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Audit slams decision-making on Victoria road schemes

2 Jun 11 An audit into the management of major road projects in Victoria, Australia, has criticised traffic forecasting, economic estimates and procurement decision-making.

The Frankston bypass, now known as <br> the Peninsula Link
The Frankston bypass, now known as
the Peninsula Link

It has recommended the adoption of traffic modelling and economic approaches used in the UK and New Zealand.

The audit examined how effectively state roads authority VicRoads and the Linking Melbourne Authority (LMA) managed a sample of six major road projects with a combined capital cost of AU$2bn (£1.3bn). Capital costs that varied between AU$41m million for the Goulburn Valley Highway duplication, to AU$1.2bn for the Western Ring Road upgrade. The Peninsula Link project, which has an expected cost of AU$750m, was subsequently developed and procured by LMA as a public private partnership.

Both agencies fell short of the standards required to reliably forecast traffic and estimate projects’ economic benefits when informing the decision to proceed, found the report. LMA also had weaknesses in the way it had informed procurement decisions. Addressing these weaknesses is critical because decisions have been made without a complete understanding of the consequences, it found.

Based on the projects reviewed, neither organisation has effectively measured all of the intended project outcomes, but both are working to do this for current and future projects, said the audit. Once decisions had been reached on projects and their procurement, VicRoads and LMA monitored and managed their delivery effectively. This was evident from their performance in delivering projects close to their planned time lines and costs.

The major areas of weakness were in the way VicRoads forecast traffic and the estimated benefits of road projects affecting congested parts of the road system. VicRoads had not adequately assessed the traffic induced by these improvements, found the audit. This shortcoming creates a risk of overestimating the benefits and giving decision-makers false confidence about the capacity of the improved.

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VicRoads should adopt the practice of the United Kingdom and New Zealand which are more effective at modelling the traffic impacts of road investments and measuring their economic benefits, recommended the audit. Business cases should include sufficient information so that the reliability of the estimated traffic impacts and the economic benefits can be understood.

The report’s recommendations include that VicRoads assess the significance of induced traffic for all major road projects and takes account of this when forecasting traffic and estimating the economic benefits. Business cases should include sufficient information on the reliability of the traffic impacts and economic benefits.

LMA was responsible for developing the 25km Peninsula Link project and is now overseeing its delivery through a public private partnership. The report found that LMA did not adequately inform decision-makers about whether the Peninsula Link project should proceed, and how it should be procured. Consequently, assurance cannot be provided that the procurement represents value-for-money, said the report.

The audit found weaknesses in the way LMA informed the decision to proceed because the estimate of the economic benefits was unreliable and it did not adequately communicate this uncertainty to decision-makers. There were also weaknesses in how LMA informed procurement decisions because of the way it estimated the cost of state delivery and because it did not test the sensitivity of the relative costs of the public sector and private bids to small changes in the PPP discount rate.                                                     

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