State Auditor General Colin Murphy has given a scathing review of the Perth Arena development, saying there were significant failings in the planning and management of the $483 million indoor stadium.
State Auditor General Colin Murphy has given a scathing review of the Perth Arena development, saying there were significant failings in the planning and management of the $483 million indoor stadium.
Mr Murphy today delivered his report into the 14,000-seat indoor stadium, which found that the Department of Housing and Works under the previous Labor government had much to answer for.
The department was responsible for scoping, planning, tendering and contracting for the Arena.
Mr Murphy today said the project was not properly scoped or planned, and that key parts of the normal processes were either skipped or rushed.
He added that there was little consideration of the potential risks to the state or any alternative options to the final tender offer.
"The initial estimates of the cost and opening date for the Arena were unrealistic and made before the project was well understood or defined," Mr Murphy said.
"The effect of these failings has resulted in the Arena project budget increasing to $483 million, three times more than originally budgeted and scheduled to open in November 2011, almost three years later than planned.
"There also remains a risk of further delays and cost increases."
Mr Murphy said the final contract negotiated between the department and the successful tenderer, BGC Construction, differed from original requirements, with the state government taking responsibility for cost increases and delays resulting from design changes.
"Major changes to the Arena design were made during contract negotiations without a good understanding of what this would cost or the impact on the project schedule. These have resulted in cost increases and delays" he said.
"The contract price was at risk from the start."
In the final contract, provisions were made for design changes that could not be costed including the car park which had a provisional cost of $20 million but was now $54 million.
The final Arena budget price also assumed that $34 million would be saved through "design engineering" but only $2 million of savings had so far been achieved.
The changes were not reported in writing to the minister and Cabinet.
"DHW did not implement governance and project management arrangements required to control a major project like the Arena," Mr Murphy said.
"A lack of transparency and oversight on the Arena project meant that warning signs of the project going wrong were not heeded and opportunities to put the project back on track were missed.
"The lack of documented evidence means the agency cannot explain how and why key decisions were made, or who made them. That is wholly unsatisfactory.
"Parliament and the community need to know that the state's resources are well managed and that they are getting the best value for their dollar. I can't provide that assurance on this project."
Treasurer Troy Buswell said the project was hopelessly mismanaged.
"The former government left us with a contract that is very open ended, where we'll be having to defend and engage in negotiations under a whole range of claims from the builder," he said.
"Effectively, this contract was full of holes, and the builder, and you can't blame the builder for this, is taking every advantage of that."
Opposition Leader Eric Ripper today acknowledged there were shortcomings in the project.
"I acknowledge there were significant problems in the administration of the Perth Arena project during Labor's time in office ..." Mr Ripper said.
"This was clearly a project where the scarcity of planning and project management resources were exposed."
The report also found that since the Office of Strategic Projects (OSP) had taken responsibility of the project, the economics of the indoor stadium had strengthened.
In December 2008, changes were made to the governance arrangements and the management of project resources was being handled by the OSP. The OSP is now under the Department of Treasury and Finance.
Mr Murphy today warned that although responsibility for the project has changed, some risks remained to the timely completion of construction and a smooth transition to operation.
"Agencies need to learn the lessons from the Arena for other capital works projects, and all agencies must ensure that they can provide clear accountability for how they spend taxpayers money," he said.
"The focus for the Arena project now needs to be on successfully completing construction and fit out and opening what I hope will be a great venue for the community to use."
Mr Buswell said that the government expects the total cost of the project to pass the $500 million mark and the Arena to open in April 2012.
