Australian governments are committing to a record number of ‘mega’ transport projects, and that exposes taxpayers to mega risks of cost blowouts.
Ten years ago there was just one transport infrastructure project in Australia worth more than $5 billion. Today there are nine, and costs have already blown out by $24 billion on just six of them.
Inland Rail from Melbourne to Brisbane was costed at $4.4 billion in 2010; it’s now estimated to cost $9.9 billion. Melbourne’s North East Link was costed at $6 billion in 2008; it’s now expected to cost $15.8 billion. The Sydney Metro City & Southwest was costed at $11 billion in 2015; this year the NSW Government announced the latest cost estimate is $15.5 billion.
Even before the mega-projects era, cost overruns were a mega-problem. Over the past two decades, Australian governments spent $34 billion more on transport infrastructure than they first told us they would. Analysis of all projects valued at $20 million or more and built in the past 20 years shows that the actual costs exceeded the promised costs by 21 per cent.
Big projects are particularly risky. More than one third of overruns since 2001 came from just seven big projects.
Projects announced before governments are prepared to formally commit are also particularly risky. About one third of projects are announced prematurely; they account for more than three quarters of the cost overruns.