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Canberra to light rail tenderers: Charge whatever you want!

By 27 February 2013 13

Brendan Smyth has the disturbing news that no price is too high to build the Capital Metro:

Smyth: You said there is more work to do before we go to procurement?

Barr: That’s correct.

Smyth: So whatever the numbers turn up its going ahead?

Barr: Well yes, we are committed to this project.

Later, Mr Barr put it beyond any doubt:

Smyth: Is there a number at which the project will not go ahead?

Barr: No

Someone somewhere will do very well out of this.

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13 Responses to Canberra to light rail tenderers: Charge whatever you want!
#1
dungfungus11:17 am, 27 Feb 13

Sounds like the deal has already been done. My guess it is a carbon copy of the GoldLinQ Gold Coast light rail in Queensland. Corbell has recently visited it to assure us none of the problems they are having will be duplicated in Canberra so what more proof do we need?
The problem that he didn’t mention is how the Canberra Capital Metro city to Gungahlin project is going to be financed. I outlined on another post that an industry spokesman at the December AusRail 2012 in Canberra last December said a PPP for the Canberra project seemed doubtful as the Gold Coast one was marginal and they have almost 10 times more of the population using their network that will potentially use the City-Gungahlin route. The fact that the Brisbane Airport Link PPP went into receivership spectactularly last week with write-offs of over $3 billion means the Canberra project is a dead duck even now. There are other options more suitable for Canberra but consistent with Barr’s obsession with “Euro” traffic lights and French art, we are destined to have a totally unaffordable and unsuitable “Euro” not-so-light tram system. Our rates will more than triple for this.

#2
shirty_bear11:25 am, 27 Feb 13

… so I went and looked up GoldLinQ. Their website says their trams carry “people, surfboards and wheelchairs in air conditioned comfort”. So there’s that.

Reckon I’ll be looking for a job with these clowns – am way overdue for my next redundancy, and this should be a nice little sheltered workshop.

#3
HiddenDragon11:34 am, 27 Feb 13

Let’s hope that was a nuanced “no” from Mr Barr. The apparently blissful lack of concern about fiscal reality in this town is beyond disturbing, it verges on the terrifying.

#4
PantsMan11:38 am, 27 Feb 13

The way to do it is to get everyone who tenders to build in a kickback to all the other tenders in their bid.

Win, win!

#5
enrique11:53 am, 27 Feb 13

dungfungus said :

… a PPP for the Canberra project seemed doubtful as the Gold Coast one was marginal and they have almost 10 times more of the population using their network that will potentially use the City-Gungahlin route. The fact that the Brisbane Airport Link PPP went into receivership spectactularly last week with write-offs of over $3 billion means the Canberra project is a dead duck even now.

Other recent PPP’s such as CrossCity, AirportLink, Clem7 all failed for the tenderer because they grossly overestimated the future revenue streams and were locked in to fixed terms. Hence, although the people of the various cities got their infrastructure at zero public-cost, the investments themselves made by the successful tenderers turned out to be loss making and hence they were wound up.

There is a way to make a PPP work for this…

As per Menezes, F. http://apo.org.au/commentary/public-private-partnerships

Allocate risks appropriately and ensure that the benefits of PPPs over public tender are realised

1) Run a least-present value of revenue tender
2) Specify a discount rate to calculate PV of revenue/ticket price
3) The winner of the tender is the firm that has submitted the lowest present value of revenue

(i.e. don’t let the tenders themselves over-estimate the value of future revenue by using ridiculous passenger modeling figures or pricing)

4) Don’t lock down the period in which the successful tenderer/PPP partner has rights to operating revenue (i.e. keep it flexible). Allow the contract to remain open until the successful tenderer recovers the amount of revenue bid
5) my addition… include an incentive clause that allows the successful tenderer to make extra profits over a given timeframe if stipulated minimum service levels and maximum ticket prices are maintained.

Using a PPP such as this, Canberra’s light rail could feasibly be built at zero dollar cost to the ACT budget. Even better, if you have a private company operating it as a profit making venture to recover their initial investment, with the flexibility/guarantee that they’ll get at least their minimum required return, then they’ll stay interested and efficient in operations. Give them the incentive and ability to make higher profits while ensuring the ACT people aren’t shafted in the process and they might even do a good job of running it – i.e. if they can’t raise ticket prices too high, and they can’t reduce the service quality, then their only other option is to improve the service and entice more passengers to get on board…win-win.

#6
thebrownstreak6911:55 am, 27 Feb 13

HiddenDragon said :

Let’s hope that was a nuanced “no” from Mr Barr. The apparently blissful lack of concern about fiscal reality in this town is beyond disturbing, it verges on the terrifying.

Correct.

#7
Aeek12:34 pm, 27 Feb 13

shirty_bear said :

… so I went and looked up GoldLinQ. Their website says their trams carry “people, surfboards and wheelchairs in air conditioned comfort”. So there’s that.

Surfboards? Sounds like it will work as well as Carnell’s QLD grass did for Bruce Stadium.

#8
Bosworth1:39 pm, 27 Feb 13

dungfungus said :

Our rates will more than triple for this.

Over what period will they triple? Starting and ending when?

#9
p12:05 pm, 27 Feb 13

Bosworth said :

dungfungus said :

Our rates will more than triple for this.

Over what period will they triple? Starting and ending when?

I suspect, starting when the initial cost overuns happen, and ending, well, never. From then on rates will never decrease.

#10
gooterz12:22 am, 02 Mar 13

Bosworth said :

dungfungus said :

Our rates will more than triple for this.

Over what period will they triple? Starting and ending when?

overnight.. hopefully only for Gungahlinites

#11
wildturkeycanoe6:38 am, 02 Mar 13

They still haven’t fixed the cycleway adjacent Morshead Drive after the floods of March 2012. Now there’s unlimited cash to get people to take a train.
Oh, I see, if the project can make money back it’s viable. Perhaps a toll on cycleways to pay for infrastructure repairs will get this drawn out project back on track.

#12
dungfungus10:46 am, 02 Mar 13

enrique said :

dungfungus said :

… a PPP for the Canberra project seemed doubtful as the Gold Coast one was marginal and they have almost 10 times more of the population using their network that will potentially use the City-Gungahlin route. The fact that the Brisbane Airport Link PPP went into receivership spectactularly last week with write-offs of over $3 billion means the Canberra project is a dead duck even now.

Other recent PPP’s such as CrossCity, AirportLink, Clem7 all failed for the tenderer because they grossly overestimated the future revenue streams………..

Have you seen the estimated revenue streams for the Canberra project?

#13
dungfungus10:50 am, 02 Mar 13

wildturkeycanoe said :

They still haven’t fixed the cycleway adjacent Morshead Drive after the floods of March 2012. Now there’s unlimited cash to get people to take a train.
Oh, I see, if the project can make money back it’s viable. Perhaps a toll on cycleways to pay for infrastructure repairs will get this drawn out project back on track.

What is the fare to ride a bike along Morsehead Drive cycle way? Oh, that’s right, you whinging lycra people don’t pay the equivalent of road user fees or public transport fares. Why don’t you get Pedal Power to organize a working bee and fix it yourselves. It’s all about the user pays principle.

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