Page 4027 - Week 11 - Wednesday, 16 Sept 2009
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projects to provide to the Legislative Assembly by close of business on Thursday, 17 September 2009 in relation to both of the Cotter Dam enlargement and the Murrumbidgee to Googong transfer project:
(a) a full accounting of the factors leading to the cost blow-out; and
(b) a chronology of advice given to the shareholders, individual ministers, Cabinet or any government agencies in relation to the cost blow-out.
On 3 September 2009, Mr Sullivan from Actew announced that the cost to enlarge the Cotter Dam to 78 gigalitres had blown out by almost a quarter of a billion dollars to $363 million. That is a far cry from the $120 million that was promoted in the future water options paper in 2005. But before I delve a little further into the cost explosion that surrounds the Cotter Dam, let me put on the record once again that the Canberra Liberals have long been in support of improving Canberra’s water storage capacity. We support the principles of securing Canberra’s future water supply, and we have said this many times. We do support the government’s approach to the enlargement of the Cotter Dam as part of this strategy. I think it is important that, in commencing this debate, we reaffirm that support.
What we do not support is the Stanhope government’s management of the project to date. It is worth once more giving a chronology of the cost increases. In 2005, the water options report indicated that we could build an enlarged Cotter Dam for $120 million. Announcing the major water security projects in 2007, the Chief Minister said the Cotter Dam enlargement would now cost $145 million. On 18 May, Actew Corporation’s Managing Director, Mr Sullivan, told the estimates committee that Actew was working on a figure 30 per cent higher that would take the figure to $188.5 million. On 30 May, less than two weeks after the estimates hearing, the same Mr Sullivan said that the cost would be 50 to 70 per cent higher. That would take it to $246 million. Barely three months later, on 3 September, Mr Sullivan announced that the cost would now be $363 million. On this basis the cost of the project to enlarge the Cotter Dam has increased by more than 200 per cent or, in dollar terms, more than a quarter of a billion dollars since 2005.
On 18 May, Mr Sullivan said to the estimates committee:
We tend to always have a low estimate at starts, despite people trying to encourage it to be as reasonable as possible. We have a peer review to have it confirmed. Then, by the time we get to this target out-turn cost, the TOC, we generally see a fairly large increase.
Well, it seems that the definition of a fairly large increase is now a minimum 200 per cent increase.
The 2005 water option report said that the cost estimate for the enlarged Cotter reservoir to 78 gigalitres was $120 million. There was no warning to say that this was a rough estimate. There was nothing to say that geotechnical reports might mean that the cost would increase. There was no mention of contingencies for costs of materials, and not even any suggestion that the final target out-turn costs might result in a fairly large increase. In fact the words “target out-turn costs” do not appear at all in that
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