The marvellous PTUA (public Transport Users Association) writes in its July 2017 newsletter about alleged losses on cancellation of the the EW Link:
The government announced on 16 July that the major “design and build” contract for the Metro Tunnel has been awarded to the Cross Yarra Partnership.
This is a consortium that includes Lendlease Engineering, John Holland, Bouygues Construction and Capella Capital. Readers may recognise these as the same companies that were awarded the Napthine Government’s rushed contract for the East West Link – and with whom the Andrews Government had to negotiate the contract’s cancellation after the previous government attempted to force the issue with its ‘side letter’ in the leadup to the 2014 election.
There are two useful observations from this successful outcome.
The first is that there was, after all, no substance to fears in 2014 about ‘sovereign risk’ in regard to cancelling the East West Link contract. The parties to that deal were not only compensated, but have now won a substantial and lucrative construction tender from the same State government.
The second observation goes back to the ‘side letter’ compensation itself. It was an exaggeration to speak of “$1.3 billion down the drain” when the contracts were cancelled. The value of the actual compensation was closer to $900 million – the rest being the value of the real estate acquired, which as of February this year is being gradually re-sold. This $900
million included, according to Treasurer Tim Pallas, a ‘finance facility’ that was drawn down on contract signature.
Is it conceivable that this same facility might now be at least partially usable on the Metro Tunnel project, further reducing the sunk cost of the East West Link debacle?
The question is an interesting one.