There are many similarities between the Waterview motorway project the City Rail Link. Both are extremely large projects involving considerable amounts of tunnelling but the comparisons don’t stop there. While there are very clearly a lot of other motorway and rail projects being bandied about, both projects effectively complete their respective networks allowing us to get the most out of our existing investments in them. With Waterview now well under way, I thought it might be a good idea to see if there was anything we can learn from it to help with the CRL.
The first area where Waterview could provide some useful benefits is in the area of tunnelling. While the massive TBM that is being used on Waterview is way too big for the CRL, my guess is that the engineering and construction knowledge gained by local agencies and companies will be invaluable when it comes time to build the CRL. This is especially the case as the two projects almost perfectly dovetail into each other. Waterview is under construction now with the tunnelling itself expected to start around October of this year and completed in 2016. If the CRL sticks to its current schedule of being operational in 2020, construction on the project is likely to start in 2015 but really ramping up in the 2016-2019 period as shown in the graph below from the original business case.
When it comes to promoting the project, the cost is perhaps another area that we could learn a lot from. Back in 2008, when the previous Labour government were starting to get serious about Waterview, the cost of the project was reported at $1.89 billion for a pair of twin lane tunnels. To build it wide enough for three lanes, as was being pushed by the roading lobbies was projected to cost $2.14 billion.
Also interesting to note that back then then National Party spokesperson, Maurice Williamson, said he doubted we could afford $1.9b on a single project through traditional financing methods as it would deprive the rest of the country of investment yet less than a year later the party embarked on the RoNS programme, which included Waterview and that it is set to cost the country ~$10 billion over a decade.
“I don’t think the Government could ever fund a $1.9 billion road from just straight land transport funding,” Mr Williamson said. “That would mean the rest of the country would get nothing for nearly three years, so you have go to find an alternative source of funding.”
Back to Waterview, six months later in early 2009, following more work done on the project by treasury and the MoT the cost had ballooned to $2.77 billion for the two lane option and $3.16 billion for the three lane option. This caused then transport minister Steven Joyce to send the NZTA back to the drawing board and look at other options. Also worth noting that he quite clearly stated that he wanted to see the tunnels with three lanes each.
Serious doubt has engulfed Auckland’s Waterview motorway tunnels project – the vital last link in the western ring route – after a cost blowout to between $2.77 billion and $3.16 billion.
The Government has ordered an urgent review of route options after the Treasury and Ministry of Transport added financing costs of more than $500 million and an upgrade of the nearby Northwestern Motorway for $240 million to the main project.
Previous estimates of $1.89 billion for two-lane tunnels each way along the 4.5km Waterview route or $2.14 billion for three-lane links – as sought by the Automobile Association and business groups – did not include any of those costs. The new estimates are $2.77 billion for a 3.2km pair of two-lane tunnels and $3.16 billion for three lanes in each direction.
Transport Minister Steven Joyce announced yesterday that he had given officials until April to review all options for a connection of State Highway 20 to the Northwestern at Waterview, including a potentially disruptive surface route through Mt Albert and previously discarded “cut and cover” proposals.
Going from a proposal of two lane tunnels at $1.9 billion to three lane tunnels at a cost of $3.2 billion represents an absolutely massive price increase. By late 2010, despite being a three lane tunnel option, the cost of the project was back down below $2 billion at $1.75 billion. Fast forward to today and the project is being built $1.4 billion with the causeway project coming in at an extra $220 million. That means that all up both the Waterview project, and the causeway are costing ~$1.6 billion, almost $300 million less than just what the two lane tunnels were expected to cost roughly 5 years ago.
Why have the costs come down so much being almost half of what they were at their peak? I believe much of it relates to how we estimate these types of projects. As a project moves through the stages of investigation, costs tend to increase as all of the potential issues/risks start to get thought through and these start to get factored in to the cost of the project. As the knowledge of the project improves, many of the risks can be addressed and this can give some certainty about how much the project will ultimately cost. Such a big project should hopefully also cause construction companies to be extremely competitive in the tendering process.
So how does this relate to the CRL? Well it’s going through exactly the same process. Back in 2009 it was estimated to cost $1-$1.5 billion. The November 2010 business case, came in well over that figure at $2.4 billion, as seen in the construction cost summary. Most interesting is that the construction costs alone come in at less than $1 billion but the rest of the $2.4 billion is made up of contractor costs, design and planning costs as well as factoring for various risks. The cost of the project was the one area that both Auckland Transport and the Government agreed on when the latter reviewed the business case in 2011.
For planning documents Auckland Transport then inflation adjusted the price out to when it would be built which saw the cost increase further to $2.86 billion. However critically it also emerged that Auckland Transport had already managed to find over $150 million in savings off the base cost as shown below.
Why is all of this so important? Well based on what we saw with Waterview, it is likely that the actual cost of the project will end up coming in much less than the $2.86 billion that opponents (and AT) like to throw around. A figure somewhere in the $1.5 – $2 billion mark is perhaps much more likely and would have an absolutely massive impact on the viability of the project. In fact it seems that despite the governments continued opposition to the project, we may have missed an extremely important milestone. Subtly the conversation has actually shifted from “if” to “when” with the government and MoT now seemingly focusing on the timing of when it should happen rather than if it should happen at all. If costs continue to come down, like they did with Waterview then it only help to further justify the project.