CASE STUDY 4: Perth Arena OCTOBER 2014 About the Committee for Perth The Committee for Perth is a member funded think tank focused on maintaining and improving the liveability of the Perth metropolitan region by ensuring its vibrancy, economic prosperity, cultural diversity and sustainability. We currently have over 100 members representing a broad cross sector of the business community, civic institutions and local government and rely solely on our members’ financial contribution to enable us to undertake our work, research and activities. A full membership listing is included at Appendix 2. The role of the Committee for Perth is to advocate on issues that we believe will help us realise our vision for Perth and we have developed a unique model of advocacy through which this is achieved. Regardless of whether a project is our initiative or one implemented by government or others, we remain informed advocates for projects that we believe will benefit future Perth whatever stage they are at, be it in concept or development. Further information about the Committee for Perth and our work can be obtained from our website at www.committeeforperth.com.au CASE STUDY 4: Perth Arena ©This paper is copyright of the Committee for Perth. While we encourage its use, it should be referenced as: (2014) What we thought would kill us: a case study of Perth Arena. The Committee for Perth, Perth. Committee for Perth Postal: Office 7, 996 Hay Street PO Box 7117 Perth, WA 6000 Cloisters Square T: (08) 9481 5699 Perth, WA 6850 F: (08) 9481 7738 www.committeeforperth.com.au Acknowledgements We would like to thank VenuesWest for reviewing a draft and providing the images for this report. We would also like to thank members of our Reshaping Working Group for reviewing a draft of this report and providing feedback. Case Study 4: Perth Arena 1 Foreword This case study is the fourth in the ‘What we thought would kill us’ series undertaken by the Committee for Perth. The purpose of this series is to examine some of Perth’s most controversial developments with the aim of informing the debate for future projects that are big and bold. This report examines the construction of Perth Arena, a multi-purpose entertainment and sporting arena in Perth’s city centre which is one of the most hotly debated public projects in recent times. As a community we railed against the cost blow outs and responded negatively to its design. Yet now Research Report: ‘What we thought would kill us’ that Perth Arena is open we have visited it in droves, forgotten how much it cost and don’t mind the Case Study 4: Perth Arena building either. Regardless of the path to get the project completed, the experience as a concert goer or spectator at the tennis or basketball is second to none. 1.0 Introduction 5 Perth Arena, so controversial during the design and construction phase, is now an important part of Perth’s sporting and entertainment infrastructure. Let it be a reminder of poor project definition planning 2.0 History – The Need for a New Indoor Arena for Perth 8 and practice never to be repeated but also a beacon for further bravery. 3.0 Purpose and Key Features 11 I hope you enjoy reading about Perth Arena’s journey. 3.1 Exterior Design 11 3.2 Place Making Role 12 4.0 The Costs 14 Marion Fulker CEO, Project Manager 5.0 The Benefits 17 5.1 Findings of Recent Literature 17 5.2 Summary of Perth Arena Benefits 19 5.2.1 Patronage and Revenue 19 5.2.2 Attracting New Events 20 5.2.3 Retaining the Hopman Cup 20 5.2.4 Public Support 21 5.2.5 National and International Recognition 21 5.2.6 Place Making Benefits 21 Our reports to date on Hillary’s Boat Harbour, The Evolution of Perth’s Passenger Rail and The Bell Tower are available on our website at http://www.committeeforperth.com.au/researchSpecialReports2.html 6.0 Conclusion 23 Appendix 1: Researchers 24 Appendix 2: Committee for Perth Members 25 Appendix 3: References 27 2 Committee For Perth Case Study 4: Perth Arena 3 1.0 Introduction Perth Arena is a cutting edge, indoor, multipurpose arena owned by VenuesWest on behalf of the State Government and managed by AEG Ogden. The Arena was designed by a joint venture team of ARM Architecture and Cameron Chisholm Nicol. Initial construction began in June 2007 by BGC Construction Group and the venue was officially opened on 10 November 20121. Perth Arena is a facility that Perth, as a growing region of nearly 2 million people, needed to deliver the cultural and sporting amenity that current and future generations expect in a modern and growing city. It has delivered on multiple fronts. The venue has attracted internationally acclaimed artists and tours to Perth; it has welcomed more than one million patrons through its doors; its design and construction has been widely acclaimed; and it has been recognised as one of the world’s top performance venues. On top of this, Perth Arena has provided an important catalyst for the regeneration of the surrounding area as a vibrant and mixed use entertainment and retail destination as part of the Perth City Link project. The development of Perth Arena is therefore a success story, but it is one marred by considerable The development of Perth Arena is a success story, controversy in the lead up to opening its doors. but it is one marred by considerable controversy in Perth Arena was controversial for two key reasons: it was over budget and late on delivery. The project was originally estimated to cost $160 million, however the final completion cost was $558 million, almost 3.5 times the original budget2. Similarly the project was initially earmarked for completion by January the lead up to opening its doors. 2009 – but did not ultimately open until November 2012. A 2010 review of the project by the Auditor General identified the primary reasons behind both of these problems: • The original budget and timeframes were unrealistic. They were based on insufficient scoping, planning, costing and analysis. They significantly underestimated the construction costs of the building and omitted to include substantial costs such as the construction of car parking; the venue fit out; and the costs of transition to opening. • The project management and governance arrangements were not sufficient for such a major project and meant that there was inadequate transparency and oversight, blurred accountability and inadequate record keeping in the early phases of the project. • Contractual issues resulted in the State retaining a higher level of risk throughout the project than intended. • Major changes to the Arena design were made during contract negotiations without a good understanding of what this would cost or the impact on the project schedule. This included changes to the proposed car parking from a multi-storey car park over the railway line to a 650 bay underground car park, the cost of which was significantly underestimated. • There were significant uncertainties in the contract3. 1 Department of Treasury, n.d., Perth Arena. Available from: <http://www.treasury.wa.gov.au/cms/content.aspx?id=12740> 2 Ibid. 3 Murphy C, 2010, The Planning and Management of Perth Arena, Western Australian Auditor General. Available from: <https://audit.wa.gov.au/wp-content/uploads/2013/05/report2010_01.pdf> 4 Committee For Perth Case Study 4: Perth Arena 5 Collectively these problems generated considerable public criticism. They also resulted in negative backlash from expectant users such as the Perth Wildcats who expressed concern about the lack of car parking in the original proposal4 and whose financial viability and season fixtures were reported to be negatively impacted by delays in the Perth Arena project5. Changes were made to the project governance in December 2008 with the insertion of the Office of Strategic Projects and VenuesWest delivering more robust management for the completion of the project. The Auditor General’s 2010 report also made various recommendations for agencies involved in the delivery of capital projects to ensure more rigorous project approval and governance processes for major capital projects in the future. This included a recommendation for the reinforcement of the role of the Strategic Asset Management Framework in decision making, including the need for the preparation of robust business cases (including reliable cost estimates) for capital projects. The recommendations were widely supported by the government agencies involved6. It is further noted that the need for more rigorous and transparent analysis of the costs and benefits of infrastructure projects in Australia has been highlighted by the Productivity Commission in its recently released Inquiry into Public Infrastructure and is something that could prevent the recurrence of problems experienced during the Perth Arena project in the future7. These problems ultimately meant that Perth Arena cost taxpayers more than originally intended and took longer to complete. It also meant that the project and venue attracted more public scrutiny and criticism than may have otherwise occurred. As a result the Perth Arena needed to overcome negative perceptions in order to build public support following its opening. But it has. Today, less than two years after its opening, there is ample evidence that Perth Arena has become an integral and strongly supported component of Perth’s entertainment, cultural and sporting landscape and its bold and imaginative design have delivered the potential for the facility to become Perth Arena is an essential and long overdue piece of one of Perth’s most iconic buildings and landmark destinations. There is also evidence to suggest that while the cost of the venue was significant, the total cost is cultural, entertainment and sporting infrastructure reasonably comparable with the cost of development and projected costs of other major multifunctional indoor stadium projects elsewhere in the world, particularly those that have placed a significant for Perth.