A good rule for life—and one learnt very hard sometimes by teenagers—goes like this: just because you can do something, doesn’t mean you should.

Just because you can stand on the roof of a car travelling at 90 kilometres per hour, doesn’t mean you should. Just because you can drink 2,000 ml of vodka in a single sitting doesn’t mean it’s a great idea.

And as it is with teenagers, who admittedly are traumatised by hormones, so it is with governments and ministers.

Just because a government can build a dam or a rail line or make a road wider or increase spending or reduce taxes doesn’t mean it should.

And now that we are in the Age of Implementation, we must be doubly careful about asking the questions: Well, implementing what exactly? And to what ends?

For careful governments and agencies, public value is the lodestar and guide. We implement project X because we create value not just for an individual or an industry, but for society and, as a result, the world is made a slightly better place.

If we don’t, then we actually risk making the world worse off.

One example serves to prove this point.

In the ACT, taxpayers are now the owners of a light rail, built at a cost of approximately $675 million. According to the ACT Government, perhaps channelling Rhonda from Utopia, ‘Light rail is proving to be hugely popular already, with more people using it every day.’

According to the ACT Auditor–General, however, the transport benefits from the project itself are projected to be much less than the costs. Reporting in 2016, the Auditor–General observed that other benefits included by the ACT Government to justify the project are calculated using methodologies that must be ‘treated with caution’. They are neither widely nor uniformly accepted and their ‘use is hampered by the lack of necessary base data’.

This suggests a careful and scrupulous professional who thinks, but cannot say, that the ACT light rail and the underpinning methodology was dreamt of, designed, developed and delivered by the Dodgy Brothers.

If the total cost is actually the touted $675 million and the total transport benefits are still $406 million, then the total amount of value that is dissipated is around $269 million. The benefit–cost ratio is 0.60: an estimated 40 cents is lost for every $1 spent.

Imagine it this way. The ACT community would have been better off if the government had heaped $250 million cash up into a pile, doused it in petrol, put a torch to it and burnt it to ashes.

Of course, at this stage, a careful thinker should ask about energy savings and plausible reductions in greenhouse gas emissions. They would urge that these benefits be included. And the response is that such benefits were estimated over the life of the project to be $13 million and were included as part of total transport benefits, $406 million.

So, even when we include considerations that are increasingly important in a world racked by climate change, the arithmetic still does not add up. The ACT could have saved taxpayer funds and invested it more wisely in projects that actually generated a positive social return. Schools, hospitals, energy efficiency, parks, gardens, libraries, bus services, reduced rates.

The ACT Government is now talking of extending the light rail system to Woden. But before it does, it should stop, pause and apply these principles of cost–benefit analysis—outlined by the Business Council of Australia—to its thinking:

• When: before a decision to proceed is made
• Why: to determine whether or not a proposed project generates a positive social return and is the best option available; to help inform decisions that result in the creation of public value
• How: use forecasts based on comparable projects; use forecasts based on economic and population growth; measure against the status quo; include first-round costs and benefits; include externalities; do not include second-round costs and benefits because methodologically suspect; use a transparent process to develop estimates; address uncertainty by conducting a sensitivity analysis
• Who: analysis should be done by an independent and objective third party
• What else: make the analysis widely available for comment; do work that is proportionate to the size of the investment; ignore sunk costs; update your analysis as new and better information comes to hand.

Want to know more about cost–benefit analysis, the economics of projects or project management? Contact 02 6247 2225 or service@ethoscrs.com.au.