The $15.4bn Torrens to Darlington project structure poses “significant risk exposures to the state”, a new Auditor-General’s report has warned, highlighting that even a one per cent cost overrun on the project would slug taxpayers an additional $154m.
In the report, tabled in parliament on Tuesday, Auditor-General Andrew Blaskett stated the Department for Infrastructure and Transport had established “structured risk and issue management arrangements” for the project, but that there were opportunities for DIT to “strengthen its insight” and provide “greater assurance that significant project risks and issues are being effectively managed”.
“DIT should clearly define how it oversees risks and issues managed by the Alliance, which present significant risk exposures to the state,” the report said.
In particular, the Auditor-General’s report highlighted a one per cent total project budget overrun would cost $154m.
However, the report also acknowledged that cost overruns were subject to “pain-share arrangements” in the Alliance agreement – the “Alliance” referring to the consortium of companies that have united to deliver the T2D project.
Mr Blaskett said the audit was not a review of whether the T2D project is on budget or on schedule, but “whether appropriate arrangements are in place to identify, manage and oversee risks and issues associated with a project of this scale and complexity”.
“The T2D project is one of the most significant public infrastructure investments ever undertaken in South Australia. Effective risk and issue management is critical to ensuring decision-makers have clear visibility of emerging threats to project cost, schedule and delivery outcomes,” he said in a statement released alongside the report.
“DIT has established a structured framework for managing T2D project risks and issues.
“Our audit found that this framework provides a sound foundation, but there are opportunities to strengthen oversight, reporting and assurance arrangements as the project progresses through its most complex delivery phases.”
The report acknowledged that the T2D was “inherently a high-risk project”, pointing to its cost, scale complexity and long delivery time frames.
“The T2D project’s delivery model requires particular attention to oversight arrangements because the state ultimately remains accountable for project outcomes and bears cost overruns above the cap specified in the Alliance agreement,” Mr Blaskett said.
“Projects of this scale inevitably face evolving risks and emerging issues over time. Strong governance, transparent reporting and clear assurance processes help ensure those risks and issues are identified early, managed effectively and escalated when necessary.”
In a letter to Mr Blaskett published with the report, DIT chief Jon Whelan said the department had reviewed the findings and recommendations in the report.
“Actions identified in response to the recommendations will be incorporated into the project’s governance and assurance framework and monitored through established governance processes,” Mr Whelan wrote.
The Torrens to Darlington is the largest infrastructure project in South Australian history, and will support more than 5,500 jobs during peak construction.
Transport Minister Joe Szakacs said “adequate contingencies had been included in the project schedule” to ensure it will be delivered on time and on budget.
“While recommendations have been made to further strengthen aspects of oversight, reporting and assurance, the audit did not identify any fundamental failures in project governance or risk management,” he said.
“The Malinauskas Government undertook a significant review of the project on coming into government in March 2022, which ensured it had appropriate funding, oversight and governance.”