Page 4037 - Week 11 - Wednesday, 16 Sept 2009
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December 2008, the estimated cost of the Cotter Dam had gone up to around $250 million, and this was indeed the figure that was considered valid right through until May this year, when the managing director of Actew, replying to a question on notice, indicated that the price of $145 million was expected to rise by 50 to 70 per cent, putting this in the region of $217 million to $246 million.
The reasons given at this stage for the cost increases were broad. I quote: “Significant increase in cost of labour, concrete and other materials, and also due to the nature of the rock found.” That was in May this year. So even at that point, Mr Sullivan indicated in his answer, and I quote again:
There is still considerable uncertainty on costs due to impacts on labour and materials from the global financial crisis and the substantial level of construction within the Australian water industry.
I guess it could be fairly said, as the Treasurer indicated yesterday, that perhaps we were warned. The equivocal and vague answers provided in response to questions about increasing costs indicated trouble on the horizon but I also suspect that no-one was expecting the next and supposedly most accurate bill to come in at $363 million. That is a 250 per cent increase on the first amount quoted. It is also a one-off hike of $118 million from the last amount mooted by Actew—$118 million in one single step.
It is not just the impact of inflationary or economic factors on products or services. I do not know but is the impact of this GFC driving labour costs up or down? I assume that the implication of the number of projects being developed in the Australian water industry is that labour costs might go up due to a shortage of labour but what is the impact of the GFC? Has the price of concrete gone up or down as a result of the GFC? Presumably with the tailing-off of some projects and the well-stated concern by government that we face economic crisis in the signficant stimulus of the economy, what is going on?
This is really the point. We do not know and we have not yet been given clear information about why the bottom line cost for this project has blown out to such a level. What is that $118 million a direct result of? The whole thing raises questions about a process by which we, the Canberra community, have been locked out of—an honest debate about our water infrastructure, infrastructure that the community is investing heavily in and that the community will continue to pay for for many years. For me, this raises questions about the process and common practice employed by consortia or alliances that deliver large major infrastructure projects to governments.
It became obvious in the estimates hearing in May that Actew had an expectation that costs would go up from the original cost that was quoted. Indeed, the managing director of Actew stated quite clearly that this was accepted practice. Whilst Mrs Dunne has touched on this point already this morning, I would again like to pull out the quote from estimates, because I think it is a fascinating insight into how the costing of these projects takes place. The managing director of Actew said:
We tend to always have a low estimate at the start, 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.
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