Westconnex traffic modelling company AECOM pays out $280million for flawed modelling

Westconnex predicts abundant usage, but based on recent history the traffic modelling used could mean empty tunnels, bankrupt operators and an even bigger financial hole for tax payers to fill.

The $17 billion of tax payers money being spent on Westconnex is in part being allocated with data from a company that has just paid out $280million as the data they supplied was incorrect, misleading and sent toll road operators into receivership.  The NPBA wants to know if the Department of Environment and Planning intends to approve the Development Application for Westconnex Stage 2 despite knowing the information they base their decision on could be misleading and incorrect.

Traffic modelling is one of the key tools to assessing the potential impact of a major road project such as Westconnex.  Decisions to approve, reject or amend these projects are made through assessing different criteria, but many major decisions are made on the basis of this information.  Therefore its accuracy and best possible representation of what the future holds is a critical component in the approval process.

An American based company AECOM was selected by Roads and Maritime Sydney to complete this critical work to form the basis of their project direction and requirements.  This information is publicly available in the EIS submission dated 27 November 2015. AECOM’s history of providing this critical information has recent precedent with the Clem 7 in Brisbane, which has led to a windfall of budget blowouts, record payouts, bankrupted operators and ultimately an unacceptable use of tax payer funds.  Here is an outline of what happened

In 2011 the RiverCity Motorway Group, the operators of the Clem7 tunnel, go bankrupt as traffic volumes fall well short of AECOM’s projections. As a result of this, receivers sue AECOM for $1.68 billion.  In addition to this, a shareholder class action of $200 million was also launched.  A collection of the world’s largest banks is also party to the suit. They claim that the forecasting work supplied by AECOM’s subsidiary for A$2.5 million in 2006 has cost them up to $1.68 billion. This information has been sourced from the Wall Street Journal article dated 12 February 2014.

The level of discrepancy in this forecasting is astounding.  AECOM estimated that the average daily number of vehicles using the Clem7 tunnel would hit more than 100,000 a day by 2011. The actual traffic numbers for Clem7 in 2011 average less than 24,000 vehicles a day.  This information has been sourced from the Sydney Morning Herald report on April 15 2011. At an average toll price of $2 per vehicle, that’s $55.48 million of revenue per year lost for the operators.

This story relating to the Clem7 in Brisbane represents a common theme for investors in Australian toll roads and tunnels who have lost billions of dollars in recent years because of too much debt and overestimates on traffic volumes. The Cross City and Lane Cove tunnels in Sydney and the $4.8 billion Airport Link in Brisbane just to name a few.  The Clem7 was eventually bought by Queensland Motorways Group for $618 million.

A Wall Street Journal’s article in September last year reported that AECOM was forced to pay out $280 million to the receivers of the failed Rivercity Motorway Group.  This payout was due to the incorrect and misleading traffic modelling AECOM supplied to the operators of the Clem7 toll road.

Knowing all of this information, we at the NPBA have many questions that we believe require an answer before the NSW Department of Planning and Environment can respond to the 9000+ submissions entered in opposition to stage 2 of Westconnex.

  1. Why is the state government using a company that has a history of supplying incorrect and misleading traffic modelling information for the largest road project in Australia’s history?
  2. How can the Department of Planning and Environment make an informed, reliable decision regarding the suitability of this project based on this potentially misleading information?
  3. Has the Sydney Motorway Corporation made this information available to the proponents who are already being considered to operate this flawed toll road?
  4. Are those being considered for financing Stage 3 of Westconnex being informed of the failure of the Clem7 and RiverCity Motorway Group and that AECOM’s flawed traffic modelling is the reason for this?
  5. What is Sydney Motorway Authority, or it’s governing body Roads and Maritime Sydney, doing to investigate the validity of the current traffic modelling and the subsequent impact on the plans for this entire project?

Having recently established communication with both authorities, the NPBA will be seeking answers to these questions as well as the many more concerns regarding the next stage of development, stage 3.

 

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