Sydney's CBD light rail: a $517m mispriced business case grew into a $3.1bn project

In November 2013 the NSW government published a $1.6bn business case for a 12km light rail line from Circular Quay through the CBD to the south-east. In December 2014 Transport for NSW signed the main-works PPP with ALTRAC Light Rail - a consortium whose design-and-construct contractors were Alstom and Acciona - at a budget that had already grown by $549m to $2.1bn. The NSW Auditor-General later found that $517m of that increase came from mispricing and omissions in the business case itself.

The Auditor-General's November 2016 report concluded Transport for NSW did not effectively plan and procure the project for value for money. The agency assured the project itself rather than obtaining independent assurance, skipped assurance steps under election-driven deadlines, and signed the contract before key third-party agreements were settled. Most consequentially, the contractor was led to believe the utility Ausgrid had agreed a relocation plan for the 12.5km route; after contract close in February 2015 Ausgrid returned far more extensive requirements, changing the scope.

The fight turned into court: in April 2018 Acciona sued Transport for NSW for $1.1bn alleging misleading conduct in the lead-up to the contract, with the state fighting back. The line was promised for March 2019, before the state election; services to Randwick started on 14 December 2019 and to Kingsford on 3 April 2020. In November 2019 the government revised construction costs to $2.9bn, and a revised agreement with ALTRAC added $576m.

The Auditor-General's follow-up of June 2020 put the real total at $3.147bn - $153.84m of costs including $36.07m pre-contract spending, a $60m small-business assistance package and $57.77m in delay-driven financing had never been in the published figures. Expected benefits had not been updated since April 2015, and by April 2020 actual journey times averaged about 48 minutes against the 37.5 minutes contracted.

Final cost $3.147bn vs $1.6bn business case; $517m mispricing at contract day; a year late; $60m small-business aid; Acciona sued for $1.1bn

The 2013 business case was underpriced by $517m through omissions and mispricing, but the delivery timetable was fixed to a state election date, so speed beat accuracy.

Transport for NSW supplied its own project assurance instead of independent gateway reviews, and the governance arrangements skipped assurance steps the NSW government had approved.

Key third-party agreements - most critically Ausgrid's utility relocation requirements - were not finalised before tender and contract award, so the contractor priced a scope that then changed.

Cost transparency collapsed after award: the project board got just one financial report after May 2017, and public factsheets quoted figures below the internal revised budget.

A business case with $517m of pricing holes passed every gate because the project reviewed itself. Lock third-party agreements and buy independent assurance before signing a fixed-price PPP.

The line is running, but at roughly double the original business case. The Auditor-General's June 2020 follow-up found Transport for NSW still had not consolidated a final cost - its own website understated the budget twice - and made four recommendations to publish the final cost, updated benefits and first-year performance. The small-business package grew to $60m as construction overran through shopping streets, and journey-time targets were still being missed a year after opening.