Stadium cost plan and budget

Cost planning for the Perth Stadium, its surrounding Sports Precinct, plus associated transport infrastructure was undertaken in 2012, and resulted in an approved Asset Investment budget totaling $1.277 billion in the 2013/14 State Budget. 

Part 1: Project Definition Plans (2012)

The first Project Definition Plan (PDP) considered the project capital budget required to design and construct the Perth Stadium, plus the essential infrastructure in the Sports Precinct around the Stadium, based on a Master Plan and a Functional Brief developed in 2012.

The PDP describes the proposed Functional Brief for the Perth Stadium and its surrounding Sports Precinct, which was based on the Major Stadia Taskforce report published in 2007. That initial brief for a 60,000 seat multi-purpose stadium (with capacity for future expansion to 70,000) was updated in 2012 through extensive stakeholder consultation undertaken with the help of an experienced sports architect firm (Populous), as well as benchmarking against other major stadia (particularly the Docklands (Etihad) stadium in Melbourne).

The first PDP also involved extensive master planning during 2012, which resulted in a transport strategy that focused on maximising public transport. Hence a significant difference from the proposal in the Major Stadia Taskforce report was the removal of the underground car park (below the stadium), on the basis that these funds would provide better value if they were invested in public transport infrastructure.

The starting point for the 2012 PDP costing analysis was the estimated capital costs for development of the Perth Stadium, as outlined in the Major Stadia Taskforce report (which assumed construction would start in 2008 and would be completed by March 2013).   The total cost in the Major Stadia Report was $1.147 billion, comprising the Stadium at $685 million, $339 million for parking and transport infrastructure, escalation at $101 million for construction starting in Sept 2008, and $22 million related to pre-opening expenses and some other capital costs. The approach taken in the 2012 PDP was to initially prepare an estimate in June 2011 dollars for the updated Functional Brief.  This allowed comparison of the current cost plan to the $700 million indicative budget (in June 2011 dollars) announced by Government when the Burswood site was selected in June 2011. The costs were then escalated to allow for a construction start in 2014 and completion by the end of 2017. That escalated amount was the basis for the approved Budget.

The 2012 PDP cost estimate also used a range of benchmarks from other recently constructed Australian stadia, including Docklands (Etihad) Stadium, the MCG Northern Stand, AAMI Stadium (Melbourne) and the Adelaide Oval redevelopment. This work was undertaken by the State’s Cost Planner WT Partnerships. Cost escalation was based on the Australian Institute of Quantity Surveyors (WA) Construction Cost Index Forecast (CCIF) dated April 2012.

The Asset Investment Budget for the Department of Sport and Recreation (DSR) outlined in the first PDP and approved by Government in September 2012 totals $918.4 million. It comprises:

  • Stadium – $820.7 million ($690.0 million at June 2011 plus $130.9 million escalation)
  • Sports Precinct – $81.7 million ($70.2 million at June 2011 plus $11.5 million escalation)
  • DSR and Department of Treasury (Treasury) Project Management – $16.0 million.

Read the Perth Stadium Project Definition Plan.

The first PDP provided a basis for the decision to commence the delivery phase of the project. It included a Master Plan for a sports and entertainment precinct surrounding the Stadium, which included a transport solution, staging and an implementation strategy. Approval of this Master Plan enabled the Public Transport Authority (PTA) to finalise its PDP, which focused on the public transport and pedestrian access facilities for the project.

This second PDP was approved by Government in December 2012, and was based on rail and bus capacity for 50,000 patrons (or around 83% of a 60,000 crowd) to leave by public transport within an hour of an event.

The Asset Investment Budget for the PTA outlined in the Transport PDP totals $358.6 million. This approved budget comprises:

  • Stadium Rail and Bus Station, the Swan River Pedestrian Bridge and associated bus stands, and some road and bridge works – $339.2 million ($298.0 million at July 2012 plus $41.2 million escalation)
  • PTA Project Management – $19.4 million.

Read the Transport Project Definition Plan.

Part 2: Procurement Strategies

Each PDP also outlined the proposed procurement strategy for the delivery of the infrastructure.

This procurement strategy comprised early works packages for both the Stadium and the Transport infrastructure. These early works largely comprised ground treatment to precede the main construction contracts, to prepare the ground, and to facilitate the planning for the environmental approvals assessments. These pre-construction site works commenced in mid 2013, and were undertaken in parallel with the procurement processes for the main design and construction works packages.

The most significant procurement process was a Public Private Partnership (PPP) strategy that involved a package of infrastructure comprising the Stadium, its surrounding Sports Precinct, and a small amount of the Transport infrastructure, delivered through a design-build-finance-maintain (DBFM) procurement model.

The DBFM procurement model was identified as the best model to balance the control of project cost and risk with the achievement of project objectives, and the structure most likely to maximise value for money outcomes for the State. By including a 25 year facilities maintenance period in conjunction with a design and construct contract, the successful consortium has very strong incentives for whole-of-life cost considerations (for building systems such as fire, security, ICT backbone, lighting and lifts)  as well as quality service outcomes (for services such as security, cleaning and waste management).

The selection of the DBFM procurement model had the following implications for the overall budget:

  • The elements of the budget were split into DBFM works (delivered by the contracted consortium) and non-DBFM works delivered through other procurement arrangements (such as pre-construction site works, utility services for water, power, gas and telecommunications to the site, and certain furniture and fittings best procured by the Stadium operator).
  • Some elements included in the Transport PDP (valued at $22.4 million) moved to the DBFM works. These included the Stadium Bus Station, aspects of the pedestrian underpass adjacent to the Rail Station, and some pedestrian assembly areas adjacent to the rail and bus facilities.
  • The State is to fund 60% of the DBFM infrastructure works during the construction phase as a capital contribution to the design and construction sum, and the remaining 40% of the infrastructure cost is to be funded by DBFM financiers. The Government will repay this DBFM financial contribution, together with interest costs, over the 25 year DBFM operating and maintenance phase (as a component of the monthly service payments), commencing in early 2018, once construction is complete and the Stadium is operational. To meet the relevant accounting standards, this PPP arrangement is to be treated as a finance lease from when the DBFM project reaches commercial acceptance and the operating phase commences (scheduled for early 2018). The State capital contribution during the construction phase (with payments commencing in September 2015) are to be treated as finance lease prepayments.
  • Based on the business model approved in the first PDP, there is no government funding requirement for the facilities maintenance (including life cycle replacement) costs included in the DBFM contract, because the intention of the stadium hirer arrangements is that these facilities maintenance costs, as well as the venue management fee, will be included in net revenue. VenuesWest, the Stadium and Sports Precinct governance agency, will be managing these funding arrangements, with effect from early 2018.

Separate to the DBFM procurement, the PTA procurement strategy proposed a range of design and construct contracts (in partnership with Main Roads WA) for the road works in Victoria Park Drive, the Rail Station and other railway works, and the Swan River Pedestrian Bridge. Future maintenance funding for these transport works will be budgeted by the PTA and MRWA respectively, as part of the normal annual government budget processes.

Part 3: DBFM Contract Award, August 2014

As outlined above, the Stadium, the surrounding Sports Precinct, and some of the transport infrastructure is being procured through a PPP using a DBFM procurement model.

In August 2014, the Westadium consortium was awarded the DBFM contract, which includes a 25 year maintenance period.  The consortium is led by three key members: John Laing (equity investor and asset manager), Brookfield Multiplex (the builder leading the design and construction), and Brookfield Global Integrated Solutions (the facilities manager leading the maintenance and services delivery, in collaboration with VenuesWest and the Operator).

Under this model, the State of Western Australia is funding 60% of the design and construction cost (paid during the three year design and construction phase) and Westadium is responsible for financing the remaining 40% of the infrastructure.  The State will repay this amount over the 25 year maintenance and operating phase of the DBFM contract, as part of monthly service payments.

The total contract value over 28 years (3 year construction period and 25 year maintenance period) of the Westadium DBFM contract is $1.212 billion (net present cost in August 2014 dollars).

Westadium’s builder, Brookfield Multiplex has now awarded most of its key subcontractors and in June 2016, the Stadium Operator was appointed. As a result, the commercial sensitivity of certain information, which was previously redacted, has diminished.

For a detailed overview of the DBFM contract including previously un-redacted information (compared with the version first released in February 2015), please refer to the Project Summary available on the Department of Treasury website.

Part 4: Public Sector Comparator 

A Public Sector Comparator has been used to determine the value for money from the DBFM procurement model.

The Public Sector Comparator for the DBFM project is a comprehensive document that calculates the risk adjusted cost to design, construct, partially finance and maintain the same infrastructure included in the DBFM scope of works and services, if undertaken by government agencies using traditional design, construct, and maintain procurement processes.  This Public Sector Comparator was developed by the State Project Team in collaboration with its commercial advisor PricewaterhouseCoopers (PwC), supported by the State’s Quantity Surveyor and Facilities Management consultants.

The value of this Public Sector Comparator, as published in the Project Summary, is:

  • Capital - $897.3 million (comprising $813.0 million construction sum plus $84.3 million capital risks)
  • Operating - $639.6 million (comprising $554.5 million facilities maintenance and $85.0 million operating risks)

TOTAL Public Sector Comparator - $1.536 billion (net present cost in August 2014 dollars)

It has been developed broadly in accordance with National PPP Guidelines and additional State Policy guidance for Western Australian PPP projects prepared by Treasury.

The estimated cash flows (over the same period as the DBFM contract) are discounted in accordance with the National PPP guidelines to obtain the net present cost (NPC) of the Public Sector Comparator. The same approach is used to develop a NPC for the DBFM cash flows.

Given the Westadium DBFM contract value is $1.212 billion, by utilising this DBFM procurement model, there is an estimated saving of around $324 million (or 21%) over the life of the DBFM contract. This represents outstanding value for money from the DBFM procurement strategy.