The Planning and Management of Perth Arena

Audited Entities

• The former Department of Housing and Works (DHW)
• Department of Treasury and Finance (DTF)
• Western Australia Sports Centre Trust

Audit Scope and Objectives

The audit examined the planning and management of the Arena project including tendering, contract award, and construction between March 2004 and December 2009. The audit focused on two main lines of enquiry:

• What is the current status of the Arena against original cost and time estimates?
• Has the management of the Arena project minimised risk to the state?

Audit Criteria

• Not publicly available

Main Audit Findings

• Perth Arena is substantially over budget and late. On current estimates, it will cost $483 million, more than three times the original estimate of $160 million. The Arena is scheduled to open almost three years later than originally planned, in November 2011 rather than January 2009. Insufficient scoping and planning meant that both the original cost estimate and opening date were unrealistic.
• Key decisions on the project during contract negotiations have altered the planned allocation of risks between the state and contractor, increased the risks to the state, and led to project delays and cost increases. These decisions were made without systematic or sufficient analysis of their impact, consideration of alternatives, external scrutiny or legal advice.
• There is little evidence that appropriate planning, monitoring and reporting processes were established or followed. Significant changes to the contract and resulting risks were not reported in writing to the Minister and Cabinet so their decisions may not have been fully informed.
• DHW did not implement the project management and governance arrangements required to control a major project like the Arena. This resulted in inadequate transparency, oversight and blurred accountability. Statutory governance, financial and record keeping obligations under the Public Sector Management Act and the Financial Management Act may not have been met.
• Recent changes to governance and project management have improved transparency and strengthened project oversight. But the project remains at risk of further cost increases. Further time delays represent a risk to the Arena’s fit out and transition to operation, which depends on the agreed construction schedule being met. At the end of December 2009, construction was three months behind schedule.

Audit Recommendations

• Agencies involved in the procurement and delivery of capital projects should:
  • put in place governance structures and project management systems which reflect the scale and complexity of the project;
  • ensure government receives full and complete advice about project status, risks, and decisions;
  • seek appropriate legal advice; and
  • establish and maintain adequate records which meet their obligations under the State Records Act 2000.
• The Department of Treasury and Finance should exercise more active oversight of major projects and should ensure consistent application of the Strategic Asset Management Framework to all major capital projects.
• The Department of Treasury and Finance should reinforce the Strategic Asset Management Framework with more rigorous staged project approval processes that ensures:
  • that projects are funded only when well scoped and planned, and announced budgets and timelines are realistic;
  • the risks at each stage have been identified and addressed; and
  • the governance frameworks implemented by agencies reflect good practice transparency of the progress and performance of major projects to government and Parliament.

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