“We have a process where the standard business case guidelines are adhered to, but they are enhanced,” she said. “A small road project is very, very different to the Airport Rail Link or the Suburban Rail Loop.”
The Auditor-General’s Office noted, however, that departmental guidance was designed for “large-scale investment projects”. The Andrews government committed to the Suburban Rail Loop and Airport Rail before their business cases were produced, whereas it was “commonly accepted better practice” that business cases “precede and inform investment decisions”, the report said.
The Suburban Rail Loop East business case said it would produce between $1 and $1.70 in benefits for every $1 invested and the Airport Rail projected a benefit-cost ratio of $1.10 to $1.30 for every $1 invested.
But the auditor-general said Suburban Rail Loop East would lose 51¢ in the dollar and the Airport Rail would lose 48¢ if the business cases were prepared using department guidelines. Governments usually do not proceed with projects that have a loss-making benefit-cost ratio.
This decision and the failure to consider alternative options for the two projects meant “decision-makers did not have all necessary information at their disposal”, the auditor said.
The auditor-general recommended the government produce a business case to demonstrate the economic rationale for the entire 90-kilometre proposed Suburban Rail Loop project. But the government told the auditor-general it had “no plans to do so”, the report says.
The rail loop would continue from Box Hill to Melbourne Airport by around 2050 and then through the western suburbs to Werribee.
The second report also found the government was not providing timely, relevant, sufficient and transparent updates to the public about how projects worth more than $100 million were progressing. The expected benefits of a project, or changes to its scope, were often not properly explained, the report said.
“Without this information, parliament and the community cannot hold responsible entities accountable,” it said.
The auditor-general’s business case report examined four projects. It found the case for the $365 million Barwon Heads Road upgrade had been delivered too late, but was satisfied with the business case for the $220 million Mickleham Road upgrade.
Shadow treasurer David Davis said the report backed up the opposition’s claim that the Suburban Rail Loop is “shonky” and “a dog of a project”.
“This is the king daddy of risky projects,” Davis said.
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