Project Overview

TAG Advisory was engaged by Dexus to prepare an independent replacement cost estimate for insurance purposes for the Eastern Goldfields Regional Prison in Kalgoorlie. This critical infrastructure asset required comprehensive valuation to ensure adequate insurance coverage, with particular attention to the significant cost implications of the remote regional location and post-COVID market conditions that had dramatically impacted construction costs across Western Australia.

Key Challenges

The valuation presented unique challenges stemming from the facility's remote location in Kalgoorlie, approximately 600 kilometres from Perth. Regional cost pressures were substantially exacerbated beyond typical metropolitan rates, with labour costs including remote area allowances, accommodation and travel requirements significantly inflating construction costs.

Post-COVID market volatility had created unprecedented cost escalation that particularly impacted regional projects. Material supply chains to Kalgoorlie faced extended lead times and transport premiums, whilst skilled labour shortages in regional areas commanded substantial premiums. The original project had experienced significant cost and time overruns, highlighting the complexity of delivering major infrastructure in this location.

Asset owners' existing understanding of replacement costs proved significantly understated when current market conditions and regional factors were properly considered, creating potential insurance coverage gaps that required urgent addressing.

Methodology and Approach

TAG Advisory implemented a comprehensive approach to develop accurate replacement cost estimates reflecting current market reality. The methodology incorporated detailed analysis of the specialised prison infrastructure including security systems, accommodation blocks, support facilities and perimeter controls.

Key estimation considerations included:

• Analysis of recent regional construction projects for benchmarking
• Application of location factors specific to Kalgoorlie-Boulder region
• Assessment of labour availability and productivity impacts
• Evaluation of material supply logistics and transport costs
• Incorporation of temporary facilities and establishment costs
• Quantification of extended preliminary and general items for regional delivery
• Review of specialist security systems and detention-specific requirements

The team engaged with regional contractors and suppliers to validate cost assumptions and ensure estimates reflected actual market capacity and pricing. Special attention was given to understanding the cost implications of maintaining security standards and operational continuity during hypothetical reconstruction.

Outcomes and Value

TAG Advisory delivered a comprehensive replacement cost estimate that revealed the true cost of replacing this critical infrastructure asset in current market conditions. The valuation demonstrated that replacement costs were significantly higher than previously understood by asset owners, ensuring adequate insurance coverage could be secured to protect Dexus's investment.

Clear documentation of regional cost factors and market conditions provided transparency for insurance underwriters and supported evidence-based coverage decisions. The assessment highlighted specific cost drivers unique to the Kalgoorlie location, enabling informed risk management strategies.

Conclusion

The Eastern Goldfields Regional Prison valuation demonstrated TAG Advisory's expertise in addressing complex regional and market factors for insurance valuations. By accurately capturing the substantial cost implications of regional delivery and post-COVID market conditions, TAG Advisory ensured Dexus secured appropriate insurance protection for this significant infrastructure asset, reinforcing our capability in specialised asset valuations for risk management purposes.