak : I can confirm that.
Senator Cash: I can also confirm that my understanding is that the entire East West Link Project was listed as a priority project in the Infrastructure Australia report to COAG in 2012. Now we all know about priority projects in Infrastructure Australia. Senator Rice, perhaps you also have a project?
Senator RICE: No, I just want to add some further detail, in addition to Senator Back's question, which I also think would be relevant to give us the full—
Senator Cash: You should not have opened the door, Chair!
Senator CAMERON: Mr Mrdak, are you aware of the coalition election promise to do cost-benefit analysis for all projects of values over $100 million?
Mr Mrdak : Yes.
Senator CAMERON: Has a promise been kept, in terms of the processes for infrastructure projects that you are aware are underway?
Mr Mrdak : Infrastructure Australia is assessing projects over $100 million. That is the case.
Ms O'Connell : That commitment has been put into legislation, in terms of the new legislation for Infrastructure Australia.
Senator CAMERON: Why has that not been carried out for the East West Link and WestConnex?
Mr Mrdak : As we outlined early this morning, Infrastructure Australia has published its assessment of WestConnex. As we also discussed this morning, they were undertaking an evaluation of the East West Link business case and had sought further information. That assessment was not completed.
Senator CAMERON: I am not asking you about IA's assessment—I am asking you about a cost-benefit analysis. The coalition went to the election with a promise that they would do a cost-benefit analysis for all projects of value over $100 million. Has that been undertaken in the context of the projects that your department is involved in?
Mr Mrdak : I believe it has. I will check with my officers. I believe certainly in relation to projects that I am aware of it has.
Senator CAMERON: East West?
Mr Mrdak : Yes, we discussed this case this morning and the benefit-cost ratio that was contained—
Senator CAMERON: It was not there before you dumped hundreds of millions of dollars, was it?
Mr Mrdak : There was a business case we discussed in mid-2013—
Senator CAMERON: That was the shonky business case. It was a shonky business case—
Senator Cash: Chair, that is Senator Cameron's interpretation.
Senator CAMERON: I am just trying to get people to understand what was put forward by the Auditor-General. There were problems with that business case, weren't there? I think you have conceded that.
Mr Mrdak : We discussed that this morning, and I think the Victorian government recognised that further work needed to be done—which was completed.
Senator CAMERON: Can you provide details of all projects that are underway at the moment from this government and where the business cases are up to. That would be helpful.
Mr Mrdak : Certainly.
Senator RICE: In addition to the list of projects mentioned by Senator Back and the list of projects tabled by Senator Cameron, could we have a benefit-cost ratio for each of them and an articulation of the benefit-cost ratio for each of those projects.
Mr Mrdak : Certainly. As Infrastructure Australia publishes its assessments, they also publish those. Where we have others we will certainly identify that in the advice back to you.
Senator CAMERON: Can you also have a look at this: when the money was allocated for these projects in the 2014 budget, had Infrastructure Australia completed its business case analysis, and had there been cost-benefit analyses done for every project?
Mr Mrdak : I will come back to you with the detailed advice. In essence, though, as we discussed this morning, Infrastructure Australia was continuing its assessment at the time the Australian government made its funding commitments.
Senator CAMERON: I come back to the Pacific Highway. Have there been any fund allocations for the Pacific Highway under the national partnership agreement of 10 October 2014? Has any of that funding been changed since 2014-15?
Ms O'Connell : Yes, there have been funds committed to the Pacific Highway, consistent with the government's decision to commit funds to the highway.
Mr Jaggers : I do not think the profile has changed, and $5.64 billion has been committed by the Australian government for upgrading the Pacific Highway.
Mr Mrdak : Are you asking whether the funding profile has changed?
Senator CAMERON: Yes.
Mr Jaggers : Are you asking whether it has changed since the national partnership agreement?
Senator CAMERON: Yes, of October 2014.
Mr Jaggers : I do not believe it has changed.
Senator CAMERON: Has it changed since the election of the Abbott government?
Mr Jaggers : The numbers for the Pacific Highway changed after the new government came in because a lot of funding was brought forward from 2019-20 onwards into the current forward estimates period, and there was additional money made available for the Pacific Highway. So those numbers flowed through into the government's first MYEFO and then into the budget in 2013-14.
Senator CAMERON: Can you provide details of changes to the funding for the Pacific Highway since the election of the Abbott government?
Mr Jaggers : Certainly.
Senator CAMERON: Can you confirm that there will be $312.5 million in Commonwealth funds spent this year?
Mr Foulds : In 2014-15 there is $357.5 million allocated to the Pacific Highway.
Senator CAMERON: Is that $315 million?
Mr Foulds : Three-five-seven-point-five million in 2014-15.
Senator CAMERON: All right. A lot of that was committed under the previous government. Is that correct?
Mr Foulds : There was a profile for Pacific Highway funding under the previous government. I cannot tell you exactly how much of that was in that year in previous budgets.
Senator CAMERON: Then can I just go to some details. Tintenbar to Ewingsdale—is the allocation of $123.65 million still in place?
Mr Foulds : The Australian government funding for Tintenbar to Ewingsdale is $554.1 million.
Senator CAMERON: Five-five-four—
Mr Foulds : Five-five-four-point-one-million. The total cost is $816.4 million.
Senator CAMERON: So is that $554.1 million going to be expended in 2014-15? I doubt it.
Mr Foulds : Actually, I would have to get individual project details.
Senator CAMERON: Yes, I think so. I am not asking the total funding cost. I am asking what the allocations are for 2014-15.
Mr Jaggers : On Tintenbar to Ewingsdale the profile for 2014-15 is $148.95 million.
Senator CAMERON: Frederickton to Eungai?
Mr Jaggers : Senator, $60.7 million in 2014-15.
Senator CAMERON: Oxley Highway to Kundabung?
Mr Jaggers : That is $16.53 million.
Senator CAMERON: Warrell Creek to Nambucca Heads?
Mr Jaggers : That is $23.99 million.
Senator CAMERON: Woolgoolga to Ballina?
Mr Jaggers : There is a planning project which does not have money in this year, then there is the construction project which is $103.14 million.
Senator CAMERON: There is a planning project with no money? What does that mean?
Mr Jaggers : That planning project has actually had previous allocation to it, but there is no money this financial year. Then there is the actual construction project where there is $103.14 million this financial year—2014-15.
CHAIR: Can I ask a question on a procedural matter? With the questions—which are quite legitimate—that Senator Cameron is asking, I presume on behalf of the shadow minister, is it possible that the shadow minister could just put those questions on a piece of paper outside the estimates committee and get the answer anyhow?
Mr Jaggers : Yes.
CHAIR: So this is just dressing it up? Fair enough.
Senator CAMERON: You can call it what you like. This is the estimates process.
CHAIR: I am just saying that it is interesting. You could actually just say: 'Hey buddy—'
Senator CAMERON: Mr Mrdak, can you tell me the amounts that the federal government paid to the New South Wales government for the Pacific Highway projects for the following years: 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14. Do you have them here?
Mr Mrdak : I do not know if I have those with us. I will just check with my officers. We can get that for you on notice.
Mr Jaggers : I do not have that with me.
Ms O'Connell : No, We have the profile going forward, not retrospective.
Senator CAMERON: You have got the profile going forward. What is the difference between the profile going forward—oh, you have got the forward profile over the estimates period, but you do not have it for the previous years?
Ms O'Connell : Not for the previous years; that is right.
Mr Mrdak : The change, in late 2013, was the lift in funding given on the sections north of Woolgoolga, which went to 80-20 funding rather than 50-50, so that changed the funding split over the out years. But we can get you that information for the full profile, back to 2008-09.
Senator CAMERON: So was the funding 80 federal, 20 state?
Mr Mrdak : That is what it is now. Previously, under the—
Senator CAMERON: It was 50-50.
Mr Mrdak : The offer from the previous federal government was 50-50 funding, Woolgoolga to Ballina. The coalition government has been elected and it implemented a policy of 80-20—80 federal, 20 state, for that section.
Senator CAMERON: For Tintenbar to Ewingsdale, you have given a figure of $148.95 million. Is that the federal government's 20 per cent?
Mr Mrdak : That is our 80 per cent.
Ms O'Connell : Eighty.
Senator CAMERON: So we are donating 80 per cent?
Mr Mrdak : Yes.
Senator CAMERON: So we are donating 80 per cent. I thought you said it was the other way around?
Ms O'Connell : Tintenbar to Ewingsdale is not on the Woolgoolga to Ballina section.
Senator CAMERON: So what is that?
Mr Mrdak : We can read that in. We will get you the file. Woolgoolga North is 80-20, Tintenbar to Ewingsdale is—
Ms O'Connell : Is north of Ballina.
Mr Foulds : Tintenbar to Ewingsdale is a ratio of 68 to 32.
Senator CAMERON: So take me back to Ewingsdale. How much is that?
Mr Mrdak : Sixty-eight per cent Commonwealth, 32 per cent state.
Senator CAMERON: And what about Fredericton to Eungai?
Mr Foulds : Fredericton to Eungai is 50-50.
Senator CAMERON: What about the Oxley Highway to Kundabung?
Mr Foulds : Oxley Highway to Kundabung is 66-34.
Senator CAMERON: And what about Warrell Creek to Nambucca Heads?
Mr Foulds : Warrell Creek to Nambucca Heads is 50-50.
Senator CAMERON: Woolgoolga to Ballina?
Mr Foulds : It is 80-20.
CHAIR: Could we just table the entire thing to save asking all these questions?
Senator CAMERON: How do you come to these break-ups? What is the methodology?
Mr Mrdak : It reflects negotiations between the Commonwealth and the state. As I said, in some situations it varies by project. In some areas the Commonwealth has provided 50-50 funding and in other areas the funding has varied depending on contributions negotiated.
Senator CAMERON: So it is just a negotiated outcome? There is no rhyme or reason other than negotiation?
Mr Mrdak : It is varied at times when the Commonwealth has put substantially more money into some areas to accelerate projects. The previous government's position was that the completion of the highway should be done on a 50-50 basis. The current government's position is completion for Woolgoolga to Ballina will be 80-20, with the Commonwealth funding 80 per cent. They are policy positions, which are then negotiated with the state government.
Senator CAMERON: So you will take on notice these other individual break-ups under 2014-15?
Mr Mrdak : That is right.
Senator CAMERON: Can I just come back now to the question that you have taken on notice about the Victorian cabinet decisions, or the analysis, that were made. I will forward to the secretariat a link to the cabinet documents and the secretariat will forward you a link and then you can access these documents that I have spoken about. Can you ensure that they give you some context in your response?
Mr Mrdak : Certainly. Thank you.
Senator CAMERON: I think that is me on this section.
Senator BULLOCK: We have already done a bit of work on the Perth freight link, but I would just like to go back there for a minute. How much of the $74 million that was scheduled to be given to Western Australia has, so far, actually been paid in this financial year?
Mr Jaggers : Appropriation for this financial year is $96.9 million. I will just check with Mr Pittar. I do not think any of it has yet been spent. I will just confirm that for you.
Mr Pittar : None—no expenditure.
Mr Jaggers : There has been no expenditure yet. I mentioned earlier we are still to settle the project proposal report with the Western Australians for the funding approval.
Senator BULLOCK: Do you think that will be done in the remainder of this financial year?
Mr Jaggers : Yes, certainly.
Senator BULLOCK: Do you think so? So you anticipate passing that money over during the course of this financial year or—
Mr Jaggers : We will be settling the milestones with the Western Australian government. The Western Australian government have already done quite a lot of work in preparing the project. Once those milestones—
Senator BULLOCK: What have they done?
Mr Jaggers : They have developed a business case; they have done a significant amount of work on alignment and design work.
Senator STERLE: Absolutely. Right up the top.
Mr Jaggers : They have done a significant amount of work on project approvals as well, including environmental approvals and community consultations. Once the project proposal report is received, we will settle milestone payments with the Western Australians and we would anticipate making payments this financial year.
Senator BULLOCK: Some payments this financial year?
Mr Jaggers : Certainly some payments, but I do not want to confirm the amount.
Senator BULLOCK: No, if it depends on unknowables then you cannot answer the question. I am absolutely fine with that.
Mr Jaggers : So that is our estimate, but we will confirm that once we have settled those milestones with WA.
Senator BULLOCK: When do you think the Western Australian government might actually kick the tin? There is nothing in the 2014-15 budget and nothing in their forward estimates. You are ready to put money on the table, but when do you think they might be ready?
Mr Pittar : The national partnership agreement, which was signed in October of last year with all jurisdictions, confirms that the Western Australian government has made a commitment to the project.
Senator BULLOCK: When?
Senator STERLE: Senator Bullock asked you when. Can we just get an answer to the questions, because we really are tight for time.
Mr Pittar : During the five-year period. So that will depend again on the profile for the project.
Senator STERLE: Good luck, Senator Bullock.
Mr Pittar : We do not have those specifics at our fingertips.
Senator BULLOCK: You are comfortable that at some time over the next five years the Western Australian government might make a contribution to this project?
Mr Pittar : We do not have the specifics at our fingertips.
Mr Jaggers : The Western Australians have agreed to provide the funding share of the project, so the Australian government is providing $925 million, the Western Australian government are providing $650 million and they have agreed with the Australian government that figure.
Senator BULLOCK: Sorry, I did not hear that last bit.
Mr Jaggers : The Western Australians have agreed to provide that amount of money to the Australian government through the national partnership agreement. The profile of that will be determined through the settlement of the milestone payment construction schedule which is being discussed at the moment with the Western Australian government.
Senator BULLOCK: I will look forward to the Western Australian budget this year with interest. One other thing which goes to the additional estimates: I just noticed that since the budget the estimated expenditure on improved infrastructure across Australia through investment in and coordination of transport and other infrastructure has dropped by $67¾ million, and I wonder if you could give us a breakdown of where that nearly 13 per cent reduction has occurred.
Ms O'Connell : Could you tell us which page?
Senator BULLOCK: Page 21.
Mr Mrdak : We will get that breakdown for you.
Senator BULLOCK: It would be good. It is a significant reduction. That means that there must be many things going undone. It would be interesting to know what they were.
Mr Mrdak : I think it probably reflects a movement from the out years as we have got better definition of when project delivery will be. But I will get you a breakdown of those and the rationale for that reduction.
Senator BULLOCK: Thank you very much.
Senator STERLE: I do hope a heck of a lot of money gets spent on Western Australian roads, particularly a road freight network. I am just not confident at the moment. Mr Jaggers, what would happen if the state government struggled to meet the $650 million co-payment agreement due to a lack of—I mean, mining royalties have gone through the floor and we have lost our AAA credit rating. That is not a cheap shot. These are just actual facts. What will happen to the project?
Mr Jaggers : It is a hypothetical question. I am not—
Senator STERLE: That is weak—fair dinkum. Have a crack. What happens if they do not meet the target this year? You are just going to give some money? Look, I want the road, but do not play games with me, please.
Mr Jaggers : I am not trying to play games.
Senator STERLE: You do—the lot of you.
Ms O'Connell : The Australian government's contribution is capped, so any overrun in the project becomes the responsibility of the state government to fund. The state government in the end will contract for the construction, so they have the direct contracts with whoever the road and construction builders are. Prior to signing those contracts, they have got an obligation to make sure that the funding is available. They are very aware of our funding contribution, which we will commit to and keep. They need to make sure their funding contribution is there before they sign the contracts.
Senator STERLE: Fantastic. And if they cannot, federal money will not flow?
Ms O'Connell : That is right.
Senator STERLE: That is all I wanted, Mr Jaggers. Thank you.
Senator BULLOCK: We just heard in connection to the Pacific Highway that the proportion arrangements can change over time. Is that same flexibility built into this project, or when you say 'capped' do you mean 'capped, concreted and nailed down'?
Ms O'Connell : It is capped according to the commitment made by the Australian government, so over a period of time, for different projects, the funding arrangement or split might change, but when we do commit and sign up under the national partnership agreement, our funding is capped based on that dollar level. It is not a percentage; it is a dollar level.
Senator BULLOCK: So it is capped, but with the capacity for the proportions to change?
Ms O'Connell : It is capped at a dollar figure, so once there is negotiation and discussion about how much each government is going to pay, our national partnership agreement includes those dollars, and it is capped at that dollar amount.
Senator BULLOCK: So it cannot change it all?
Ms O'Connell : No. Subject to there being agreement between governments, it could change, but the intention is that it remains our contribution.
Senator GALLACHER: Mr Mrdak, you would be well across the argument of the South Australian local government supplementary road funding?
Mr Mrdak : Yes.
Senator GALLACHER: Just to get it on the record: we in South Australia are 11 per cent, or 75,000 kilometres, of the nation's local roads. Would you agree with that?
Mr Mrdak : Yes, I think that is—
Senator GALLACHER: We are around 7.2 per cent of the population and we get 5.5 per cent of the identified local roads grant funding.
Mr Mrdak : Yes.
Senator GALLACHER: In 2006, it was recommended by the Commonwealth Grants Commission that we should get 8.9 per cent of the funds.
Mr Mrdak : I do not recall the specifics of the numbers, but go on.
Senator GALLACHER: Supplementary road funding by the Howard, Gillard and Rudd governments has always brought it up closer to eight per cent or 7.9 per cent; however, this financial year, lost revenue from the supplementary road funding is $18 million. Is that correct?
Mr Mrdak : Yes. It is of the—
Ms O'Connell : Eighteen per year.
Senator GALLACHER: That will be $78 million over the forward estimates. Is that also a correct figure?
Ms O'Connell : That sounds right.
Mr Mrdak : That is right. It is roughly right with whatever indexation would otherwise take place.
Senator GALLACHER: The minister responsible for this is the member for Mayo, the Hon. Jamie Briggs?
Mr Mrdak : The minister has responsibility for some elements of the infrastructure program. Local government matters remain with the Deputy Prime Minister.
Senator GALLACHER: You would probably be well aware that there are a number of councils—and this is probably right up in the chair's area of interest—who are saying, 'We will simply not be able to reseal roads, and we are cutting back on road services, grading and resealing.' Are you aware of those comments?
Mr Mrdak : I am aware of concerns, not just by South Australian councils, but by councils throughout all the jurisdictions in relation to the funding available. But, yes, I am particularly aware of South Australian councils' concerns.
Senator GALLACHER: Are you aware of the fact that people are making statements that people cannot easily get around to do their business and that it will impact on productivity in relation to transportation of goods?
Mr Mrdak : Certainly any reduction in funding that was anticipated does have an impact on their investment programs, yes.
Senator GALLACHER: Is there any work that your department does about not maintaining your road network? If you do have this cut, and it gets to the stage where a road needs resealing and is not resealed for a number of years, do you have to rebuild it?
Mr Mrdak : It varies. In some situations, governments have found it more efficient and economical to actually allow the paving to go back to gravel. In some situations, it is much more efficient and effective than maintaining a seal. It is not always clear that removing the seal will result in a deterioration of the base, but it can happen.
Senator GALLACHER: Are you aware that 61 per cent of the fatalities in South Australia are on rural roads?
Mr Mrdak : I was not aware of that figure.
Senator GALLACHER: That is a historical figure which is from 1994, that rural roads have a higher number of fatalities. There is the argument about seatbelts and people not doing the right thing, but roads are a component in that. Are you aware of those stats?
Mr Mrdak : Yes.
Senator GALLACHER: Given that the Local Government Association tell me they have exhausted discussions with Minister Briggs and they now have a position they would put to Minister Truss, do you have any idea when this $18 million will be forthcoming?
Mr Mrdak : The program was a terminating program that terminated on 30 June last year. Due to the budget circumstances, the government has not been able to fund that program. That is the position, it remains so, and I am not aware of any proposals within the government to restore that funding, given the current fiscal circumstances.
Senator GALLACHER: $18 million on regional and rural roads which will degrade or go back to gravel, where you have a council like Elliston which would say, '1,200 people and 1,300 to 1,400 kilometres of roads to maintain.'
Mr Mrdak : The funds were not solely for rural and regional councils. They were funding all councils in South Australia. The issue is that, in the current fiscal circumstances, the government was not able to make provision for that program to continue. It was a terminating program. It terminated on 1 July 2014 and, in the current fiscal circumstances, I am not aware of any proposal to be able to reinstate the program.
I would add that the government has made additional provision for Roads to Recovery and Black Spots funding over the next two years, which is quite a substantial lift in expenditure, particularly in 2015-16, for local government, including South Australian councils. So around your road safety issues, there is additional Black Spots and Roads to Recovery money, even though the supplementary program for South Australia has not been continued.
Ms O'Connell : So there is an additional $200 million for Black Spots and $350 million, nationally, for Roads to Recovery.
Senator GALLACHER: But you would agree with the position that is put that South Australia is the only state that has been treated in this way on local road funding. This situation only exists in South Australia, with the cuts to the supplementary roads.
Mr Mrdak : The supplementary—
Ms O'Connell : The supplementary only applies—
Senator STERLE: So it is borne solely by the South Australian local governments.
Mr Mrdak : It reflected—
Senator STERLE: And yet we have an assistant minister from South Australia here.
Mr Mrdak : The supplementary payments reflected the way in which roads funding was split. It was done almost 20 years ago in relation to state and local government splits in South Australia. As I said, because of the fiscal circumstances, the government has not been able to continue the program.
Chair, if I may: Senator Bullock asked me earlier about a figure in relation to page 21. I have just been advised that that figure is accounted for on page 18 with the investments that are set out in outcome 1, the reallocations between the Treasury. Essentially, the funding has not been decreased; it has been transferred from our programs to Treasury payments, under bridges and investment. Effectively there has been an increase in the payments done through Treasury, as opposed to payments done directly by ourselves.
CHAIR: A reallocation to Treasury?
Mr Mrdak : Yes. That is the rationale for the explanation. It is not a reduction overall.
CHAIR: Last night, just so everyone knows, because of this—I use the language of the bush—ballsed-up system we have got, where you can just go on and do circle work for all your time, we had people coming here who were told they would be on at 11 o'clock in the morning, who did not bring clothes et cetera and had no accommodation. It was a serious inconvenience for everyone.
Today we are trying to satisfy people that have come from South Australia. The last flight out is at six o'clock. I would like the committee to cooperate so we can get them out of here safely and onto the six o'clock plane. So if we could just cut out a bit of the circle work. We will try and do infrastructure next and then we will go to the ARTC. I would ask for the cooperation of everyone, including the bureaucrats, in giving short answers, getting to the point and cutting out all the bureaucratic bullshit.
Senator STERLE: We should really consult with each other so we all know what is going on. It makes it easier for us.
CHAIR: I am trying to accommodate. Thank you, everybody, for your cooperation.
Senator RICE: I have a quick follow-up to the East West Link question that I was asking previously. Mr Mrdak, you were talking about what you understand is the support for the western half of the East West Link. I was wondering whether the department has undertaken an assessment of the western half of the East West Link as a stand-alone project.
Ms O'Connell : The recent business case was focused on the eastern section, which we did our detailed assessment of. There may have been an earlier version of the western section business case, but we would be going back some period of time. I will just ask Mr Foulds.
Mr Foulds : The department has not received a business case for the western section from 2010 or 2011, when that project was on foot. There is a very preliminary document that has been provided to IA on the western section, but there is not a business case, as such, to be assessed, for the western section at the moment.
Senator RICE: So neither the department nor Infrastructure Australia have done any assessment.
Mr Foulds : I cannot speak for Infrastructure Australia.
Senator RICE: I will ask them. The department has not done one.
Ms O'Connell : We have not done a contemporary assessment of anything to do with the western section.
Senator RICE: So your comments, Mr Mrdak were just based on your understanding that there was support for it rather than any assessment of its value as a stand-alone—
Mr Mrdak : That is correct.
Senator RICE: Just to clarify, has the incoming Victorian government raised with you, or discussed with you, the option of construction of the western half of the East West Link as a stand-alone project?
Mr Mrdak : Not at this stage.
Senator PERIS: My question is on the Tiger Brennan Drive. Can I get an update with respect to the Northern Territory government? Has it published and completed its milestones, to date? I know that there was a press release put out last year stating that works between Woolna Road and Tiger Brennan Drive will commence in August. I want to know if that has started.
Mr Pittar : Work has started on the section between Dinah Beach Road and Berrimah Road. We have settled milestones with the Northern Territory government for that project.
Senator PERIS: Are they on track to achieve the milestones set out?
Mr Foulds : I do not have the milestones at my fingertips but, as with all projects, our payments are tied to the achievement of those milestones.
Senator PERIS: Of the $70 million that has been committed by the federal government, how much has been paid?
Mr Pittar : Expenditure in 2014-15 to date is $25 million.
Senator PERIS: Out of the $70 million?
Mr Pittar : Out of a total of $70 million, which is the overall amount for the project.
Senator PERIS: When does the $70 million stretch out to?
Mr Pittar : There is a further $31 million provided for in 2015-16.
Senator PERIS: And the balance will be in 2016-17?
Mr Pittar : No, there was some expenditure that occurred prior to 30 June 2014, for earlier stages of work. That work was concluded prior to Christmas last year. It concluded in late 2014.
Senator PERIS: So those three totals complete the $70 million.
Mr Pittar : They do. There was $14 million expended prior to June 2014, $25 million in 2014-15 and $31 million budgeted for 2015-16.
Senator PERIS: The next questions I have are around the privatisation or lease of the Darwin port. Is that in this area.
Ms O'Connell : Is that in terms of prospective asset sales? Is that the area that you want to go to in terms of the Darwin port?
Senator PERIS: Yes.
Ms O'Connell : That is managed by the Treasury portfolio. We provide advice to Treasury in relation to any proposed project that the state would have that they wish to spend the asset sales funds on, but not what it is that they are going to sell. That is up to the Treasury portfolio.
Senator PERIS: Did you provide any advice to Treasury on the sale of the Territory Insurance Office?
Ms O'Connell : No.
Senator PERIS: So there was no guarantee that the sale of the Territory Insurance Office would accumulate any potential asset recycling.
Ms O'Connell : That is being managed out of the Treasury portfolio, so if there was any discussion about it, or proposal for it, it would happen with the Treasury portfolio. What we are asked to look at is where the state have made a suggestion of what they are going to spend the asset recycling on. We make an assessment of that.
Senator PERIS: And the Northern Territory government has given you no—
Ms O'Connell : The agreement is with the Treasurer, so it would go to the Treasury in the first instance to say what it is that the Northern Territory is intending to do under asset recycling. It is not managed by our portfolio.
Senator PERIS: With regard to the lease—the privatisation—that is nothing to do with this area.
Ms O'Connell : No.
Senator PERIS: Okay. Recently the Northern Territory government signed up to the National Partnership Agreement on Land Transport Infrastructure Projects. As part of that it was indicated that the Northern Territory would get $833 million over the next six-year period from 2013 up until 2018-19. Is it true that this is the amount currently allocated under this signed agreement?
Mr Jaggers : Could you repeat that number for me, please.
Senator PERIS: The Northern Territory government recently signed up to the National Partnership Agreement on Land Transport Infrastructure Projects. As part of that agreement it was stated that the NT only gets $833 million over the six-year period from 2013 to 2019. Is it true that this is the amount currently allocated under the signed agreement?
Mr Jaggers : I will just give you the numbers.
Ms O'Connell : I have $602 million but there might be other components not included.
Mr Jaggers : Under the Infrastructure Investment Program there is $601.79 million allocated to the Northern Territory for the period 2013-14 to 2018-19.
Ms O'Connell : That is the Australian government funding. The figure you have might be the Australian government plus the Northern Territory funding as a total spend, or it could include asset recycling in terms of prospective money there. Some of the other programs—bridges money, national highway upgrades and a number of grant funded rounds that the Northern Territory would be eligible for—are done on an application basis.
Senator PERIS: So there is no guarantee that it would get that $833 million.
Ms O'Connell : I am not clear whether that $800 million is a figure of the Australian government plus the Northern Territory government under the land transport initiatives already announced in the national partnership agreement, or whether it is the potential for these other programs that are submission based. I would have to see where that figure of $800 million came from.
Senator PERIS: We have some documents here. It is the Northern Territory projects National Partnership Agreement on Land Transport Infrastructure. It had that the total Australian government committed funding of $833.72 million. But it says here that the asset recycling fund project is $90 million.
Ms O'Connell : It includes more than the specific projects we have listed, yes.
Senator PERIS: Okay, so—
Mr Jaggers : So the asset recycling funding would come from the Treasury portfolio, not from this portfolio. The numbers I have provided are just this portfolio's contribution under that national partnership agreement. We might take that on notice just to double-check that figure for you and come back to you.
Senator PERIS: The last question I have is on the Pivot north paper handed down. What analysis has the department done on the cost of implementing the recommendations within Pivot north, and have there been any discussions with the government on the cost of implementing the recommendations and over what time frame?
Ms O'Connell : What project are you are referring to?
Senator PERIS: The paper Pivot north: inquiry into the development of northern Australia.
Mr Mrdak : This is the Entsch committee report?
Senator PERIS: Yes.
Ms O'Connell : Sorry, I thought it was a project.
Mr Mrdak : The government will be responding to that report as part of its northern Australia white paper. We anticipate that to be completed by about the middle of this year. Within that paper, decisions are yet to be taken on the quantum of investment and the like that will take place.
CHAIR: It was fairly good junket, that committee.
Mr Mrdak : The short answer is that at this stage it is under consideration.
Senator PERIS: It is under consideration but you are expecting something in the middle of June.
Mr Mrdak : The government will make announcements in the white paper on northern Australia.
Senator STERLE: I have got about a dozen questions, Mr Mrdak. I will be precise, and I trust the answers will be short and succinct too. I just want to confirm that the government has received 400 proposals in relation to the National Stronger Regions Fund.
Mr Mrdak : Yes.
Senator STERLE: You have received 405 proposals for that fund; is that correct?
Ms O'Connell : Yes, that is correct.
Senator STERLE: Fantastic. Do you have a list of where these proposals came from?
Mr Mrdak : We do have a list.
Ms O'Connell : But we do not have it with us.
Senator STERLE: That is fine. Please take it on notice. Could you provide the committee with the information on how many are from each state and territory, each local government area and each electorate.
Mr Mrdak : Yes. I do not know if we have the information by electorate, but we can certainly get you information by jurisdiction.
Senator STERLE: We will soon work that out if you have a list of the names next to it. Thanks, that is good. What proportion of the applications came from regional, rural or remote Australia versus the proportion from the metropolitan area? If you have got the answer now, great. If you have not—
Mr Mrdak : We do not have that.
Senator STERLE: Take that on notice, thank you. Has the department done any analysis on the types of local governments and organisations that have applied for the NSRF?
Ms O'Connell : We are currently in the process of doing assessments on all of those projects. We are part way through the 405 assessments.
Senator STERLE: This is a tricky question, I know, but how long do you think it will be before that work is completed? Bear in mind you have the budgets coming up and all sorts of stuff.
Mr Mrdak : By the end of March we anticipate completing our assessment process, which would enable the ministerial committee to then consider the funding recommendations.
Senator STERLE: Will that information be available at the same time for the committee?
Mr Mrdak : We will endeavour to give you the information you have sought.
Senator STERLE: Thanks, because I do get nervous—not because of you guys, because you pull your fingers out and get going, but because answers to questions on notice can get lost in this building. Has the department got any information on how many local governments applied for funding the NSRF?
Mr Mrdak : We can get that for you.
Senator STERLE: You will take that on notice as well?
Mr Mrdak : Yes. We do not have that detail here.
Senator STERLE: Will a full list of all applicants be published even after the decisions are announced so we know who is in and who is out?
Mr Mrdak : I would have to take that on notice.
Senator STERLE: Sure.
Mr Mrdak : I do not think that has been done in the past, but I can take that on notice. I do not think that has been done in the past.
Unidentified speaker : All successful applicants are obviously published.
Senator STERLE: We always find out who is not successful because our emails go crazy, so I understand. I thought I had already worked out the answer to that question, but I had to ask. Mr Mrdak, does the department know if there has been a noticeable impact on smaller local governments or smaller community organisation applying for the NSRF as compared to the Regional Development Australia Fund, which is what it was before.
Mr Mrdak : Not to my knowledge. From what I have been advised, I think we have got a good spread of projects from smaller rural and regional councils. I am not aware of any difference in terms of the type of applications or the types of projects sought.
Senator STERLE: I am pre-empting, but I would expect that there would be a good, solid list of councils that require funding. Are there any plans to tailor any rounds of the NSRF to smaller regional cities or quarantine some the funding for these areas?
Mr Mrdak : Not at this stage, although the government will review the guidelines for the program after completion of round 1 of the program.
Senator STERLE: Remind me about when completion of round 1 of the program will be?
Mr Mrdak : We anticipate that we will start opening applications for round 2 in May.
Mr McCormick : The application period will open on 1 May and close on 31 July.
Senator STERLE: That is round 2. When will you be able to tell us whether you have quarantined some of that funding before round 2?
Mr Mrdak : If the government is to make changes to the guidelines, it will do that before it goes to round 2. Essentially, once we have given advice to the ministers on the applications that have been received and the assessment undertaken the ministers will look at the guidelines to see whether they are meeting their objectives.
Ms O'Connell : There will be further rounds beyond rounds 1 and 2, so there is potential to look at those issues in other rounds, should the government choose to do so.
Senator STERLE: If I could get answers to the questions taken on notice that will certainly assist us. I would like to talk about Roads to Recovery. I do have an interest in the freezing of the FAG grant. I have written to every council and every shire in Western Australia about it. How has the federal government satisfied itself that the Roads to Recovery funds have been genuinely additional to other planned road expenditure?
Mr Mrdak : The governance arrangements for the program do require maintenance of effort by the local governments involved. I will get Mr Foulds to take you through that. We have provisions in the guidelines and we have mechanisms for this.
Mr Foulds : You asked how we ensure that councils achieve their own reference amount. There is an amount of money that councils are required to spend each year in order to qualify for Roads to Recovery funding. Councils tell us in an annual report, which is audited before it gets to us—we have confidence in the audit—that they have expended their reference amount, or the amount of money that they are required to expend, from their own sources. On that basis we provide their funding. We can provide all of the funding in year 1, all of it in year 2—any way a council needs, providing that it spends its reference amount aggregated across the Roads to Recovery Program.
Senator STERLE: This is a very open question: we know that the FAG funding has been frozen—the increase. We know that most councils had plans on the board for spending the money that they thought was coming in. We also know that there is a serious amount of FAG funding that is spent on roads. The figure escapes me at the moment—I have something like 30 per cent stuck in my head. I am trying to work out how you will know that the Roads to Recovery expenditure will be over and above what councils already thought they were going to use as part of the FAG funding for other projects.
Mr Foulds : Because of the return that they have to provide us to qualify for Roads to Recovery funding. Roads to Recovery is not FAG money.
Senator STERLE: Yes, I know. So if a council thinks, 'Oh, oh, we've lost this extra funding we thought was coming.' If they thought they were going to put it into Roads to Recovery they are in for a rude shock. Is that it in a nutshell.
Mr Jaggers : Local governments are required to report to us on their existing expenditure. This year we are commencing 50 assurance and compliance reviews of Roads to Recovery grants. Through that audit and compliance program we will pick up whether there is strong compliance or not. We did, I think, about eight or nine last year and there was pretty good compliance with the program guidelines. We have expanded that this year, so we will have better information after that.
Senator STERLE: Councils got a rude shock because money was not coming in. FAG funding that they thought was coming they cannot shuffle across to Roads to Recovery; it does not work that way.
Ms O'Connell : They cannot spend the Roads to Recovery money on something else, that is right. The government has doubled the Roads to Recovery money for next financial year, and the same applies to that $350 million.
Senator STERLE: That is fine. They know that Roads to Recovery is Roads to Recovery. They have to argue that pot of money in that set of guidelines.
Mr Foulds : Roads to Recovery can be spent in conjunction with other funding.
Senator STERLE: How will the government address the additionality of Roads to Recovery funding in the light of its freeze on the Financial Assistance Grants?
Ms O'Connell : The fact is that Roads to Recovery money remains as the Roads to Recovery money. Indeed in 2015-16th there is a doubling of it—
Senator STERLE: And that is guaranteed?
Ms O'Connell : an additional $350 million into Roads to Recovery which can only be spent on Roads to Recovery.
Senator STERLE: This is my last question. With the new project signage is 'building our future' the phrase?
Ms O'Connell : That is correct.
Senator STERLE: Where did that come from? It is curiosity rather than anything else. Surely you did not think of that one, Mr Mrdak; you are too smart for that.
Mr Mrdak : I do not know about that, Senator. It was some work done by the department and settled by the government in terms of its signage for the future.
Senator STERLE: What did you do? Did you run a competition through the local schools and everyone got a colouring-in book to go with it or what?
Mr Mrdak : A number of concepts were developed for government consideration and the government settled on that as its signage.
Senator STERLE: You kept a wonderfully straight face. You are not going to tell me who came up with it. As I said, it is curiosity.
Mr Mrdak : Much smarter people than me, Senator.
Senator CAMERON: How much did it cost to develop this new signage?
Mr Mrdak : There were a range of processes involved. We are not replacing any pre-existing signage, but there was market testing done of the concepts. That was undertaken and I will get that for you, Senator.
Senator STERLE: I have questions I want to put on notice.
CHAIR: Thank you very much. Now we are going to move to infrastructure. It is my intention to go to ARTC. We are not going to complete infrastructure, just that one there, because I guarantee we are going to get those people on the 6 o'clock plane.
Mr Mrdak : Thank you. While we are waiting, if I may, Chair, Senator Sterle asked this morning about the market research components for the Western Sydney Airport, $228,000. That is for two separate consultancies. One is to Essence Communications for market research into the Western Sydney Airport, which enables us to produce communications materials and a communications campaign on issues for the community. That includes qualitative and quantitative research. That contract is for $139,000. Secondly, GFR Australia was contracted separately over a 16-month period to provide independent research on surveys and community information. That has commenced. It is a contract for $89,901.
Senator STERLE: Thank you, Mr Mrdak.
Ms O'Connell : While we are waiting for the Infrastructure Australia people to come to the table, I have two other short answers to questions that were asked earlier, I think by Senator Back. The cost of the Noarlunga to Seaford rail line project was $291.2 million and the cost of the Ipswich highway, the Dinmore to Goodna section, was $1.572 billion.
Senator STERLE: Actually, Chair, I might get Mr Mrdak to table what he told me anyway.
Mr Mrdak : Yes, we will give you a full answer to both of those.
Senator STERLE: If you table that, that is fine.
Senator CAMERON: Mr Alchin, on the last occasion we were at estimates, Infrastructure Australia indicated that they were still assessing the WestConnex business case.
Mr Alchin : That is correct.
Senator CAMERON: Where are you up to with that now?
Mr Alchin : I will provide an initial answer and, if there is anything else, Mr Roe might assist me. We have completed the assessment of the business case that was presented to us last year. The results of that assessment have been published on our website.
Senator CAMERON: Do you want me to go on the website now and have a look at it, do you?
Mr Alchin : The results—
Senator CAMERON: Are you seriously saying I should go and look at the website?
Mr Alchin : No.
Senator CAMERON: I am glad. Can you answer my question.
Mr Alchin : I am giving you the answer.
Senator Cash: The Chair did ask us all to be very quick, and it would be a very efficient way of doing that.
Mr Alchin : The result of that assessment, in summary form, was that it found that the project had a benefit-cost ratio of 1.8 to one and, on the strength of that and a broader assessment of the project, it has been rated at 'threshold' on Infrastructure Australia's infrastructure priority list.
Senator CAMERON: Is this for the whole project or certain parts of the project?
Mr Alchin : That was for the whole project.
Senator CAMERON: The BCR is 1.8?
Mr Alchin : 1.8.
Senator CAMERON: Is this with or without wider economic benefits?
Mr Alchin : It is without wider economic benefits.
Senator CAMERON: Did you assess the business case approved by the New South Wales government in July 2013?
Mr Alchin : We assessed—and this is where I may take some assistance from Mr Roe—the July 2013 business case that was developed at that time. We also had the benefit of reviewing some additional benefit-cost analysis that was provided to us later in 2014.
Senator CAMERON: So there was a comprehensive business case in 2013. Did you get that in an executive summary form?
Mr Roe : We received the full business case in July last year, and our assessment was on the basis of that.
Senator CAMERON: Based on the full business case?
Mr Roe : Yes.
Senator CAMERON: Have you received any additional materials to the business case?
Mr Roe : Yes. There was an updated cost-benefit analysis contained in an M5 east report—that is, stage 2 of the project—which was a KPMG report dated August 2014.
Senator CAMERON: What was the KPMG report about?
Mr Roe : They were the consultants engaged by the WestConnex project office to look at the updated design and cost-benefit analysis for stage 2 of the project.
Senator CAMERON: When you say 'look at', what does that mean? I am sure they were not getting paid big bucks just to look at it.
Mr Roe : They were asked to take the concept design of the project further and also update the analysis that was contained in the previous July 2013 business case.
Senator CAMERON: Was that because the 2013 report had some issues?
Mr Roe : No. It was because of normal project developments. The July 2013 business case was based on the best information available for the project at the point in time. Since that point in time, there has been further project development, and the like, as the various stages of the project progress and develop.
Senator CAMERON: How critical are traffic forecasts for evaluating the business case?
Mr Roe : They are very important. They are an important driver of economic benefits that feed into the cost-benefit analysis.
Senator CAMERON: How many traffic or patronage forecasts for WestConnex stage 2 have you seen?
Mr Roe : There was an AECOM-SKM traffic analysis that was the basis of the July 2013 business case. That traffic analysis was subject to a peer review by RB Consulting, which was commissioned by the department of infrastructure. RB Consulting has undertaken an initial review of that original traffic forecasting. That work is ongoing, as is my understanding, and is likely to be updated in the coming months.
Senator CAMERON: So you still do not have a finalised traffic forecast?
Mr Roe : The traffic forecasts are developed at the relevant point in time, but they are on the basis of the best available information at that point in time. But they are subject to further refinement and development as the project—
Senator CAMERON: Do you have a finalised traffic forecast for WestConnex?
Mr Alchin : The New South Wales government's concept for WestConnex is evolving. There has been some discussion about northern and southern connections, so New South Wales is still doing further work on the project. As that work is finished, the traffic modelling and the business case, we expect to continue to receive that and we will assess the material that comes in at that time.
Senator CAMERON: So you are still in assessment mode?
Mr Alchin : Yes.
Senator CAMERON: Given that traffic forecasts are extremely important, why would we be committing to a project where the traffic forecasts have not been done?
Mr Alchin : Traffic forecasts have been done for the project so far. They go into the economic appraisal and the overall business case assessment. As I have said, Infrastructure Australia's assessment was that the project still has economic merit, has a benefit cost of 1.8 to one exclusive of wider economic benefits. The New South Wales government is continuing to refine its proposal.
Senator CAMERON: Have you looked at the assumptions in the various traffic forecasts?
Mr Roe : Yes, we have.
Senator CAMERON: Are the assumptions similar for the two forecasts? Are they the same assumptions?
Mr Roe : They are different outcomes. Just to complete my answer from before, there was also some road network modelling work done that went to the traffic forecasting as well as traffic model outputs that were reduced and developed as part of the process. Our assessment—
Senator CAMERON: Are you sure now that you have given me a comprehensive answer on that or do you need to go back, have a look at any other—
Mr Roe : No, I was halfway through my answer when you asked a follow-up question. I was getting on to those two additional documents, previously.
Senator CAMERON: Okay.
Mr Roe : Just working through the, I guess, the analysis. We looked at the cost-benefit analysis, which is a critical part of the assessment framework. We have made some recommendations in our assessment for the updated business case work that New South Wales government has indicated that it is developing for the next stage of the project. In terms of traffic forecasts, we recommended the use of variable trip matrices to feed into the traffic forecasting models. The variable trip matrices take into better account of induced demand associated with a project of this scale. In our view, that would form a more accurate estimation of the likely traffic demand impacts of the project. Taking that into account and also looking at the capital cost side of the project, we are looking for full probabilistic based cost estimates.
Senator CAMERON: Full what?
Mr Roe : Probabilistic based cost estimates.
Senator CAMERON: Probabilistic?
Mr Roe : Probability based.
CHAIR: Can we be more precise rather than that bureaucratic stuff—we are drowning it.
Mr Roe : Sorry.
CHAIR: Let's just cut to the bloody chase. We want to get out of here.
Mr Roe : There are a couple of areas that we have flagged in our brief that we would like picked up for the updated business case.
Senator CAMERON: So you have picked up problems?
Mr Roe : We have identified some areas that the New South Wales government has indicated they are looking to further develop and refine in the final business case.
Senator CAMERON: So you do not have a fully developed and refined traffic forecast?
Mr Roe : We do for this point in time of the project development.
Senator CAMERON: But if the project is changing? The project is continually changing, depending on the New South Wales government's political determinations. If you do not know what those changes are, then that could affect the traffic forecast and the viability of the operation if, for political purposes, a decision is made that diminishes the cost-benefit of the project, couldn't it?
Mr Alchin : As I was saying before, the project is evolving. We will continue to look at the project based on the information that is provided to us by the New South Wales government. In our project assessment that we published, we noted that the project will benefit from having all three stages developed. Therefore, we are confident that the overall project is a worthwhile project to proceed with.
Senator CAMERON: Is the tolling strategy unchanged?
Mr Alchin : We will have to take that one on notice.
Senator CAMERON: So you do not know about the tolling strategy?
Mr Alchin : There was economic modelling and financial modelling considered as part of the original business case, but I will have to take the details on notice.
Senator CAMERON: Have you factored in the tolling strategies in terms of the cost of the project?
Mr Alchin : I will have to take that on notice.
Senator CAMERON: Have you really not done that, or is it that just do not know?
Mr Alchin : I will just have to take that on notice. We have assessed the economic costs and we have had a look, also, at some of the financials, but I will take the details on notice.
Senator CAMERON: Has Infrastructure Australia read the New South Wales Auditor-General's report?
Mr Roe : Yes, we have.
Senator CAMERON: Mr Alchin, have you read it?
Mr Alchin : Yes.
Senator CAMERON: Did the report cause Infrastructure Australia any concerns?
Mr Alchin : The report was issued by the Auditor-General just before Christmas. It raises issues about the internal project assessment frameworks used within the New South Wales government and the project team. They are obviously issues that that we will continue to look at as we provide our advice and develop our thinking on the project.
Senator CAMERON: Are you aware that the peer reviewer engaged to review the traffic analysis produced a report, but not until November 2013—after the business case went to government?
Mr Alchin : Not me, personally. I was not involved in the detail of the assessment of the project at that time. I would have to take any further questions in that area on notice.
Senator CAMERON: When you said that you had read this report—and this is out of the report—it says that the traffic modellers were too pressed for time to consult on a continuous basis with the peer reviewer. Is that satisfactory?
Mr Alchin : It would be better if those processes could be done in a proper, discursive manner.
Senator CAMERON: So it was not done properly or in a discursive manner?
Mr Alchin : I would not say that. I am not across the detail of the precise discussions.
Senator CAMERON: But you just said it would be better if it was done in a proper and discursive manner.
Mr Alchin : Yes.
Senator CAMERON: So obviously it was not. The reviewer described the exercise as more of an audit than a peer review. Is that your assessment?
Mr Alchin : We have looked at the material that was provided to us, as I said, in the July 2013 business case, as supplemented by some of the later economic appraisal from late last year. That has been the basis for our evaluation.
Senator CAMERON: Do you have similar concerns to the Auditor-General that the traffic data raises questions about the underlying quality of the modelling?
Mr Alchin : I would have to take that on notice.
Senator CAMERON: So you have read the report; you are going to say yea or nay to—
CHAIR: I am calling a point of order. You are asking for an opinion on a matter of policy. He does not have to answer.
Senator CAMERON: No, I am not asking for—
CHAIR: You are.
Senator CAMERON: Rubbish.
CHAIR: And, by the way, your 15 minutes are up.
Senator CAMERON: Well, I need longer.
CHAIR: Well, you are not going to get it until after—
Senator CAMERON: Well, I do need longer—
CHAIR: We will give it to you after Infrastructure's on.
Senator CAMERON: No, no, that is—
CHAIR: We'll give you five minutes, mate. We're doing circle work. I'm not going to bugger up because—
Senator CAMERON: This is just a joke!
CHAIR: It is a joke. I appreciate it is a joke. It is not working.
Senator CAMERON: Okay. If I have five minutes, I want to use—
CHAIR: You said you wanted 15 minutes.
Senator CAMERON: Yes, but I did not realise the responses were going to be five minutes a pop.
CHAIR: What crap. Five minutes and then you can come back later.
Senator CAMERON: Thanks, Chair. Isn't the lack of a completed traffic analysis a significant failing for a business-case process for a transport project?
Mr Alchin : As we said earlier on in response to earlier questions, there was a traffic analysis done at the time of the original July 2013 business case, and we will continue to evaluate the traffic analysis as it evolves and as the New South Wales government's thinking about the project evolves.
Senator CAMERON: I will put questions on notice on this that you can obtain to refresh your memory. But I have to go to this question now. In your assessment brief of WestConnex, you indicate that the proponent's capital cost estimate in nominal terms is approximately $15 billion.
Mr Alchin : Correct.
Senator CAMERON: And you have 'P50' in brackets. I understand 'P50' means there is a 50 per cent chance of a cost blow-out. Is that correct?
Mr Alchin : Yes.
Mr Roe : That is a 50-50—
Senator CAMERON: So there is a 50 per cent chance of a cost blow-out on a project?
Mr Alchin : Not so much a cost blow-out as a 50 per cent chance that the cost will be higher than that figure or 50 per cent below.
Senator CAMERON: So there is a 50 per cent chance that it will be higher than the $15 billion?
Mr Roe : As well as a 50 per cent chance it will be lower
Senator CAMERON: Okay. Next to the 1.8 figure, the 'BCR stated by the proponent', it says:
… methodology except capital costs are not P90 …
That is what it says in the project assessment.
Mr Alchin : That is correct.
Senator CAMERON: It says:
1.8 (Infrastructure Australia methodology except capital costs are not P90, excl. Wider Economic Benefits …
This means that, if there is a cost blow-out, the 1.8 would diminish.
Mr Roe : If costs are higher than the estimated P50 number—
Senator CAMERON: There is a 50 per cent chance the costs could increase, right?
Mr Roe : Then the benefit-cost ratio will drop below 1.8.
Senator CAMERON: The benefit-cost ratio of 1.8 would decline then, wouldn't it?
Mr Roe : Yes. This gets to the probabilistic cost estimates that I was mentioning earlier. In our assessment, we took into account the points that I made in terms of the traffic modelling and in terms of the capital costs for the project, and we formed the view that, given that benefits are 80 per cent higher than costs, there is a degree of confidence that the net economic benefits—
Senator CAMERON: A degree of confidence.
Mr Roe : are above 1 to 1.
Senator CAMERON: There is 'a degree of confidence.' Okay. This is the last question, Chair. I go to page 5 of the WestConnex assessment, to your 'Strategic alignment summary'. You say there:
There is a degree of confidence that following an adjustment to the BCR for P90 and any negative adjustment due to induced trips, the BCR will remain positive.
Induced trips are basically what caused a problem in previous projects. The estimates of induced trips were not enough, and the project ended up not being profitable at all. Is that correct?
Mr Roe : Induced demand has the effect of increasing the traffic volume on the motorway over time. That in turn may create traffic congestion further down the track. So, to the extent that is taken into account in the modelling, that can have a negative effect on economic benefits.
Senator CAMERON: There could be choke points further down so there is the possibility that you cannot make the 1.8 because of choke points and cost blow-outs.
Mr Roe : Yes. I should say that under reduced demand there are consumer surplus benefits in the short term before that recongestion occurs, so you really need to see the modelling to see the overall impact of that effect. That is why we have asked for that modelling to occur at the next stage of the business case development.
Senator CAMERON: Thanks, Chair.
CHAIR: God bless you, Curly. So could we now have ARTC?
Senator STERLE: What?
CHAIR: Because of the ridiculous arrangements, these people have got to fly back to Adelaide.
Senator CAMERON: That is very disappointing and I know that you say I am uncaring—
CHAIR: We know you are a loving and caring person.
Senator CAMERON: The Senate estimates process is one of most important processes. Whether public servants have not packed a bag and whether public servants have got a flight to catch, the estimates process is more important.
CHAIR: I appreciate that, Senator Cameron, but the trouble is—
Senator CAMERON: I just want to get that on the record.
CHAIR: —we can no longer refer ourselves to a timetable because this is a bullshit process.
Senator CAMERON: Well, you know my view of the process.