An infrastructure expert says inflation and labour can’t account for the $7bn cost estimate used by the Victorian government to call off the state’s Commonwealth Games, as the Greens call for an integrity crackdown on the use of consultants.
The state opposition has also referred the government’s scrapping of the event to the auditor general, saying it needed to be determined why the costs of hosting the Games escalated and how much Victorian taxpayers would pay for their cancellation.
The Andrews government called off the 2026 event on Tuesday, saying the cost of hosting the event in five regional locations had exploded, from an initial estimate of $2.6bn, to between $6bn and $7bn.
Government sources have confirmed that consulting firms, including EY, contributed to the initial $2.6bn estimate. An EY spokesperson said on Wednesday that the firm “did not provide the advice that the costs of the games would ‘top $6.2bn’”.
However, the government’s use of consultants – amid a federal inquiry after the PwC tax leak scandal – is being questioned by the Greens.
Speaking generally, the Greens’ integrity spokesperson, Tim Read, said the use of external consultants should fall within the remit of the state’s integrity agencies like the Independent Broad-based Anti-corruption Commission (Ibac).
“The public service is within the reach of Ibac, but not external consultants. It’s one clear change that needs to be made,” he said.
“There’s a real risk they’ll tell the government what it wants to hear. There’s a risk they won’t say this is a bad idea if there is a potential to get more work.”
Read said all consultants should have to act “in the public interest.”
The transport and cities program director at the Grattan Institute, Marion Terrill, said regardless of the use of consultants or internal department analysis, it was the government’s responsibility to ensure it sought quality advice.
“It’s still advice you chose to rely on,” she said.
She said shortage of labour and materials had existed for quite some time since the start of the pandemic.
“The supply and cost inflation can’t fully account for this massive increase in costs,” she said.
On Tuesday the Victorian premier, Daniel Andrews, pointed to security, transport, services and temporary infrastructure as contributing to the cost overrun.
On Wednesday he said the government had canvassed all alternative options for hosting the Games but all exceeded the initial $2.6bn budget.
He said hosting the games in Melbourne was probably the cheapest option, but would have cost more than $4bn.
The Commonwealth Games Australia body has said the stated blowouts were exaggerated and claimed the government had ignored recommendations it made to reduce costs.
Terrill said she was surprised the cost had more than doubled since the government announced it would host the games in April last year.
“We’ve seen quite big overruns on mega-projects but it usually takes them longer to come to light,” she said.
“It’s an enormous increase in less than 18 months. The longer the amount of time passes, the more opportunity for things to go wrong or the environment changes.”
Amid a focus on work given to consultancies, some transport experts have called for PwC’s original analysis on the benefits of the Andrews government’s Suburban Rail Loop project to be re-examined.
It was first estimated to cost $50bn in 2018, but last year the state’s parliamentary budget office calculated it could cost more than $200bn.
The prime minister, Anthony Albanese, on Wednesday said there could not be a situation “whereby we essentially contract our government advice.”
“We need to be able to have the capacity to ask the public service for advice and to get it directly from the public service,” Albanese told 2GB radio.
“A culture has developed where any question gets referred to one of these consultants and these guys make billions of dollars and we need to do better.”
