Major Projects Performance Reporting 2024

Project cost changes in BP4

In our survey and case study interviews, entities gave us detailed information about budget changes. But they do not provide the same level of detail in their BP4 footnotes. 

For example, entities internally reported cost changes for some projects because: 

• market demand projections changed
• supply chain costs increased
• project delivery schedules were amended.

But these reasons were not reported in BP4 footnotes. 

This means that BP4 footnotes do not always represent accurate and transparent reporting of root cause factors affecting a major project’s performance.

Our 2023 major projects performance reporting assurance review noted that DTF updated its guidance for 2023–24 so entities could provide accurate, complete and well-structured footnotes for capital projects listed in BP4.

DTF's guidance says that if there are changes to a project’s TEI or completion date from the last BP4, the entity should include a footnote to explain why the change happened.

Ten projects in our case studies had a TEI or date change, but 8 projects had not disclosed the full reasons why this change occurred in their BP4 reporting.

These observations show entities are not consistently meeting DTF's footnotes content guidance. DTF advised us that some entities may be meeting the content guidance but this detail is not being published in BP4. 

This is because although DTF prepares BP4 for the Treasurer, it is a document produced at the government’s discretion with no format or content requirements set by legislation or ministerial direction. Any content in BP4 is therefore published at the Treasurer’s discretion.

Public reporting

During our review we found meaningful information about project performance, but the information we saw is not publicly available.

We found some public construction updates with useful point-in-time information about disruptions or specific project milestone progress. But other public updates did not discuss known progress challenges or focus on any state-approved changes to a project’s cost and time.

DTF identifies and analyses every 3 months the reasons why projects significantly change, but it does not provide this broader analysis to entities assessed by DTF. Making key elements of this analysis available to entities may help them better understand what challenges are occurring in other major projects and help them avoid future project delivery risks.

Meaningful major projects information

Some major projects give more meaningful public information than others. PPPs have a requirement to publish a detailed project summary, including key contractual terms and value for money considerations, which the Treasurer tables in Parliament and DTF publishes on its website.

Some non-PPP major projects, including major projects that are using an alliance or lump sum procurement model, have similar or higher TEIs compared to recent PPPs. However they do not have the same transparency requirements as PPPs.

Alliance model projects do not have the same requirement as PPPs to publicly explain design decisions, contractor selection, project costings, public interest and probity safeguards, and broader value for money considerations. Although alliance projects are expected under national guidelines to develop a final value for money assessment after the project has been fully delivered, this analysis is not usually made public. 

All major project contracts must be published on the Buying for Victoria website. But these contracts can sometimes have key commercial terms redacted, and do not explain the project's main attributes in plain English, like PPP summaries do.

Public summaries for non-PPP major projects would improve transparency and accountability. Projects adopting this enhanced disclosure could be defined by having a TEI over $250 million or being identified as a HVHR project.

Project changes analysis 

Entities do not specifically analyse how major changes to cost, time and scope impact a project’s benefits and economic viability.

Some projects we examined have been through a detailed economic appraisal to produce a BCR. This allows entities to understand potential economic benefits and a project’s overall value.

Infrastructure Australia independently assessed the BCR for the North East Link (all roads packages) as part of a requirement to get Australian Government funding.

Infrastructure Australia published a 1.3 project BCR in October 2018, based on a $14.87 billion to $15.79 billion nominal cost band for the project. This reflected the state's early proposal and cost assessments from preliminary engineering and design work.

The state government changed some aspects of the project’s design and scope in late 2018. Due to this and other factors, the North East Link packages are now expected to cost $26.21 billion, or $10.42 billion more than what Infrastructure Australia initially analysed.

This means the data Infrastructure Australia used to assess the project’s BCR is no longer accurate.

We saw no evidence that Victorian entities formally reassessed the original BCR or project benefits to reflect the project’s significant changes.

Because this work was not done, there is no way to understand how scope and cost changes impacted the project’s economic viability. It also means that Parliament and the community have no way of knowing the current estimated economic benefit from the project.

DTF’s analysis and reporting

During our case studies work, we also analysed examples of DTF's project assurance advice to government and entities. We found DTF’s work:

• was relevant to the project
• was developed by review teams with appropriate expertise
• focused on high-risk matters that could impact a project's delivery
• allowed for wider insights and lessons learnt analysis across the major projects portfolio.

DTF provides comprehensive major projects performance advice to ministers every 3 months. This advice is confidential and not intended for the public. Only project-specific observations are distributed to major projects delivery teams.

DTF recently implemented an online data management and analytics tool to streamline its quarterly data collection. DTF told us this improved the analysis reporting timeline to within one month of the end of quarter.

We identified instances before this where ministers did not formally consider DTF’s quarterly advice until months after the advice was lodged.

DTF told us a delay between advice lodgement and formal consideration did not necessarily mean the advice was not useful. This is because the detailed project analysis, once approved and lodged, is available to central agencies, senior DTF officers and the Treasurer's office. 

Project assurance systems

DTF's project assurance processes, such as HVHR and gateway, give useful, practical advice to senior project leaders. HVHR processes apply to 77 of the 113 projects we reviewed. 

Larger and more complex projects, like the Suburban Rail Loop East or North East Link, have worked with DTF to develop a modified HVHR and gateway review implementation approach. 

This includes using PARs at key lifecycle points to give project leaders focused, timely advice and improvement recommendations. 

HVHR project progress RAG ratings

All HVHR projects are captured in DTF’s quarterly reviews sent to ministers. According to BP4, HVHR projects are subject to additional scrutiny, independent review and government approval processes.

DTF uses RAG ratings to track HVHR projects' progress against their estimated, cost, time and scope.

Project assurance systems

The Budget papers usually disclose which projects have been classified as HVHR.

Of the 63 projects listed in the most recent BP4, 53 of them are also within the scope of this assurance review. The remaining 10 listed in BP4 are out of our scope because they are either technology or land purchase projects, or a program of works with no sub-project worth $100 million or more.

Seventy-seven (68.1 per cent) of the projects we reviewed were subject to HVHR processes. There are more projects in our selection than listed in BP4 because some projects are sub-packages in the overarching level-crossing removal programs, which is subject to HVHR at a program level.

Gateway and PARs

Under the HVHR framework, any gateway and PAR red-rated recommendations require the relevant entity to develop a recommendation action plan.

All the case study projects we reviewed are following the agreed or required HVHR steps with available evidence showing that red recommendations are being responded to.

But the available evidence was not always clear about the implementation timeliness of agreed response actions.

DTF tracks these types of recommendations in its quarterly reporting to ministers, but this monitoring status report is not widely available.

Our review of recent monitoring reports showed some action plans were overdue, but these projects were not in our case study selection, so we did not follow up the reason for this delay.

It is not clear whether DTF actively monitors gateway and PAR red-rated recommendations. It is also not clear whether DTF or the relevant entity is responsible for following them up. DTF could clarify this with entities as the major projects oversight body.

Market volatility

Construction market volatility in recent years has had a significant impact on some project budgets. Some construction market prices are significantly different to early project TEI projections. 

DTF advised entities in December 2022 on how to manage unexpected or difficult-to-estimate input cost escalations. This advice noted that:

'volatile input costs can be attributed to a range of factors, including but not limited to the impacts of the coronavirus pandemic, record government investment in infrastructure, the increasing cost of borrowing, global supply chain disruptions, and geopolitical instability'.

Although this advice has now lapsed, the causes of price volatility may still exist, so agencies will still need to closely scrutinise market conditions when estimating project costs. 

Value management approaches

We saw evidence of good-practice value management approaches. An entity we examined worked with senior project stakeholders to focus on delivering high-quality outcomes after market prices came in higher than expected. 

Other examples of good practice include sequencing sites for construction (construction staging), building basic structures (cold shell fit-outs) and installing supporting infrastructure or works to enable future services and facilities that were currently unfunded.

Other evidence showed a project took a longer-term approach to try and gain value from whole of-life costing by using scope ladders, which are a series of iterative and cumulative scope options and choices. 

This exercise allowed the state to better understand the opportunity cost of building in options now rather than trying to retrofit them in the future. This approach allows any current cost implications to be offset by future value outcomes.

Procurement approaches

Some major projects changed their expected procurement approach after an initial funding decision had been made.

This caused some observable impacts. For example, because government policy requires PPP whole-of-life costs to be included, project TEIs are revised upwards if the procurement approach changes from a lump sum contract to a long-term PPP. Changing the procurement approach can also delay project schedules and lead to unexpected cost increases.

When developing project investment cases, entities could also specifically consider desired project procurement approaches to avoid these cost increases.

Project benefits measurement systems

We rated all 10 projects in our case studies as amber for project benefits. We saw evidence that entities' project benefits measurement systems are underdeveloped, with unreliable baseline and progress data. 

It was also not clear which entity (such as the client entity, end-user entity or the project delivery entity) should measure project benefits, or when. 

Project benefits reassessments

Some projects in our case study reviews have had significant TEI changes since they were first approved but entities have not reassessed the project's BCR compared to the BCR originally used to assess economic value. 

This means there is a risk the state is proceeding with a project that no longer provides a net economic benefit and runs the risk of wasting scarce public money. 

This contrasts to our survey, which asked a question about whether entities have a process to recalculate any changes to project benefits due to a significant scope change. Of the selected 113 major projects, 101 (89.38 per cent) said 'Yes'. 

This means that entities believe they have a process to recalculate project benefits. 

Entities’ project benefit roles

Benefit management plans (BMP) we examined were not always clear about which entity will measure longer-term benefits. 

Some benefits measurement approaches, especially for less tangible and long-term economic outcomes, were vague and tended to rely on data that third parties might collect in the future, rather than data that the sponsoring entity, or final asset user would take responsibility for. 

DTF's gateway guidance discusses the importance of collecting sufficient baseline and progress data so that a useful benefits assessment can be made after the project has become operational. The guidance expects this assessment (Gate 6: Benefits realisation) to occur some 6–12 months after the project is complete. 

The guidance also says that benefits measurement should occur throughout the project lifecycle and take account of the original benefits expected and specified at the investment case stage.

Major projects reporting

The Treasurer reports to Parliament on major projects’ status on Budget day. 

DTF prepared the 2024–25 BP4 for the Treasurer. It shows the Victorian public sector is spending $208 billion on capital projects. This amount:

• is $7.85 billion more than the $200.63 billion reported in 2023–24
• includes $12.36 billion invested in new projects, compared to the $27.52 billion allocated to new projects in 2023–24.

High-cost major projects

Out of 113 major projects we examined, 21 projects cost over $1 billion. 

The transport sector has 7 major projects worth over $5 billion.

TEI distribution across sectors

Major projects TEI distribution is shown in Figure 1. 

Transport has the largest TEI share, making up 83 per cent of all examined major project investments. Major transport projects’ TEI are substantially higher than other sectors. 

Figure 1: Total major projects TEI distribution across project sectors ($ billion)

Note: This shows a sector-level overview of reviewed major projects disclosed in the 2024–25 BP4. See Appendix G for information on our survey data, including funding sources.
Source: VAGO.

Project distribution across sectors

Figure 2 shows the transport sector has the most projects (56.6 per cent), followed by health and human services. 

Of the 64 transport sector projects, 7 make up $84.05 billion (69.6 per cent) of the sector's TEI.

Figure 2: Major projects distribution across project sectors

Source: VAGO.

HVHR projects

DTF uses a risk assessment tool to determine if a project is HVHR. According to the Budget papers, HVHR projects go through rigorous scrutiny, independent review and approval processes.

There are 63 HVHR projects listed in the latest BP4.

Entities identified 77 (68.1 per cent) of the 113 projects we examined as HVHR. Our selection has more HVHR projects because some are wider programs' sub-packages that are subject to HVHR.

Transport has the most HVHR projects compared to other sectors, followed by health and human services.

Water sector projects are not included in DTF’s quarterly ministerial reports unless they have been specifically designated as HVHR. There are no HVHR water sector projects at present.

Figure 3: HVHR projects by sector 

Source: VAGO, using entities’ self-certified data.

Entities' self-assessment

We asked entities to self-assess their projects' current performance against cost, time, scope and benefits.

Appendix E lists the criteria we asked entities to use for self-assessment and provides a historical record of major projects’ ratings over the last 3 years.

This year we introduced a new project benefits self-assessment with questions about benefits management systems. We also asked how entities collect and share lessons learnt.

Most entities said their projects are on time, in scope, within budget and have well-developed benefits measurement systems. Time and cost were identified as the biggest challenges to project performance.

The Suburban Rail Loop – Airport major project is marked as not available because the responsible entity did not provide a self-assessment rating. This is because the project is currently paused.

Figure 4: Entities' self-assessment ratings

Source: VAGO.

Cost changes

All sectors except for justice and emergency services reported an increase in their total TEI, as shown in figures 5 and 6.

Transport reported the highest total TEI increase ($8.5 billion). This represents a 7.57 per cent change, the second-lowest percentage change across all sectors, because of transport’s substantially higher $120.8 billion total TEI. The environment and water sectors had much smaller TEI changes.

The justice and emergency services sector reported a TEI decrease. BP4 footnotes say this is ‘due to budgeted amounts being reclassified as operating instead of capital expenditure, in line with accounting standards’.

Figure 5: TEI increases or decreases by project sector ($ million)

Source: VAGO.

Figure 6: Total TEI percentage change by sector

Note: The environment sector has the highest TEI percentage change driven by its sole project, the Suburban Parks Program. BP4 footnotes attribute the increase in TEI to meeting forecast capital costs for land acquisition and parkland establishment.
Source: VAGO.

Case study 1: TEI percentage change in the environment sector

Source: VAGO.

Significant time changes

Figure 7 shows that all sectors reported changes to project completion dates. 

The health and human services sector reported the most delays, with 14 projects not meeting their original estimated completion dates.

Figure 7: Delays to project schedules by sector (quarters) 

Note: Our time change analysis excluded projects with zero and TBC values. 
Source: VAGO.

Figure 8 shows the number of delayed major projects by sector. 

The transport sector reported 18 of its 64 projects as not meeting original completion dates. The main impact of this delay is that expected project benefits are also delayed.

Figure 8: Delayed projects by sector

Note: Our time change analysis excluded projects with zero and TBC values. 
Source: VAGO.

Significant scope changes

We found 32 of the 113 reviewed projects (28 per cent) had at least one significant scope change. A significant scope change is a change that requires ministerial or government approval.

Figure 9 shows there are 12 projects that have had 2 or more significant scope changes. One project reported 4 significant scope changes.

In 4 projects, the change was due to the state government approving additional scope. For example, the Frankston Hospital redevelopment added a multistorey car park and 2 new emergency department initiatives.

Figure 9: Major projects with 2 or more significant scope changes

Source: VAGO.

Project stages

Most major projects we surveyed are in delivery/under construction.

Project business cases

Preparing a business case is the first stage of planning a project. DTF describes business cases as an opportunity for an entity to conceptualise a project and demonstrate that it is worth doing.

DTF requires any public sector (except for water sector) project costing more than $10 million to develop a business case, an investment logic map (ILM) and a BMP. All non-water sector major projects subject to this review are required to produce these documents, unless formally exempted.

Water sector projects have similar requirements. The Treasurer scrutinises projects at certain project value and decision points that are specific to the various water corporations. An external regulator also examines and approves capital expenditure as part of a water tariff pricing process. 

Investment lifecycle documents

Figure 11 shows that 94 of 103 major projects we looked at (or 91.3 per cent) have a business case.

Our sample size for this analysis is 103 major projects because we excluded some individual level crossing removal sub-packages that assert they rely on a program-level business case. We have not seen these program-level business cases and responses to our survey for the 2 overarching level crossing removal programs said they did not have one. The Victorian Infrastructure Delivery Authority (VIDA) told us that the subsequent level crossing removal programs do not need business cases because they apply the first program business case approved in 2017, which was initially developed for the first 50 level crossing removals. 

The 9 major projects without business cases either have a similar document to a business case, are currently on track to developing one, or are not required to produce one. 

For these 9 projects:

• one is a program of works and does not have any investment lifecycle documents because the Crisis Council of Cabinet approved it as part of the COVID-19 response 
• one used a Cabinet submission instead of a business case
• one is part of a wider enhancement project and is included in another project business case
• one did ‘not have a high enough value to trigger the requirement for a business case’, according to the responsible entity 
• 2 are the overarching level crossing removal programs 
• 3 are currently either in the funding submission stage or are developing a business case. This means either early funding has been given to support the project’s planning and development, or the government approved the project in principle but requires more planning or justification for a final funding decision.

Some projects have a selection of required documents and similar alternative documents. 

Figure 11: Major projects with a business case, BMP and ILM documents

Note: We have not counted separate level crossing removal projects on a statistical basis.
Source: VAGO.

Procurement models

Figure 12 shows that 30 of the 113 major projects (26.5 per cent), all in the transport sector, use an alliance contracting model.

Appendix F provides detailed definitions on procurement models.

The second most common procurement method, excluding other and multiple approaches, is design and construct with 14 projects (12.4 per cent). All sectors use the design and construct approach.

The transport and health and human services sectors have the most variety of procurement methods.

Multiple approaches is when a sector uses more than one type of procurement model for a project. For example, a project can use both a design and construct and a managing contractor model for different project or sub-project stages.

Eight health and human services projects use the multiple approaches procurement model. In the transport sector, 7 projects use this model with survey responses noting there are multiple workstreams requiring different delivery approaches.

Only the transport and health and human services sectors selected the 'not yet decided' response for procurement model choice, with 9 projects in this category.

TEI change by procurement models

Figure 13 shows the median TEI change for each procurement model used. The PPP model has the highest median TEI change.

PPP projects often change their TEIs after contracts are finalised due to their complex financing structures and accounting treatments. There is also a policy requirement that full lifecycle costs are reflected in approved project costs.