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JOINT COMMITTEE ON PUBLIC WORKS - 13/09/2007 - Refurbishment of staff apartments, Australian Embassy complex, Tokyo, Japan

CHAIR (Mrs Moylan) —Welcome. I declare open this public hearing into the proposed refurbishment of staff apartments at the Australian Embassy complex, Tokyo, Japan. This project was referred to the Joint Standing Committee on Public Works on 21 June 2007 for consideration and report to parliament. In accordance with section 17(3) of the Public Works Committee Act 1969:

(3)      In considering and reporting on a public work, the Committee shall have regard to -

(a)      the stated purpose of the work and its suitability for that purpose;

(b)     the necessity for, or the advisability of, carrying out the work;

(c)      the most effective use that can be made, in the carrying out of the work, of the moneys to be expended on the work;

(d)     where the work purports to be of a revenue-producing character, the amount of revenue that it may reasonably be expected to produce; and

(e)      the present and prospective public value of the work.

The committee has received confidential evidence from the Department of Foreign Affairs and Trade. The committee will now hear public evidence from the Department of Foreign Affairs and Trade. Do you have any comments to make on the capacity in which you appear?

Mr Lochran —I am the project quantity surveyor.

CHAIR —The committee has received a statement of evidence from DFAT. This will be made available in a volume of submissions for the inquiry, and they are also available on the committee’s website. Does DFAT wish to propose amendments to the submission as it was made to the committee?

Mr Davin —There are no amendments, thank you.

CHAIR —I now invite you to make a short statement, Mr Davin, and then we will go to questions.

Mr Davin —The Department of Foreign Affairs and Trade is seeking approval to refurbish 43 staff apartments in the Australian Embassy complex in Tokyo, at a projected cost of $22 million. The apartments are an integral part of the chancery complex, which is located in the Minato-ku, a high-quality residential area adjacent to the central business district of Tokyo. The compound comprises a 4,300 square metre chancery, a head of mission residence and 43 apartments. The apartments range in size from two to four bedrooms, with appropriate living areas. The tenants in the compound also have access to recreational and family facilities.

The chancery complex in Tokyo is the most valuable property in the owned overseas portfolio. It was valued at $286.7 million as at 30 June 2007. The building was designed in the 1980s, and construction was completed in 1990. At the time of construction, the complex fully complied with both local and Australian building codes, but it no longer fully meets current standards.

The remaining useful life of the complex, subject to completion of mid-life refurbishment works and ongoing maintenance programs, is at least 35 years. The apartments have been well maintained, but normal wear and tear over 17 years of occupation has adversely affected their condition. Internal services and fittings have degraded to the stage where they are now at the end of their useful life and present a poor representational image. In addition, power and data reticulation, electrical and fire-detection infrastructure, engineering services, access and air reticulation all require upgrading. OH&S concerns, particularly with respect to fire, electrical services and ventilation, need to be addressed.

In June 2006, a full scoping study for the refurbishment of the 43 apartments, including a current condition assessment for each apartment, budget cost estimates and delivery strategies, was commissioned. The Overseas Property Office reviewed the report and finalised the proposed scope of work, staging approach and delivery strategy. A prototype apartment has been refurbished to evaluate the finishes, test feasibility assumptions, assess unknown factors, ascertain the time and cost of the works, identify likely problems and solutions and establish a quality benchmark for all the apartments.

Several options were considered for phasing the refurbishment project. The option chosen was to undertake a full refurbishment of the apartments two blocks at a time, which would involve working on a maximum of 13 apartments in each stage of construction, with all refurbishment, OH&S and compliance works completed in each stage. This option will provide the most effective economies of scale and consistency of finish and materials and will minimise disruption to tenants. It will also allow the shortest time frame overall for completion of the project.

The projected out-turn cost of $22 million represents a good investment, given the current value of the property. The proposal has been developed in close consultation with tenant agencies and with embassy staff. Subject to the approval of parliament, the project would commence in early 2008, with completion in 2010.

CHAIR —For the record, can you tell us on what basis you made a decision to amalgamate some of the apartments and how this impacts on the ability of the department to house all of its staff?

Mr Davin —Some of the apartments in the original concept were smallish two-bedroom apartments on the ground floor and, given the changing character of our tenants and families in the building, they were no longer fully utilised. We were using some of these apartments on an ad hoc basis for Japanese language students, but generally they were not being fully utilised. That really reflects the change in the establishment profiles at our overseas embassy. We now have far fewer unaccompanied junior officers overseas. They are more likely to be more senior, with accompanying family. So we are taking the opportunity to combine some of these smaller units—three, in effect—to produce larger apartments which will be much more suitable for the profile of staff we now have at the embassy.

Mr BRENDAN O’CONNOR —The complex itself was built 17 years ago.

Mr Davin —That is correct.

Mr BRENDAN O’CONNOR —It was purpose built?

Mr Davin —Yes, it was.

Mr BRENDAN O’CONNOR —It would have been subject to the public works committee, I presume.

Mr Davin —It certainly was.

Mr BRENDAN O’CONNOR —I will have to go back and look at the transcript. Why, then, would Japanese standards have been used for the fittings if it was a purpose-built complex for Australians? Therefore, why would we be spending so much money fixing something that should not have been there in the first place?

Mr Davin —The rationale for this refurbishment is not the fact that the fittings in the kitchens and the toilets reflect Japanese standards; it is for other reasons. But we are taking this opportunity; it is time to replace them. I should say at the outset that the Japanese standards these were built to do comply with Australian standards. They do not sit outside of that. But we have found, with the practical occupation of these units over the years, that people find the benches and the toilet fittings are too low. It is a good question.

Mr BRENDAN O’CONNOR —I guess what I am saying is that if we had got it right in the first place we would not be spending the money to fix bench and fixture heights throughout the apartments. Your submission does say, in paragraph 3.2, that the reason for much of the expenditure is indeed to redesign in order to accommodate Australian requirements for occupant comfort—which I understand. You probably were not there at the time, in this position, when the construction occurred. But what I do not understand is—and I am wondering if you are aware—why we constructed and fitted the complex with different standards, which means that it now has to be altered at the expense of the Commonwealth and, therefore, the taxpayers of Australia.

Mr Davin —The complex was actually constructed by a Japanese developer as part of a broader deal. But Australians designed it and had that input. Whilst the fittings that went in met Australian standards, I think it has really only been in the practical occupation that they have been found to be less comfortable than they might have been.

Mr BRENDAN O’CONNOR —I thought that we might have had not just singles back then but shorter people working in the building. Not true?

Mr Davin —I cannot say definitively what negotiations or consultations may have gone into the design of the building but I suspect they met Australian standards, and that is as far as anyone really looked at it. But in its construction and occupation it was found that the various benches, toilet fittings and vanity units would be more comfortable to your standard Australian if they were a bit higher.

CHAIR —As a supplementary to that, given that we have approved a lot of embassy buildings or refurbishments in the last little while, are these things being taken into consideration in places like Cambodia and Bali, where perhaps you might expect a different height of bench tops and different heights of toilet seat fittings?

Mr Davin —Yes, those projects certainly have been built to the Australian standards and to do meet the norm in Australia. It is a standard. I cannot really give you the detailed background of how this occurred in Tokyo, other than it was a local developer.

Mr BRENDAN O’CONNOR —That is the point, I guess: that we do not continue to make the same mistakes.

Mr Davin —We are certainly alert to it in all our current projects.

Mr BRENDAN O’CONNOR —Thanks, Mr Davin. Can I also ask about the asbestos removal from bathrooms and terrace balcony under-surfaces throughout the apartment blocks, which is referred to in paragraph 3.3. I am surprised that such a new building would require the removal of asbestos. I mean, this building was constructed in 1990, if I am not mistaken.

Mr Davin —It was the late eighties, but it was occupied in 1990.

Mr BRENDAN O’CONNOR —The late eighties—and we have a problem with asbestos? That just seems to be very unusual.

Mr Davin —I take the point. The fact is that it is sheeting, and it has quite a low asbestos content, but all the same—

Mr BRENDAN O’CONNOR —I understand that it is not airborne, but the point is: why were we using asbestos sheeting in the late eighties to construct a building of such expense? I just find it quite—

Mr Davin —It only came to our notice within the last two years that this had happened. Our investigations revealed that it was not illegal to use this.

Mr BRENDAN O’CONNOR —It certainly did not fit Australian standards of the late eighties, though. You were just saying before that the fittings, whilst not perhaps appropriate, were not in breach of any Australian standards.

Mr Davin —I meant the height.

Mr BRENDAN O’CONNOR —I understood what you meant. But, in respect of this particular matter, I would have thought that this was actually not in accordance with Australian standards.

Mr Davin —Certainly we were rather dismayed to find this in the building.

Mr BRENDAN O’CONNOR —Sure. I understand that you inherited this problem; I just think it is relevant.

Mr Davin —One thing I do recall from our inquiries was that it was not against Japanese standards. Do we have any analysis of where this sits and what the regulations—

Mr Morgan —No. I do not know the answer to that, but you often find when they are building overseas that materials that we would normally expect to be compliant are used and they are not detected until you do a full survey, for whatever reason.

Mr BRENDAN O’CONNOR —I understand that that is the position you found yourselves in.

Mr Morgan —Yes.

Mr BRENDAN O’CONNOR —I was just trying to get to the bottom of whether in fact it was properly constructed, given that the Commonwealth built it, whether it used contractors or not. I just wondered whether that was in any way in breach of the standards that would have been expected by the Commonwealth in 1989 or whatever year it was that the building was built.

Mr Davin —In the inquiries that I made when this came to notice, the best answer I could get was that, at the time it was built, these sheetings were perfectly fine. I cannot really say that that would have met an Australian standard in the late eighties; I am not sure exactly what the Australian position might have been on sealed hardboard.

Mr BRENDAN O’CONNOR —Most asbestos is fine. It raises anxiety once it is airborne or disturbed, but I understand it is encased. But I would not have thought it was to be used.

Mr Davin —Yes, it is a fair point.

Mr BRENDAN O’CONNOR —Again, I know it is something you have just inherited, but it says something about the plans back then, I guess. You also refer to OH&S concerns in paragraph 3.4, and you say that ‘particularly with respect to fire, electrical and ventilation’ they ‘need to be addressed’. Can you just expand upon the problems that have been identified and what needs to be addressed specifically?

Mr Davin —Yes. I am not sure that I would not be better deferring to my colleague, who has a more expert knowledge.

Mr BRENDAN O’CONNOR —Yes, thanks.

Mr Davin —Steve, do you want to talk it through?

Mr Morgan —Basically, the fire issue is that, under the rules in Tokyo, they require two means of egress from an apartment. Australian standards only require one, but being in a seismic zone they need to cover both aspects, so we are installing escape mechanisms from the external balconies. That is the first bit.

Mr BRENDAN O’CONNOR —What are ‘escape mechanisms from the external balconies’—stairs?

Mr Morgan —No, they will be a harness arrangement. It is specified for Tokyo and approved by the fire department in Tokyo and they have used it.

Mr BRENDAN O’CONNOR —How do they operate? I am not aware of harness arrangements—abseiling?

Mr Morgan —In its simplest form.

Mr BRENDAN O’CONNOR —Are they are allowed to use that if there is no emergency as well? How does it operate? Do you actually harness yourself in and abseil down the building?

Mr Morgan —I believe that is the mechanism, yes.

Mr FORREST —How do you do that?

Mr Davin —It is not quite as dramatic as abseiling, but it is a harness device that is gradually lowered. You are lowered. We do have them in a few locations.

Mr BRENDAN O’CONNOR —I am not aware of them, sorry. What about the other matters?

Mr Morgan —The ventilation issue is not about Australian standards, but it is a requirement in Japan to cycle the air through every two hours within the apartments. It is all to do with the materials—formaldehyde et cetera that is given off by various bits of equipment. So we have a ventilation cycling system that is going to be installed for that.

Mr BRENDAN O’CONNOR —Did you respond to the matters to do with electrical concerns?

Mr Morgan —I do not know the absolute detail of the electrical, but it will be upgraded to current standards.

Mr BRENDAN O’CONNOR —Okay. Thanks.

Mr FORREST —It would be useful to explain to the committee the engineering challenges associated with the drainage—the sullage and the baths. That is obviously the source of a fair amount of the cost.

Mr Morgan —Yes.

Mr FORREST —And the difficulties of altering the plumbing associated with that and the electricals. Could you run all of those issues past the committee.

Mr Morgan —Okay. In terms of the baths, the system that was installed fully complied with the Japanese standards of the time, but it was not what we would do under Australian standards, which would be a direct connection from the outlet in the bath down through to the drainage system. They have a collection mechanism under the bath and then the water finds its way into the actual piping and runs away. The problem that has occurred over the years with that is that, because there were no filters or whatever in the system, that would build up with hair and various other bits and pieces and overflow. You would have an overflow into the apartment et cetera, plus all of the hygiene aspects of it, I suppose, as well. In Australia, it would be clean and out through an S-bend and then through your system.

Mr FORREST —That is a feature in every Japanese hotel you go to, isn’t it? It is quite bizarre.

Mr Morgan —That is my understanding, yes. So that is the main thing about that.

Mr FORREST —You can hear the water sloshing under the baths. What about the electricals?

Mr Morgan —I would need to seek detailed advice on the electrical. I am not an electrical engineer or an electrician, so I cannot go into the detail of that.

Mr Lochran —I think one of the aspects of the electrical was the number of power points and GPOs that were available for use within the apartment. It was the reticulation of data and television outlets which was not up to what we would expect today in a home. It was quite limited when we went through the apartments.

CHAIR —And computers?

Mr Lochran —Yes, that is why it is going in.

Mr FORREST —You are not going to strap cables down the wall; you are going to find a way to get them inside the solid wall?

Mr Lochran —No, they are plasterboard walls. They are hollow walls internally.

Senator HURLEY —I have just a quick question while we are talking about fire and that sort of thing. Are there any particular requirements for earthquake or any other Tokyo type disaster problems?

Mr Davin —Tokyo is a recognised high-risk seismic environment, and the building was originally constructed to the highest seismic standards. There is nothing in this proposal which alters any of that.

Senator HURLEY —This will not impact that?

Mr Davin —It will not impact on it.

Senator HURLEY —And there are no higher requirements now than when it was built?

Mr Davin —No. The building certainly still meets the local codes—very high standards. The residents committee and the emergency procedures in the building are very finely calibrated and practised for these sorts of crises. It is probably one of the best built and prepared buildings in Tokyo. It is very substantial.

Mr FORREST —Most of my concerns have been asked about. Back to the asbestos question: the amount we discussed in the estimate is only small, so it is obviously not fibro cement; it is some small amount of asbestos in suspended tiles or something.

Mr Davin —That is correct. My understanding is that a very low quantity of asbestos has been included in the HardiPlank sort of construction items, but it is there and it is a risk if those planks or those walls are broken. That is why we—

Mr FORREST —We still have some of that problem in Australia, actually. There has been an overlap which is hard to catch up. The only other thing I want to ask is about the plans. I know that on the board you have some typical plans of the units. I am especially interested in how the ground floor amalgamations of units are going to occur. You will obviously end up with units of four bedrooms, which are probably more than you would need—or are you taking advantage of the layout?

Mr Davin —We are able to take advantage of the layout, but you are correct: we are taking quite small two-bedroom units which were appropriate at the time the building was designed back in the eighties, which no longer really meet the staffing profile we have now, and turning them into larger units which will be more appropriate for the family compositions we are getting at the post.

Mr FORREST —Do you have plans of that?

Mr Davin —I think there are some plans of that. We have some drawings on the wall.

Mr FORREST —But they are sample plans; they are not—

Mr Davin —Is that a detailed diagram of the actual work? Can someone describe the works that are going on at the moment? I do not know if we have anybody—

Mr FORREST —Do we have to swear the engineer in?

Mr Davin —Who is best placed to talk them through the works here?

Mr BRENDAN O’CONNOR —Can you take it around and talk it through?

Mr Davin —Apartments 410 and 411—are they the ones you are referring to on the ground floor?

Mr FORREST —I do not even know how many apartments you are converting.

Mr Morgan —There are six apartments in total; two are upstairs-downstairs and one is across. Two apartments are side by side: 410 and 411. They will be amalgamated as a ground-floor apartment, which is quite simple, and the other two will take into account above and below.

Mr FORREST —So you are going to remove the need to have upstairs-downstairs?

Mr Morgan —In two of the apartments that are adjoining there will be upstairs-downstairs. On one of the amalgamated apartments, apartments 410 and 411, they will be horizontal, at grade—

Mr FORREST —Okay. So what would that make the area—in the old language; that is, in squares—of a family apartment?

Mr Lochran —It must be around 18 to 22, on average, if not a bit bigger.

Mr Morgan —Apartment 410 is currently 90.3, so double that. That is—

Mr Davin —That is nine squares, roughly.

Mr Lochran —You double that, so it is 18 squares—you have got two together.

Mr Davin —It will be 168 square metres when it is finished.

CHAIR —That is about the average size of a three-bedroom home.

Mr Davin —Well, that is certainly one of the largest apartments that there will be in the complex when it is done. The average apartments are somewhere around 140 square metres. There are certainly some larger ones, which are there for the more senior staff, who have some entertaining responsibilities.

Mr FORREST —The only other question is: how many of the smaller, bachelor-style apartments will you have? You will have to keep some there; you will still occasionally have a need for those. How many of those would you have left?

Mr Davin —We will still have a substantial number of two-bedroom apartments; we would still have 15 or so. But some of the two-bedroom apartments have quite substantial public representational areas as well. It does not necessarily fit that the fewer apartments there are the smaller the overall apartments are.

Mr Morgan —Basically, they will be three-bedroom apartments; there will not be many two-bedroom ones left.

Mr Lochran —My estimation is that there will not be any two-bedroom apartments left.

Mr Davin —There will be. There certainly will be some.

CHAIR —Perhaps you can take that on notice—if it is important to you, Mr Forrest, to get the answer to that.

Mr Davin —Sorry, I was looking at the number of bathrooms rather than bedrooms. I think there will be only two.

Mr FORREST —Is that information you are quoting from available to us?

Mr Davin —Yes, we can make that available to the committee.

Mr FORREST —Right. My last question is about broadband access and so forth. I understand there is a need for the introduction of cabling and so on, but wouldn’t it be easier to set up the whole complex with wireless broadband and so avoid an enormous amount of expense from cabling?

Mr Davin —I am not sure what the local capability is in Tokyo—whether they run a wireless system or whether it is all cabled.

Mr Morgan —During our planning we discussed whether we would go wireless or whether we would hard-wire, and the advice from the local technical person at that post was that it would be beneficial to hard-wire in the first instance because they were not quite ready for total wireless there. So it was an option that we looked at.

Mr FORREST —This is the space-age. I am disappointed in that response. You are obviously investing an enormous amount of money in something that will be obsolete in a few years time. Broadband access by wireless will be the norm. It is happening in airports; my own home is a sign; this building—

Mr Davin —Well, we do not encourage people to work from their homes; that is not good work practice. And we do not seek to put classified systems into residences either. It is hard to say that wireless is there. Where I live, out past Queanbeyan, they are going through an extraordinary process to put in fibre-optic cable. It involves major excavation and digging. I wish they were using wireless, but they are not. So cable still seems to be the major means of providing that sort of data.

Mr FORREST —That is about a million bucks going down the drain—but anyway.

Mr Davin —I might just add that it is a combined voice and data system—and you can only do that on hard wire; I do not think you cannot do voice through wireless.

Mr FORREST —How much is it? It is tangled up in the electrical estimate. I am just going through my memory for that quote.

Mr Lochran —It will be under $100,000 to do that.

Mr FORREST —Just for the—

Mr Lochran —For the data outlets, the cat 6, which is two RJ45s per room.

CHAIR —I will just go back to the drainage issue. Given that there have been some difficulties in the past, how has that impacted on the integrity of the base building? Has any analysis been done on whether there have been water problems in the building?

Mr Davin —We have certainly had some flooding as a result of this local system, but none of the investigations we have done have indicated that there is any structural damage as a result of that. It is more an issue of convenience and damage to soft furnishings.

CHAIR —So there is no alarm that it has impacted on the structural integrity of the building?

Mr Davin —No. Certainly in our work on the prototype apartment there was no evidence of that sort of damage and it has not shown up elsewhere.

CHAIR —Can you give us a bit of a sketch of the tendering process. What is the current status of the tender process for this project and how is the project going to be managed?

Mr Davin —Once we have parliamentary approval we will go through a public tender process to appoint the various consultants. The actual delivery will be through a lump-sum tender process. Is there anything further we should add to that?

Mr Nixon —It will be a competitive tendering process. The normal probity requirements and the normal requirement to satisfy the value for money criteria will be adhered to.

Mr Davin —It will be advertised in Australia and Japan, so there will be opportunities for Australian participation.

CHAIR —I think I saw somewhere that you have actually had to do a prototype apartment.

Mr Davin —We have done a prototype just to get a sense of a whole range of issues—partly to see what sort of issues we will have to face in doing this project. It is also an ideal opportunity to seek input from our current tenants in the building. They have all been through to look at it. Questions arise such as: is the bench high enough? Are the finishes right?

Mr BRENDAN O’CONNOR —From the users?

Mr Davin —Yes, the users. One of the major features we are putting in is some additional lighting and things like that. Of course, this is an energy opportunity for us.

CHAIR —There was a cost associated with that. That work has actually been completed, I take it.

Mr Davin —One apartment has been completed.

CHAIR —And there was a cost associated with that. Where did that money actually come from?

Mr Davin —We budget funds each year within the Overseas Property Office for this sort of development activity. That is where we have drawn the funds for this prototype so that we can get a sense of what needs to be done and what the likely costs would be.

Mr Nixon —The development of the prototype allows us to be better educated and more accurate in the development of the costings for the overall project delivery.

Mr BRENDAN O’CONNOR —It would save money if you got things resolved in that one site.

Mr Davin —And people are much more patient with the disruption these works will obviously bring if they are able to walk around and see the finished product, so you have less disharmony with your current tenants.

Mr FORREST —This apartment allocation has the names of tenants on it. I am just wondering whether that is appropriate.

Mr Davin —Perhaps it should not be—

CHAIR —Maybe it should be tendered as part of the confidential cost hearings.

Mr Davin —If you like I can write to the committee with a sanitised version of that, which would help.

CHAIR —I am sure we would be satisfied that.

Mr Davin —I should add that, on further analysis of this, it seems that there will not be any two-bedroom apartments once we have done this work. I was looking down the wrong column.

CHAIR —I thank the witnesses who have appeared before the committee today and at the private hearing earlier.

Resolved (on motion by Mr O’Connor):

That this committee authorises publication of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 10.15 am