On Saturday the Herald proclaimed that the cost of the City Rail Link had blown out by $500 million which came on the heels of Prime Minister John Key saying that the project will “almost certainly cost more than they thought”

The cost of Auckland’s most expensive project – the $2.5 billion City Rail Link (CRL) – has jumped to more than $3b.

Auckland Transport chief executive David Warburton says the project needs more money in the rail network that could easily take the “combined project cost” above $3b.

He understood that Prime Minister John Key was referring to additional investment in the rail network when he claimed last month the CRL will “almost certainly cost more than they thought”.

The article also quotes some unnamed sources, presumably from the government, claims extra work is needed for the CRL

A second source said that a “bit more rigour and discipline” since the Government had agreed to bring forward a business plan had identified work that should have been costed in the first place.

Of course it didn’t take long for the three councillors who have consistently opposed improvements to the city to jump on board and claim they predicted doom and gloom all along.

Confirmation by Auckland Transport that the cost of the City Rail Link will undoubtedly rise to over $3 billion does not surprise three Auckland councillors who recently wrote to the Auditor-General outlining their concerns about the project and urging the Office of the Auditor-General to ensure a close oversight. The trio now wonder what the ‘no go’ point is with the CRL.

It equally didn’t take long for Auckland Transport to (unusually) get in touch and tell me that the article was wrong and that they’d be making a formal complaint about it. They later provided me with the information David Warburton sent Orsman who seems to have confused and conflated a couple of issues.

Firstly, AT say the estimated price of the project remains $2.5 billion but the crucial aspect is that they say it has always been the centre of a range that could be +/- 20% – in other words they say it will cost between $2 billion and $3 billion depending on how tendering goes. It seems that Orsman and the herald have only taken the upper limit of this range to fit their narrative. They also say that “recent tenders for large civil works contracts in NZ have come in at 10% to 15% under the initial QS estimate“. They won’t actually give any examples of these projects though, saying their “pricing analysis is to assist in competitive indexing“. They also claim that the only people to benefit from claiming the prices have gone up are the those tendering for the work “creating an environment of high price expectation“. The CRL business case estimated the impact of the cost increasing by 20% and shows that even if that happens, the BCR drops from around 1.6 to 1.3, conversely if costs dropped by 20% the BCR rises to 1.9. This is shown below with the figures in 2015 $.