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The Victorian government leapt into a doomed startup venture with US printing giant Xerox without doing its homework, costing taxpayers $20 million.
In a damning report tabled in state parliament on Wednesday, the Victorian Auditor-General's Office slammed the way the failed Eloque joint venture was set up.
Xerox and Victoria's Department of Transport (DoT) went into business in 2021 to sell sensors they hoped could remotely monitor bridges for cracks and other structural deficiencies.
The state government held a 37.5 per cent share in Eloque and committed to spend $82.5 million on the project.
But the company was wound up suddenly in August 2022 after problems emerged with the FiBridge technology, which the government had already spent $20.4 million on commercialising.
Sensors placed on 23 state-owned bridges did not provide consistent and reliable data, initially prompting a pause on their rollout to focus on development.
Eloque revised its viable product timeline to the third quarter of 2023 but did not meet the department's expectation to reduce costs.
Before committing to the project, state rail agency VicTrack told the government FiBridge was proven and ready for commercial rollout.
The auditor-general said the agency knew it required significant further development, branding its advice inaccurate and incomplete.
"It gave an over-optimistic view of FiBridge as market-ready, and did not transparently outline how the commercial aspects of the venture would work," the report said.
"As Eloque's first customer, DoT did not conduct sufficient due diligence before investing."
![The West Gate Bridge and the city of Melbourne skyline at sunrise](https://syndicates.s3.amazonaws.com/aap/assets/2023101816100/518dd57c-f2f8-4fc4-8d57-cedddf0fa9b0.jpg)
VicTrack's base case scenario suggested the venture would generate annual revenue of $422 million after 10 years, a 41 per cent return on investment.
But the projections were based on a fast-tracked consultant report and information devoid of independent testing or verification.
The transport department set up another company, known as HoldCo, to oversee the government's interest in Eloque.
Campbell Rose spent 10 months simultaneously acting as chief executive of both VicTrack and Eloque, fuelling a lack of transparency around his responsibilities and conflicts of interest.
The department, VicTrack and HoldCo failed to effectively oversee Eloque's operation, the auditor-general said.
"They were late to identify problems with FiBridge's performance and the interim CEO's conduct."
In a formal response to the report, VicTrack chair Geraldine Gray admitted its trust in Mr Rose to commercialise the technology was misplaced and said his conduct was unacceptable.
"Mr Rose oversaw plans to implement a remuneration and equity scheme, which had not been disclosed, from which he would have benefited," she wrote.
Mr Rose said the auditor-general's findings were fundamentally flawed and based on incomplete materials.
"The report fails to explain how it has considered those matters or how it reached different conclusions," he wrote.
"This is manifestly unfair and wrong."
![Victorian Premier Jacinta Allan in parliament](https://syndicates.s3.amazonaws.com/aap/assets/2023101816104/538ab792-6244-494b-82f3-aa8e73b3415e.jpg)
Opposition Leader John Pesutto said the joint venture was the latest example of government waste, as the state's bill to cancel the 2026 Commonwealth Games grows past $500 million.
"(Premier) Jacinta Allan simply can't be relied upon or trusted to deliver any project major or minor," he told reporters.
Ms Allan, who approved the arrangement as transport infrastructure minister, sought to distance herself from the failed joint venture.
"When it became clear that the project wasn't going to deliver as expected, it was not continued with," she said in question time.
No recommendations were made in the 44-page report.