It’s so much easier to con us when we’re begging to be conned
What is it about tollways? Over and over again they’ve failed miserably to deliver what’s been promised, and yet we come back for more.
That’s WestConnex in a nutshell: the latest, and by far the largest, of the overcooked plans we’ve been offered as the magic solution to all our travel woes.
Fool me once, shame on you. Fool me twice, shame on me. Fool me three times? I don’t think so.
First, they gave us the Cross City Tunnel. In 2002 Cross City Motorways won the contract to build the 2.1km tunnel, with a business case based on traffic modelling that predicted 95,000 cars would use it each day. The tunnel opened in 2005, and by the end of 2006 it had gone into receivership, struggling to get a third of the predicted traffic. In 2013 it again went into receivership, and Transurban bought it for $475M, about $200m less than it had cost to build nearly a decade earlier.
Rather than learn from these ongoing issues, the Lane Cove Tunnel project repeated them on a grander scale. Built by a consortium consisting of ABNAmro, Thiess and Transfield, its business case was based on traffic projections prepared by Parson Brinckerhoff and checked by Booz Allen Hamilton. It opened in 2007. By 2009 it was also in receivership, eventually to be bought by Transurban for $630 million, about $1 billion less than it had cost to build. Only 66,000 cars per day were using it, again about a third of the projected volumes.
How did the traffic projections go so wrong, not just once, but twice? Vesna Poljak explained in the AFR after Brisbane’s Clem Jones tunnel suffered an identical fate:
Contracts are often awarded to the bid which promises the highest return for the state government vendor, creating an incentive to tender bullish traffic forecasts which underpin the revenue the asset is expected to produce and the pile of construction debt it needs to service.
In other words, everyone from the forecaster to the investors to the government’s infrastructure body was suffering from “deal fever” — that dangerous tendency for investors to abandon good sense when someone promises to make them a lot of money.
Deal fever can happen to anyone. Smart investors know that, and guard against it by putting good processes in place — processes like checking basic assumptions with external experts, reviewing each potential project in the context of a pipeline of opportunities, and above all, setting a high hurdle for the success of the project.
The tricky thing about deal fever, though, is that it gets reliably worse as the size of the deal increases. Some investors find record-breaking deals irresistible, even when the deal comes with its very own warning signs, flashing “attention: crushing financial failure approaching”, for all to see.
Which of course brings us to the looming $15 billion debacle that is WestConnex. Because the size of this project is important in lots of ways, let’s put $15 billion in context:
The Snowy River Hydro scheme cost a bit over $6 billion in today’s dollars, so if there were any rivers that needed damming, you could do a couple of nice big hydro projects.
The new airport at Badgery’s Creek has a $2.5 billion budget, so you could have six more of those.
Or if real estate is more your thing, you could buy this house 1,250 times over. An entire luxury village of your own!
More pertinently, $15 billion buys an awful lot of railway line. The North West Rail Link, connecting Rouse Hill with Epping, has a $2.5 billion budget, for example.
Safe to say, $15 billion is just the kind of price tag to bring on a roaring case of deal fever, and the signs are everywhere: Listen to Premier Mike Baird, Roads Minister Duncan Gay, WestConnex Chair Tony Shepherd, or any of the project’s supporters and at some point you’ll hear the words “biggest infrastructure project in Australia”.
That phrase should ring alarm bells. It should make us shout, Tom Cruise-style, “show me the business case!” It should lead us to demand, like good investors, to know the assumptions that were used, what the experts think of them, and what our other options might be. Because make no mistake, if the business case turns out to be dodgy, as have multiple tollway business cases in the past, that’s $15 billion we’ll have sunk — $15 billion that can’t be spent on other transport projects, or on schools or hospitals, or on anything else.
Unsurprisingly, there is increasing demand for the business case to be made public. In March last year, the NSW parliament passed Greens MLC Mehreen Faruqi’s motion to have the business case and related advice tabled — a decision that led Minister for Roads Duncan Gay to call his parliamentary colleagues “idiots”, only slightly less fevered than Liberal MLC Catherine Cusack’s assessment that it was “redolent of Robert Mugabe”. But when in the end the government did table 38 boxes containing 9,000 WestConnex documents, the business case was not among them.
That this didn’t provoke a public outcry is symptomatic of NSW voters’ general disenfranchisement. We are so used to bad government, it doesn’t even surprise us anymore, let alone provoke us to outrage.
Among transport infrastructure experts, there’s little support for WestConnex, in part because it’s hard to support something that hasn’t been adequately explained.
In contrast, experts have voiced clear, consistent support for transparency on infrastructure projects. The federal Coalition itself was a great supporter of transparency, right up until the point when it took power and Tony Abbott decided he’d be Infrastructure Man.
But NSW voters by and large have responded with “meh”. Talk to them about WestConnex and there’s a good chance they won’t know what it is. When they do know, you’ll most often hear them say one or more of the following:
“Duh, look at the traffic!”
Anyone who drives or takes the bus regularly in Sydney knows congestion is a serious issue. Making more room for all those vehicles seems like an obvious fix, which is why you’ll often see comments like these:
It makes perfect sense — right up until you widen your perspective beyond the bottleneck in front of you. Transport experts tell us that well-designed roads are one way to address congestion, but there are plenty of others, including moving freight onto rail, improving public transport, and providing better bike lanes.
It shouldn’t need saying: the frustration you feel looking at an endless string of tail lights in front of you isn’t a good substitute for a well-considered business case that compares the costs and benefits of the available solutions.
“Screw you, Clover!”
In a peculiarly Sydney version of “the enemy of my enemy is my friend”, some of the most fervent supporters of WestConnex have noted that since the project gets up the nose of inner city residents, and especially those inclined to support the Greens and Independent Lord Mayor of Sydney Clover Moore, it must therefore be a good thing:
There’s history behind this of course — residents of Sydney’s West are among the most over-courted, under-serviced voters in the state. The frustration with inner-city spoilers is palpable:
People who’ve seen decades’ worth of infrastructure projects proposed and then scuttled feel understandably hard done by when it looks like happening yet again. There’s a sense that anything, even a very bad road, would be better than nothing at all.
But that’s the trick. If state and federal governments between them are ready to stump up for billions of dollars worth of infrastructure, surely it’s time to demand solutions that are considerably better than nothing. In ramming through a poorly-thought-through tollroad to punish greenies and ensure the West gets something, we might well be cutting off Sydney’s nose to spite its face.
“Don’t bother. It’s a done deal.”
Perhaps the most insidious effect of the endless train wreck that is NSW politics is the electorate’s general submission to victimhood. We’re so used to egregious government incompetence, seasoned with regular forays into blatant corruption, that it can be hard to raise the energy to get excited about it any more. And so quite a sizeable group of WestConnex supporters are supporters by default, accepting it as a foregone conclusion:
The danger in accepting toll roads as “the price” of living in a city, or the “political reality” of incompetent government, is that for certain we will get more of them, whether or not they actually solve the problems they’re supposed to solve.
Meanwhile, the reality of big, modern cities is that more of them are pulling out toll roads than building them. If paying a billion dollars not to build the EastWest Link in Melbourne boggles the mind, consider the cost of removing a poorly-designed tollway after it’s been built.
In inner or outer western Sydney, or anywhere else in the state, it’s taxpayers who are WestConnex’s investors. As investors, we can choose to demand better information as a prerequisite for supporting such a huge project — as we would if we were taking seriously our responsibility for the long term future of our city.
Or, we can choose to take the promises of the government and its contactors on faith. We can allow ourselves to get caught up in the fever of a $15 billion deal, despite a terribly patchy record of delivering benefits on much smaller projects. But that would just be begging to be conned.