Monday, August 13, 2012

The Sydney Harbour Bridge and the NBN


I don’t propose making this blog a full-time refutation of every misstatement made about the National Broadband Network: I’d never have time to write anything else.

Henry Ergas tells us in The Australian (probably paywalled) that the Sydney Harbour Bridge can’t be used as an analogy for the NBN, because (a) the Royal Commission that examined the harbour crossing in the early 20th century created a cost-benefit analysis (based on forecast rising property values and rail income), (b) on the basis of that analysis, the bridge was expected to yield an operating profit on rail income alone, and (c) rather than being “gold plated”, Bradfield settled on the second-cheapest tender and avoided “novel” designs.

There may have been a cost-benefit analysis of the dear old coathanger, and it may have offered up a model for cost-recovery - but it was based on cost estimates that by the end of the project were no longer accurate.

While the original contract was more than £100,000 below Bradfield’s estimate, and well below the £6 million originally authorized by the NSW parliament, the final cost more than doubled Bradfield’s expectations.

Some quick details from the Sydney Morning Herald via Trove:

The original tender was for a little over £4.17 million pounds (http://trove.nla.gov.au/ndp/del/page/1228584?zoomLevel=1)

The builders, Dorman, Long and Co, eventually received £4.9 million pounds (attributing the increase to higher wages, among other things – http://trove.nla.gov.au/ndp/del/article/16845323?searchTerm=sydney%20harbour%20bridge%20sums%20up&searchLimits=).

In 1931, before the bridge opened, the NSW Auditor General estimated the total project cost had already passed £8 million (http://trove.nla.gov.au/ndp/del/article/46623699#pstart3444730).

Different sources put the ultimate cost at about £10 million – but even at the lower £8 million, the blow-out was sufficient to completely invalidate any cost-benefit analysis. We ended up with a toll to cover the balance.

Finally, a word about “novelty”. Optic fibre is not a “novel” technology by any reasonable definition of the word. Australia began to take notice of the technology in the 1970s; there were deployments by Telecom in the 1980s. Optical fibre is, technically, no more novel than the design of the Sydney Harbour Bridge.

1 comment:

franksting said...

Richard, an ongoing problem with Public Service investment the world over. The pressure is always to get "value for money" (read: cheapest) while understanding that in order to get the Tender in the first place, vendors underquote. And let's not get started on the opex costs associated with the project and how they are included in the total costs of these "cheap" projects. How much has the Harbour Bridge cost to maintain in 1927 dollars since it was built, do you think?