In her famous book, The march of folly: from Troy to Vietnam, multiple Pulitzer Prize winning author Barbara Tuchman describes how governments sometimes persist, despite overwhelming evidence to the contrary, with policies that are against their own interests.
Ted Baillieu’s folly might be his Government’s unconditional election commitment to build a rail line to Avalon Airport. Handed the perfect opportunity to begin stepping backwards from the project by reports of Tiger Airway’s imminent withdrawal of all services from Avalon in favour of Tullamarine, the Premier was steadfast in his support for the Avalon link.
Although Tiger accounts for half of all Avalon’s airline business, the Premier is reported as saying that he doesn’t think a pull-out by Tiger would have any longer term implications for the airport. In another report, the Premier told The Age planning for the rail line would continue irrespective of what Tiger does:
The rail link is part of the development of Avalon and if you look at the numbers around Melbourne airport, there is going to be a need for a second international airport
No doubt there’ll come a day when Melbourne does need a second major airport, but as I’ve explained before, we’re a long, long way from that now. In fact spare airport capacity is one of the city’s great competitive strengths compared to arch-rival Sydney. If the Federal Government’s current investigations conclude that High Speed Rail between Sydney and Melbourne is viable, the warrant for a second major airport in this city would recede even further into the future. In any event, given the majority of Melbourne’s population lives south of the Yarra and will be for many years yet, it’s not obvious that locating an airport near Geelong would be the most sensible course to pursue.
Now is the time to be planning long-term for a future airport, not to be building the associated infrastructure – yet the Government has committed to starting construction of the Avalon rail link in its first term. Read the rest of this entry »
Under-estimating the cost of major infrastructure projects and over-estimating the demand is so chronic that forecasters deserve some harsh medicine, according to Professor Bent Flyvbjerg from Oxford University’s Said Business School. He says “some forecasts are so grossly misrepresented that we need to consider not only firing the forecasters but suing them too – perhaps even having a few serve time”.
Australians have plenty of experience with underperforming infrastructure projects. For starters, just in transport alone, there’s Brisbane’s Clem 7 road tunnel, Sydney’s Lane Cove and Cross City tunnels, the Brisbane and Sydney airport trains, Melbourne’s Myki ticketing fiasco, and the 2,250 km Freightlink rail line connecting Adelaide and Darwin. And they’re just the ones we know about!
Professor Flyvbjerg says cost overruns in the order of 50% in real terms are common for major infrastructure projects and overruns above 100% are not uncommon. Writing in the Oxford Review of Economic Policy, he argues that demand and benefit forecasts that are wrong by 20–70% compared with the actual outcome are also common.
Transport projects are among the worst performers (see exhibit). Professor Flyvbjerg examined 258 transport projects in 20 nations over a 70 year time frame. He found the average cost overrun for rail projects is 44.7% measured in constant prices from the build decision. For bridges and tunnels, the equivalent figure is 33.8%, and for roads 20.4%. The difference in cost overrun between the three project types is statistically significant and the size of the standard deviations shown in the first exhibit demonstrate the high degree of uncertainty and risk associated with these sorts of projects.
He also found that nine out of 10 projects have cost overruns; they happen in all nations; they’ve been a constant over the last 70 years; and cost estimates have not improved over time.
And it’s not just under-estimation of costs. Errors in forecasts of travel demand for rail and road infrastructure are also endemic. He found that actual passenger traffic for rail projects is on average 51.4% lower than forecast traffic. He says:
This is equivalent to an average overestimate in rail passenger forecasts of no less than 105.6 per cent. The result is large benefit shortfalls for rail. For roads, actual vehicle traffic is on average 9.5 per cent higher than forecasted traffic. We see that rail passenger forecasts are biased, whereas this is less the case for road traffic forecasts.
He also found that nine out of ten rail projects over-estimate traffic; 84% are wrong by over ±20%; it occurs in all countries studied; and has not improved over time.
Thus the risk associated with rail projects in particular is extraordinary. They face both an average cost overrun of 44.7% and an average traffic shortfall of 51.4%. Read the rest of this entry »
I’ve believed for some years that motor scooters and motorcycles are likely to become a much more important component of Melbourne’s transport system if the cost of fuel increases dramatically.
Scooters and small motorcycles are extremely popular in cities like Hanoi where, like the probable Melbourne of the future, the cost of transport is very high relative to incomes.
Like cars, scooters offer a very high degree of personal mobility. They also have the advantage that they can ‘thread’ their way through congested traffic, are easy to park and are light on fuel. Read the rest of this entry »