Senate Environment and Communications Legislation Committee, , 8:39:27 to 8:45:20
Senator Henderson questions the $25 billion total project cost and the "earned value" progress of Snowy 2.0 construction.
Topics: Snowy Hydro, Infrastructure, Government spending
Speakers: Dennis Barnes, Hon Sarah Henderson, Unknown Speaker
>> thank you very much, Chair. Um, Mr. Barnes, the revised target cost to complete is 22.2 billion with the contingency buffer, which ends up at 25 billion. Can I ask what is the revised actual total cost of the project from start to finish? Is there any difference between
the two numbers? No, that that would be the range.
>> Okay. So, it is $25 billion.
>> Well, the range is 22.2 to 25
>> including the contingency that so that is the total cost to complete. >> What about the cost of transmission?
>> Snowy Hydro isn't responsible for transmission.
>> No. But are you aware of what those
costs are? Uh I wouldn't hazard a guess at what the buildout of the grid is costing. Uh we don't have a responsibility for that.
>> So like all major projects, Snowy uses the term earn value to describe work that is completed against a set plan. So that is um plan work compared to actual work completed. So I'm just want to draw your attention to page 26 of the ANAO report which noted that the snowy board tracks earned value. Uh what is the current earned value and is it an increase or decrease from the previous reporting period?
>> Well earned value obviously has a uh financial component. Uh so the earned value has increased since the uh last report but the earned value at the 22.2 billion figure is I think currently 54%.
>> 54%. >> and so how much is that increased by?
>> Well it's it's actually comparing two different things. So when the project cost was 12 billion we were more progressed. Now the project cost is 22 billion. on a dollar's basis, we're clearly less progressed.
>> So 54%.
>> Yeah. So I would say that earned value isn't the only measure one can look at when uh looking at the progress of a project. You have to look at the milestones that are achieving the completion targets uh to to deliver the So we discussed earlier in the excavation phase we're nearly complete. So some elements of the project are 95% complete. The concreting in the powerhouse is only 3% complete. So it's earned value is a complex measure but it does have a uh it it includes the target cost to complete. So it will have gone down the period on period because the target cost to complete has increased.
>> And Mr. Bans, are you embarrassed by the cost blowout of this project?
>> I mean, I've incredibly disappointed I'm here with this cost blowout. I was in place during the 2023 reset. Uh the immaturity of the design at that stage. Uh we didn't fully
So I just sorry I just want to go back to the the current earned value. So to um how much of the work was planned over the last 12 months with only so if you can just take me through how much was planned over the last 12 months and how much of that work is actually being completed.
So the at the prior target cost to complete the planned progress over the year was 11%. Uh all of that has been completed it's
Um are you confident that this project can be completed? Firstly, it can be completed given the massive logistical issues that you face. And secondly, are you confident that it can be completed for the revised cost of $25 million?
>> I am confident that it can be completed. Uh I do believe that the contingency and risk buffer we've applied to the balance and it's 3 billion on 10 billion so not 3 billion on 22 billion uh is an appropriate buffer and can be completed for that. The complexity of this project means that there are no cast iron guarantees though of course.
>> So when you say there are no cast iron guarantees where is the biggest doubts
ahead of us that means we do most work about you know the current contract model allows us to have full visibility and risk management uh are the uh geological zone on the headra tunnel for which we've bought a new tunnel boring machine and we have confidence that that new tunnel boring machine will traverse that geological fault zone. Uh and we are moving into a phase of complexity where if you can picture the cavern the size of the Sydney Opera House where we are constructing uh a concrete building inside to then build a power station inside using one access tunnel to get in and out. There is a degree of complexity in that process. They're the two areas right now that are exercising our mind and that's what we're managing risks around.