Rural Affairs and Transport Committee
21 October 2010
Senator LUDLAM-Diplomacy. I want to pick up on a couple of specific projects, if I can. We will start in Victoria. By far the largest fraction of urban public transport funding thus far is the Werribee to Melbourne line, the regional rail link in Victoria, which was, I think, at about $3 billion. That has been quite heavily critiqued by a range of commentators. As a result, I think in response to some of those critiques, you have indicated that you will change the way that you assess projects. Were there issues arising with the funding of that project that have caused you to change the way that you evaluate and prioritise projects, or is that not strictly true?
Mr Deegan-No, Senator.
Senator LUDLAM-Are there any substantive changes, whether they are related or not, with the way you would evaluate projects such as a major rail link like this one that would be different to how they were when that project was prioritised?
Mr Deegan-No. Essentially, what we are still insisting upon in our strategic approach is a clear identification of the problem that the state or private proponent is seeking to resolve and the various options that might sit around alternative solutions. Some of those, for example, in the road area are about pricing. We then move through to whether the proposed solutions are the best fit for the problem. So that is a very strategic overview of where that goes before we get into the cost-benefit analysis. So clearly we have learnt a lot in the first two years. We are continuing to refine our process and operation. But it is not a criticism or indeed anything negative about particular projects that we have supported. In fact, it is quite to the contrary; it has reinforced our view.
Senator LUDLAM-I will stay with that rail link. Did you evaluate at the time or publish anything that said, ‘For $3 billion we could put this rail link in or this is what else we could do for Melbourne's public transport network for $3 billion'?
Mr Deegan-That was part of the assessment, yes.
Senator LUDLAM-Did you ever publish what those alternative options were and how you decided against them?
Mr Deegan-There were a range of proponents. Our analysts looked at those proposals. The recommendation we put to the Infrastructure Australia council was the one that ended up being funded by the government. I maintain that position.
Senator LUDLAM-Well, you prioritised it and then they chose to fund it. Have you determined a minimum set of standards or a minimum benefit-cost ratio baseline that has to be met for a project to proceed with Infrastructure Australia funding?
Mr Deegan-Generally, Senator, we are looking for, in a benefit-cost ratio, a minimum level of 1.5 to one. That is the basis upon which we work. That is around a host of risk issues. Part of our assessment deals more strongly with the deliverability risk issues than perhaps previous assessments from governments have undertaken. There will be opportunities where people have spent a lot of time designing risk out of the projects. You may in fact decide that the extra space that you have left in the cost-benefit ratio has been dealt with by dealing with the risk. You might adopt a lower benefit-cost ratio. That margin is around how the risk issues are being assessed. So we spend a lot of time looking at the risk and how that might be best managed and whether it might bring down that risk and, therefore, improve the performance of the project.
Senator LUDLAM-But, to be specific, the material that was received eventually under FOI-the Victorian government's initial submissions-showed that the road project's benefit-cost ratios were always lower than the public transport proposals yet the projects are the ones that end up getting funding.
Mr Deegan-I think in Victoria the regional rail project is a significant amount of Commonwealth support for public transport, which is-
Senator LUDLAM-I certainly do not disagree.
Mr Deegan-a huge change of approach.
Senator LUDLAM-I do not disagree at all. But it is one rail line for a very, very large city. It is not actually going to make a material difference to most of Melbourne's residents. It will make a difference in the area where it is going, but it is one rail link for $3 billion compared with network scale improvements that could have been carried out across the entire metropolitan area. The benefit-cost ratios for the road projects that were put forward generally were lower than some of those more holistic public transport proposals that came forward.
Mr Deegan-I would be happy to talk to you separately about that. There is a different range of views. Some of the critiques that you mention, we believe, have some holes in them as well.
Senator LUDLAM-I might take you up on that opportunity.
Mr Deegan-Certainly when you look at the network rail benefit, which is something that we do across the system, we spend a lot of time thinking about where you might best spend money. This regional rail express project, in my view, will transform Melbourne. Melbourne has then other significant rail projects that they are proposing that will deal with a whole host of the congestion issues and the opportunity to bring more people to public transport. I am sure you would agree that is a worthy goal that we should pursue.
Senator LUDLAM-Yes. I think the ends we are in complete agreement with. Maybe it is the means where we are at odds. But I will take you up on that opportunity to discuss that stuff further.
Mr Deegan-We go down into looking at timetables. We look at operating plans. We spend a lot of time on the current operations thinking about when there are improvements that could be made without spending any money. That is always a good position to start. We then build up from there rather than simply accept a proposal to spend a lot of other people's money.
Senator LUDLAM-Do you get to think about governance arrangements and the mix and public operation and coordination of the network?