Value derailed as trains off track

AMID ongoing debate in Western Australia about record ambulance ramping, and a shortage of hospital beds and social housing, there’s no doubt how the state government is prioritising its infrastructure funding.

The ambitious Metronet rail program, slated as revolutionising transport and planning across Perth, has surpassed a $9 billion price tag.

But the new railways are among an increasing number of public works set to cost more than the estimated community benefits, with as much as $5 billion spent on projects around Perth that fail analysis on the most up-to-date budget numbers.

Graphic: Some projects have updated costs exceeding proposed benefits.

Joining the rail lines on the list are road projects, and a plan to move Edith Cowan University’s campus into the city.

That raises questions over whether governments have been allocating cash to WA’s most important infrastructure needs or have incorporated political considerations in their decision-making.

It’s not just a state government choice, either.

The train routes were a core Labor state election commitment in 2017, yet they have since attracted bipartisan backing at a federal level.

The Thornlie-Cockburn Link, a 14.5-kilometre route through Canning Vale, is one project where costs have risen.

When the state government submitted its assessment of the rail line to Infrastructure Australia, the proposal expected $969 million of public benefits over its lifetime.

Road travel time savings would be worth $268 million, the assessment said, while about a third of the total benefit was reducing time for public transport users.

Without new rail lines, residents of suburbs such as Harrisdale and Piara Waters would need to continue to travel to Murdoch rail station, which the report said was the busiest suburban station on the network.

The report also projected that the project would cost $818 million over its life, including building and operation.

The figure was not split further, but for comparison, the state’s 2019 budget had estimated the line’s capital cost would be $536 million.

Now, construction is set to cost $880 million, according to the most recent budget forecasts.

That’s a big increase, and assuming operating expenses are like what was proposed when the evaluation was first lodged, the loop line in Perth’s southern suburbs is set to cost more over its life than the proposed community benefits.

A spokesperson for the state government said investment decisions were made on the best information available at the time.

Most infrastructure projects across the country had been hit by cost pressures driven by the pandemic and Ukraine war, they said, and the government had acted to smooth the project pipeline to manage challenges.

“Despite the economic challenges we face, the state government is getting on with the job, and many of our transport infrastructure projects continue to be delivered at a fraction of the cost compared to similar projects on the east coast,” the spokesperson said.

“There is no question the Metronet rail projects will deliver significant benefits to many communities across Perth, and for some, access to a train line for the first time.

“Unlike the previous government, the McGowan government is following through on its commitments and is proud to be delivering projects like the Morley-Ellenbrook train line.”

The government had invested $6.2 billion extra into health and mental health since the 2022 budget, the spokesperson said, and would spend $2.4 billion on social housing over the next four years.

Grattan Institute transport and cities program director Marion Terrill said every investment decision had an opportunity cost.

In economics, that means the value of the next best alternative use for the money.

That might be a new hospital, a road upgrade, or social housing.

“There’s an opportunity cost for every dollar you spend on a low-value project, you’re not spending it on higher-value uses,” Ms Terrill said.

In this case, the government’s evaluations show several projects generated comparatively low community benefit (see table, above).

The state government started work on Metronet following a national debate about an infrastructure deficit, which Engineers Australia had suggested was as high as $800 billion in 2016.

But fixing that alleged shortage of infrastructure would require spending to be targeted at the highest-benefit projects.

Ms Terrill said she had never considered talk of an infrastructure deficit to be helpful.

“It implies there is an optimal, correct level of infrastructure,” she said.

“We’re a very long way away from being able to say the right amount of infrastructure is ‘this’.”

Ms Terrill said alternatives to building new projects were improved maintenance and pricing for use of infrastructure.

No price, or a price too low, would lead to excess demand and potential congestion.

“You can’t build your way out of that kind of problem,” Ms Terrill told Business News.

Off track

The budget is not all that is off track for the Thornlie-Cockburn Link line.

The line was due to begin operation from 2021, which was later shifted to 2023 amid a hot construction market.

Last year, the state government quietly pushed the completion date out to 2025, attributing this extension to the need to shut the Armadale line for two other projects.

However, Business News can reveal the Thornlie-Cockburn project has met its own obstacles, and they go beyond the frustrations caused by the COVID-19 pandemic.

To build the passenger rail line, the Metronet team will first need to shift a freight track.

The freight line will move to the north side of the corridor, to the right in the image. Photo: Matt Mckenzie

Only in the September quarter of last year did the government agree on an alignment for the freight track with carrier Arc Infrastructure, according to documents from the project’s community reference group.

When asked by Business News about the time taken to complete negotiations, a spokesperson for Arc said the company had enjoyed a close and collaborative relationship with the Metronet team.

Project representatives told community members in November its top priority was to finish design work for the freight line on the northern side of the rail corridor.

Before construction can start on that freight line, the contractors will have to complete a new oil pipeline, decommission an old pipeline, and finish a retaining wall.

All that means there’s still plenty of work to do before the residents of Canning Vale are hopping on a local rail service.

The future site of the Ranford Road station will be behind the bridge. Photo: Matt Mckenzie

The Thornlie-Cockburn Link was bundled with the Yanchep Rail Extension in a $954 million contract for NEWest Alliance (CPB Contractors and Downer EDI).

The contract has blown out by $101 million, according to public tender documents, following 60 variations in the year to December.

A spokesperson for Metronet said contract variations had been for adjustments to works through the normal course of the project life cycle.

“Due to the commercial-inconfidence nature of these contracts, the specifics of these cannot be disclosed,” the spokesperson said.

The variations had been funded from the project’s approved budget, they said.

The Yanchep line has had its own delays.

Designs for the new stations on the route were finalised in the final months of 2022, according to community briefing notes.

NEWest told community representatives that ballast, sleepers and other materials had arrived for the first stage of rail installation, with track welding to begin soon.

Rail installation was likely to start in early 2023, according to the minutes.

Metronet did not respond to questions about the delays prior to this article going to print.

Making choices

Level crossing removals on the Armadale line, the Byford rail extension and the Albany Ring Road went ahead despite failing cost-benefit analysis.

The Edith Cowan University campus is an especially unique example, despite the nominally high benefit number (see table).

Infrastructure Australia knocked back a proposal to put that project on its priority list, saying it could not be confident the project would deliver value for money, or that it aligned with the objectives of the Perth City Deal.

“The approach adopted in this business case appears to attribute the entire lifetime earnings of international students as a benefit of the project,” Infrastructure Australia said in that report.

Those earnings represented about 89 per cent of proposed benefits.

Other projects have been hit by big cost rises, such as the Bunbury Outer Ring Road, which mean the cost now exceeds benefits.

At risk would be the MorleyEllenbrook rail line, which Infrastructure Australia said was marginal at the time it was approved.

The state government now has its own infrastructure umpire, Infrastructure WA, a key recommendation of John Langoulant’s Special Inquiry into Government Programs and Projects.

Business News can reveal that body, set up in 2019, has so far assessed only three projects.

A spokesperson for Infrastructure WA said its functions had begun under a phased approach, with evaluations of infrastructure projects starting in January 2022.

The phased approach meant IWA could focus on development of the State Infrastructure Strategy, the spokesperson said.

In the interim, however, the government has approved plenty of big infrastructure spending commitments without that degree of oversight.

Meanwhile, there have been several alternative visions for how transport infrastructure cash could be prioritised.

A consortium of local councils proposed an inner-suburban trackless tram network as part of the negotiation process for the Perth City Deal.

Another group of councils put forward transit links in Perth’s south, connecting Murdoch and Cockburn to Fremantle, a corridor that Infrastructure Australia has highlighted as a priority.

In 2016, the Barnett government’s ‘Perth and Peel @3.5Million, the Transport Plan’ named rail lines to Yanchep and linking Thornlie to Cockburn among near-term priorities.

Also on the near-term list were light rail projects linking suburbs near the city, and a heavy rail line on a new direct, underground route to Morley.

But the Byford and Ellenbrook lines were lower priorities in that study.