Snowy Hydro 2.0’s escalating cost has brought renewed focus to the procurement and governance challenges associated with delivering large-scale infrastructure projects in Australia, with the latest Australian National Audit Office (ANAO) findings emphasising the importance of market testing, commercial oversight and risk management.
Snowy Hydro 2.0 is a pumped hydro expansion of the existing Snowy Mountains Scheme, designed to provide large-scale energy storage by moving water between the Tantangara and Talbingo reservoirs in New South Wales.
Once complete, the project is expected to deliver up to 2,200 megawatts of on-demand generation and approximately 350,000 megawatt-hours of storage, which will see it play a major role in supporting Australia’s transition to a renewable energy grid.
First announced in 2017 with an estimated cost of around $2 billion, Snowy Hydro 2.0’s budget was reset to $12 billion in 2023 following a series of revisions due to engineering complexity, challenging ground conditions, inflation and project delays.
As of 31 March 2026, actual expenditure stood at $11.1 billion, with the ANAO’s June 2026 audit revealing a separate cost reassessment is likely to push the total even higher. A further request for government financial support is also considered probable.
While many of these factors extend beyond procurement, the project’s evolution shows how commercial arrangements, supplier capabilities and governance can significantly influence the delivery of major infrastructure investments.
The ANAO’s audit found Snowy Hydro had been only “partly effective” in managing the project since its 2023 reset, identifying a variety of shortcomings across governance, procurement, contract management and cost forecasting.
Among its key findings, the audit said procurement approaches should be matched to the specific risk profile and complexity of a project, rather than applied as a one-size-fits-all framework.
The project has been delivered during one of the most challenging periods for the global construction sector, with inflation, supply chain disruption, skilled labour shortages and strong international demand for specialist contractors placing significant pressure on infrastructure delivery.
These conditions have tested procurement teams responsible for securing highly specialised suppliers while balancing cost, schedule and risk.
Industry-wide increases in construction costs, combined with evolving project requirements, have contributed to contract variations, revised delivery schedules and more complex commercial negotiations across major infrastructure projects.
Snowy Hydro 2.0 has also highlighted Australia’s reliance on a relatively small number of international contractors capable of delivering complex tunnelling and underground civil works, limiting competitive tension once projects are underway.
The audit found that in the lead-up to the 2023 reset, Snowy Hydro relied on legal advice, scenario modelling and contractor performance data rather than directly testing the market to see whether alternative contractors were willing or able to finish the works, despite having sought external advice on the likely cost and time impact of switching suppliers.
The findings emphasise the importance of implementing extensive market analysis and supplier engagement before committing to large-scale procurement decisions, particularly where specialist capability is limited and competition is restricted.
The audit also shone a spotlight on the governance pressures that can emerge as major projects evolve.
As project costs and delivery timeframes changed, procurement and project teams were required to balance commercial negotiations with ongoing delivery requirements and government expectations.
An internal 2023 Snowy Hydro review, which was cited by the ANAO, found that time and cost had become the primary drivers of contractor decision-making rather than what was considered “best for project”, highlighting the commercial pressures that can emerge as complex infrastructure projects progress.
The experience has also prompted broader discussion about procurement models for megaprojects.
Traditional contracting arrangements designed to allocate significant risk to contractors can become increasingly difficult to sustain when projects encounter major unforeseen events, prolonged inflation or changing market conditions.
Governments and infrastructure agencies are continuing to examine whether more collaborative contracting models could provide greater flexibility for future projects.
Snowy Hydro 2.0 reinforces several key considerations for future infrastructure investment, including the need for more rigorous market analysis, stronger supplier risk assessment, enhanced commercial capability within procurement teams, and governance frameworks that enable emerging risks to be identified and escalated earlier.
The project also highlights the importance of strengthening Australia’s infrastructure supply chain.
As governments continue to invest heavily in transport, energy and social infrastructure, demand for specialist contractors is expected to remain strong, making supplier capacity and market competition increasingly important considerations in procurement.
Speaking to The Australian, Acciona Australia Chief Executive Bede Noonan said the market had been forced to adapt as contractors grew wary of traditional lump-sum arrangements, telling the paper contractors were now “very concerned about lump-sum contract risk.”
He also argued that insufficient contingency planning had contributed to challenges for project sponsors.
Snowy Hydro Chief Executive Dennis Barnes has also acknowledged the project’s difficulty, telling an Australian Energy Council conference that it is simply “bloody hard to build”, while maintaining that it remains of good value and will deliver lasting benefits to the grid once complete.
While Snowy Hydro 2.0 is expected to become a major component of Australia’s future energy system, its delivery has also become one of the country’s most significant procurement case studies.
The lessons emerging from the project are likely to shape how governments approach procurement, contracting and governance on future megaprojects, particularly as infrastructure pipelines continue to grow while specialist supplier capacity remains constrained.
