This inflammatory story is currently the lead item on ABC online:
Experienced industry consultant and project manager Malcolm McKenzie has told Radio National’s Background Briefing program the costs of big telecommunication rollouts always blow out.
The claim comes as the Federal Government prepares to announce that more than 300,000 extra premises will be connected to the NBN than originally planned.
“I would say for any project this size, [a cost blowout of] 50 per cent to 100 per cent would not be unrealistic,” Mr McKenzie said.
He says red tape and rain are just two issues that will cause delays.
He’s “an experienced industry consultant and project manager”? Great. Like Craig Mayne? Maybe McKenzie has relevant experience – or maybe he doesn’t. Maybe he has a barrow to push – either commercial or party political. Maybe he doesn’t. Maybe he has inside knowledge of how NBNCo has done its costings. Maybe he doesn’t. Maybe he spent a lot of time analyzing the rollout. Maybe he’s speaking off the cuff. How would we know from the incredibly brief quotes here?
The specific issues raised make me a little skeptical. If you’re trying to cost a single project in a single location over a relatively short space of time, rain is undoubtedly a big risk factor. If you’re laying a single cable that’s going to take a day to put in, if rain means the crew, trenching, and laying and machinery sits idle for a day, you’d go close to doubling the cost of the project. But the NBN involves laying literally millions of cables across the length and breadth of Australia over a period of six years. There will be thousands of such delays over the course of the rollout, undoubtedly. But it’s like playing at the casino. If you only play one hand of blackjack, the outcome can vary hugely based on luck. If you play thousands of times, the overall result gets more and more predictable. Yes, there’s still risks – an abnormally wet year during the peak of rollouts, for instance – but if a $40 billion project has been planned without anybody thinking of this particular risk I’d be more than a little surprised.
As for red tape, it’s much easier to make that go away when the owner of the project is the entity responsible for writing – or erasing – that red tape.
I’m not trying to prejudge the actual content of the Background Briefing report on Sunday. But running what is no more than a promotion for an upcoming story, with uncontextualised claims that a $40 billion project will cost something more like $80 billion, as news, in the midst of an election campaign, is not living up to the ABC charter.
You’ll note, in the lower part of the story, that the NBN is planning to cover more regional cities while remaining within the project budget; the Opposition essentially has no policy, except to say the NBN is bad. There’s a news story for you.
Ah, but the *reason* the opposition has no “build a NBN” policy is because it’s such a dumb idea. Even the impartial ABC says so. {/sarcasm}
I wonder how much of this is the ABC trying to be just as dumb and biased as the bought media, and how much is that they genuinely are that dumb and biased.
Moz, I was going to say just that. Labor is now paying for squandering its opportunity to justifiably reform the ABC and SBS after 2007. The bias thing has been impicit for a while but the presentation Robert Merkel employs sounds alarm bells.
Cross cross promotion – it was also featured on AM sadly.
I thought it was a blatant beat-up then, and it’s even more obvious now.
@1 The answer I think is that they’ve spent so much time and effort trying to be as dumb and biased as the ‘bought media’ that now it comes naturally.
The likes of Annabell Crabb and Chris Ulhmann seem to be the personalities (pretending to be journalists) that the ABC favours these days.
Julia’s doing a good job in the NBN press conference in Perth of getting her message across, talking about what she wants to do, and batting away all the media questions about KRudd, Latham and Tim.
Agree with your comments on this. I also was struck by the shallowness of the article when I heard it this morning. The other point which was not made is. Now NBN Co has agreed terms with Telstra to get access to its ducts this will reduce the amount of trenching and risk/cost.
I work in this industry and have knowledge of how these things are costed and rolled out. I have never heard of Malcolm Mackenzie so was immediately sceptical that this was a “plant” story. Just a bit sad that ABC publishes this drivel without questions
Robert, surely we’ve been over this time after time?
There is no business case, cost benefit analysis, project planning or anything else that would enable assessment of the basic question of whether this is a worthwhile project, let alone risks such as time and cost over-runs. At least any that the Government (didn’t it come in on the promise that it was going to be soooo much more transparent than anyone ever had been before?)has deigned to make public.
In that situation the “my experienced industry consultant and project manager is more expeinced than your experienced industry consultant and project manager” sort of argument is just silly. Neither of them has got anything to work on, and you and I have even less in weighing up their views if they try.
Until the Government comes clean with its business case, it deserves every query and negativity on the NBN that it gets. And no responsible Opposition could do anything other than say that it will abandon a project which comes in at $43 billion, minimum, and has had nothing put forward to justify it.
When I say “comes clean with its business case”, I am not of course implying that I think it actually has anything to come clean with. Far from it.
Robert do you know anything about the contracts used to construct the NBN network? If risk is borne by the contractor, costs should not increase much beyond the agreed figure. However if the government has been silly enough to use cost plus contracts, or to accept the risk of delays from things like the weather, then a 100% cost blowout is by no means unrealistic.
The conditions of contract should be public documents but like so much else these days, the government may well have preferred to negotiate them in secret.
The other consideration of course is that on my understanding, most of the costs are just estimates at the moment because contracts have not yet been awarded. If that is the case, any cost quoted is an informed guess and almost certainly too low.
Ken, the government established NBNCo to build the network, which is a government business enterprise.
They are running things on a commercial basis, as I understand it.
Either way, Ken, if you’re putting in one cable, a 100% blowout on costs due to weather is entirely plausible. If you’re putting in millions across the country over an eight year period, it would seem likely that the level of disruption would be something you could model to within a reasonable level of confidence.
Wozza, as you know, I have my reservations about the NBN. But just saying “we’ll abandon it” is not a telecommunications policy. What are they going to do? Let us continue with the current shemozzle of an industry structure? Let Telstra reestablish itself as a private monopoly?
Sure Robert the costs of delays could be estimated; the question is whether they have been. I surmise the absurd response is that such sensitive information is commercial-in-confidence.
Robert, as you know, regression to the mean for large projects is often factored into range estimates. I’ve probably worn out people’s eyes over at Catallaxy Files and Club Troppo banging on about presenting estimates in ranges. An advanced estimating technique for a project of this size would be to use monte carlo simulations to determine the probability of the project becoming significantly late and over budget.
Nevertheless, as we both know, there is a persistent positive bias amongst engineers to estimate the best case and to neglect the downside. There is an even stronger bias amongst managers to only accept the best of the best cases as ‘the’ estimate.
However, without adjusting the estimate based on the historical performance of the same estimators, we’re just pissing in the wind here.
Even if risk is contractually transferred, actual risk cannot be completely transferred. Contractual transfer of risk sublimates the cost-blowout risk into contract-goes-bankrupt risk.
@6
“When I say “comes clean with its business case”, I am not of course implying that I think it actually has anything to come clean with. Far from it.”
So you reckon the government don’t have a business case because you reckon there never can be a business case based on … just saying there is no business base. Looks like you have about the same level of justification as you accuse the government of not having. Confusing eh? LOL.
Agreed.
However, NBNCo seems to be doing something that Myki didn’t do and collecting data (in the form of trial sites) to firm up its cost estimates.
It depends on how the pilot projects are viewed and discounted, but yes, it’s good that they’re trying to calibrate the estimates.
If they intend to take the risk themselves by allowing contractors to claim extensions and variations for anything over and above NBNCo’s estimates and/or data, they are setting themselves up for a lot of pain.
Oops sorry, forgot to change my name.
It’s their ABC.
Broadband (FTTH) will have an enormous impact upon our productivity and our culture. Only the most reactionary fossils would oppose it. The so called “alternative ” of wireless is simply a joke from a bandwidth and energy consumption perspective. Useful for the small percentage of sites that cannot be reached by FTTH -perhaps.
I think the opposition is forwarding the same arguments that the ruling class reactionaries used against public sewers and water supplies in the 19th century. Oh they cost (us) too much!!!
Huggy
The ABC news home page does not have a single mention of anything NBN. NOT A SAUSAGE. It’s all Rudd’s Gall Bladder and will he campaign outside his electorate after he gets better. Total 100% froth and drivel.
I am completely over the ABC. Let Murdoch have it. At least it will be upfront about its irrelevant gossip-driven bias.
Broadband (FTTH) will have an enormous impact upon our productivity and our culture.
- we’ll be able to pay our Optus bills 20% faster
- find a plumber in 3 minutes rather than four
- download more porn in the time allowed between loads of washing
The so called “alternative ” of wireless is simply a joke from a bandwidth and energy consumption perspective.
Because producing and laying optical fibre puts energy and CO2 back into the ground, and wireless has reached “peak bandwidth” which will never be exceeded
The ABC news home page does not have a single mention of anything NBN.
It got a pretty good run on ABC radio, however.
PeterTB
Problem with wireless is the energy required to generate the equivalent bandwidth to fibre.To get from A to B with fibre you send a light based data stream down a pipe directly to your target/s. Wireless you just spray all the data out into the ether and a tiny fraction of it goes where you want it to go. So don’t talk about carbon emissions.
I see the major consequence of broadband being the ability to work, learn and shop etc from your living room. Commuting will be for socialising not necessity. I can also see workplaces becoming local as the need for city centre offices declines mor CO2 reductions. People such as myself could do most of their work at home with my collaborators on line, we do it now sometimes but it’s really primitive.
Like I say the people who oppose this are really really ignorant and reactionary. In Gutenburg’s day they would have been burning down the printing shops.
Huggy
Tyro Rex. 19. No no no do not let Murdoch have the ABC. That equals foreign ownership. John Howard stacked the ABC with his people starting at the top and was probably planning to give the Australian Network News to Rupert when the five year contract expires in a few weeks. Long knives are needed to bring the ABC back to being the national broadcaster with integrity rather than just another useless copy of the commercial crap.
What does it DO that’s any different to Murdoch? Screw it, I say.
PeterTB @ 20 your comment is analogous to someone sneering at a new freeway because it will let people save 5 minutes buying their pizzas. You clearly haven’t the slightest understanding of the way the internet has improved efficiency and productivity in most industries, and the enormous additional benefits that will be available from faster speeds.
To engage in just one learning opportunity, go talk to a contractor about the huge advantages of having instant real-time communication with a client’s data base and then come back to humbly apologise for your profound ignorance.
KL – Your analogy is spurious.
The NBN is like the governments intervening in the early 20th century to build ubiquitous railways to every hick town in the country – ignorant of the technologies of the future, but arrogant enough to “pick winners”.
Your offensive personal attack indicates to me that you have pretty much run out of reasoned arguement, or perhaps the ability to reason.
go talk to a contractor about the huge advantages of having instant real-time communication with a client’s data base
I’ll talk to myself then.
I agree that the nature of the contractual arrangements to be put in place by the government will be key. As someone who has had quite a bit of experience with various Telecoms/IT PFI disasters in the UK, I can only advocate very close scrutiny in the selection of the contractors and ensuring that they are held (and not just “incentivized”) to deliver their part of the project (and to deliver on time). That has been the recent trend in the UK, and I think people here are looking at countries such as France where central government has driven the broadband roll-out process firmly and at a near-military cadence. I can only speak from personal experience: in France the speed and quality of the broadband service is excellent (far better than in the UK where I am currently working) and broadband services are amongst the cheapest in the EU.
Ummm PeterTB @ 26 by the early 20th century most of the railways had already been built … by the private sector, who made such a hash of it the state had to intervene to maintain some kind of efficient transport system. Otherwise, nice analogy.
I work in two universities where dozens of jobs have disappeared because online transactions have replaced manual handling of hard copy. Reducing labour while maintaining output = increased efficiency and productivity. None of the transactions involved paying Optus bills, finding plumbers or downloading porn.
‘… and wireless has reached “peak bandwidth” which will never be exceeded …’
Absolutely. And the world will never need more than seven mainframe computers, PCs will never be used in the home and nobody could ever fill a 40 GB hard drive.
KL: If I had added “/sarc” after the word exceeded, would that have assisted your comprehension? I actually think that wireless might be the future……
paying Optus bills, finding plumbers or downloading porn
For 80% of us urban dwellers and businesses, a 3 or 4 fold increase in our already multi mega bandwidth will make FA difference to our productivity
ps Any sign of an apology for your inappropriate abuse?
HB: “Problem with wireless…….”
Maybe – but there are a lot of manufacturing and installation energy costs which need to be offset before the wireless energy equation starts to look attractive – and you’ll probably need to replace the fibre about then…..
It would be nice to see this explored in a business case – and maybe throw in the option of burying suburban electricity infrastructure in shared facilities – or consider how much more might be wrung out of the copper network etc etc.
I’m leaving aside for the moment the arguments about the NBN and just looking at the ABC issue.
Tyro, there is much that is world class about Radio National still. In the hands of Murdock it would probably be closed down.
NewsRadio is also worth preserving, although I’d like the Deutsche Welle segment in a more favourable spot than 3am. That probably has to do with cost and a bulk contract with the BBC.
NewsRadio and RN news items and current affairs segments (such as you get on The Word Today, AM and PM) are routinely written up as news items for ABC Online. The writers routinely smooth things out, leave things out, and sometimes distort the overall impact of the original item. To what extent bias comes into this is moot.
This one originated on NewsRadio. The original had a response from Quigley saying that they’d done the engineering for the Tasmanian trial and with that experience they expected the continetal rollout to be under budget if anything.
As they do, NewsRadio kept on repeating a cut-down version of the story all day, but always with Quigley’s response.
The ABC Online version dropped Quigley’s response and whoever wrote the headlines sensationalised what was left. My impression was that the RN and local radio news feeds were based on the ABC Online rewrite.
I often link to PM and The World Today segments. I always do that in preference to the ABC Online rewrite for what must be obvious reasons.
The worst distortions generally speaking are in the TV news. Here you typically get a segment of about 30-60 seconds on an item that I’ve already heard 5-10 minutes on by listening to radio. What you get on TV is often pathetically incomplete and/or mangled and often downright misleading.
Happens all the time.