Category: value for money

Why Is Melbourne’s Transport System So Costly?

Post author By Roger Taylor
Post date 12/10/2020
No Comments on Why Is Melbourne’s Transport System So Costly?

This has been the subject of extensive research over many years and it is not possible to discuss it in detail in this blog, other than in general terms.

The main reason our transport system is so costly is that it promotes the least efficient modes of travel and transport ie motor vehicles for personal travel and most of the freight task (some of which could be transported more efficiently on rail). This in turn demands more infrastructure to support them and has been supported by city planning and development policies, particularly since WW2.

This problem is compounded when precious funds are wasted on infrastructure we don’t need or would not need if we operated our transport system more efficiently but must still be managed and maintained at considerable cost. Some of this infrastructure takes up valuable city space that could be used for other purposes, such as housing or community facilities including parks or growing food. Transport infrastructure – particularly roads and motorways also contribute to the “heat island” effect by elevating surface temperatures which increase stress, service disruptions and reduce liveability in cities – particularly during heat waves, the frequency and intensity of which is expected to increase in the future.

Melbourne’s transport is also costly because of the way we use it. Our transport fleet needs to be more efficient with a greater focus on fuel economy and operated in a way that minimizes pollution – air, noise and groundwater. We need to minimize impacts on human health; not just from pollution but also from accidents and fatalities. Transport related health impacts manifest themselves in a wide range of diseases: cardiovascular, neurological, respiratory, muscularskeletal diseases, and severe mental health impacts. Many of these the result of physical inactivity more likely to occur in car dependent societies such as Melbourne. There are environmental impacts as well and an imperative to reduce greenhouse emissions.

These costs are under reported and tend to be dismissed as the price we pay for progress but they have a profound impact – not just at a personal level but for the economy and livability of the city as a whole. Reducing them requires good governance in the form of sound policy, strategic intervention, appropriate regulation, and effective administration to make it happen. Some cities do a far better job managing them than Melbourne so there is considerable scope for improvement.

There are also costs which some economists and politicians exaggerate such as congestion and use it to justify major infrastructure works, particularly for building new motorways. This will be the subject of my next blog.

Tags failure of governance, inefficiency, State Government, Victoria

advocacy public policy sustainability governance governance public transport value for money

Beware China’s Belt and Road for Melbourne

Post author By Roger Taylor
Post date 06/10/2020
No Comments on Beware China’s Belt and Road for Melbourne

We have long argued that infrastructure investment must be justified in its merits – on the basis of need (our collective needs and affordability), and fitness for purpose in the most cost effective manner. Further, that the development of infrastructure programs and projects should be the responsibility of relevant government departments as part of a well prepared strategic plan. It should not be used as a political football for other purposes but unfortunately that is exactly what it has become, particularly in Victoria by becoming linked with China’s One Belt One Road (“OBOR”) project.

Premier Andrews has argued that this is a way to increase jobs. That in itself is inappropriate – there are far more effective ways to create jobs and as I have explained in earlier blogs, using it for this purpose always runs the risk of it being used for political purposes for poorly conceived projects developed in haste that we don’t need.

More important concerns have been raised (The Age 6th October 2020) however by Paul Monk, a former head of China analysis at Australia’s Defence Department about “OBOR” being used to subordinate us into China’s sphere of influence in a way that could impose unacceptable political and economic risks. In the same article Senator Patrick said the freedom of Information documentation revealed “an extraordinary case of a state government pursuing a shadow foreign trade policy, quite separate and independent from the federal government”.

Use of grand infrastructure projects to secure political advantage by major powers is not new. The US through the agency of powerful multinational corporations pursued this for decades, convincing poor countries to accept huge development loans to ensure they were forever in debt to US companies, but often ended up taking over strategic assets when promised benefits failed to materialize forcing these countries to default on their loans. Some political analysts believe China’s “OBOR” has similar objectives.

Whilst the Victorian economy may be more robust than many of the third world countries seduced by these schemes, it is vulnerable nevertheless. Business cases for the Victorian mega projects which would be candidates are expected to provide very poor returns and I have outlined this in earlier blogs. These returns, miserable as they may be will be further diminished as we enter a covid induced recession or worse and recovery may take many years. It may also expose us financially – not just for annual repayments which could be onerous but more so when the debt needs to be repaid. Political implications in this case could be profound. We believe these risks are unacceptable and the federal government has every right to be concerned.

Tags belt and road, china, failure of governance, State Government, Victoria

advocacy public policy sustainability governance governance public transport value for money

Why Is Melbourne’s Transport System So Poor And So Costly?

Post author By Roger Taylor
Post date 05/10/2020
No Comments on Why Is Melbourne’s Transport System So Poor And So Costly?

Covid has forced significant changes in our travel patterns. Some of these will become permanent so it is timely to reflect more broadly on our transport system, the way we use it and the extent to which it really meets our needs.

This was a question many people would have asked after returning from a holiday in Europe, Japan, Singapore, China and many other parts of the world where it was easy to get around at relatively low cost without the need for a car. There are many cities that we can learn from that have become accepted as models of excellence and It is not rocket science. Nor are we unique. Some of these cities are not unlike Melbourne and had been confronted with similar problems. Nor is It a matter of cost and whether we can afford it or not. We are a very wealthy city and we can, particularly when so much of the infrastructure necessary to achieve it is already in place. So what is stopping us from achieving from achieving world best practice?

There are several reasons for this and these will be discussed in a series of blogs over the next few weeks but the most fundamental reason is the absence of any desire to change. This is a mindset problem. If government had the mindset to develop a world class transport system it could do so and within a relatively short time. In fact the foundations could be laid within a parliamentary term. So what is this mindset and how do we change it?

The mindset is a collective one, comprising the government itself, the Department(s) that advises it and the community. Overall we seem very comfortable with our grossly inefficient transport system but oblivious to the extraordinary high cost it imposes on us.

Since WW2 much of our city and transport planning has been developed on the presumption that the motor car and road based transport in general will be the transport of the future and this has become embedded in our economy. But the high cost of this inefficient system – not just in economic but also in social and environmental terms is starting to catch up with us and covid is exposing many of the flaws in this strategy. This will be discussed in my next blog.

Tags failure of governance, State Government, Victoria

megaprojects public transport value for money

Risks of Megaprojects in Post-Covid Recovery

Post author By Nicholas Low
Post date 14/09/2020
No Comments on Risks of Megaprojects in Post-Covid Recovery

The Grattan Institute’s transport and cities program director, Marion Terrill has been urging caution in the rush to build mega-infrastructure projects for a post-Covid recovery (The Age 09/09/2020). Support for her position comes from a formidable source. Danish geographer and social policy analyst Professor Bent Flyvbjerg, in a paper to be published shortly in the journal Environmental Science and Policy argues that, in the case of certain kinds of events, we cannot rely on accumulated data from the past to predict what will happen in the future. Among other kinds of events, he lists pandemics, bushfires and floods, all too familiar to Australians.

Flyvbjerg is the Director of the Major Project Management Programme at Oxford University. He made his name through exhaustive analysis of hundreds of multibillion megaprojects worldwide such as motorways, rail lines, airports and dams. He showed that, on average, such projects failed to meet their performance goals, projects ran late and over budget. Final benefits were overestimated and costs underestimated. While a high level of performance was always argued for each individual project, the mean for actual completed projects showed otherwise.

The statistical theory predicting such underperformance is called ‘regression to the mean’. In simple terms, over-optimistic assumptions about individual cases are invalid because they ignore the impact of unpredicted random effects on the outcome. A recent example in Melbourne is the discovery of high concentrations of PFAS chemicals in contaminated soil dug out for the West Gate Tunnel. But in all such projects there are factors that cannot be predicted which can be summed up as ‘luck’. The actual performance of megaprojects, Flyvbjerg argued, reverts to the historical mean for most actual projects.

Now, in new research, he challenges the premises of his own past work which was based on seeking the mean performance of megaprojects. He now argues that regression to the mean is meaningless when considering the risks of mega-projects affected by unpredictable future variables such as climate change and pandemics.

The reason lies in the unusual extremes now known to be occurring. The distribution of the performance of any large number of actual cases normally has the shape of a bell curve with a large hump in the middle and a ‘tail’ with extreme cases showing up at each end. We don’t need to worry about the positive tail where the outcome is much better than expected. We do need to worry about the negative tail where the outcome is much worse than expected. But Flyvbjerg goes further, arguing that in the rapidly changing context of pandemic or climate change risk we have to take account not only of past events but also of the future.

When we find evidence of new and larger extremes becoming ever more frequent in any distribution of events over time (what he calls ‘fat tails’), we need to anticipate the possibility that it will be these fat tails and not the mean that will give us clues to the future. Hence his theory of ‘regression to the tail’.

Flyvbjerg argues that where regression to the tail applies, prudent decision makers and their risk managers will do two things: reduce the tail by mitigation measures, and avoid tail risk by taking a cautious approach. He particularly targets measures to rebuild the economy after the Covid 19 pandemic. These measures include giant construction projects with ‘fat-tailed’ risks such as multibillion dollar megaprojects in IT, transport, energy, water, education, housing, health and defence. The financial risks increase with the uncertainty of the future, which in a post-Covid world afflicted by global atmospheric heating is very uncertain indeed.

As far as transport is concerned, Flyvbjerg, like Terrill, points out that lockdowns and stay at home measures have reduced traffic and pollution levels. The aim should be to prevent traffic demand from returning to pre-Covid levels, to turn the focus from high risk supply-side measures (freeways, massive rail projects to meet assumed demand) to demand-side measures such as encouraging working from home for at least part of the working week. I would add, following Flyvbjerg’s risk mitigation logic that low risk supply-side measures (which may also shape demand) such as providing safe infrastructure for cyclists and pedestrians, and serious investment in fast and effective bus transport across metropolitan cities and regions must also be included to relieve traffic congestion.

public transport toxic soil tunnel value for money

A Bad Case of Tunnel Vision – A Dirty Problem

Post author By Roger Taylor
Post date 07/09/2020
No Comments on A Bad Case of Tunnel Vision – A Dirty Problem

Our politicians love building tunnels. It has been said “a politician is someone who on seeing the light at the end of the tunnel orders more tunnel”. The quote is anonymous but in Victoria it is certainly true. In Melbourne we are already digging the West Gate Tunnel and Metro Rail Tunnels, and shortly the North East Link and later the Suburban Rail Loop and the Airport Rail link – all with tunnels attached. All projects have question marks over their viability but one of the first things the government should do with any of these projects is check where it can put the dirt.

This sounds simple and elementary but it is becoming a real problem. This is not just because of the huge amounts involved but because much of it is contaminated with highly toxic chemicals. This is especially true for the West Gate Tunnel.

In the case of the West Gate Tunnel the problem is so bad it has threatened the viability of this project. This issue has been covered extensively over many months by The Age newspaper. In 6/3/2020 it reported “Secret borehole tests reveal PFAS contamination in soil near Coode Island – where a toxic inferno was triggered by a chemical explosion in 1991 — is so severe that dumping the waste in landfills would be impossible without very expensive treatment. Contaminated soil on the West Gate Tunnel’s construction site on New Street, South Kingsville”. The problem is so severe it brought the project to a standstill and the builders threatened to walk away from it.

The toxicity of the soil in this area was well known and engineers involved in the development of this project should have anticipated this or at least done some soil tests first at the beginning of the feasibility and planning stage. But this is only the beginning of this State Government’s tunneling odyssey and the question remains – where will it put the dirt for all these tunnels – now and in the future? It is time the State government stopped digging holes (not just in the ground but in government finances and debt creation) and started to do some planning and re-evaluate the merits of these projects.

bike covid-19 public transport value for money

Covid has created a perfect opportunity for people who want to travel by bike

Post author By Roger Taylor
Post date 31/08/2020
No Comments on Covid has created a perfect opportunity for people who want to travel by bike

As reported by Timna Jacks in The Age public transport rides have dwindled to 9% of normal levels and are unlikely to recover fully for years to come as a direct result of the covid pandemic. But now is not the time to reinvest in more private car travel. Whilst it is true there will be more congestion on the roads as more people go back to their cars we know that building more roads and providing more car parking will not solve the congestion problem – it never has and only feeds it. There is an overwhelming imperative – environmental, social and economic to resist this and promote alternatives.

One of these is active transport – particularly cycling and e-biking which can be provided at minimal cost. There are huge benefits promoting cycling. It is accessible or should be for almost everyone now – particularly with the arrival of e-bikes. It is dirt cheap, particularly in comparison to the private car (which is important in a time of recession, particularly for young people who are bearing the brunt) and provides huge health and environmental benefits. It can also be linked with public transport ie by carrying them on trains. Buses and trams should also make this option available, but it should certainly be possible for people with small folding bikes.

What governments need to do is create a safer environment for people to ride ie make roads safer for cyclists. This can be done very cheaply using a variety of measures but it needs a change in government mindset at all levels to do this and that is something the community should be demanding now. Government should be reminded that if this can be achieved in cities like Copenhagen where 62% of Copenhageners choose to bike to work and study Melbourne can get many more people on bikes instead of cars if we create the right environment for bike travel.

advocacy public policy sustainability governance North East link value for money

How Can You Tell The North East Link Is A Dud?

Post author By Roger Taylor
Post date 25/08/2020
No Comments on How Can You Tell The North East Link Is A Dud?

Smart cities stopped building motorways long ago, some of them never built them realizing they were hugely costly and did not solve their transport problems in the first place. In short the business case for the community as a whole simply did not stack up.

In Victoria the government has overcome this problem by constructing them in a way that makes them viable on a commercial basis by over- designing them and creating a monopoly situation in which alternatives are made more difficult, and passing the risk onto a third party like Transurban. Tolling companies require sweateners from the government to enable them to make these deals profitable (at the public’s expense ofcourse). In the case of the Westgate Tunnel project the sweetener was a ten year extension of hugely profitable tolling rights to City Link plus a significant contribution to the capital cost of the project.

The State government has attempted to use these strategies for the North East Link. Its original purpose was to act as the final link for a ring road but in order to make it more profitable for a toll operator It has grossly overdesigned it in a way that also promotes city bound traffic from Melbourne’s north east. As a result the cost of the project has ballooned. Despite these inducements the business case is so poor the private sector is reluctant to take it on. On this criteria alone the project is a dud.

But it gets worse. Both projects are propped up by biased traffic forecasts and distorted business cases to get them across the line (and garner federal contributions). These are based on business as usual projections that do not anticipate a covid induced recession. The State government now says it might build it themselves then run the tolling themselves (presumably at a massive loss). I rest my case – the project is a terrible dud.

advocacy public policy sustainability governance value for money

Investing in Public Infrastructure

Post author By Roger Taylor
Post date 17/08/2020
No Comments on Investing in Public Infrastructure

Are we getting value for money and what we can do to achieve it

Infrastructure is the latest buzz word on every politician’s lips. It is seen as the answer to restoring our staggering economy, an opportunity to promote economic growth and create more jobs. Governments at every level are spending a lot of money building new infrastructure projects. The Victorian government’s “Big Build” boasts the delivery of approximately $70 billion of transport projects including 119 major road and rail projects and the creation of over 15,000 jobs across Victoria. But most of this is being spent on a small number of mega projects. The latest on the Victorian government’s drawing board is the Suburban Rail Loop (SRL). The Government says it will be “the biggest public transport project in Australian history” with a proposed start date of 2022 and completion date of 2050. The guestimated cost at this stage is ‎$50–100 billion” although is it likely to be much higher given the absence of a detailed feasibility study and an increasingly uncertain economic environment which is likely to compromise many of the assumptions that underpin its viability. The question we must ask – is this investment in areas where needs are greatest? Are we getting value for money, remembering that it is our money government is spending, and what are the risks?

The growth of mega projects is not confined to Australia. As Bent Flyvbjerg (Said Business School University of Oxford) notes in his in 2014 paper “What You Should Know about Mega projects and Why” ” total global megaproject spending is assessed, at US$6 to US$9 trillion annually, or 8% of the total global gross domestic product (GDP), which denotes the biggest investment boom in human history”. But as Flyvbjerg notes they have a terrible track record which he describes as his “iron law” of megaprojects: “megaprojects are systematically subject to “survival of the unfittest,”- “over budget, over time, over and over again

This would not be so bad if these were inherently good projects and designed to meet community needs, but this is rarely the case. As Bent Flyvbjerg notes “Like the Tower of Babel, nations’ rulers want to create the tallest, widest, biggest projects they can; and so often these are driven by ego rather than financial good sense”. He describes these drivers as the four sublimes

the technological sublime as the rapture engineers and technologists obtain from building large and innovative projects, with their rich opportunities for pushing the boundaries for what technology can do,
the “political sublime”, which is the rapture politicians obtain from building monuments to themselves and their causes
the “economic sublime”, which is the delight financiers, business people and trade unions get from making lots of money and jobs from megaprojects. Given the enormous budgets for megaprojects, there are ample funds to go around for all rent seekers, including contractors, engineers, architects, consultants, construction and transportation workers, bankers, investors, landowners, lawyers and developers.
the “aesthetic sublime” is the pleasure designers and people who appreciate good design get from building, using and looking at something very large that is also iconically beautiful, such as San Francisco’s Golden Gate bridge or Sydney’s Opera House.

There is a fifth sublime ofcourse and that is the use of capital projects for shameless political pork barreling often linked to pressure from vested interest groups (rent seekers).

And this is how much of the community’s money – our money paid from taxes and charges is now being spent today, and explains to a large extent why many areas of need become run down because they have been starved of funds. All of this is built on debt of course, which ultimately must be repaid but comes at a huge opportunity cost when investment in areas of real need remain neglected. This includes much of our existing infrastructure that is in poor condition because of inadequate maintenance or is in urgent need of upgrading or renewal.

It is time to get back to “basics” and understand what infrastructure is, its role, the way it creates value for the community and investment criteria that should be applied when evaluating and approving projects in the first place. It is also time to start applying proper processes to the evaluation, assessment process and ranking of projects as part of an overall planning framework and plan for the future. At a more detailed level it requires the identification of alternatives. For example many of the outcomes that could be achieved by an SRL could be achieved by improving the bus network, much of it to smart bus standard. This could be achieved at a fraction of the cost and very quickly, probably within a parliamentary term instead of decades and with minimal risk. It would also create many new jobs. There are other options ofcourse. The question needs to be asked why these have not been included in the evaluation process. It is likely this option does not satisfy Flyvbjerg’s sublimes. Whatever the reason pursuing the current trend will rapidly impoverish our State/nation and lead to disastrous social outcomes.

Government financing will become increasingly difficult in the future. This should force a radical cultural change in which governments and the community at large will be forced to do more with less. Some cities have demonstrated how this can be done. Frugal but appropriate and well designed investment in physical infrastructure releases government funds for other areas of need, particularly in social infrastructure: public health, education, research and development, community services, and many others that are highly valued by the community and contribute to its livability and its place as a civil society. It also enables communities to focus more sharply on the social and environmental challenges ahead, challenges that will dwarf those of the past and will need to be tackled seriously and effectively with increasing urgency.

Future investment in public infrastructure must become an integral part of a broader sustainability strategy in which resource use will be a key issue. This will require a fundamental shift in thinking by government and many of its agencies about the role of infrastructure, the way it is operated and managed and the demands placed on it in the future.