William McDougall

THE tale of my West Gate Tunnel experiences is a long one. I’ve broken it up into three parts:

1. The overall story (this post)
2. The transport modelling
3. The cost-benefit analysis

Overview

I was closely involved in the Government’s process of assessing Transurban’s West Gate Tunnel proposal. I was retained to review the transport modelling and economic appraisal, and quickly found major problems with the work being done. Frustrated with resistance from the appraisal team, I eventually alerted the Treasurer to the problems. This was a bad move on my part; I was promptly removed from the work.

I did get a chance to tell my story a little while later, but it was too late. The project was approved, and it progressed through to construction, where many new problems have arisen.

West Gate Tunnel should never have been approved by the Victorian Government. Like East West Link before it (and North East Link after), the business case was distorted to make the project look much better than it is, through erroneous traffic forecasting and cost-benefit analysis.

To cap it all, Transurban’s CityLink concession will be extended as part of the deal, on top of extra escalations of CityLink tolls AND another $2.6 billion of public funds. Obviously, the project doesn’t even stack up on its own financially.

I predict that, if and when it eventually opens, the forecast conditions that it depends on won’t materialise. It won’t deliver the claimed benefits and it’ll stand as an ugly monument to our broken planning system.

Similar problems exist with North East Link. I’ll cover that in another post soon. In the meantime, I implore the Andrews Government to avoid what could be an even bigger mistake, and re-evaluate North East Link properly. COVID-19 provides the circuit-breaker for an urgent and honest re-think of the priorities.

Independent, concurrent peer reviews should be mandatory. They must be ‘open book’, and show how the reviewers’ requirements have been satisfied. A final report must be released documenting the process, listing outstanding problems and describing the fitness for purpose of the work.

Such reviews cannot be done after the work is complete (which is what happened later, on North East Link).

Beginnings

Back before the 2014 election, which hinged in part on Labor’s promise to scrap East West Link, I was invited by Tim Pallas, along with a few others (far more distinguished than I!), to join a planning think tank. We discussed the need for evidence-based, sustainable land use and transport planning, trying to help Labor’s election platform.

During this process we talked about the East West Link cancellation and I remember being told: “Don’t worry – we have another idea that’ll take shape after the election”.

In November 2014, Labor won the election and East West Link was quickly cancelled.

Peer review

Early in 2015 I got an assignment under contract to the Department of Transport (when it was DEDJTR – Economic Development, Jobs, Transport and Resources), reviewing business cases for transport projects.

A flurry started in April 2015, when Transurban’s proposal to build West Gate Tunnel (then called Western Distributor) was revealed, and the Government put the wheels in motion to assess this ‘market-led proposal’.

An assessment team was set up within DEDJTR from the remains of the Linking Melbourne Authority (LMA had been implementing East West Link after taking it through a business case and environment effects appraisal under Denis Napthine’s government). Consultants were brought in to do transport modelling and the economic appraisal (the same ones who’d done that work for East West Link). I don’t know whether this consulting work was competitively tendered for.

I was allocated to review the economic appraisal, and an external peer reviewer was appointed for the transport modelling. Because of the many overlaps between the two, we worked together very closely.

Meetings started; the assessment team seemed very keen to get the project through. I heard someone say words to the effect of: “we didn’t get East West Link; we’re determined to get this one”. Hardly an impartial appraisal of a private company’s proposal.

The business case work was fast-tracked, with insufficient time and meetings for us to review progress as it happened. Nonetheless we immediately found some real problems with the work. Traffic modelling was producing much higher growth than we expected, and economic benefits were being overstated.

When we raised our concerns, we were told that they’d be looked into, but no promises were made because of the tight timeframe. We were even told that the issues might not get addressed after the business case was completed. This seemed ridiculous to me.

Finding it impossible to do our job under these circumstances, we documented the problems as much as we could, as more detail was progressively – but too slowly – provided to us.

After much frustration over several weeks, I took it on myself, rightly or wrongly, to alert the Treasurer, Tim Pallas, to the problems we were encountering. I warned him that the work being done was as bad, if not worse, than in the business case for East West Link. He thanked me and told me that he’d get someone to follow up with me.

I heard nothing more, and about a week later both the peer reviewer and I were taken off the project. No explanation was given to me for this; I was transferred onto another piece of work within the Department to use up the rest of my allocated budget.

At that stage I was afraid to speak up because nobody had said a word to me about my talk with Tim Pallas. I decided to lay low and see what happened next.

I’ll go into more detail in the next couple of posts, but in a nutshell, these were our main concerns at the time:

1. The traffic forecasting model used a non-standard, illogical shortcut to create future year projections. Called the ‘single loop’ method, it arbitrarily combined present-day travel demand with the future-year transport network when calculating future-year travel patterns. This demonstrably produced much more traffic growth than the proper way of doing such modelling. It also meant that the model’s mathematical stability (a fundamental requirement) could not be calculated in accordance with established guidance and best practice. We had quite a few other problems and queries, but this was the biggest one.
2. The economic appraisal had many distortions and add-ons, which got the benefit-cost ratio over the magic threshold of 1.0. Many of them were non-standard and highly questionable. Added to these, the business case assessed a double-act, namely West Gate Tunnel AND an upgrade to Monash Freeway on the other side of the city. The latter was there mainly to boost the benefits of the former; there was no interdependence between them. Finally, the appraisal had two benefit-cost ratios, one for Infrastructure Australia and one for the Victorian Government. The first was larger, because it was calculated without any allowance for induced traffic; the team (wrongly) claimed that IA’s guidance at the time didn’t require it.

I watched as the business case was released in late 2015 and the Government announced their support for the project, which was really a foregone conclusion. This included a new development; the intention to extend Transurban’s CityLink concession to give them 10 years’ more revenue. I wondered, if West Gate Tunnel was such a great project, why didn’t it stand up financially without this extra revenue?

The problems we were concerned about were not addressed in the published business case. They were also carried through, unchanged, into the environmental effects statement.

Senate inquiry and EES

In 2017, a Senate inquiry was announced into toll roads in Australia. I made a submission focussing on my West Gate Tunnel experiences. The inquiry committee told me they’d had a request that my submission be kept secret, but after some discussion they agreed to release it anyway (I’d used publicly-available data to demonstrate my points). I was also interviewed at the hearings in Melbourne. The transcript of this was also made public, and the story was out.

This coincided with the start of the EES hearings.

During the EES hearings, a lot of effort went into persuading the Government to release the transport modelling peer review report (which I knew had never been properly completed), but nothing was forthcoming. I gave some behind-the-scenes advice to one of the objectors, writing extensive notes for them in response to the EES documents and evidence presented during the hearings.

It was all too late to make any difference, but at least I’d got it off my chest.

There was a lot of obfuscation during the EES hearings and many major objections were ignored or discounted when the project was approved.

Construction

Construction of West Gate Tunnel started in 2018. It soon ran into difficulties, the largest of which was the extraction, treatment and disposal of PFAS-contaminated soil.

As of August 2020, this issue is ongoing; Transurban is battling it out with the builder, and the Government is watching from the sidelines denying any responsibility, at least so far. We shall see how that plays out.

Conclusions

From the outset, the appraisal and approval process for West Gate Tunnel was biased in favour of the project proceeding.

As I’ll show in my next couple of posts, the transport modelling and economic appraisal for the business case contain distortions which combine to provide a highly optimistic view of the project’s effectiveness. Removing these shows that the project is not economically justified, and should not have been approved.

The project’s lack of viability is further proven by the fact that it doesn’t stack up financially. Transurban can’t make it work without extra toll revenue on City Link AND a substantial injection of public funds.

Construction problems are forcing significant delays and extra costs. Transurban has reportedly considered cancelling their agreement with the Government to build it. I wonder what will happen next.

Independent, concurrent peer review processes should be mandatory on all major project appraisals. The reviews must take place in an ‘open book’ fashion as the work proceeds, with clear audit trails to show how the reviewers’ requirements have been satisfied. A final peer review report must be released documenting the review process, listing any outstanding problems and giving a clear opinion on the fitness for purpose of the work.

It’s entirely unacceptable for peer reviews to be done after the work is complete, because if any serious shortcomings are identified it’s too late to do anything about them.