The Channel Deepening Project
1. Audit summary
1.1 Introduction
The Port of Melbourne is critical to the economic wellbeing of
Victoria. It handles more shipping containers than any other
Australian port and is the key entry and departure point for
Victorian imports and exports. The port is linked to the open sea
by shipping channels running through Port Phillip Bay. These
provide a passage for vessels with a draught of up to 11.6 metres
at all tides.
The importance of Port Phillip Bay goes beyond its role as a
passageway for cargo vessels. Many Victorians, rely on the bay for
their livelihoods, either from fishing or commercial tourism.
Victorians value the bay environment as a place for leisure and
recreation, and for its rich variety of plants and animals. The
public interest in safeguarding the bay environment emerged as a
key issue during the development of the channel deepening project
(CDP).
The Port of Melbourne Corporation (the corporation) was
established to promote sustainable trade growth by providing
effective port services and managing sea channels for vessels to
access these services. The corporation is responsible for the CDP
to allow larger ships, with up to a 14-metre draught, to use the
port at all tides.
The CDP is a high priority for the corporation because it
expects the container trade to more than treble by 2035, with a
trend towards using larger, more efficient vessels. The failure to
provide additional channel depth is expected to force shipping
companies to work around this constraint and increase the costs of
shipping cargo through Melbourne.
Government policy is to grow the state’s economy while
protecting the environment for future generations. The CDP was
strongly supported subject to environmental and other requirements
being satisfied. To safeguard the environment, the government
required the corporation to prepare an Environment Effects
Statement under the Environment Effects Act 1978.
The corporation started preparing this statement in mid-2002 and
secured the required approvals in February 2008. The project
started immediately and is planned for completion by the end of
December 2009, within a total approved budget of $969 million.
The audit assessed how effectively the corporation developed
and, to date, has implemented, the CDP, by examining:
- the business case used to inform the decision to proceed
- the contracting arrangements used to procure the CDP works
- management of the environmental risks to date
- progress compared to the planned time frame and budget to
date.
1.2 Conclusion
1.2.1 Project development
By early 2008, the corporation had developed an effective CDP
that included:
- a robust business case, complying with
better practice guidelines and providing government with the type
and quality of information it needed to endorse the
project
- an Environmental Management Plan that
addressed the requirements of the environmental assessment process
and was endorsed by ministers under the state and Commonwealth
environmental legislation
- contracting arrangements, where the
corporation followed sound processes in determining how works
should be procured and the contractual terms.
It is recommended that the corporation documents the lessons
learnt from the channel deepening alliance, improves its contract
manual and adds two additional measures to confirm the project’s
benefits.
While ultimately effective, the development process was not
without its challenges and problems. In February 2005 the
independent panel appointed to consider the Environment Effects
Statement recommended that the CDP should not proceed without
revision.
The panel found that the risk analysis, project design, the plan
for managing the environmental impacts and communication with the
community required substantial revision. In some of these areas the
corporation had not been able to complete its work within the
deadline for submissions. The panel also found the project needed
better cross-departmental support and recommended the formation of
a high-level taskforce.
In March 2005 the Minister for Planning agreed with the panel’s
conclusion and required the corporation to prepare a Supplementary
Environment Effects Statement.
Two and a half years later in October 2007, a second independent
panel found that the project could now proceed on an
environmentally acceptable basis and the Minister for Planning
accepted this assessment. The corporation had strengthened its
approach to risk management and the government had provided a
greater level of practical support through the establishment of a
project taskforce.
There are lessons for the management of large, complex and
high-risk projects, directly affecting wide sections of the
community, to reduce avoidable costs. First, the proponent should
complete the work required to be able to assure the government and
the community that it has effective plans for managing the project
risks. Second, projects of this nature require the coordinated
support of government departments and agencies during their
development.
On both counts, the project fell short in mid-2005. However, the
subsequent assessment process worked to address these shortcomings,
albeit at some financial and reputational cost.
1.2.2 Project implementation
Between February 2008 and February 2009, the corporation had
been effective in implementing the CDP as planned.
To date, the arrangements for reporting on and responding to
environmental incidents have been effective.
The CDP is on track for completion by the end of December 2009
deadline and is within the budget of $969 million.
1.3 Recommendations
The corporation should:
- improve the contract manual during its planned review of
procurement processes (Recommendation
5.1)
- document the lessons learnt from the
channel deepening alliance in an executive completion report
(Recommendation 5.2)
- complement its proposed measures of
success by showing how larger vessels have made use of the
additional depth provided by the project and these measures should
include:
- the maximum draught of vessels using the
port
- the actual draught of vessels on entry and
when leaving the port (Recommendation
7.1).