Reports
Newcastle Urban Transformation and Transport Program
The urban renewal projects on former railway land in the Newcastle city centre are well targeted to support the objectives of the Newcastle Urban Transformation and Transport Program (the Program), according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The planned uses of the former railway land achieve a balance between the economic and social objectives of the Program at a reasonable cost to the government. However, the evidence that the cost of the light rail will be justified by its contribution to the Program is not convincing.
The Newcastle Urban Transformation and Transport Program (the Program) is an urban renewal and transport program in the Newcastle city centre. The Hunter and Central Coast Development Corporation (HCCDC) has led the Program since 2017. UrbanGrowth NSW led the Program from 2014 until 2017. Transport for NSW has been responsible for delivering the transport parts of the Program since the Program commenced. All references to HCCDC in this report relate to both HCCDC and its predecessor, the Hunter Development Corporation. All references to UrbanGrowth NSW in this report relate only to its Newcastle office from 2014 to 2017.
This audit had two objectives:
- To assess the economy of the approach chosen to achieve the objectives of the Program.
- To assess the effectiveness of the consultation and oversight of the Program.
We addressed the audit objectives by answering the following questions:
a) Was the decision to build light rail an economical option for achieving Program objectives?
b) Has the best value been obtained for the use of the former railway land?
c) Was good practice used in consultation on key Program decisions?
d) Did governance arrangements support delivery of the program?
1. The urban renewal projects on the former railway land are well targeted to support the objectives of the Program. However, there is insufficient evidence that the cost of the light rail will be justified by its contribution to Program objectives.
The planned uses of the former railway land achieve a balance between the economic and social objectives of the Program at a reasonable cost to the Government. HCCDC, and previously UrbanGrowth NSW, identified and considered options for land use that would best meet Program objectives. Required probity processes were followed for developments that involved financial transactions. Our audit did not assess the achievement of these objectives because none of the projects have been completed yet.
Analysis presented in the Program business case and other planning documents showed that the light rail would have small transport benefits and was expected to make a modest contribution to broader Program objectives. Analysis in the Program business case argued that despite this, the light rail was justified because it would attract investment and promote economic development around the route. The Program business case referred to several international examples to support this argument, but did not make a convincing case that these examples were comparable to the proposed light rail in Newcastle.
The audited agencies argue that the contribution of light rail cannot be assessed separately because it is a part of a broader Program. The cost of the light rail makes up around 53 per cent of the total Program funding. Given the cost of the light rail, agencies need to be able to demonstrate that this investment provides value for money by making a measurable contribution to the Program objectives.
2. Consultation and oversight were mostly effective during the implementation stages of the Program. There were weaknesses in both areas in the planning stages.
Consultations about the urban renewal activities from around 2015 onward followed good practice standards. These consultations were based on an internationally accepted framework and met their stated objectives. Community consultations on the decision to close the train line were held in 2006 and 2009. However, the final decision in 2012 was made without a specific community consultation. There was no community consultation on the decision to build a light rail.
The governance arrangements that were in place during the planning stages of the Program did not provide effective oversight. This meant there was not a single agreed set of Program objectives until 2016 and roles and responsibilities for the Program were not clear. Leadership and oversight improved during the implementation phase of the Program. Roles and responsibilities were clarified and a multi-agency steering committee was established to resolve issues that needed multi-agency coordination.
Recommendations
For future infrastructure programs, NSW Government agencies should support economical decision-making on infrastructure projects by:
- providing balanced advice to decision makers on the benefits and risks of large infrastructure investments at all stages of the decision-making process
- providing scope and cost estimates that are as accurate and complete as possible when initial funding decisions are being made
- making business cases available to the public.
The planned uses of the former railway land align with the objectives of encouraging people to visit and live in the city centre, creating attractive public spaces, and supporting growth in employment in the city. The transport benefits of the activities are less clear, because the light rail is the major transport project and this will not make significant improvements to transport in Newcastle.
The processes used for selling and leasing parts of the former railway land followed industry standards. Options for the former railway land were identified and assessed systematically. Competitive processes were used for most transactions and the required assessment and approval processes were followed. The sale of land to the University of Newcastle did not use a competitive process, but required processes for direct negotiations were followed.
Recommendation
By March 2019, the Hunter and Central Coast Development Corporation should:
- work with relevant stakeholders to explore options for increasing the focus on the heritage objective of the Program in projects on the former railway land. This could include projects that recognise the cultural and industrial heritage of Newcastle.
Consultations focusing on urban renewal options for the Program included a range of stakeholders and provided opportunities for input into decisions about the use of the former railway land. These consultations received mostly positive feedback from participants. Changes and additions were made to the objectives of the Program and specific projects in response to feedback received.
There had been several decades of debate about the potential closure of the train line, including community consultations in 2006 and 2009. However, the final decision to close the train line was made and announced in 2012 without a specific community consultation. HCCDC states that consultation with industry and business representatives constitutes community consultation because industry representatives are also members of the community. This does not meet good practice standards because it is not a representative sample of the community.
There was no community consultation on the decision to build a light rail. There were subsequent opportunities for members of the community to comment on the implementation options, but the decision to build it had already been made. A community and industry consultation was held on which route the light rail should use, but the results of this were not made public.
Recommendation
For future infrastructure programs, NSW Government agencies should consult with a wide range of stakeholders before major decisions are made and announced, and report publicly on the results and outcomes of consultations.
The governance arrangements that were in place during the planning stages of the Program did not provide effective oversight. Project leadership and oversight improved during the implementation phase of the Program.
Multi-agency coordination and oversight were ineffective during the planning stages of the Program. Examples include: multiple versions of Program objectives being in circulation; unclear reporting lines for project management groups; and poor role definition for the initial advisory board. Program ownership was clarified in mid-2016 with the appointment of a new Program Director with clear accountability for the delivery of the Program. This was supported by the creation of a multi-agency steering committee that was more effective than previous oversight bodies.
The limitations that existed in multi-agency coordination and oversight had some negative consequences in important aspects of project management for the Program. This included whole-of-government benefits management and the coordination of work to mitigate impacts of the Program on small businesses.
Recommendations
For future infrastructure programs, NSW Government agencies should:
- develop and implement a benefits management approach from the beginning of a program to ensure responsibility for defining benefits and measuring their achievement is clear
- establish whole-of-government oversight early in the program to guide major decisions. This should include:
- agreeing on objectives and ensuring all agencies understand these
- clearly defining roles and responsibilities for all agencies
- establishing whole-of-government coordination for the assessment and mitigation of the impact of major construction projects on businesses and the community.
By March 2019, the Hunter and Central Coast Development Corporation should update and implement the Program Benefits Realisation Plan. This should include:
- setting measurable targets for the desired benefits
- clearly allocating ownership for achieving the desired benefits
- monitoring progress toward achieving the desired benefits and reporting publicly on the results.
Appendix one - Response from agencies
Appendix two - About the audit
Appendix three - Performance auditing
Parliamentary reference - Report number #310 - released 12 December 2018
Regional Assistance Programs
Infrastructure NSW effectively manages how grant applications for regional assistance programs are assessed and recommended for funding. Its contract management processes are also effective. However, we are unable to conclude whether the objectives of these programs have been achieved as the relevant agencies have not yet measured their benefits, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.
In 2011, the NSW Government established Restart NSW to fund new infrastructure with the proceeds from the sale and lease of government assets. From 2011 to 2017, the NSW Government allocated $1.7 billion from the fund for infrastructure in regional areas, with an additional commitment of $1.3 billion to be allocated by 2021. The NSW Government allocates these funds through regional assistance programs such as Resources for Regions and Fixing Country Roads. NSW councils are the primary recipients of funding provided under these programs.
The NSW Government announced the Resources for Regions program in 2012 with the aim of addressing infrastructure constraints in mining affected communities. Infrastructure NSW administers the program, with support from the Department of Premier and Cabinet.
The NSW Government announced the Fixing Country Roads program in 2014 with the aim of building more efficient road freight networks. Transport for NSW and Infrastructure NSW jointly administer this program, which funds local councils to deliver projects that help connect local and regional roads to state highways and freight hubs.
This audit assessed whether these two programs (Resources for Regions and Fixing Country Roads) were being effectively managed and achieved their objectives. In making this assessment, we answered the following questions:
- How well are the relevant agencies managing the assessment and recommendation process?
- How do the relevant agencies ensure that funded projects are being delivered?
- Do the funded projects meet program and project objectives?
The audit focussed on four rounds of Resources for Regions funding between 2013–14 to 2015–16, as well as the first two rounds of Fixing Country Roads funding in 2014–15 and 2015–16.
The project selection criteria are consistent with the program objectives set by the NSW Government, and the RIAP applied the criteria consistently. Probity and record keeping practices did not fully comply with the probity plans.
The assessment methodology designed by Infrastructure NSW is consistent with2 the program objectives and criteria. In the rounds that we reviewed, all funded projects met the assessment criteria.
Infrastructure NSW developed probity plans for both programs which provided guidance on the record keeping required to maintain an audit trail, including the use of conflict of interest registers. Infrastructure NSW and Transport for NSW did not fully comply with these requirements. The relevant agencies have taken steps to address this in the current funding rounds for both programs.
NSW Procurement Board Directions require agencies to ensure that they do not engage a probity advisor that is engaged elsewhere in the agency. Infrastructure NSW has not fully complied with this requirement. A conflict of interest arose when Infrastructure NSW engaged the same consultancy to act as its internal auditor and probity advisor.
While these infringements of probity arrangements are unlikely to have had a major impact on the assessment process, they weaken the transparency and accountability of the process.
Some councils have identified resourcing and capability issues which impact on their ability to participate in the application process. For both programs, the relevant agencies conducted briefings and webinars with applicants to provide advice on the objectives of the programs and how to improve the quality of their applications. Additionally, Transport for NSW and the Department of Premier and Cabinet have developed tools to assist councils to demonstrate the economic impact of their applications.
The relevant agencies provided feedback on unsuccessful applications to councils. Councils reported that the quality of this feedback has improved over time.
Recommendations
- By June 2018, Infrastructure NSW should:
- ensure probity reports address whether all elements of the probity plan have been effectively implemented.
- By June 2018, Infrastructure NSW and Transport for NSW should:
- maintain and store all documentation regarding assessment and probity matters according to the State Records Act 1998, the NSW Standard on Records Management and the relevant probity plans
Infrastructure NSW is responsible for overseeing and monitoring projects funded under Resources for Regions and Fixing Country Roads. Infrastructure NSW effectively manages projects to keep them on track, however it could do more to assure itself that all recipients have complied with funding deeds. Benefits and outcomes should also start to be measured and reported as soon as practicable after projects are completed to inform assessment of future projects.
Infrastructure NSW identifies projects experiencing unreasonable delays or higher than expected expenses as 'at‑risk'. After Infrastructure NSW identifies a project as 'at‑risk', it puts in place processes to resolve issues to bring them back on track. Infrastructure NSW, working with Public Works Advisory regional offices, employs a risk‑based approach to validate payment claims, however this process should be strengthened. Infrastructure NSW would get better assurance by also conducting annual audits of compliance with the funding deed for a random sample of projects.
Infrastructure NSW collects project completion reports for all Resources for Regions and Fixing Country Roads funded projects. It applies the Infrastructure Investor Assurance Framework to Resources for Regions and Fixing Country Roads at a program level. This means that each round of funding (under both programs) is treated as a distinct program for the purposes of benefits realisation. It plans to assess whether benefits have been realised once each project in a funding round is completed. As a result, no benefits realisation assessment has been done for any project funded under either Resources for Regions or Fixing Country Roads. Without project‑level benefits realisation, future decisions are not informed by the lessons from previous investments.
Recommendations
- By December 2018, Infrastructure NSW should:
- conduct annual audits of compliance with the funding deed for a random sample of projects funded under Resources for Regions and Fixing Country Roads
- publish the circumstances under which unspent funds can be allocated to changes in project scope
- measure benefits delivered by projects that were completed before December 2017
- implement an annual process to measure benefits for projects completed after December 2017
- By December 2018, Transport for NSW and Infrastructure NSW should:
- incorporate a benefits realisation framework as part of the detailed application.
Appendix one - Response from agencies
Appendix two - Maps of funded projects
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #300 - released 17 May 2018
Albert 'Tibby' Cotter Walkway
On 17 September 2015, the Acting Auditor-General of New South Wales, Tony Whitfield, released a report on the Albert ‘Tibby’ Cotter Walkway which crosses over Anzac Parade in Moore Park. The Walkway’s primary function is to cater for event patrons in the precinct. Moore Park is listed on the State Heritage Register and is an open space specifically established to cater for public recreation.
Roads and Maritime Services (RMS) delivered the Walkway to an extremely tight timeframe. It was operational for the 2015 Cricket World Cup at the Sydney Cricket Ground as promised by the government. However, the World Cup deadline added substantially to the total cost of the Walkway, which is projected to be $38 million.
Transport for NSW and RMS could not provide evidence of a compelling economic or financial argument to support the construction of the Walkway or for the tight deadline. Also, the processes they adopted to provide assurance of the project’s value for money were not adequate.
Parliamentary reference - Report number #260 - released 17 September 2015
Sydney metropolitan bus contracts
On 9 September 2015, the Acting Auditor-General of New South Wales, Tony Whitfield, released a report on Sydney Metropolitan Bus Service Contracts.
All scheduled bus services in the Sydney metropolitan area are provided under contracts with the public and private operators. The contracts allow Transport for NSW (TfNSW) to determine what bus services are provided and to whom. This audit assessed the effectiveness of TfNSW’s design and management of these contracts.
Bus services provided under the Sydney Metropolitan Bus Service Contracts have largely been effective and efficient. Operators are mostly meeting their key performance indicators. Customer satisfaction is better than under the previous contracts and improving, patronage is increasing, and the unit costs of providing services are now lower than under the previous contracts.
However, punctuality remains a problem. Private operators are mostly starting their trips on time, but rarely meeting their mid and end-of-trip targets. State Transit Authority’s (STA) punctuality is improving but is worse than private operators, and other areas of performance are generally below private operators.
The current situation is a substantial improvement over what we found in our 2010 audit on the previous contracts.
Parliamentary reference - Report number #258 - released 9 September 2015
Large construction projects
The independent assurance given to the NSW Government and sponsor agencies on the viability of large capital projects throughout their lifecycle is inadequate. Government policy is regularly not followed and not properly communicated to those responsible for implementing such policy.
This audit sought to test the effectiveness of the NSW capital project assurance system - which includes gateway reviews and reporting - but significant levels of non-compliance identified in our case studies prevented this. The NSW Commission of Audit also identified this issue in 2012. Gateway reviews are conducted by independent reviewers at key stages of a project’s life cycle and provide an independent assessment on a project’s readiness to proceed to the next stage.
Parliamentary reference - Report number #252 - released 7 May 2015
Managing Overtime: RailCorp and Roads and Maritime Services
Overtime is a significant cost for RailCorp and Roads and Maritime Services, adding about ten per cent to the cost of regular salaries. RailCorp’s overtime cost was $133.7 million in 2010–11, and at Roads and Maritime Services it cost $49.3 million.
Parliamentary reference - Report number #223 - released 20 June 2012
Handback of the M4 Tollway
This audit focuses on the M4 handback. It looks at whether the road will be in good condition when the State gets it back, and whether it will cope with the extra traffic after the toll is removed. These are critical issues for taxpayers and motorists. Taxpayers don’t want to be responsible for a large repair bill and motorists don’t want to be stuck in traffic jams.
To ensure that future private sector partnerships (PPP) deal adequately with handback, we recommend that the Roads and Traffic Authority (RTA):
- ensure deeds spell out an appropriate inspection and testing program to determine repairs required to bring roads up to a satisfactory condition at handback (p.11)
- ensure deeds link condition standards and maintenance approaches to changing industry standards and approaches over the life of the PPP (p.11)
- consider including in deeds a requirement that operators provide a performance bond or similar security over the cost of handback repairs (p.11)
- review the lessons learnt from the M4 tollway handback and determine whether it should seek to negotiate changes to existing tollway deeds to better deal with handback, by June 2010 (p.11)
Parliamentary reference - Report number #193 - released 27 October 2009
Review of Eastern Distributor
Following a resolution of the Legislative Council, the Audit Office has undertaken a performance audit of the Eastern Distributor. For a number of reasons, The Audit Office is not in the position to determine “whether the proposed toll and concession period represents the best deal”. In part this is the result of time constraints which do not allow a careful analysis of many toll and concession options. Similarly, the audit does not answer “whether the current proposal represents the best environmental outcome”. But each of these issues (toll and concession and environmental consequences) is discussed in the audit report.
The Audit Office recommends that the Roads and Traffic Authority (RTA), for any further major project of this type, ensures that it establishes a process which allows all decision makers to have a thorough understanding of the reasonableness of the proponents’ offers and their implications for the State and for the public. The Audit Office also recommends that the RTA should at the outset consult with TCorp in respect of each major project put to tender.
Parliamentary reference - Report number #42 - released 31 July 1997
