CHAIR (Mrs Moylan) —I declare open this public hearing into the proposed provision of facilities for Project Single LEAP phase 2. This project was referred to the Public Works Committee on 29 March 2007 for consideration and report to the parliament. In accordance with subsection 17(3) of the Public Works Committee Act 1969, which concerns the examination and reporting on a public work, the committee will have regard to:

Earlier this morning the committee received a confidential briefing from the Department of Defence and inspected the sites at RMC and ADFA in Canberra. The committee also conducted site inspections at Lavarack Barracks in Townsville, Queensland, and Randwick Barracks in New South Wales. I would like to add here that the committee does propose to arrange sectional committees to visit all other sites if possible and report back to Defence and the minister if there is anything in particular to report.

The committee will now hear evidence from the Department of Defence. Do you have any comments to make on the capacity in which you appear?

Mr Predgen —I am from Currie and Brown, the quantity surveyors and cost consultants on the PSC.

Mr Sabbatucci —I am from Sinclair Knight Merz. I am project director and technical advisor to the Project Single LEAP team.

Mr Brooke —I am a partner with KPMG and I am a financial and commercial adviser to the Department of Defence.

CHAIR —The committee has received a statement of evidence and two supplementary submissions from Defence. These will be made available in a volume of submissions for the inquiry and they are also available on the committee’s website. Does Defence wish to propose any further amendments to the submissions it has made to the committee?

Brig. Sowry —We have one change to the statement of evidence for phase 2 of Project Single LEAP. The Department of Defence advises that it has amended the original statement of evidence. Page 4, paragraph 21 is the location of the amendment. It is a minor amendment to the first sentence. The paragraph has been changed to read:

We have a formal letter here advising you of the change.

CHAIR —Thank you very much. Brigadier Sowry, I invite you to make a brief opening statement and then we will go to questions.

Brig. Sowry —Following on from the committee’s consideration of phase 1 of Project Single LEAP—Living Environment and Accommodation Precinct—in 2006, Defence appreciates the opportunity to seek parliamentary approval for phase 2 of Project Single LEAP. The project originates from a 2003 review into all of Defence’s living-in accommodation and a subsequent prioritisation of the requirements by the Defence People Committee. As you know, Project Single LEAP aims to improve the living standards for single Australian Defence Force personnel required to live-in for service-specific or operational reasons. These personnel generally fit into the category of junior service men and women who have only recently enlisted into the Defence Force and whom Defence requires to live-in to help inculcate them into service life because of specific operational or training needs that exist or because there is an in loco parentis responsibility to do so. They differ from more experienced single ADF members who are not required to live on base and can access rental assistance to obtain rental accommodation in communities within their location.

As you are aware, the living environment of ADF personnel is a major contributor to defence capabilities, impacting as it does on the readiness, mobility, morale and esprit de corps of personnel and with a direct effect on recruitment and retention rates. This project aims to address this issue by providing service men and women with a place that they can be proud to call home. Funding for this project originates from the 2004-05 federal budget when the government announced the Single LEAP project with an expectation that it would potentially be delivered through a public-private partnership arrangement. The ultimate litmus test for a public-private partnership delivery approach has to be the achievement of a lower overall cost to the Commonwealth coupled with improved services for Defence.

As you would appreciate, the upkeep of the defence estate has suffered over recent years due to major capability requirements competing for and winning the lion’s share of defence capability funding. Defence believes that, subject to value for money considerations, the PPP approach to delivering accommodation services of this nature is appropriate and will ensure that the integrity of these facilities will be maintained over the 30-year life of the contract. Since the release of the expression of interest, it has been clear that there is significant interest in the delivery of this project. We believe that we have four very strong bidders, which will make for a very competitive tendering process. Specifically, the scope of the PPP ensures the competition between bidders for a whole-of-life asset and related services will provide scope for innovation and other initiatives to achieve efficiency savings above those achieved under equivalent public sector delivery and financing.

As I discussed in the confidential cost briefing, the phase 1 outcome has very clearly demonstrated that, by using PPP as a procurement method, the Commonwealth is able to achieve significant savings over what can be delivered through traditional means. As you are aware, a separate briefing on the outcomes of phase 1 of Single LEAP has been provided to the committee. Phase 2 of Single LEAP now aims to expand the same living-in accommodation service concept through a strategic partner by delivering a further 3,535 permanent rooms on base at 17 Defence bases in every state and territory in Australia, except Tasmania. Subject to PWC approval, this exciting project will therefore represent one of the largest, if not the largest, social infrastructure projects in Australia.

Similar to phase 1 Single LEAP, the committee has been provided with a summary of phase 2 Raw Public Sector Comparator and the cost to the Commonwealth, if the project were to be delivered through traditional procurement methods. The total estimated cost to deliver phase 2, as notified publicly in the statement of evidence, is $1.2 billion.

Subject to committee approval of the project, I hope to be in a position to release, as soon as possible, a RFP to the short-listed consortia to achieve the project’s goal of obtaining government approval of the preferred strategic partner in mid-2008. If this project schedule is maintained, commercial acceptance of the first tranche of phase 2 Single LEAP, accommodation services, should commence at the end of 2010. I have already highlighted that, should it meet your approval, Single LEAP phase 2 will potentially be the largest social infrastructure project in the country. We have very solid indications from phase 1 of what is achievable and what benefits are to be had. While the service men and women are the ultimate beneficiaries, we should not forget this project represents a significant investment in rural and regional Australia, which will enhance the social and economic aspects of local communities.

Defence’s greatest asset is our people—the young men and women of today’s Defence Force who want to make a contribution to their society, who want to help people overseas in time of disaster, in time of trouble or in time of conflict. They are highly trained and highly motivated young men and women who represent the very best qualities of being an Australian and are prepared to serve in today’s Defence Force to protect our national interests.

These are proud words, but I think they are a perfect characterisation of our defence people. This project is about investing in them, because for them it is not merely a job, it is a way of life, and improving their standard of living by creating an environment they are proud to call home is what Single LEAP is all about. We would be happy to take your questions.

CHAIR —I am pretty confident in saying that everyone on this committee would endorse the last part of your comments. We all feel justly proud of the work that our members of the Defence Force do. Also, we all recognise the importance of a reasonable standard of accommodation in order to maintain the morale of the Defence Force. We know that there is a big recruiting drive, and it is very hard to get recruits if you cannot offer them reasonable conditions, at least those that perhaps accord with general community standards. We know that a lot of the defence infrastructure in housing is very old.

I would like to go to the review of accommodation, because I think for the public benefit this committee has to establish that there is a need and that it has been based on some reasonable background work. Your submission tells us that you have drawn on a Defence report in 2003, entitled A review of accommodation arrangements for ADF members without dependants. It is now 2007. That report is four years old.

The other thing, having been the chair of this committee for nine years, is that it seems only a few years ago that we were having discussions with Defence and Defence Housing about preferences in accommodation and how today many of the Defence Force personnel like to live off base, not on base. There has always been a fairly robust discussion about that. I wonder whether you could give us a little bit more detail on what other reports there are. In paragraph 3 of your submission it says that the report drew on ‘research of previous living-in arrangement reviews, existing data sources, base visits, stakeholder consultations and international comparative studies’. I was also wondering whether the review was carried out completely by Defence or whether arms-length, independent reports were done on the need for living-in accommodation in the way in which it has been proposed in LEAP 1 and LEAP 2 and whether staff were consulted in that process?

Brig. Sowry —I will get my staff to work in the background to see if we can get a couple of words on the external studies—if they have been conducted. By and large, the 2003 review was very comprehensive—it was nationwide—in determining the state of living-in accommodation. At the time, it identified our total holding and gave a general opinion about the condition of that housing. At the time, about 36,000 units were required for accommodation. As a result of that study they determined that over 20,000 of those units were substandard.

As you highlighted in your opening comments, part of the issue is that Defence accommodation has been developed since the fifties. We still have some living-in accommodation that goes back to that date, but Lavarack stages 2 and 3 in Townsville have developed the very best of level 5 accommodation that is currently available in the country. There is a wide variance in what is being provided and in what is now classified as level 5 by the Defence People Committee. It was classified by the Defence People Committee as meeting the need, but it no longer classifies as level 5 accommodation. As a result of that review by the Defence People Committee, they determined that, with the funding available, the best we could do was to upgrade under Single LEAP phases 1 and 2—the 6,400 rooms.

The audit of Project SMILE, the Strategic Management of Infrastructure in the Living-in Environment, is being updated across the country so that we will have an accurate snapshot of the state of all accommodation across level 1, level 3 and level 5 within the estate.

CHAIR —What is the make-up of the group that is conducting that study?

Brig. Sowry —It is a project team within my branch.

CHAIR —Is it all being done within Defence?

Brig. Sowry —It is an internal Defence study.

CHAIR —There is no arms-length input into that process?

Brig. Sowry —No, not at this stage.

CHAIR —Do you think that that would be a good idea?

Brig. Sowry —There is potential to use that sort of facility, but at this stage the people who know best about our estate are the regional managers, and we have been working very closely with them—doing consecutive tours across the country and getting an accurate snapshot.

CHAIR —Are you concerned that the review on which these decisions were made was completed in 2003 and it is now 2007? Are you concerned that things have moved on and perhaps changed?

Brig. Sowry —The shape and structure of the Defence Force was, in broad terms, understood when the decision was made to proceed with Single LEAP. There have been some initiatives since, such as the Enhanced Land Force and the Hardened and Networked Army initiative, but, in essence, they were forecast at that time—although the decision was not made. We are very confident that the accommodation that we will provide under Single LEAP will meet the extant needs—and an element of the projected needs—of the Defence Force.

CHAIR —How much are staff involved or consulted in this decision-making process? Is a group making these decisions, and, if so, who are they? How many rank-and-file staff who are serving soldiers or officers are involved in—or have some input into—the decision-making processes about the shape of the living-in accommodation changes?

Brig. Sowry —I think that you are referring to the input they have had into the standards that are being developed and the accommodation that we are providing under level 5.

CHAIR —Do they have an opportunity to express a preference for living on or off the base or, as we heard today with the Australian Defence Force Academy, is there a policy—you could loosely call it that—to require people who are studying to live on base? That it is probably most people’s choice—but what staff input is there into the whole process? Do their preferences count?

Brig. Sowry —In the first instance I think it is a bit more like the latter. As we have highlighted, Single LEAP is providing accommodation for those people who are required to live in. That may be for operational reasons, it may be for training purposes, as we saw at ADFA or at RMC today, or it might be because we have an in loco parentis responsibility for those few recruits who are actually under the age of 18 when they enter. We insist that they have a guiding adult hand to ensure that they stay with the right people while in the barracks.

I would further say that Defence is not necessarily as democratic as any other organisation out there. In the case of ADFA, or in my previous experience as a regimental commander, we generally had a requirement to inculcate people into regimental life, to spend the first year if possible in that level 5 accommodation so they got used to the rigours. The recruit training cycle is necessarily short these days, so there is a time of regimentalisation, if you like, once they get in there, to get them used to living in the communal military environment.

There has been a very comprehensive process over time to give them feedback into the design of the rooms themselves and how they wish to live in them. I would like to refer back to Lavarack phase 2 and Lavarack 3, and I know that you have seen the very high standard of level 5 accommodation that is being provided at those rooms. They have very much been the model for what we are now providing, and they form the basis of the standards that have been selected by the Defence People Committee as an appropriate level 5 standard. During the development of those particular structures there were a number of mock-ups done at Lavarack Barracks, where they could provide input to the design, the fixtures, the fittings, the general layout and the sort of amenity that is being provided. That has been re-engineered back into our particular process.

In terms of Single LEAP phase 2 validating those designs, Ms Pepper has conducted a focus group with the Federation Guard, which was a perfect capture of people, being tri-service—Army, Navy, Air Force—who come from all bases and organisations around the country. She conducted a focus group to reconfirm that what we are providing is going to meet what we anticipate to be an enduring need over the 30-year life of the project. So part of this is trying to future-proof the design so that what we provide now is largely what would be acceptable in 15 years time, not only to the soldiers themselves but to the community, with its expectations of how our people should be housed.

CHAIR —Further to that, a couple of years ago I took the opportunity to inspect the accommodation at Campbell Barracks. I think our governor has been quite focused on seeing an improvement in the standard of living at Campbell. One of the things that was apparent and was raised with me during that inspection was the fact that the accommodation by today’s standards is pretty poor, as you would well know. There was no room for storage of kits. Your SAS people particularly have a lot of gear, and there was nowhere really to store that within a reasonable distance, and also for personal effects. Has this been taken into account in the design of the new accommodation units?

Brig. Sowry —It has. In the reference project for the design, as we have described a number of times, the typical design is a two-storey structure with under-croft parking that also includes a storage area that is accessible to the soldier concerned on a basis of a storage area per person.

Mr Sabbatucci —Through the course of our site selection process we met with each of the on-base personnel and talked to them about the room spaces and sizes and the sorts of functional requirements that they had. As we went around the country we picked up some of the differences between the types of units and their requirements, and we did indeed understand what the SAS were seeking as well. We will reflect that in the brief that goes back out to the market.

Brig. Sowry —In that respect, the extra kit of SAS has been identified and is incorporated into the RFP as an additional design requirement specifically for Campbell Barracks.

CHAIR —Yes, I felt sorry for them. Once they have got their kit in the room there was no room for them.

Brig. Sowry —There is not much left, yes. So they certainly have that now. If I could follow up on an earlier point, referring to other studies elsewhere, we reviewed Project SLAM, which was the British version of their single living-in accommodation review, and similarly with the New Zealand and the Canadian forces. In terms of developing the broader standards and how they were classified, that was done in 1999 in terms of the process for currently allocating level 1, level 3 and level 5 accommodation and the fixtures, fittings and amenities that are provided. So in essence that 1999 study provided the basis for what was developed in Townsville in 2002-03.

Senator PARRY —In the private briefing I asked some questions concerning the adjusted risk public sector comparator. Because we are dealing with a fairly extensive and expensive program, just to have it on the public record—and I am not going to mention any figures—there was a mean risk adjusted public sector comparator used for Single LEAP phase 1, and I would like you to comment about the four bids that came in and where they fitted in compared with your risk adjusted public sector comparator—without mentioning names.

Brig. Sowry —Obviously there is a degree of sensitivity with this and we have to be quite careful. We obviously will not mention names, but I think—in terms of the public interest—when the bids were made there was a spread across the public sector comparator, with two above and two below. Clearly, as I noted in my opening comments, the litmus test is to come below the PSC, and that is how we achieved value for money in phase 1.

Senator PARRY —Thank you for that. I think it is good to have it on the public record, to give some comfort to the public as well as the committee that the mean was fairly accurate. We have to establish that the risk adjusted public sector comparator was a fairly accurate figure.

Also, could you place on the public record the issue of probity with the bidders and the extent Defence goes to to ensure that the bidders do not have any connection or any risk of pecuniary interest as far as having a relationship with any of the bidders is concerned, or any of the organisations involved with preparing the public sector comparator, particularly the risk adjusted one?

Brig. Sowry —Surely. I will call upon Ms Pepper to provide those comments.

Ms Pepper —The Australian Government Solicitor provides probity advice and support to the project. All of the bidders tendering for phase 2 Single LEAP will be required to submit confidential agreements and to disclose any interests that they may have. If they fail to do so, the RFP will be quite clear that they would be excluded from continuing the tendering process. Similarly, Defence’s consultants to the project are bound by confidential agreements with Defence to protect our interests and their interests.

Senator PARRY —Thank you. Further, again just to place it on the public record from the confidential briefing, there is a time line of events. This committee does not have the opportunity to view the risk adjusted public sector comparator, but that is viewed by the minister. All bids are viewed by the minister prior to decision by cabinet, is that correct?

Brig. Sowry —That is correct. After the PWC has approved the project and given us an expediency motion we will go through a very comprehensive request for proposal process, a tendering process. The assessment of that will be presented through the minister to cabinet for decision. That cabinet submission will include all the data related to the four bidders, to ensure that appropriate oversight is given in the decision-making process.

Senator PARRY —Thank you. Your submission mentions Defence guidelines used for the development of allocated risk. Is it possible for the committee to be provided with a copy of those guidelines?

Brig. Sowry —Yes, it is.

Senator PARRY —We would appreciate it if you would take that to notice and provide those. There is a non-financial score, I understand, that is utilised by Defence to assess or compare again with the public sector comparator. Could you just describe how that worked with Single LEAP phase 1? Can you give basically some broad outline of the non-financial score comparisons with the bidders? I think that at the inspection of Lavarack base it was indicated that that even resulted in improved whitegoods or top-of-the-range whitegoods, so there is obviously a level of comfort for the occupants based upon reduced maintenance costs by buying superior equipment. Would you like to make some comments about that?

Mr Aikins —In terms of the process by which bidders are assessed, they are assessed sans financial matters in the first instance so that the focus is on technical quality. The individual tender evaluation working groups that are evaluating the bidders are not swayed by seeing prices. The technical merit is the focus. That is what delivers scores. It delivers an assessment in terms of design and construction, whole-of-life maintenance, and financial, legal and commercial issues—financial issues not related to the actual price. Then the price is assessed in terms of those scores so that the value for money outcome can be achieved for the Commonwealth. The process means that we get a very clean view of the technical merit of the bids and then we see the value for money outcome and the Commonwealth then makes a cost-benefit analysis of technical merit versus price. Does that answer your question?

Senator PARRY —Yes, by and large. So you are satisfied that the non-financial score marries in quite neatly with the final financial figures?

Mr Aikins —Yes.

Brig. Sowry —It does provide us with the opportunity to assess innovation in what is being provided, as you alluded to. You can potentially get over and above what you asked for because they have been able to be innovative in their construction or their management process and use add-ons as a competitive measure in their bid.

Senator PARRY —Brigadier, are you satisfied that the way that you have arrived at the public sector comparator is the best possible way you could have arrived at that process? As far as you are concerned, is that an accurate figure that you have arrived at?

Brig. Sowry —I think the proof is in the pudding. We followed a very similar approach to that which we did in phase 1. As we highlighted in the confidential cost briefs, we achieved significant savings in phase 1 against the comparator. The comparator provides us with, if you like, a best estimate of industry standard—not the cheapest and not the most expensive but the mean for how we could deliver this through traditional means. The spread of bids that we had, both above and below the PSC, is a solid indicator that it is an accurate representation of traditional build and how it can be delivered.

CHAIR —The secretary just reminded me that we must seek the agreement of all committee members to include the replies to questions asked by Mr Forrest and Senator Hurley into the public evidence. If the committee will agree to that then we can move on. They were just provided to the secretary.

Mr FORREST —I think we had better ask Brigadier Sowry if he is comfortable with that. Brigadier, you certainly satisfied my curiosity about the rigorous process of selection of a bidder, which probably in hindsight could have been asked on the public record. But we cannot use it unless you agree.

Brig. Sowry —I would be quite comfortable using them in the public record, with the caveat that we do a check on the inclusion of sensitive information in the response.

CHAIR —I am sure the secretary will take that into account as the drafting takes place. As everyone is agreeable to including that as evidence, it is so ordered.

Mr JENKINS —The warm and sensitive nature of this hearing is getting to me! The observation I make is that people I hunt and run with within Her Majesty’s loyal opposition would be amazed that I can admit to having visited all but three or four of the sites. But I am trying to get a sense about the process you go through with the sites. I take it that all these units are new.

Brig. Sowry —Correct.

Mr JENKINS —There is no remediation of any kind?

Brig. Sowry —We are looking at refurbishment at Robertson Barracks in the Northern Territory.

Mr JENKINS —How is that handled in the processes that you have been through to this stage?

Mr Sabbatucci —In going through the site selection process we have identified accommodation units that may well be redundant at the moment because of operations requirements. It just so happens that the land which those buildings are sitting on is suitable for the level 5 accommodation. We have then gone through and reviewed the condition of those buildings and done a pre-feasibility assessment. We have determined that it may well be suitable and cost effective for the market to renovate those buildings rather than build new ones. However, there are some risk issues around it, such as taking on board existing structures and the like. So what we are proposing, through the request for proposal documentation and in making the sites available, is to say that these buildings are available at the bidders’ initiative to see if they wish to renovate those and provide a 30-year whole-of-life solution or, alternatively, if they wish to work out from their own cost-effective investigations whether they would prefer to demolish and rebuild. So we will effectively be making it, at their discretion, an option to work out what is the most cost-effective way of delivering that whole-of-life accommodation solution.

Brig. Sowry —Ultimately, that site at Robertson is perhaps more suited to it than any other site in the country by virtue of the buildings being considered are only 10 years old, but they predate the 1999 standard, so the standard being provided there is different to what we are proposing to provide. In essence it will be up to the bidders to determine how much risk they are prepared to take in a 10-year-old building and in doing a renovation in effect on a 10-year-old building.

Mr JENKINS —In other sites there will be redundant living-in stock. Are decisions about the use of those buildings or their demolition part of this project or some other?

Brig. Sowry —It is part of Project SMILE, that redundant stock. Well, it is not redundant; it is not level 5 stock. It still conforms in some cases to level 1 and level 3 standards. Project SMILE, the Strategic Management of Infrastructure in the Living-in Environment, is, as I said in the confidential brief, doing a review of all of that accommodation to bring it up to the current standard for level 1 and level 3 and looking at doing that as an ongoing refurbishment program. So that stock will not be wasted. It is going to be used for training purposes, or in some instances it will be used for recruits.

Mr JENKINS —So when we were out kicking dirt at the ADF Academy and we were told that in the messes some rooms would be converted for other use, that is outside of LEAP phase 2?

Brig. Sowry —That is correct.

Mr JENKINS —What about assessment of any heritage or other values of any of the stock that is involved?

Brig. Sowry —In the stock we are replacing, and correct me if I am wrong, there is no stock of heritage value. On the sites that we are occupying there are some buildings that have some heritage value, but generally speaking the assessment by our environmental heritage and risk branch is that, given the sites and the relatively low nature of their heritage status, if you like, those buildings could largely be demolished.

Mr JENKINS —As close to a local interest as I can get is Simpson Barracks in Watsonia. In that case there has been other living-in stock provided—

Brig. Sowry —I just might add that at the moment we have some heritage buildings at Edinburgh and at Larrakeyah Barracks in the Northern Territory which are continuing to be assessed. If need be, representative examples will be retained according to the assessment that is finally made by the environmental heritage and risk branch.

Mr JENKINS —And that, again, is in the documentation presented?

Brig. Sowry —Yes, it is.

Mr JENKINS —At Simpson there was some other stock that is going to be provided which is outside of LEAP phase 2.

Brig. Sowry —Yes.

Mr JENKINS —I am just a bit confused—

Brig. Sowry —Defence Force School of Signals will be providing 216 rooms in the Defence Force School of Signals project.

Mr JENKINS —What was behind the decision to do it by the traditional method rather than having it included in this?

Brig. Sowry —As Brigadier Grice advised in the PWC consideration for that base, it was purely a timing issue. Those 216 rooms are required at a time that we cannot meet, earlier than Single LEAP can deliver.

Mr JENKINS —I might leave it at that because I am sure that Mr Forrest will ask the other series of questions that I want to ask. But, if he does not, I will ask them.

Mr FORREST —Can I just make a comment about the sense of humour of the people who dream up the acronyms? We have Single LEAP and we are already in our second LEAP. Actually, according to my figures, we will probably have a third LEAP before very long. Clearly the planning work for another rollout or phase 3 is going to follow on very shortly.

Brig. Sowry —You are talking about the numbers that we are delivering through the Single LEAP phase 1, Single LEAP phase 2 and the deficit between that and the 6,400.

Mr FORREST —Yes.

Brig. Sowry —At this stage the requirements for Enhanced Land Force, Hardened and Networked Army and some of the other initiatives that are currently in play in terms of naval and air force programs mean that there is scope to provide the remainder of rooms to support that. The process would be that, if that accommodation was required in the locations currently proposed under Single LEAP phase 1 and phase 2, the strategic partner who is operating that site would be asked to bid for those additional rooms. Subject to value for money considerations in a normal tender evaluation, they could be selected and those rooms would be added to the extant contract.

Mr Aikins —We are coming back to this committee on those matters.

Brig. Sowry —It would be done with your oversight.

Mr FORREST —There is one criticism because of the level and extent of expenditure here that this has happened because Defence has taken its eye off the ball and let standards slip. But it is obviously more complex than that. The expectations of participants have increased.

Brig. Sowry —When we were all children the homes we lived in did not necessarily have ensuites or parents retreats. They did not necessarily have courtyard gardens and the like. Clearly, over time, the expectation has risen. We are competing in a very competitive market for a small pool of talented people. We have to provide what the market expects as an attraction to get these people in. I have lived in the full spectrum of accommodation, from multi-person to the single room through to the extant level 5. I know which one I would rather be living in.

Mr JENKINS —It is a fair question from the junior coalition partner about keeping an eye on the ball—and smiling through the SMILE process!

Mr FORREST —We are used to living in tents out where I live. What is SMILE the acronym for again, just out of curiosity?

Brig. Sowry —Strategic Management of Infrastructure in the Living-in Environment. I could tell you the alternative, but I will leave that for another time.

Senator HURLEY —In addition to the questions I asked in the confidential session, could I just clarify again that the risk modelling was a joint exercise between KPMG and in-house government departments.

Brig. Sowry —That is correct. Clearly, Defence is not the sole expert and does not possess all the expertise to conduct such a comprehensive risk-modelling exercise, therefore we go to the experts out in the marketplace. In this instance, KPMG and others assisted in that exercise.

Mr Aikins —But, in terms of that risk modelling, they require significant input from the department and departmental officers.

Brig. Sowry —That is largely in the area of ground truthing. The risks are often site specific, and the people who best know the sites are our regional managers. They have significant input into identifying what we believe to be those issues.

Senator HURLEY —I presume therefore that there are Chinese walls in place because KPMG may have a relationship with the bidders, of course, through their other work.

Brig. Sowry —I very much refer to the response provided earlier by Ms Pepper about the confidentiality agreements we have between KPMG and the activities that we undertake. We are very mindful that KPMG is a big firm and has relationships with many people around the country, potentially some of the bidders in the project, through other projects. We are very strict in ensuring a separation, if you like, between what our people are doing and associations elsewhere.

Ms Pepper —Hypothetically, if KPMG were providing assistance to any of the bidders, there would be a requirement for them to disclose that and to disclose that those Chinese walls existed to prevent any leakage of information. They would be bound by those disclosure agreements.

Senator PARRY —So you would still allow KPMG to continue if they were involved with one of the bidders?

Ms Pepper —There would be confidentiality agreements in place, which they would be bound by, to prevent any leakage of information between those elements off the company.

Mr Aikins —We should clarify that it will depend on the nature, obviously, of the relationship, should it exist. If you are talking about auditing of company accounts in a totally separate division of KPMG, then that is quite removed from the sort of work that is done here. Graham you might wish to comment.

Mr Brooke —Just to conclude, KPMG is well aware of its responsibilities to Defence. We know that we are not able to act directly for a bidder in relation to this transaction; that would never happen, and we have made that commitment to Defence.

Senator HURLEY —Just to follow up again on those probity considerations: are there rules in place about lobbying by the bidders?

Brig. Sowry —In terms of lobbying, we have made sure that we have had very good guidance from the Australian Government Solicitor about what we can and cannot do. For example, there have been invitations to dinner and the like, and to date they have all been declined. We have very carefully avoided any sort of situation that could potentially compromise the tender that we are about to put out.

Senator HURLEY —Getting away from the bidding process altogether, what kind of weighting and evaluation is given to the design as opposed to the technical considerations and other aspects?

Mr Aikins —I am not sure of the extent to which this is disclosed to bidders in the tender process because it might force them to change their—

Brig. Sowry —Their emphasis, yes. We would decline to answer that question on the basis that it would expose our assessment methodology for the tender.

Mr FORREST —If you want to pursue it, we could go back in camera.

Senator HURLEY —Yes, I am sorry, I should have asked that question earlier, apparently.

Mr FORREST —You can never get it right, can you!

Mr Aikins —We can give you confidential advice.

Brig. Sowry —We can come back to you to give you that advice, if you like.

Senator HURLEY —If that could be provided, yes please.

CHAIR —Are you satisfied with that, Senator Hurley?

Senator HURLEY —Yes, thank you.

CHAIR —I have a couple of other questions. The first is in relation to the number of rooms that are subject to refurbishment or replacement and the number of ADF personnel. If you do the sums on this, it appears that the rooms that are proposed to be refurbished over the whole of the LEAP project cater for about 50 per cent of the total number of ADF personnel. That brings me to the question of occupancy. The submission seems to be silent on this particular issue. Can you tell us what kind of planning has gone into determining the occupancy rates at each site that would therefore justify current numbers of rooms required after the Single LEAP phase 2?

Brig. Sowry —When you mentioned that the number of rooms in total is 50 per cent of the ADF, that is the reference to the 30,000 being—

CHAIR —That is right—38,684 actually.

Brig. Sowry —Chair, that was an audit of what we had at that particular time. It is important to note the number of LIA that have been developed since the fifties. Not all of those will be redeveloped, clearly, because even since I joined up in 1980 the Army has gone from 32,000 down to 23,000; now we are going back up to 27,000. There has been some fluctuation. Clearly, over time there a rooms which have become surplus. Typically they are now classified as ‘transit’ rooms. In effect, with Project SMILE—I cannot give you the detailed figures—off the top of my head we have approximately 7,000 transit rooms, which are surplus to requirement. Over the period of Project SMILE we would look at disposing of those and utilising the space elsewhere because they are largely substandard and provide long-term maintenance liability if we retain them.

CHAIR —So you can confidently assure the committee that the current number of rooms required under Single LEAP phase 2 are justified?

Brig. Sowry —In essence, yes. Again off the top of my head, as of the last payday we had 8,000 people living in. With the Hardened and Networked Army and Enhanced Land Force initiatives that figure will rise slightly. In general terms occupancy rates operate at about 80 to 90 per cent across—

CHAIR —It is that high?

Brig. Sowry —It is that high. You might remember at Randwick Barracks, when we visited the Endeavour Centre, Warrant Officer Johnson highlighted that the Endeavour Centre had 98 per cent occupancy. It varies from time to time depending on the operations—whether a ship is at sea. That will fluctuate but typically you are going to operate at 80 to 100 per cent occupancy rate.

CHAIR —Has a calculation been done on the cost to the Commonwealth of unoccupied rooms, because while they are unoccupied presumably they have to be maintained as well?

Brig. Sowry —I do not have information available on the detailed cost. I would make the observation that you cater for the need that exists. We have gone out to the service chiefs who have identified their needs by base and by rank and we are working to those particular figures. They are the needs that exist and the projected needs that are going to come through ELF, the Hardened Network Army and some of the other maritime and air initiatives that are in play. We do not provide less than the need; we provide for the need and manage the difference.

CHAIR —Are you satisfied that the projections of what accommodation is needed have been refined down to maximise the value of the project?

Brig. Sowry —I think the issue as it stands at the moment is that we have people paying living-in charges for 8,500 rooms currently. Not all of those are currently level 5. Many of them are living in level 3. The assessment made by the Defence People Committee was that, with programs like the Defence Force School of Signals providing 216 and the 800 or so that we have already provided in Townsville, the 6,400 makes up the immediate need deficit. I am quite confident that what you find with pre-existing acceptable standard level 5 and what we are proposing under Single LEAP will meet the long-term Defence Force need for level 5 accommodation. Any new initiatives over and above what we currently know about that come with a traditional manpower requirement for accommodation will clearly need to be identified and the cost should be attributed to those projects to provide the additional facilities required in a whole-of-capability sense.

CHAIR —I have a couple of other questions as well about Randwick. I inspected Randwick on Monday on behalf of the committee. There are a couple of letters here. One is from the Randwick City Council. I will not go into all the detail, but there is a summary of their concerns. There were two issues that struck me when we did the inspection on Monday. One is that many of the buildings earmarked for demolition appeared to me to be solid brick buildings in good condition. We did not do an inspection of the internals of those buildings, but certainly they looked to be really solid buildings. Have you got anything that the committee can look at? I think Mr Sabbatucci raised the issue of a cost-benefit analysis that you have done relating to renovating old buildings versus building new ones. Is that what you said earlier?

Mr Sabbatucci —Yes, it is.

CHAIR —Have you done that at Randwick? If so, can the committee see that work so that we can be convinced that there is a benefit in demolishing the buildings that are earmarked for demolition at Randwick?

Brig. Sowry —I will just make some comments about the buildings at Randwick. They are level 3 accommodation. Their starting point is level 3 accommodation of a generation ago. Their standard is significantly different to what we are proposing under the level 5 accommodation. The facilities are over 20 years old. They are solid brick and concrete, so the structural issues for providing the additional space required to have the metreage in accordance with what we are proposing are significant.

CHAIR —Have there been some comparisons done along the lines of the cost of refurbishment compared to the cost of new development? There was a sweeping statement made that it would be cheaper to knock them down and build new ones. I am not convinced of that.

Brig. Sowry —We can give you the analysis of that which we conducted at the Enoggera Base, which indicated that—

CHAIR —You could not really do that comparison, I do not think. You would have to look at it. Are you telling me that you are just basing it on what you have done at another base and that you are not looking at the actual situation at Randwick and doing that analysis?

Mr Sabbatucci —One of the issues that we looked at at Randwick was that we have to accommodate 650 units on a piece of land that requires a higher density solution compared to the other places we are looking at.

CHAIR —That leads me to my next question, which is around the density. I have to say that I have concerns about the density of development at Randwick. The council has concerns about the density. If you look at its analysis, you see it has actually gone through other examples. For example, Lavarack Barracks in Townsville has a site of 150 hectares and a proposal to provide 540 units. Robertson Barracks in Palmerston, Darwin has a site area of 1,200 hectares and a proposal to provide 686 units. Randwick Barracks has an approximate site area of 17 hectares and a proposal to build 650 new units—and 148 of the existing units will be demolished. That is a lot of units being demolished. Given that there is surplus land which is going to be sold off to private developers, why isn’t that surplus land being used to build the units necessary to meet the requirements at Randwick given that there are concerns?

These are legitimate concerns, I have to say. What it also does is cut down on green area and recreation area. Randwick is a site, as you well know, that sits right in the middle of a built-up area. In fact the density of development already in the Randwick locality is very high in comparison with other suburbs. This will be added to by trying to squeeze in 500 and whatever it is units at Randwick, and in the process we are going to demolish 148 perfectly good units. I am not convinced that this is value for money. So you have a bit of work to do. I do not know how the rest of the committee feel, but you have a bit of work to do to convince me that this is value for money and that there is some good reason why we ought to be selling off the remediated land adjoining Randwick Barracks. Our Defence establishment is growing hugely at the moment. Here we have a prime bit of land in the middle of Sydney at Randwick and we are going to start selling it off to private developers. I am sorry, but it does not make sense to me. I would like you to come back and convince me that there is a good reason for this.

Brig. Sowry —I will try to address those points. Clearly we have seen the Randwick letter. We noted all of their concerns. As I highlighted earlier today, after we had our briefing with you on Monday we proceeded to the Randwick City Council and addressed with them, case-by-case, each and every one of those concerns. In the first instance, the figures they quote in terms of the land are directly out of the statement of evidence. They are quite accurate in terms of saying that Townsville is putting X number of rooms on 150 hectares, but that description of the Lavarack Barracks Townsville is for the entire base.

CHAIR —Yes, I know that.

Brig. Sowry —So the density in terms of where we are putting the accommodation there is in a far smaller area, for example.

CHAIR —I do understand that. But I do not understand, given that, why we are selling off large chunks of remediated land on the perimeter of Randwick. If we are talking about providing better accommodation and better facilities for our serving members of the Defence Force and lifting morale then why do we want to cram them in in shoe boxes on a site which is, in my view, being overdeveloped?

Brig. Sowry —In the first instance, we do not believe that we are cramming them in. The space that we are providing the 600-odd rooms in is equivalent to the space that we are providing at Enoggera Barracks in Brisbane for the same accommodation. The issue has been somewhat eased since we have been able to clarify the status of that DNSDC warehouse, which adds an additional 1.6 hectares to the site at the time of construction. So our perspective is that Project Single LEAP can achieve what it needs to achieve on the allocated space within the Randwick Barracks as it stands.

I think your comments about the portion of Randwick Barracks which is proposed for disposal is an important one. I know there have been discussions about the future of that particular piece of land. One of the issues that Defence is prepared to do is look at the utility of that particular portion, because it is a separate issue to Single LEAP inasmuch as Single LEAP where it is currently positioned to go is approximate to green space in terms of the football ovals, the swimming pool, the gymnasium, the mess and the like. So we do believe that, within the space available, we can achieve what we need to achieve within a density that is consistent with the remainder of Randwick proper. As you saw, Randwick in general is a high-density living environment. What we are proposing is in fact probably less dense than we saw up on the hill near Moverley Road near the housing commission flats up there.

CHAIR —I understand that, but it has been sold off to private development and they have permission to do it. If you end up with that all around, it exacerbates the situation onsite because you have your personnel living in this very densely populated area with little recreation or green space. I cannot see that that adds to the morale of our serving personnel.

The other thing is—and I have to think about how you would do this; probably there are better brains around the table that do the cost-benefit analysis—I would like to know what it is going to cost, what the 148 existing units are worth and what the cost of demolishing them is against building a new building on the remediated piece of land and retaining the 148 existing units, which would obviously need some internal refurbishment. I have to be convinced that this is value for the public money—

Brig. Sowry —I appreciate your concern.

CHAIR —and that it does what it is intended to do—that is, provide a higher level or at least an acceptable level of accommodation in an environment that will improve the morale of our serving members of the Defence Force.

Mr Aikins —I might add something for clarity with regard to density. Brigadier Sowry mentioned the DNSDC warehouse and the increasing clarity that we are getting that that site will be available within our build time frame to form part of the precinct. If that site becomes available then, with the construction approach that we are looking at—the spacing, the levels and the density, leaving aside the different car parking ratio—we would be looking at something that is very analogous to everywhere else. The more dense option is only required if we were not able to get the DNSDC site. That is clearly moving towards an outcome which will achieve that. So in that sense we will still retain a parkland feel to the place. The fall of the ground allows for a very nice fall of view and everything from the rooms.

CHAIR —Can you let us have a map of how that would look? At the moment we only have how it would look under the present proposal from when I was there on Monday and clearly things have moved on. As to other issues, I did have some concerns about car parking spaces as well when we were talking on the site the other day. I think I would like to see that resolved. That may well be resolved if you can resolve the density issue. If you were able to get access to that other place of land, would you need to demolish the 148 existing units?

Brig. Sowry —We would probably still argue that it is desirable to do so.

CHAIR —Can you provide me with some evidence that it is value for money to do it that way?

Mr Aikins —Sure. I suppose the other issue we would have to take into account is what may be the estimated disposal value of the land that the Commonwealth is looking towards. That would have to be balanced against effectively the cost-benefit of Defence not disposing of it and keeping it to keep those 150 things which we should say are currently occupied by people who are not required to live in.

CHAIR —The other issue that has been raised by the council, which again I think is a legitimate issue—and I know we did talk about this on Monday—was the suggestion that some of the staff would be bussed to the site. Nevertheless, I think there are issues around the traffic volume and the management of that volume. I would like you to assure us that there will be a detailed traffic and parking study, that we would have access to that study—if it is completed now that would be good; if it is not I think we need to see that—and that there will be ongoing discussions with the council and any other necessary people that have to be consulted in relation to the traffic movement. Can we get that assurance?

Brig. Sowry —I will give that to you in a couple of parts. Clearly, traffic and parking is an issue. We highlighted that, being predominantly naval personnel operating out of bases in the central Sydney region, they have a lower vehicle ownership than is normal, principally because they do not bother having cars because they are on ship. They prefer to use motorcycles in many instances, because of the lack of car parking at the places they work, as is currently being exercised at Endeavour House, where a shuttle bus arrangement works during peak times to take them to and from work. So the traffic emanating out of that living precinct is largely after-hours and on weekends.

CHAIR —How many of the people going to live on that site in the new accommodation would be in the Navy?

Brig. Sowry —All of them; all Navy, so 650 are identified Navy—32 senior officers I identified as trainees doing long-term training at HMAS Watson. By way of example, for the 550 people that are at Endeavour House, there are 192 car parks, and a proportion of that number are not utilised even now. So that gives an indication of what we can expect down there.

There is another traffic issue during the construction phase which is just as important to us. Just as we are doing at Enoggera, Holsworthy and Amberley, and as we plan to do elsewhere in phase 2, we will have very close consultation with Randwick City Council and other councils as appropriate to coordinate the best way of achieving that. It may be in single access and exit; it may be multiple access and egress, but the aim is to minimise the social impact. One traffic study has been done. We will take a future traffic study, which can be made available to you if you so wish.

CHAIR —The same applies to Robertson Barracks because we have had a letter, as you know, from Gerry Wood, the local Independent member for Nelson, and he raises the traffic issues in relation to Robertson Barrack. I am sure the committee would appreciate ongoing reports as to how the traffic issues are being managed there as well.

Brig. Sowry —In relation to Robertson, which I think is clearly an issue, I would highlight that, because we are just replacing existing stock, the net traffic increase is virtually zero coming out of the work we are undertaking at Robertson. If anything, we were perhaps lessening it because we will be having more people living in.

CHAIR —Fair comment; thanks for that.

Mr JENKINS —I have a couple of broader questions but seeing we are on Robertson Barracks, I noted the concluding statement, ‘No senior NCO units will be constructed due to ANEF Contour restrictions.’ Is that because of the helicopters out of the barracks?

Brig. Sowry —The decision was made not to include senior NCO accommodation at Robertson Barracks at this stage because the planned ANEF contours coming out of Darwin airport indicate that we are now within that ANEF 25 contour. We are currently trying to identify a suitable location for the senior NCO accommodation. When we do that, it will be included to fill up that deficit between 6,400 and what we are currently providing.

Mr JENKINS —I have two broad questions. The first concerns this exercise which involves you in looking at a broad range of sites. One of the things that always amazes me is that some sites have master plans and others do not, which then brings us to issues about the sites like those we are confronting today. Perhaps consistency in the way in which we look at a bit of dirt—for instance, ‘This is used for training,’ and ‘This is used for living,’ and so on—would assist us. Any comments?

Brig. Sowry —The comment I would add in terms of master plans is that since 1990 there has been a line drawn in the sand. We have gone through a force disposition review, a defence efficiency review and the recent Proust review. We have had Hardened Network Army, Enhanced Land Force and a whole series of other new capabilities introduced into it. This makes master planning somewhat challenging. It is a movable feast. In response to that, it does not mean that we do not try to manage the estate by location, and that is why they have moved towards their zonal planning arrangements, which is: this is the living-in precinct, this is the working precinct and this is the amenity precinct. Typically, as you vary from location to location, the siting work that we have done has been done in accordance with the extant plans that are in location for those particular bases. We could provide you with the status of all the master plans that we have at the moment and how they are planned for upgrade over time, if that would be helpful to the committee.

CHAIR —Yes, that is useful. Thank you.

Mr JENKINS —That will keep me off the streets for a day! The next broad question concerns the guidelines. I am interested in what we have learnt about the robustness of your guidelines to do with, for instance, ecological and sustainable development, use of water—and I have to get this on the record—Xeriscape plantings and the like. It is likely that, as we go on, we will get to a stage where the matters that I have highlighted will become more important, and there will be more pressure on you guys. I am interested because you have consistently developed guidelines that you can look at and say, ‘They are good.’ I am just hoping that as part of this exercise they have been sufficiently robust to give you guidance.

Brig. Sowry —Thank you. I have a very efficient environmental adviser. Clearly, we have a very comprehensive range of both state and federal guidance. On top of that, we have our own defence regulations and guidelines on how we undertake environmentally sustainable development, such as green building advice and the like. Of course, that has all been incorporated into phase 2 RFP. It will be the responsibility of the bidders to conform to that. We will be assessing their compliance during the tender evaluation process. As evidenced in phase 1, we have already seen the capture and reuse of rainwater. Because we are going towards low water plants and plantings around the site, we are trying to minimise the water requirements of the green zones. Obviously, we are assessing each and every site for the value of particular trees. For instance, at Edinburgh we know that there are stands of yellow box that are rare, and we will look to accommodate all of those. Occasionally there will be trees that will have to come down to accommodate that. Similarly for somewhere like Edinburgh, we have to be mindful that the vegetation we put in is consistent with their requirements—for example, they cannot plant anything with seeds because that will attract birds. If you do that next to an airport, you will suddenly have—

Mr JENKINS —I have learnt that lesson foot-in-mouth at other public hearings.

Brig. Sowry —I want to reassure you that we are taking a very comprehensive look at the environmental aspects of design and layout to ensure that we try and achieve—

CHAIR —As a supplementary question to that, because we always ask the question about your consultation with the Australian Greenhouse Office, are you consulting with them to maximise the energy use and minimise the greenhouse gas emissions?

Brig. Sowry —Yes. Defence have a standard where we try to achieve a 20 per cent improvement over the standard for residential developments. We have been in contact with the Australian Greenhouse Office and that will continue throughout the process.

CHAIR —Is that helpful?

Brig. Sowry —It is helpful in terms of the liaison there. I do find that our staff are pretty well across the issue. I have my own staff who look after the environmental side. At the next level we have our own environmental heritage and risk branch who look at it as a high-level concept. They also feed into each of the regions, who really know the detail associated with the site-specific issues that we need to be aware of.

CHAIR —Given the government’s recent announcement on replacing incandescent lights with fluorescent lights, are you planning to use all fluorescent lighting in these properties?

Brig. Sowry —That I would have to check.

CHAIR —And if not, why not?

Mr Aikins —Our reference project and more importantly the actual specifications that go out in the RFP will include all government policy requirements, including that one. Obviously that is a recent event. We will be taking all of those things into account as appropriate.

CHAIR —While I doubt that you will have any occupants who are octogenarians, I have recently had a letter from an elderly person from my electorate saying that she cannot read or do things under fluorescent lighting. That is an interesting thing to note. I do not know whether other people have eyesight issues with fluorescent lighting. Anyway it is an interesting point. I think it would be a good idea anyway if you looked at the new government policy in relation to lighting and conformed with that if it is practical to do so.

Brig. Sowry —As you are aware, Madam Chair, one of the reasons behind adjusting the processes of the PWC  is so that we can ensure that your concerns are addressed in the RFP before it goes out and we take those on board.

CHAIR —In your submission you talk about the development of 381 training rooms. This amounts to a bit over $70 million by my quick calculation of the project. It seems to me that the objective of Project Single LEAP is to provide accommodation. Can you explain why you are spending over $70 million developing training rooms as part of this project?

Brig. Sowry —We are not. The training rooms have since dropped off the requirement. Those training rooms were over and above the 6,400 rooms. Project Single LEAP is that 6,400 figure.

Mr Aikins —Precisely for those reasons.

Brig. Sowry —Yes, precisely for those reasons.

CHAIR —That clears up that point. There being no further questions, I think we can close this hearing. I thank all the witnesses who have appeared before the committee today. I thank Defence for facilitating our inspections, and hopefully you will facilitate a few more in the coming weeks. I thank you also for the private briefing this morning. I thank the secretariat for the work they have done and Hansard, who are beavering away up there.

Resolved (on motion by Senator Parry):