Page 4128 - Week 13 - Wednesday, 26 November 2014
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This ACT government is not interested in hiding information on this project. We have a very strong focus on making sure that all information is made available to the public wherever it possibly can be. There has been a lot of discussion about the benefit-cost ratio—or BCR—for the capital metro project. Indeed a number of ratios have been developed for different purposes. I want to emphasise today that all of the government’s economic analysis consistently confirms that light rail for Canberra delivers a positive economic return—that is, the benefits outweigh the costs. I note Mr Coe’s grudging acknowledgement of that fact today.
The economic analysis of the light rail project first developed back in 2011 for the Infrastructure Australia submission on the city to Gungahlin transit corridor was developed without any specific or detailed engineering analysis beyond a very high level of assessment. Transport investment project BCRs can vary significantly, even for a single project, depending on the options, assumptions and impacts included. That is why it is very important to re-evaluate as the project progresses, to test and test again those assumptions.
Let me put the capital metro benefit-cost ratio of 1.2 in contrast against other light rail projects that have been funded and delivered by other state governments, notably state governments of a Liberal persuasion. The Dulwich Hill light rail line, a BCR of one: funded and delivered by the New South Wales state government. The north west rail link, a major heavy rail project being delivered in Sydney by the New South Wales Liberal government: a BCR of less than 1.2, but still being funded by that government because they recognise the significant benefits the project brings. We hear from those opposite all the time that anything less than two is not satisfactory. Well, just go and have a look at the other public transit rail projects being funded by other state governments with BCRs of less than the capital metro BCR of 1.2.
The Capital Metro Agency was formed to deliver stage 1 of this project. As with other major infrastructure projects, once an option is selected and fully designed, a more detailed business case can be developed. This is a significant investment for the government and checks and balances are included at each stage in the planning process. In undertaking this detailed economic analysis, the agency has been able to increase the accuracy and understanding of project costs, something that was not present with the initial submission to Infrastructure Australia.
This understanding includes providing a P75 and a P90 estimate. The cost estimate is based upon a detailed concept design produced by the Capital Metro Agency’s technical advisers and through a risk quantification process. For example, the P75 estimate means that sufficient risk provisions have been included to provide a 70 per cent level of confidence in the cost estimate. Unlike the previous estimate, the latest analysis includes a contingency and cost escalation. The assertions from Mr Coe are just wrong. He asserts that the figure put to Infrastructure Australia was $614 million and the new figure is $783 million. But he fails to acknowledge that the $614 million figure had no explicit contingency or escalation, whereas the new cost estimate does.
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