Abbott government to hand over $1b for East West Link stage two despite lack of business case

This means the federal government has committed a total of $3 billion to the East West link road project without a full cost benefit analysis despite Tony Abbott promising before the election all projects worth more than $100 million would receive this scrutiny.

Officials from the government body Infrastructure Australia admitted at a Senate estimates grilling on Monday they have not seen a full business case for stage one or stage two of the project – each of which will receive $1.5 billion from the federal government.

Infrastructure Australia has assessed East West link stage one as having reached the “real potential” stage, with officials conceding it was two steps behind the body's final “ready to proceed” stage.

Another $1 billion will be allocated for the second western stage of the project by the end of the financial year, even though it is not even listed on Infrastructure Australia's December 2013 priorities list, with the remaining $500 million held back until 2018-19.

Under questioning from Labor senator Stephen Conroy on Monday, Infrastructure Australia officials revealed that an early assessment of the overall project estimated a benefit cost ratio of just 0.5, that is that just 50¢ would be recouped for every $1 spent.

That figure has since been revised up to 0.8, or 80c, and the Victorian government insists that if the “wider economic benefits” are included the project will produce a return of $1.40 for every $1 spent.

Senator Conroy asked the acting Infrastructure Coordinator John Fitzgerald what problems the road project would solve.

Mr Fitzgerald said “that discussion is still happening with the Victoria government”.

Mr Fitzgerald said Infrastructure Australia had received some “very early, very high level information” about East West stage 2, but that “there is significant more information that we require for it to be a full business case”.

But Infrastructure Department secretary Mike Mrdak defended the allocation of $1 billion for stage 2 of the project to flow by the end of June because “I think the Australian government is keen to see the acceleration of this project”.

Paul Roe of Infrastructure Australia said the body had received some material about the project from the Victorian government but had not undertaken an independent cost-benefit analysis and had not received the full business case for the project.

“We have undertaken an assessment of the material provided to us by Victorian government," Mr Roe said.

“The project [East West stage one] is not at 'ready to proceed' in our categorisation. Decisions on funding are made by government.”

Mr Roe said he had confidence in the benefit cost assessment of 0.8 for the project.

“I think there was a 0.5 number which was put forward in an early submission in 2008 or 2009 when the concept was at an indicative stage but the 0.8 number was calculated … the detail was developed and it's a more accurate number.”

Victorian Premier Denis Napthine said Infrastructure Australia had seen the full business case for the first stage of East West Link.

However he refused to say whether the project had been assessed as ready to proceed by the infrastructure umpire.

Instead he declared: “It’s ready to go according to us.”

The Napthine government has not announced when the reference design or full business case for the second stage of the link will be completed, or if they would be finished before the state’s November election.

“We’ll do it as soon as we can,” Dr Napthine said. “We are working on the business case and we are positive the business case will deliver a positive outcome.”

Construction of the $8 to $10 billion road, linking CityLink with the Western Ring Road, is due to begin next year.

It could include an elevated roadway over Footscray Road, a new river crossing and a tunnel under Footscray emerging in Sunshine, according to the government’s preliminary plan.

The project is opposed by the state’s Labor opposition, in effect turning the November election into a referendum on whether it goes ahead.

Victorian Labor said the fast-tracking of $1 billion in federal funding had allowed Dr Napthine to turn a $65 million deficit into a $935 million surplus.

Labor infrastructure spokesman Anthony Albanese said Infrastructure Australia's independence had been compromised by the federal government as it re-allocated money from priority projects to those it had promised before the election.

“The fact that East West stage 2 in Victoria has not had a business case, hasn't had proper environmental assessment, but was given $1.5 billion out of commitments from the federal government … for a project that is due to commence in 2015-16.

“The fund profile of a billion dollars being given this financial year, prior to June 30, must bee seen as providing assistance to their friends in the Victorian government.”

Greens senator Lee Rhiannon said the hearing revealed the federal government's "ideological blinkers when it comes to spending billions on private motorways at the expense of public transport projects".

“Despite the inability of Infrastructure Australia to fully assess this proposal, the Abbott government has gone ahead with a $1.5 billion spend for East-West, prioritising it ahead of public transport projects like the Melbourne Metro rail which have been rigorously analysed by Infrastructure Australia.”

A spokesman for Infrastructure Minister Warren Truss said the government stood by its commitment to publish a cost-benefit analysis of all project worth more than $100 million.

The Victorian government would be submitting an updated business case for the project, he said.

"The full benefits of the East West Link will only be realised when both the Eastern (Stage 1) and Western (Stage 2) sections are complete," the spokesman said.

East West link is expected to ultimately cost as much as $18 billion.

With Aisha Dow

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