WestConnex Assurance to the Government

Auditor-General's Report to Parliament

18 December 2014

This audit assesses the assurance provided to the NSW Government for the initial stages of the WestConnex project.

The audit examined the WestConnex project from concept development to the pre-tender phase for Stage 1A – M4 (Parramatta to Homebush Bay). It did not examine the merit of the project or whether it represented value-for-money.

This audit found a number of shortcomings with the governance of the WestConnex project during its early stages and makes recommendations on how to better govern the remainder of the project to minimise the risk of failure.

Assurance not meeting best practice

The processes that provided independent assurance to the NSW Government for the initial stages of WestConnex did not meet best practice standards.

The agencies involved adopted some good practice arrangements. However, the Government would have received greater assurance about the risks, costs and benefits of the project if its Major Projects Assurance Framework had been implemented. The agencies involved were Roads and Maritime Services, WestConnex Delivery Authority, Infrastructure NSW, Transport for NSW, NSW Treasury and the Department of Premier and Cabinet.

'Challenging deadlines heighten the need for good assurance but, paradoxically, also the risk of departure from best practice,' said the Auditor-General, Grant Hehir. 'Assurance should not be sacrificed under pressure of time,' he added.

The Government and agencies concerned were of the view that the WestConnex project warranted governance and assurance arrangements designed specifically to suit its size, duration and complexity. The agencies concerned understood that the assurance arrangements endorsed by the Government replaced externally managed gateway reviews required by the Major Projects Assurance Framework. This led to a sub-optimal process.

'Infrastructure NSW should ensure the Major Projects Assurance Framework is fully implemented for all major capital projects $100 million or more,' said the Auditor-General.

Additional independent gateway reviews should have been conducted

Only one independent, externally managed gateway review was conducted for the WestConnex project up to the pre-tender stage for the Parramatta to Homebush Bay M4 widening. If the Major Projects Assurance Framework had been fully implemented, four additional gateway reviews should have been conducted. The review that was conducted found that the preliminary business case was deficient and fell well short of the standard required for such a document.

If all gateway reviews and external assurance arrangements had occurred, they should have identified deficiencies in the business case put to the Government.

'External gateway reviews are crucial, as they provide a fresh set of eyes and arms-length independence not available from even the best internal controls,' said the Auditor-General.

Governance arrangements need to separate commissioner, deliverer and assurer

The Government relied on the steering committees and boards delivering the project to also provide independent assurance. There is a fundamental conflict in such an arrangement. If agencies had fully implemented the Major Projects Assurance Framework, Infrastructure NSW would have monitored and received reports to enable it to provide independent assurance to Government.

'A steering committee or board with delivery responsibility cannot provide truly independent assurance to Government,' said the Auditor-General. 'Infrastructure NSW need to fulfil this role for the remainder of the WestConnex project,' he added.

The post-business case governance arrangements did not clearly separate responsibilities for commissioning from board-level responsibilities for delivering the project. There were also no mechanisms to effectively manage the conflict between these roles.

'The commissioner, deliverer and assurer roles should be clearly separated on WestConnex,' said the Auditor-General.

The Auditor-General concluded:

'There were a number of deficiencies in governance and independent assurance over the early stages of the WestConnex project. Going forward, these need to be rectified to ensure that WestConnex achieves the expected benefits at a reasonable cost.'

Further information

Barry Underwood, Executive Officer, on 9275 7220 or 0403 073 664; and email: barry.underwood@audit.nsw.gov.au.

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