Project Overview

Background

In the 2000’s, Victoria was in a drought. As shown in the graph below, Melbourne’s water storage levels reached a low of around 26% in June 2009 and water restrictions had been put in place to help preserve Victoria’s water supply (Melbourne Water c. 2010).

In response to this, the Victorian Government announced the Victorian Desalination plant as part of their Our Water, Our Future campaign on the 19th of June 2007 (Victoria State Government 2007).

About the Project

The Victorian desalination plant is the largest in Australia. Construction started in September 2009, the project cost $3.5bn to build and it is located on the Bass Coast in Victoria (Water Technology c. 2014). The first usable water flowed into the Cardinia Reservoir for consumption in 2012 and the plant achieved full capacity of 150 gigalitres of water per annum in the same year (Water Technology c. 2014).

What Makes A Project Successful?

Morphy (c. 2008) discusses the Project Management Triangle (also known as the Iron Triangle) which was created by Dr. Martin Barnes in the 1980s. It evaluates projects in terms of “performance (some variations use quality or specification), cost and time” (Morphy c. 2008).

However, Masrom et al. (2015) disagrees with this method. In their article discussing the success criteria for large infrastructure projects in Malaysia, they argue that the iron triangle method of project evaluation “might result in biased measurement of project success” (Masrom et al. 2015).

Masrom et al. (2015) argues that we should also consider other criteria such as:

How well the project is used by the client
Whether the project was liked by sponsors
Whether the project resulted in the improved effectiveness or efficiency for the organization
Whether the requested project concept was achieved
If it was a public project or a public-private partnership project, whether the project was acceptable to the public

Hasan (2016) agrees with Masrom et al. (2015) and states that although the Project Management Triangle “is a good starting point” for project managers, he thinks it is too simplistic. Hasan (2016) references a survey conducted by Projectize Group which looks at the flaws in the Project Management Triangle according to project managers.

These flaws include:

No consideration for customer satisfaction
Ignoring end user adoption
No focus on quality of delivery
No emphasis on business objectives

Both Masrom et al. (2015) and Hasan (2016) agree that the Project Management Triangle is no longer sufficient to evaluate a project but acknowledge that all elements of it should still be considered. They also agree that end user adoption and whether the customer/sponsor was satisfied are important criteria. Although Hasan (2016) didn’t explicitly mention that whether the project resulted in the improved effectiveness or efficiency for the organization is an important factor, this would usually be considered when evaluating the projects alignment with business objectives and whether the customer was satisfied, as the customer is unlikely to be satisfied if the project does not improve efficiency or effectiveness. Hassan (2016) also didn’t mention that if it was a public project or a public-private partnership project, whether the project was acceptable to the public but this is likely due to his report not focusing explicitly on infrastructure projects as most other types of projects are unlikely to be a public project.

Therefore, the criteria used to assess the project will be:

Cost
Time
Performance, quality & specification
How well it is being used
Whether the project was liked by its sponsor (the Victorian Government) and the public

Project Lifecycle Framework

The project lifecycle framework that will be used in this report is below (Nediger 2019)

Was the Victorian Desalination Plant Project Successful?

Cost

The build cost in the initial feasibility study was $2.9 billion. However, this was revised to $3.1 billion once the winning bidder was announced (Victorian Water Industry Association c. 2012). Although the budget did change, it is not likely to be considered a failure at this point as it is not a material difference. However, after construction commenced this the cost was revised again to $3.5 billion (Victoria State Government 2015). This is likely to be considered a failure in either the planning stage (due to not making adequate provisions for costs associated with challenges during construction) or the execution stage (for not being able to build the plant on budget) as $3.5 billion is materially higher (around 21%) than the initial budget of $2.9 billion.

The desalination plant was built and financed by Aqua Sure. The cost of the plant is $1.8 million per day for 27 years, for “Aqua Sure to have the plant built and to operate it, that is paid irrespective of whether there is a water order” (ABC 2012). According to Peter Walsh as quoted by ABC (2012) “the actual charges will add up to around the $18 billion” excluding the cost of water orders but including the $3.5 billion build cost.

Time

The project began in June 2007 and construction started in September 2009 (Water Technology c. 2014).

Although, the project was scheduled to complete in late 2011, it wasn’t completed until December 2012 (Victorian Water Industry Association c. 2012). As this is materially longer (around 25%) this demonstrates that a failure occurred during either the execution phase (due to construction taking longer than planned) or the planning phase (for not making appropriate provisions for challenges during construction). Aqua Sure was penalized for this though $419 million in withheld payments (Victoria State Government 2015).

Performance, quality & specification

Although there is not much publicly available information, it is likely that the performance and quality of the project is satisfactory due to 27 years of operating costs for the plant being included. This would mean that if there are any issues during this time, it would be Aqua Sure’s responsibility to address these at no additional cost to the Victorian State Government (ABC 2012).

The project was built to specification as it is passed the water quality tests and can produce 150 gigalitres of water per annum as per the specifications in the contract with Aqua Sure (Water Technology c. 2014).

How well it is being used

Although Victoria was in a drought in the 2000’s, by the time the project was completed in 2012, this was no longer an issue as Victoria’s water storage levels has risen to over 80% (ABC 2012). Therefore, the desalination plant was idle until 2017 when an order for 50 gigalitres was placed (ABC News 2017). However, as the state’s water storages were around 60% full at the time, it was questioned whether this order was necessary (ABC News 2017). As of the 1^st of April 2020, Victoria’s water storages were around 58% full (Victoria State Government 2020).

A factor that should have been considered in the initiation stage is that the level of rainfall operates in cycles. According to Kevin Long (2011) there is an 8.6-year lunar and a 19.8-year synodic planetary cycle which can be used to predict rainfall levels. This research should have been considered as it showed a weather phenomenon which produced unusually high rainfall in the eastern parts of Australia would occur during 2010 and early 2011 (Long 2011).

Another factor that should have been considered at the initiation stage is the way that the official water forecasts were made. Davidson (2008) argues that the official water forecasts were badly flawed as they “were based on running a regression through the three drought years from 2004 to 2006”, “excluded inflows to the Yan Yean and the Sugarloaf reservoirs” which make up 20% of Greater Melbourne’s water supply and didn’t consider cheaper options such as “aquifer injection, Gippsland river diversions, rainwater tanks or recycling”.

Therefore, due to the desalination plant being built towards then end of a cycle with low rainfall, it has not been necessary. However, in the future when the cycle changes again and less rainfall is expected, it will help minimise the number of water restriction measures that need to be introduced but in the meantime, in addition to the build cost, the operating charge still needs to be paid regardless of whether or not it is used.

Whether the project was liked by its sponsor and the public

Overall, the public did not like the project. As discussed above, Davidson (2008) argues that the water forecasts were flawed and “Melbourne will have plenty of water in the future” without the need for a costly infrastructure such as a desalination plant. Community group Your Water Your Say was also formed and ultimately sent bankrupt after they took the government to court because they “believed they were acting irresponsibly” (Ross 2008). They criticized the state’s environmental assessment and showed them “there are cheaper and more environmentally sustainable ways of solving this (water shortage) problem” (Ross 2008).

It is difficult to tell whether the project was liked by the Victorian Government as there are political reasons for them appearing to like or dislike the project. However, as the project was unable to stick to its original budget or time schedule, it has seen minimal use and the public did not like the project, they are unlikely to have liked the project.

Conclusion & Recommendations

There were major issues during the initiation and planning phases of the project life cycle and as a result they:

Underestimated the costs associated with the plant
Underestimated the time it would take to build
Did not adequately assess Victoria’s need for additional water
Did not adequately consult the community

These factors should be considered if another similar project is planned.

Ultimately, the project should be considered a failure as it was unable to be completed on budget or on time, only a small fraction of its capacity is currently being used, and the project was unlikely to be liked by its sponsor and it wasn’t liked by the public. The only criteria it passed was that it met the original performance, quality & specification criteria.

Reference List

ABC 2012, Victorians pay dearly but not a drop to drink, Australian Broadcasting Corporation, viewed 11 April 2020, <http://www.abc.net.au/worldtoday/content/2012/s3656791.htm>
ABC News 2017, Victoria’s desalination plant finally delivers as Government places order for more water, Australian Broadcasting Corporation, viewed 11 April 2020, <https://www.abc.net.au/news/2017-03-19/victoria-desalination-plant-finally-delivers-water/8367554>
, Water policy is based on flawed figures, Sydney Morning Herald, viewed 12 April 2020, <https://www.smh.com.au/politics/federal/water-policy-is-based-on-flawed-figures-20080924-4nbp.html>
Hasan, S 2016, What are the Constraints of Project Management Triangle?, TaskQue , viewed 5 April 2020, <https://blog.taskque.com/constraints-project-management-triangle/>
Masrom, A, Rahim, M, Mohamed, S, Chen, G & Yunus, R 2015, Successful Criteria for Large Infrastructure Projects in Malaysia, Procedia Engineering, pp. p. 143-149.
Mitchell, J 2004, What makes a successful project?, Computer Weekly, United Kingdom, p. 30
Melbourne Water c. 2010, Water Storage Graph, Melbourne Water, viewed 12 April 2020, <https://web.archive.org/web/20100907012005/http://melbournewater.com.au/content/water_storages/water_report/zoom_graph.asp>
Morphy, T c. 2008, Project Management Triangle, Stakeholder Map, viewed 5 April 2020, <https://www.stakeholdermap.com/project-management/project-triangle.html>
Nediger, M 2019, The 4 Project Life Cycle Phases, Venngage , viewed 11 April 2020, <https://venngage.com/blog/project-life-cycle/>
Ross, N 2008, Opponents of Victorian desalination plant must pay costs, Herald Sun, viewed 13 April 2020, <https://www.heraldsun.com.au/news/victoria/legal-bill-crushes-desal-fight/news-story/d74e0537198068daef444711ca462716>
Victoria State Government 2015, Victorian Desalination Project Costs and Payments, Department of Environment, Land, Water and Planning, viewed 11 April 2020, < https://www.water.vic.gov.au/__data/assets/pdf_file/0013/54202/Fact-sheet-project-costs-March-2015.pdf>
Victoria State Government 2007, Our Water, Our Future: The Next Stage of the Government’s Water Plan, Department of Environment, Land, Water and Planning, viewed 12 April 2020, <https://web.archive.org/web/20090519032619/http://www.ourwater.vic.gov.au/__data/assets/pdf_file/0015/366/The-Next-Stage-of-the-Governments-Water-Plan-2007.pdf>
Victoria State Government 2020, Current water snapshot, Department of Environment, Land, Water and Planning, viewed 11 April 2020, <https://www.water.vic.gov.au/water-reporting/water-snapshot>
Victorian Water Industry Association c. 2012, Our Water Our Future – The Next Stage of the Government’s water plan, Victorian Water Industry Association, viewed 12 April 2020, <https://web.archive.org/web/20120316053151/http://www.vicwater.org.au/index.php?sectionid=969>
Water Technology, c. 2014. Wonthaggi Desalination Plant, Victoria, Water Technology, Viewed 3 April 2020, <https://www.water-technology.net/projects/wonthaggidesalinatio/>

Was the Victorian Desalination Plant a Successful Project?