Planning for Water Infrastructure in Victoria
1 EXECUTIVE SUMMARY
1.1 Background, scope and objectives
Victoria’s prosperity and attractiveness as a place to live,
work and do business depend on a secure water supply for residents,
businesses, farms and the environment. In November 2007, following
ten years of drought, Victoria’s water storages were filled to only
26.6 per cent capacity, causing water restrictions across most of
the State.
A secure, reliable supply of water requires the selection,
prioritisation and delivery of infrastructure in a cost-effective
and timely fashion. It is critical that water infrastructure
planning processes, and the associated governance and funding
arrangements, lead to the identification and delivery of effective,
economical and efficient solutions.
The Department of Sustainability and Environment is Victoria’s
principal water planning and policy agency. The Department advises
the Minister for Water on state-wide water policy, strategic,
whole-of-state and regional water planning and the performance of
Victoria’s water authorities.
The white paper, Securing Our Water Future Together,
committed the State Government to developing sustainable water
strategies for the five Victorian water regions. These strategies
will tailor the white paper’s principles and actions to the
characteristics and challenges facing each region. To date, the
Department has completed the sustainable water strategy for the
Central Region of Victoria (in October 2006).
The lowest recorded inflows to our water storages in 2006 led to
the rapid development of the $4.9 billion Our Water Our
Future—The Next Stage of the Government’s Water Plan in June
2007 (we refer to this as the ‘Victorian water plan’). This
included the acceleration of major water augmentation projects that
had been flagged as longer term prospects in the Central Region
strategy.
The present audit assessed how well the Department selected,
prioritised and monitored state-wide and regional water
infrastructure projects. To address this objective, we examined the
adequacy of:
- the processes used to select and
prioritise water supply strategies
- the processes used to monitor the progress
and impacts of strategies
- the institutional and governance
arrangements supporting the selection of water infrastructure
projects and the development of water sector strategies
- the administration of associated funding
arrangements.
1.2 Conclusions
The white paper, Securing Our Water Future Together,
set out a comprehensive framework for the sustainable management of
water resources in line with clear policy goals and within a
legislated process. The Department effectively applied the white
paper’s planning framework to deliver the sustainable water
strategy for the Central Region of Victoria.
Our review of the Department’s records shows that most of the
actions within this strategy have been progressed. Some, however,
have fallen behind schedule as resources have been diverted to
address the demands of a worsening drought.
While the white paper and the Central Region strategy have been
viewed positively by stakeholders in the sector, the level of
information provided to the community on water supply projects has
been inadequate and needs to be improved.
While the audit recorded a favourable conclusion about the
development of the white paper and the Central Region strategy, the
same is not the case in relation to the recent Victorian water
plan.
Audit recognises that the Department had to complete the plan as
an emergency response to the record low inflows of 2006, and the
risk that water supplies might run critically low within a few
years. The timelines for finalising the plan were extremely tight
and this explains the need to streamline the normal project
development processes.
Nevertheless the processes used to develop the Victorian water
plan fell short of the standard the Department applied when
developing the white paper and the Central Region strategy. In
particular, the plan was finalised with:
- minimal stakeholder
consultation
- inadequate levels of rigour applied to
estimate the costs, benefits and risks of some of the key component
projects.
It is incumbent on the Government to provide full, accurate and
timely information on its financial commitments and projects put
before the community. The Victorian water plan did not provide this
information. There were widely varying levels of rigour around the
plan’s costs and expected water savings benefits. The documentation
did not explain this. This is essential information, especially
when an emergency situation requires streamlined processes.
The Department should address these issues by clearly setting
out the processes it is pursuing to verify project estimates and by
publishing more rigorous information as it becomes available. Where
necessity forces the Department to skip project steps or to publish
figures and estimates of varying reliability, the Department should
inform the community.
The audit also considered whether the institutional and funding
arrangements in the water sector supported the appropriate planning
of water infrastructure. We concluded that:
· the institutional arrangements are not a barrier to the
appropriate selection and prioritisation of water infrastructure
projects
· the funding arrangements provide the flexibility required to
respond to changes affecting the achievement of the State
Government’s policy goals.
1.3 Recommendations
DSE should:
1.1 revise the Central Region strategy to account for the
changed assumptions and the infrastructure commitments within the
Victorian water plan
1.2 progressively inform the community about the costs and
benefits of projects included in the Victorian water plan as this
information is verified
1.3 publish the detailed analysis underpinning the estimates of
water savings and costs for the food bowl modernisation project
1.4 work with the central agencies and the relevant portfolio
minister to explain to the community the level of rigour
underpinning project costs and benefits when publishing information
on committed projects
1.5 implement its proposals to improve how it tracks and reports
on the Central Region strategy actions
1.6 provide regular, consolidated reports on progress against
the actions and outcomes within the white paper and the sustainable
water strategies
1.7 publish information on the progress and impact of projects
funded by the Victorian Water Trust (VWT)
1.8 validate the flow compliance information provided by
Catchment Management Authorities (CMAs) and make the CMAs’
operating and compliance reports available to the community
1.9 regularly make available, to the community, information
about how well the Department has met its environmental flow
obligations
1.10 strengthen the processes it uses to review water authority
plans to verify they conform with Government policy objectives and
that their projects and initiatives meet value for money
criteria.
RESPONSE provided by Secretary, Department of
Sustainability and Environment
I have a number of significant differences with the report,
which I would like formally registered.
First, as you and I discussed a number of times, I do not
believe that the real-time tracking of project development and
implementation that the Audit Office has undertaken in this report
is an appropriate or accurate means of assessing the development of
water industry planning.
An audit normally occurs based on a record of what has
happened and an explanation of that as it relates to outcomes. A
review of a live process provides at best a snapshot of what has
been done and what remains to be done, well prior to any outcomes,
yet here has been presented in the same manner as if a completed
process with internally established deadlines (rather than
externally generated ones) was involved.
In this case, while your Office sought initially to audit a
process — the 2004 White Paper and the Central Region Sustainable
Water Strategy (CRSWS) 2006 — it moved from that task into the
review of a live process, including a commercial tender
development. The Audit Office has sought to compare that urgent and
immediate response scenario with a normal policy development
process. It is unsurprising but also unreasonable that it found one
to be less detailed than the other.
FURTHER comment by the Auditor-General
The focus of this audit, as stated in the specification, was
to assess the adequacy of planning to select and prioritise water
infrastructure initiatives. The audit conduct started in late
August 2007. The Government had published the $4.9 billion
Victorian water plan in June 2007.
The audit included an examination of the processes followed
to select and prioritise the infrastructure projects included in
the Victorian water plan. This was entirely within the scope of the
audit and is an area of significant community and Parliamentary
interest.
The audit stopped short of reaching conclusions about the
ongoing project implementation and procurement processes. For
example, on the desalination procurement process the report states
in section 3.4.9 that, ‘Judgement on the procurement process will
have to wait until this work is completed.’
RESPONSE provided by Secretary, Department of
Sustainability and Environment - continued
Second, I am disappointed that the report chooses not to
note the existence of the Whole of Victorian Government
Inter-Departmental Committee (IDC) which sat through-out this
emergency response. This IDC functioned at Secretary level, a more
senior level of representation than the similar IDC noted with
satisfaction by the report when it turns its attention to the White
Paper and CRSWS.
The Secretaries Water Plan Interdepartmental Committee (the
Water Plan IDC) was chaired by the Secretary of the Department of
Premier and Cabinet. The Water Plan IDC’s membership included the
Secretaries of the Departments of Premier and Cabinet, Treasury and
Finance, Sustainability and Environment, Primary Industries, and
the head of Regional Development Victoria. This Water Plan IDC met
eight times and reported directly to the Government.
However, the proposed report continues to refer to the
Victorian Water Plan being prepared by this Department, as if in
isolation from the rest of Government.
FURTHER comment by the Auditor-General
The assertion that the report chose not to note the
existence of the inter-departmental committee (IDC) is factually
incorrect.
In its written comments on the preliminary draft report, the
Department requested that the ‘At a glance’ section in part 3 of
the report acknowledge the role of the IDC.
The fourth bullet point under the key findings section on
page 21 of the report was amended to read: ‘After issuing the
strategy in October 2006, the collapse of water inflows led the
Department of Sustainability and Environment to develop the
Victorian water plan under the guidance of an inter-departmental
committee.’
RESPONSE provided by Secretary, Department of
Sustainability and Environment - continued
Third, the proposed report compares different estimates of
water losses in the Goulburn Murray Irrigation District (GMID) and
finds them, unsurprisingly, different. Moreover, it draws an
inaccurate conclusion from emphasising that one is lower than the
other.
The potential losses identified in the Food Bowl Steering
Committee’s final report (pp 45-47) are a qualitative estimate
based on rounded figures for long term deliveries and system
efficiencies. The estimate is also based on the entire
GMID.
The losses identified in the Early Works Business Case are
different as they are:
- estimates for the GMID less the
Shepparton Irrigation Area and the Central Goulburn 1-4 Irrigation
Area; and
- based on quantitative modelling and
are less rounded; and
- the average recorded delivery losses
from the years 2004/05 and 2005/06.
In essence, the losses identified are derived from different
methods and the parameters are different and cannot be
compared.
FURTHER comment by the Auditor-General
When comparing the methods used to determine water losses
and savings, we stated in the preliminary draft report that: ‘the
estimated water losses were more refined and lower than those
published in the food bowl steering committee’s final report in
November 2007’.
A major concern, repeatedly noted in the stakeholder
submissions to the food bowl steering committee, was the use of
long-term inflows as the basis for estimating water losses and
savings. Stakeholders were concerned that this assumption did not
take account of climate change or the lower recorded inflows of the
past decade. The final report of the food bowl steering committee
did not address this concern.
The unpublished early works business case adopted a more
conservative approach estimating water losses and savings based on
the records for two recent years for a subset of the Goulburn
Murray irrigation district.
The application of this more conservative approach will
result in a lower estimate of water losses than the method used by
the steering committee when applied to the same area.
The Department made no comment on this throughout its review
of the preliminary draft report. Unsurprisingly, the text was
retained. The Department raised this as an issue the day before the
Secretary’s response to the proposed report was due.
RESPONSE provided by Secretary, Department of
Sustainability and Environment - continued
We have shown your officers the analysis reviewed by those
who have water entitlements at risk in this process, and their
acceptance that the savings are clearly available—indeed, there was
debate primarily about excess savings—but the logical conclusion to
be drawn from this does not feature in your report.
FURTHER comment by the Auditor-General
The Department claimed in December 2007 that the Victorian
Farmers Federation (VFF) now supported the project and accepted the
validity of the water savings estimates included in the food bowl
steering committee’s draft report. The Department cited a VFF media
release dated 19 December 2007 as evidence of these
claims.
The audit team reviewed this material and contacted the VFF.
The VFF has repeatedly insisted that an independent audit of the
water savings projections should be conducted. It restated this in
its media release of 19 December 2007.
RESPONSE provided by Secretary, Department of
Sustainability and Environment - continued
Finally, in relation to the proposed report’s recommendation
relating to providing regular reports on the Sustainable Water
Strategies (Recommendation 1.6, p3), and the associated text in
Section 4.4.1 (pp 45-47), the Department advises that it is not
sensible to publish updates on a plan which in significant areas
was in the process of being overtaken by events. With the
publication of the Victorian Water Plan in June 2007, the reality
of 2006-07 trumped the best efforts of widely consulted experts
working on the CRSWS in 2005-06. The Victorian Water Plan was
thoroughly outlined in the 2006-07 Annual Report.
The fact, too, that the spreadsheet of 129 actions from the
CRSWS your officers reviewed was not complete is also as much a
commentary on the weaknesses inherent in attempting to audit in
real time during a time of shifting policy and circumstances—as
noted above.
FURTHER comment by the Auditor-General
Section 4.4.1 of the report describes how the Department has
recognised the need to improve how it tracks and reports on the
progress of the Central Region strategy. The Department made no
comment on this text in the preliminary draft report.
Unsurprisingly, the text was retained.
RESPONSE provided by Secretary, Department of
Sustainability and Environment - continued
I also note for the record that the CRSWS was released in
the second quarter of 2006-07 (October 2006) and thus had been out
for implementation for a mere six months, a six month period
dominated in reality by the urgent need for a new plan in crucial
areas. As such, we find the comments on the Department’s Annual
Report unbalanced.
FURTHER comment by the Auditor-General
The audit report compared the information provided in the
Department’s 2006-07 annual report, dated October 2007, with the
Department’s legislated reporting obligations. Until this response
above, the Department had not provided this Office or the readers
of the annual report with an explanation why the information
provided did not meet these obligations.