Senator CALVERT (4:10 PM) —On behalf of the Joint Committee of Public Accounts and Audit, chaired by Senator Gibson, I present report No. 370, entitled Defence life cycle costing: Commonwealth guarantees, indemnities and letters of comfort—Review of Auditor-General's reports 1997-98 Fourth Quarter . I seek leave to move a motion in relation to the report and to incorporate the tabling statement in Hansard .

Leave granted.

Senator CALVERT —I move:

That the Senate take note of the report.

The tabling statement read as follows—

Madam President, this is our Review of Auditor-General's Reports for the fourth quarter of 1997-98.

The Committee held a public hearing in May this year to discuss these issues with relevant Commonwealth agencies. I will briefly discuss each issue in turn.

The Audit Report on life cycle costing at the Department of Defence found that there was considerable scope for Defence to further promote and implement its policy of whole-of-life costing. Our report encourages Defence to implement this policy more rigorously.

Sound costing is a crucial basis for good decision-making. This is particularly relevant for Defence, which has a significant asset base.

The Defence policy accords with Commonwealth procurement guidelines that purchasing be efficient and effective. However, the JCPAA agrees with the ANAO that its life cycle costing policy should be promoted and implemented more effectively.

At Defence, life cycle costs are estimated to be between two and three times the value of capital costs. The objective of life cycle costing analysis is to facilitate decisions that achieve maximum value for money over the whole life of an asset. Because acquisition costs at Defence are so substantial, it is vital that the Commonwealth is assured that tax payers' money is spent as effectively as possible. While the Committee understands that life cycle costing is not always easy or cheap, we nevertheless urge Defence to implement it to the best of its ability. In particular, we urge Defence to require tenderers to make contractual commitments regarding life cycle costs.

Audit Report No. 47 investigated the management of Commonwealth guarantees, indemnities and letters of comfort. This was a follow-up to a previous audit conducted in 1996. The more recent audit found that there had been considerable improvement in the guidance provided to agencies, and also in the management of these instruments by Commonwealth agencies. The JCPAA held a public hearing at which several Commonwealth agencies informed the Committee of relevant developments.

We note that there is room for further improvement in the management of these instruments, and we recommend that the ANAO monitor the outcomes of the managed funds policy.

It is gratifying to note that the overall level of Commonwealth exposure for these instruments fell from $415 billion in 1996 to $215 billion in 1997.

May I conclude, Madam President, by thanking on behalf of the Committee those people who contributed their time and expertise to the Committee's review hearing.

I am also indebted to my colleagues on the Committee who have dedicated much time and effort to reviewing these Auditor-General's reports. As well, I would like to thank the members of the secretariat who were involved in the inquiry, Dr Margot Kerley, the Committee secretary, Ms Rose Verspaandonk, Ms Tiana Gray, and Ms Maria Pappas.

Madam President, I commend the Report to the Senate.

Question resolved in the affirmative.