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Spectacular cost blowouts show need to keep governments honest on transport

The Grattan Institute's Marion Terrill writes in The Conversation (24.10.16) about how 'over the past 15 years, Australian governments have spent A$28 billion more on transport infrastructure than they told taxpayers they would spend. Behind the big number lies a very real policy problem: politicians often make promises prematurely, there’s no public cost-benefit analysis, and it’s rare for the cost outcomes of infrastructure projects to be analysed in any systematic way.'

She continues her analysis:

'Last week Fairfax Media revealed that the Parramatta Light Rail, a vital part of the New South Wales government’s plan to cement Parramatta as Sydney’s second central business district, is set to cost not A$1 billion as budgeted, but a whopping A$3.5 billion. People could be forgiven for thinking that such cost blowouts are rare. But as a new Grattan Institute report shows, they are not nearly rare enough.

'The report is the first comprehensive Australian study of all 836 transport infrastructure projects valued at A$20 million or more and planned or built since 2001. It reveals that over the past 15 years, Australian governments have spent A$28 billion more on transport infrastructure than they told taxpayers they would spend. Much of this overspending should never have happened.

'The A$28 billion over the originally promised costs does not stem from the accumulation of small cost overruns on most projects. Rather, most projects come in reasonably close to their original announced cost, as the figure below shows. The problem is that when projects do run over, it can be spectacular: 90% of the cost overrun problem is explained by the 17% of projects that overran their cost promise by more than 50%.'

 

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