Taxpayers fork out $1.1 billion for failed East West Link

UPDATE: MORE than $1.1 billion was spent by taxpayers on the East West Link toll road, which the Andrews Government dumped when it won the November election, a scathing report has revealed.

UPDATE: MORE than $1.1 billion was spent by taxpayers on the East West Link toll road, which the Andrews Government dumped when it won the November election.

In a scathing report into the costly project, Acting Auditor-General Dr Peter Frost said the project was terminated “without full consideration of the merits of continuing with the project”.

Dr Frost slammed the process surrounding the decision to build the road, saying key decisions were “driven by an overriding sense of urgency to sign the contract before the November 2014 state election”.

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He savaged both sides of politics in the report, saying the process led to big questions around risks to public administration.

“Failure to properly assess the benefits of termination against revised costs and benefits of continuing the project means the government was deprived of comprehensive advice to assure it that termination was the best use of public funds,” he said.

“The audit also found that the EWL project was terminated in June 2015 with more than $1.1 billion paid, or expected to be paid, by the state.

“This cost includes expenditure on the planning, development, procurement and termination of the project and will be partially offset by future proceeds from the sale of properties acquired for the project. The Department of Treasury & Finance (DTF) estimates that these properties can be resold for around $320 million.”

Before the election, Mr Andrews said that Victorians wouldn’t pay a cent in compensation for his decision to rip up contracts as they weren’t worth the value of the paper they were written on.

Dr Frost criticised the Napthine Government’s decision to rish the planning process.

“Signing the contract in these circumstances was imprudent and exposed the state to significant cost and risk,” he says.

“The risks associated with this decision were increased when the state agreed to amend the contract to provide additional compensation to EWC if the legal challenge to the project planning approval succeeded.”

But he was equally critical of flawed public policy processes when the Andrews Government came to power and refused to reassess the project on a cost-benefit basis.

He said that there was no way to check on the costs the East West Connect consortium had forked out - and which the state reimbursed at taxpayer expense - because the EWC kept financial records secret.

“Further, the validity of project costs reimbursed by the state could not be fully verified because the state accepted EWC’s refusal to allow access to the financial records of its related party contractors,” he said.

“This created a risk that EWC’s related parties had a windfall gain.”

The report outlines the enormous cost of the full 18km EWL, from the Eastern Fwy to the Western Ring Rd, if it had proceeded.

Stage 1 of the project, which was to cost $6.8 billion and the subject of a signed contract, was from the Eastern Fwy to CityLink in Parkville.

Stage 2 would have completed the link to the Western Ring Rd.

“The estimated total project cost of Stages 1 and 2 of EWL, had it proceeded to completion, was in excess of $22.8 billion in nominal terms over the life of the project,” the report said.

“This funding was to be met primarily through imposing tolls on users of the road, with $3 billion provided by the Commonwealth Government, and the Victorian Government meeting the remaining costs, including taking on the risk that toll revenue might be lower than expected.”