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Economics References Committee
05/04/2016
Future of Australia's steel industry

NIGHTINGALE, Mr Ian, Industry Participation Advocate, Department of State Development, South Australia

ACTING CHAIR: Welcome. I remind senators that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Do you have an opening statement, Mr Nightingale?

Mr Nightingale : I have and also I have provided some information to each of your committee members. I would like to just quickly brief your committee on my role and my purpose and give you a brief understanding of the policy and how it works in South Australia and then, in a little bit more detail, how it relates to the particular issue of steel.

ACTING CHAIR: Okay. Do we, as a committee, agree to this being tabled? Thank you, Senator Simms and Senator Carr. Go ahead, Mr Nightingale.

Mr Nightingale : The role I am in now was established in 2013. At that time it was the only one of its kind in Australia. My role reports to the Treasurer and also the Minister for Small Business. There is an important emphasis I would like to draw your attention to in the policy document I have handed out. I have been listening with interest as there is a lot of discussion about how this local industry policy stuff works in other states. We have adopted probably the most sophisticated but simple use of local industry participation of any of the states in Australia, probably because it is recent in its review.

The front cover captures it all. We measure the economic benefit from procurement through labour, capital investment and supply inputs. That is fundamentally how the policy is used. Towards the end of last year I was asked by the Treasurer, who is also the Minister for Mineral Resources, to think of other ways that the industry participation policy and the weighting that we apply to that economic benefit could be used to stimulate the steel industry, in particular. We did that, and I have also provided you with a little one-pager that was provided at a steel summit that was held in February this year, where an invitation was put out to about 200 commercial operators—architects, engineers, designers, building and construction specialists—to explain how the steel industry policy is going to work in South Australia. I have also provided you with a presentation which I would probably like to spend most of the time to just walk through and explain to you how that works.

The front page says it all, in my opinion. It is how you can use the steel initiative to leverage off the industry participation policy that the state government already has in place—as I said, confirming that it is measuring economic contribution; it is not measuring local content or location of the business. The second thing is that it is responding to quite recent events in the global oversupply of steel. Again, I have been listening with interest to some of the other submissions or evidence that was given about why it has been so particularly important. All the evidence I have been able to pick up is that the oversupply of steel is probably an event that has happened in the last three to four years, so we are seeing it play out right now. It is designed to give the local steel industry a competitive advantage against low-quality and low-cost imports. I will touch on that in a second. The third page pretty simply explains how the industry participation policy works. There are three fundamental elements to it: looking at labour—for example, employment and where that employment is sourced from; where the supply inputs come from—and in this case, very importantly, steel and the components to the steel; and the capital investment to the state.

I can say with confidence that in the last three years this policy has been transformative in South Australia. It has changed the buying behaviour of large principal contractors. The government has given my role power to intervene where I see that there has been a deviation from the commitments made to the particular tender and when those industry participation plans were assessed. In fact, there was a recent media release and media comment about one of the contracts in South Australia, which is the O-Bahn project. It is a project that is being built to build a tunnel into the city for the O-Bahn. The company that won the project, McConnell Dowell, was proactive in coming to me and saying, 'We may not be able to source this steel, as you want, from South Australia.' There was a $2.4 million economic benefit that was assessed at the point of tender. I was able to go back with McConnell Dowell, in conjunction with them, OneSteel and with the Department of Transport, Planning and Local Infrastructure and negotiate a good outcome. The billets for that steel come out of Whyalla and go to Victoria to be converted into reinforcing steel and come back into that South Australian road project. The same thing is going to be happening for the reinforcing steel that is going to be used in the precast concrete. I want to use that as an example because that is an effective use of how this policy kicks in, and it will apply now for all major contracts in South Australia.

I will go through page 4 quickly. I have already mentioned how we have explained how these contract conditions would work, particularly to the design community. There are now going to be contract conditions. The industry participation policy has an obligation by the head contractor in the government contracts, but this will be specific about how those contracts will play out with state government contracts from here on in.

I would like to draw your attention to 5, because it does pick up some of your other discussions about quality and the certification. The first dot point is: in the last six months, with the research I have been doing, it was necessary to find an independent, international certification body. What we are now requiring is that, for all steel, the source of the steel, the mill, will be certified by the Australasian Certification Authority for Reinforcing and Structural Steels. They do that globally. There are many steel mills globally that are accredited by this body, but equally so are BlueScope and OneSteel. What you can then be assured of is that the steel itself is certified by that particular body. I was informed today—just to show you how this process works—that a particular company has been delisted off that certification because it did not measure up to their audits. That is the sort of thing the government is keen to—

Senator XENOPHON: Can we get a copy of that?

Mr Nightingale : I will forward it to you. I will double-check. It is on their website.

The second part goes back to the discussions you were having and the evidence you were provided with about the quality of the fabrication. I have not got a copy for everybody but I will leave it here. That is a copy of the slides that were provided by the Australian Steel Institute at the summit, and they do identify a number of examples—I think it is about four or five, but it is four or five of many—where the fabrication clearly did not meet any standard. Some of them were pedestrian bridges. Some of them were bridge constructions and so on. So there is evidence in there. What the state government has now done is that the fabrication of steel will also be certified by the National Structural Steelwork Compliance Scheme. Again, it is available to other businesses overseas so we do not interfere with any free trade agreement issues, but it will assure the government that the fabricators that are delivering on government projects are delivering on a fair and competitive basis.

If I can go on to 6, with regard to state development, Minister Koutsantonis, for the state government, has been actively lobbying his colleagues interstate to see whether this policy could be adapted by every state, because clearly there is an advantage not only for OneSteel but for steel fabricators, and BlueScope have also indicated to me how important this will be. The government is providing financial assistance to steel-fabricating businesses, not steel mills, to help them meet the cost of moving very quickly to become certified under that national scheme for certification.

Page 7 indicates how the government's assistance will play out. The certification is in a number of categories—category 1, category 2, category 3. The government is covering the full cost of category 1 under the national steel certification. The decision then to go to category 2 is up to the business and whatever decision it wants to make to go to the second category, and at that point the government is covering 50 per cent of the estimated cost. In addition to that, with those businesses that have identified that there is a level of improvement in implementation, the government is also providing small grants to those businesses to look at implementing some of the matters found throughout that certification process.

I can confidently say that every fabricator I have met so far—about 20, and there are many more that I will be meeting with—applaud this policy and are actively signing up to get this certification moving and those businesses being certified immediately. There are a number of companies in South Australia that already are certified, and they are already indicating that it improves their competitiveness and their productivity improvement and they are also using it for business offshore.

The last thing is to do with one of the most important messages I had when I started talking to everybody in the industry, about the ability to put in a third-party audit. The government is funding a third-party audit for 12 months. That audit process will audit government projects to make sure that, with the contractors that have signed up, the obligations of the contract are being met, right through from where the steel is being sourced from—is it an ACRS accredited mill?—to the documentation around the steel certification. So the third-party audit will be broken up into two parts. One will be, like any audit, looking at a random sample of state government projects, and the second component will be, if necessary, an investigation moving towards a breach of contract if it got that serious. They are the main messages I wanted to leave with you.

I want to draw your attention to the relevance of the industry participation policy. I do support the other comments that were made from the evidence I have seen from the Australian institute and other bodies: there is a gap in Australia's certification of Australian standards. The advice I have received is that in the statement around Australia standards or equivalent there seems to be a fairly big hole around the word equivalent. I think it is fair to say that our Commonwealth agencies do not have the resources, the time or the energy to investigate whether or not steel coming into this country is fully certified. I have seen evidence from people in the steel industry where, quite clearly, the documentation is fraudulent at worst, and vague and misleading at best. That concerns me. I think that is enough for my introductory remarks.

ACTING CHAIR: Let me first of all thank you for that, Mr Nightingale. The issue that you just finished on: where is that going with the South Australian government? Is there any further work being done on that contention which you just referred to there on certification issues and things like that?

Mr Nightingale : What will happen as this becomes rolled out—and it is happening now—is the certification requirement of the state government will only accept certified steel. If the steel mill has been certified by that ACRS accredited certification body, then it will not be in scope. We probably will not see noncompliant issues unless the company wants to be in breach of a contract.

ACTING CHAIR: No worries. That was a very full explanation. I just want to go back and unpack the transaction which you talked about, which is the O-Bahn extension, and, for the purposes of this committee, we will talk about the steel rather than the contentious nature of the issue more broadly. The successful tenderers came to you and said, 'Mr Nightingale, we have got an issue. We have got a $2.4 billion discrepancy.' What was that discrepancy?

Mr Nightingale : What happens is that when companies are tendering for government work in the state they complete what is called an industry participation plan. That plan is quite detailed, because it gets down to every work package above $100,000. Within the plan, before the tender is awarded, those work packages are identified, an estimate of the cost is identified and an estimate of the economic benefit to the state is identified, looking at local labour, supply inputs and the capital investment if there was capital. What they did, quite correctly, was identify to me that they may not be able to meet that $2.4 million of economic contribution to the state of one of the work packages.

ACTING CHAIR: Which was the steel package?

Mr Nightingale : Yes, it was.

ACTING CHAIR: Why did they flag that that may be an issue? What was the reason why they came to you and flag that?

Mr Nightingale : The initial reason was cost.

ACTING CHAIR: Were they benchmarking Australian steel against steel from another country? We have heard a lot of discussion today, which you have heard, about substandard steel. Were they concerned that they were having to put over-engineered steel into something? That is the issue.

Mr Nightingale : I can answer that. The assessment they were making at the time was largely relating to cost. It was not relating to quality, at that point. But they came to me and said the economic benefit measure that we indicated at the part of the tender award was not going to be as significant to the state as they first indicated, and there was a requirement on them to notify me and my office about why that was the case.

ACTING CHAIR: Because they were not going to be able to use to Australian steel.

Mr Nightingale : Steel was going to come from overseas in that case.

ACTING CHAIR: So cheaper but compliant steel from overseas was going to be used in the project, and you intervened. Tell me what is now going to happen.

Mr Nightingale : The reason I intervened was the economic contribution assessment that was made at tender. What happens is that, if that was not going to be delivered, my office scored that IPP with a figure that really was not then relevant. So that was the adjustment that we needed to find.

ACTING CHAIR: Was Australian steel now going to be used in that project?

Mr Nightingale : Yes.

ACTING CHAIR: So where did the $2.4 million come from?

Mr Nightingale : The $2.4 million is the total benefit.

ACTING CHAIR: But how did you get it to go from, 'I don't think, Mr Nightingale, we are going to be able to make this contribution that we had in our initial tender because we're going to use steel from overseas,' to now using steel from the steelworks here in Whyalla and addressing all the KPIs that you have?

Mr Nightingale : There were a couple of things. The normal practice at the moment for reinforcing steel within the steel industry is that that steel predominantly is recycled steel, so it has no benefit to Whyalla or South Australia. What we were able to negotiate, in conjunction with OneSteel, was that billets would leave Whyalla and go to Laverton, which is the OneSteel facility that manufactures the reinforcing bar, using billets out of Whyalla to manufacture that steel, not recycled steel. That was the significant difference. Also, the state cabinet approved this new steel policy in November last year. The tender was lodged well before then, so, to be fair to McConnell Dowell, the government picked up the policy but the company was willing to work with us to make sure the billets went from Whyalla to Laverton, into reinforcing bar, and back into the state.

ACTING CHAIR: The project was not sufficiently down the track that it was unable to turn that action around?

Mr Nightingale : Correct.

ACTING CHAIR: We went close there, didn't we?

Mr Nightingale : We did.

ACTING CHAIR: That would have been embarrassing.

Mr Nightingale : Yes, and the point I want to make is that the response was to the government's policy position on steel that came in late last year, not when the tender was evaluated.

Senator KIM CARR: Was the policy that the governments endorsed in November based on the national policy that was established through the jobs act?

Mr Nightingale : No, not really.

Senator KIM CARR: How does it differ from the Australian industry plans that the Labor government introduced in Canberra?

Mr Nightingale : It kicks in at a much lower threshold—the policy actually has effect at $22,000.

Senator KIM CARR: Yes, I see that.

Mr Nightingale : The principles, I guess you could say, are the same, but its application is different.

Senator KIM CARR: It uses the same language.

Mr Nightingale : Yes, that is a fair comment.

Senator KIM CARR: But this is confined to state funded projects.

Mr Nightingale : Yes, but it does apply to contracts where the state is the contracting body. If we are looking at examples like O-Bahn and a big project in South Australia, Northern Connector, there is a significant amount of Commonwealth funds, but it will apply to that project.

Senator KIM CARR: So it is public-private partnerships and federally funded infrastructure projects and private sector projects receiving significant government support—that is, government funding.

Mr Nightingale : No; can I correct that? For $2.5 million and above, if there is $2.5 million into a private project, the policy captures those projects as well.

Senator KIM CARR: That is significant—you regard $2.5 million as significant; that is the point. It does not apply to private sector projects, though, does it? The Australian industry plans did.

Mr Nightingale : You are right. It only applies where there is a responsible government agency as the contracting body—that is the technical term.

Senator KIM CARR: What about the industry capability networks? Do you apply those as well?

Mr Nightingale : Yes, we do. You will notice that there is reference to the ICN as a contact point for initial contractors looking for work, but also, for larger projects, the work packages are listed on the ICN as a—

Senator KIM CARR: So the exceptions of a lower threshold, which I commend you for, and the fact that it is government funded rather than all projects are essentially the differences.

Mr Nightingale : I must admit, I have not sat down and directly compared the federal policy to our state policy.

Senator KIM CARR: That is good. You have the Industry Participation Advocate. In the project that I had, we had industry advocates in rail, steel and a number of other industries. How would they differ in terms of the model?

Mr Nightingale : I am not 100 per cent sure. It might be better if I explain my role.

Senator KIM CARR: Sure. Would you like to take that on notice? This is obviously a national inquiry and we are interested in pursuing policy options at a national level. These things are still in the Jobs Act. They are, at law, still in application, but the Commonwealth government has withdrawn funding for them. Is that your understanding?

Mr Nightingale : Can you ask that question again?

Senator KIM CARR: Under the Jobs Act, these measures are all set down; that is the legal basis for them, including the industry advocates, but they do not exist. Their Buy Australian at Home and Abroad unit has been scaled right back in the industry department—maybe there is a person in it; there used to be 20. Is that your understanding of what has happened in the federal department of industry?

Mr Nightingale : I certainly know that there is not an industry advocate in the federal government at the moment.

Senator KIM CARR: But I am asking a question. Have you had any opportunity to examine the operation of the Jobs Act and whether or not—while it might be at law—the federal government has hollowed it out by not funding these measures?

Mr Nightingale : No, I have not.

Senator KIM CARR: Would you take that on notice: whether you could provide the committee with any advice? It may well be that the state industry department can provide assistance in answering that question. I suppose it is a bit early to evaluate this project's success. It is not too early?

Mr Nightingale : No, it is not. I can give you some examples right now. In 2012-13, a state procurement board report measured the number of contracts from state government procurement other than building and construction that went to local businesses. It was 51 per cent. The report that was released late last year, in 2015, for the period 2014-15, indicated that since this policy and role had been put in place the number of contracts had gone up 40-odd per cent and was at 91 per cent. If you look at major building and construction projects, the direct labour associated with the contracts is running for all of them. There is the Torrens Road project, which I have mentioned, and O-Bahn, which I have mentioned. The direct employment from the principal contract is anywhere between 89 and 90 per cent of South Australian residents, which is a significant measure.

Senator KIM CARR: These are increases?

Mr Nightingale : My word they are; yes.

Senator KIM CARR: Thank you. I would be grateful for any other measures of success.

Mr Nightingale : I will provide that to the committee.

Senator KIM CARR: Thank you.

Mr Nightingale : It also applies in similar measures to the subcontractors. The measure on the subcontractors is that they need to identify local labour, supply inputs and capital provided.

Senator KIM CARR: This is all since November last year?

Mr Nightingale : No. That was an amendment in November. The policy has been running for three years. It was amended following recent cabinet changes—some minor stuff.

Senator KIM CARR: I appreciate the point. Thank you. There is the steel certification initiative. Again, I think this is a commendable action. How does it differ from what is happening in Victoria where the government has gone a step further in terms of state government projects? That is the first question. My second question, on a related issue, goes to whether it is possible to get a certification to Australian standards but still import the steel?

Mr Nightingale : I will answer the first question. My understanding of the Victorian policy around steel is that it is incorporated into their industry participation policy. That is the subtle difference. The advice I gave the government was that I thought they needed to be two different tools or two different levers. You can use the industry participation policy, as I have already mentioned, in looking at measuring economic benefit. In this case, the steel initiative is about certification and, if you like, levelling the playing field for the fabricators as well as the steel companies. To answer the second part of your question: there are ACRS accredited steel mills; there are steel mills from overseas that are accredited and audited against Australian standards. That is why I recommended to the government to go with that international certification body, because it does not fly in the face of any of our free trade agreement issues.

Senator KIM CARR: But the ISO standards are often lower than Australian standards. How do you maintain the integrity of your certification measures?

Mr Nightingale : To my knowledge, that is the responsibility of the independent certifier.

Senator KIM CARR: Are you satisfied that that is being honoured?

Mr Nightingale : Yes. In fact, the other reason we went with this particular body was the number of audits they have of those particular steel mills.

Senator KIM CARR: Thank you very much.

Senator XENOPHON: Without getting into any interstate rivalry between South Australia and Victoria—

Senator KIM CARR: I think that is unfair. I just asked a question as to whether or not the Victorians have a sharper measure. That is all.

Senator XENOPHON: I was being facetious, Senator Carr. Perhaps you could take on notice to give us an analysis of the differences between the two and how they might compare, rather than at this point. Perhaps you would like to take time to consider that. I would like to ask some further questions. Do you have any equivalent interstate counterparts?

Mr Nightingale : Not until recently. It is my understanding that the ACT have just appointed an industry advocate.

Senator KIM CARR: A steel industry advocate?

Mr Nightingale : No. Like my role, covering everything.

Senator KIM CARR: Canberra has no steel mills.

Mr Nightingale : This is a broad industry advocate.

Senator XENOPHON: Do you get state governments seeking advice from you as to how you go about doing what you do, in terms of procurement policies?

Mr Nightingale : That is my brief. My brief is to provide cabinet with advice on procurement policy and how the procurement—

Senator XENOPHON: No—to other state governments.

Mr Nightingale : How they would get that advice?

Senator XENOPHON: Have you been sought out by other state governments to say how you do what you do?

Mr Nightingale : Not directly by the governments. The ACT government approached my office for some input before they established that particular role. We have had requests from a couple of the other states, but it is more from their industry bodies rather than the state governments.

Senator XENOPHON: The issue that has understandably upset many in this state and I think around the country was the decision of the New South Wales government to procure 100 kilometres of Spanish steel rail track. Had you spoken to anyone in the New South Wales government or industry with respect to this particular deal that saw a multimillion dollar contract going to Spain rather than here in Whyalla?

Mr Nightingale : I have not spoken to anybody in the New South Wales government, but I have had contact with Tony Dixon, who is the CE of the Australian Steel Institute.

Senator XENOPHON: Do you have any idea what the price differential may have been between the Spanish and the Australian steel?

Mr Nightingale : No, I do not. Could I just clarify a point? It is really important, I think, for the committee to understand the difference between price and economic benefit. This was a question that was put to me regularly when I took this role: increasing the price. In the last two years we have assessed probably 80 to 90 industry participation plans and there is no evidence between the measure of economic benefit to the state and the price. It is really important when we are talking about language. It is a question that was put to me often by Treasury officials: will it affect price? They are completely different measures.

Senator KIM CARR: Do have a copy of that analysis? Are you able to provide the committee with support of that claim? It is an extremely important point you have just made.

Senator XENOPHON: That would be very useful to the committee's deliberations.

ACTING CHAIR: Was there another document that you wanted to table as well, Mr Nightingale?

Senator KIM CARR: The slides from the Steel Institute.

Mr Nightingale : Just the slides. They might help you.

ACTING CHAIR: We agree to have those tabled. Thank you.

Senator XENOPHON: I am nearly done. In terms of the current process, it is one of certification to ensure that Australian standards are complied with. In the US, I know that at least defence contracts insist that it has to be US steel. In fact, even merchant navy ships have to be made in the US if they are going to go from one part of the US to another. They have to be physically made in the United States using US steel. They seem to be able to get away with it without being dragged, kicking and screaming, to the WTO. Providing it is made well and efficiently and taking into account the flow-on effects of local procurement, why can't we say it has to be Australian? As long as you can show the economic flow-on effects, allowing for the price, wouldn't it be better than importing steel that might be a few per cent cheaper when you do not get the other flow-on effects?

Mr Nightingale : There are two parts to my reply. First, it is important to understand that the industry participation policy for the state covers absolutely all procurement. Second, as I said at the outset, the policy is structured around economic benefit rather than local content; it is a very important difference with some of the other state governments. I will give you that summary because we had Deloitte Access Economics do that and some other work for us. That is on our website but I will provide that to the committee.

Senator XENOPHON: It is one of local benefit as distinct from local content.

Mr Nightingale : Economic benefit opposed to local content because local content then gets a question of what is local—is it ownership of the company? Whereas economic benefit, the purists in the room that are economists will probably agree, you can measure through labour inputs, capital inputs and supply inputs; that is the principle for it.

If I can go back to the question around the US, we have had a look at that policy. There is a clear piece of legislation that affects that 100 per cent steel for Defence contracts and that may be something that the Australian government needs to consider. But I would suggest, from the information we have had, it would need to be specific for certain sectors such as steel rather than across-the-board.

If you get back into looking at applying a much higher weighting or even a local content waiting, even within the Australian-New Zealand procure agreement, you could have a challenge to say that you are preferencing local states over another.

Senator KIM CARR: This language is incredibly important in assessing compliance with international agreements. The evidence you are putting is that local economic benefit is kosher but local content may not be. Is that the proposition you are trying to advance?

Mr Nightingale : It is exactly the proposition.

Senator XENOPHON: So you are saying that if the procurement rules were shaped around economic benefit, which would obviously include the multiplier effects and supply chain effects et cetera, that would not fall foul of WTO rules?

Mr Nightingale : No, because it is not suggesting that it is preferencing any one particular business or its location. So you could have an international business, which is one of the policies I advocate for, in South Australia employing South Australians, choosing Australian supply inputs and investing in the state and it would meet our current industry participation policy.

Senator XENOPHON: Does your participation policy fully take into account the economic benefit model that you refer to or is it principally concerned with certification at this stage?

Mr Nightingale : That is a really good question because for this debate the two things I think are completely linked. If you were to have a steel certification policy by itself, I do not think it would work. Link it to a sophisticated industry participation policy and then it works.

Senator XENOPHON: Which is what you are doing now?

Mr Nightingale : That is correct.

Senator XENOPHON: So therefore it is better than the Victorian model—that was tongue-in-cheek.

Mr Nightingale : If I can clarify that point, what will happen is an amendment of the industry participation policy will clarify the steel initiative as part of the industry participation policy, not the other way around.

Senator XENOPHON: How do you measure the economic benefit though? What are the yardsticks you measure it by in addition to the certification issue which you can measure?

Mr Nightingale : That comes back to the example of Oban and other projects. Once we assess a work package of $100,000 and the information we are being provided identifies local labour—the labour associated with delivery of the contract—and where the supply inputs are coming from, whether that is road material or whatever, then it measures the capital investment that the company might make to deliver that contract. There are three measures that we look at when we assess those packages and the score that we give that particular tender is based off those three measures.

Senator XENOPHON: And those scores are pretty transparent, aren't they?

Mr Nightingale : Yes, the scoring matrix is on our website. There is a template for an industry participation plan on our website. But I would like to say that, for bigger projects such as the ones we are talking about, we tailor the industry participation plan to suit the project.

Senator XENOPHON: Do you take into account whole-of-life costs? You might get some steel from overseas that might be 20 per cent cheaper, or even cheaper still, but it is not of the same quality so it is not a like-for-like comparison; it will not last as long and it will cost a lot more to maintain.

Mr Nightingale : Our assessment does not take into account whole-of-life costs. It does the assessment of the project so it is a value through the construction project. Once the project is finished, if there was a whole-of-life cost, you would hope that was being assessed as another part of the tender evaluation.

Senator XENOPHON: To complete the loop, in addition to the valuable work that your office is doing, you do not seem to take into account the whole-of-life costs. I have spoken to the Australian Steel Institute, the welding institute, and they say that if you have something fabricated overseas with boron in the steel, the welds need a lot of maintenance, they potentially have to be rewelded et cetera and so that takes to the costs significantly.

Mr Nightingale : Yes it does. Again, I do not mean to sound like a broken record but we are measuring economic benefit at the point of tender and we are measuring the delivery and the commitments that are made during the construction of the project. But I think now the certification of the steel itself and the certification of the quality of the fabricators will provide those sorts of whole-of-life benefits that you are talking about.

Senator XENOPHON: Finally, to close a loop, I am not suggesting you should do it, but you ought to look at the whole-of-life costs in terms of maintenance, durability et cetera.

Mr Nightingale : I hundred per cent agree. I think it gets back to a broader discussion for all governments around: how do you assess value for money versus least cost?

Senator SIMMS: I am interested to know where the environment factors into the industry participation policy. In terms of assessing the economic viability or benefits that flow from these projects, is the environment one of the factors that is taken into account?

Mr Nightingale : It is an interesting question. Yes it is and it is actually happening more on implementation of other policy objectives for the government. So we are now getting requests to provide advice to government and government agencies on where the state government's expenditure can deliver environmental outcomes such as zero waste or on carbon neutral city initiatives that the state government has running. It also looks at other social benefits such as the policies being applied to the use of Indigenous businesses in the way of government contracting. The government looks in a very broad way how you can use this industry participation to deliver other policy objectives.

Senator SIMMS: With respect to steel specifically, I am aware of some new technology that is less greenhouse gas intensive for instance and used in steel production, which strikes me would be beneficial in terms of creating long-term sustainable industry given we are transitioning away from coal and carbon. Is that something that is being looked at within this industry policy?

Mr Nightingale : Yes it is and it is my understanding that that can be a part of the certification of the steel mills. It is another interesting question too with regards to our free trade agreements. My understanding is that those environmental concerns that a government may have can also be incorporated into those conditions that it places on its imports. There are a range of other factors.

Senator SIMMS: That is interesting to know because, as I said, it strikes me that in looking at an industry that is going to be the sustainable long-term, obviously ensuring that it is environmentally sustainable is a critical component of that.

Mr Nightingale : The steel certification for fabricators I am talking about also looks at occupational health and safety requirements and at the environmental standards that are expected of them under legislation and the requirements within Australia.

Senator KIM CARR: I may well have confused your evidence with somebody else but did you say that the position in regard to international standards or Australian standards measured internationally or their equivalent open up some significant loopholes? What did you mean by that?

Mr Nightingale : The advice I have been given and the more we looked at it was currently there are many terms where it uses the words 'Australian standards or equivalent'. If you have a look on that document Support our Steel, there is a presentation from the Australian Steel Institute there. That is where we get the information with regards to some of the fraudulent activities. It is really a cracker trying to get through that equivalent argument rather than prescriptively meeting Australian standards. There is also another presentation on there from a steel fabricator in the Barossa, where the steel certification compliance sticker that was on the steel that he once sourced is flippant to say that it is meeting Australian standards. Because we use 'Australian standards or equivalent' because there are so many other mechanisms to meet Australian standards it leaves the door open. That is why the advice I gave the government was to look at another mechanism for certification.

ACTING CHAIR: Thank you. Senator Xenophon has a question that we are all a little bit interested in the answer to.

Senator XENOPHON: Mr Nightingale, if your office or the government has received any legal advice as to what is possible within the constraints of the free trade agreements and our WTO compliance issues could you provide that on notice to the committee—and it could be on a confidential basis—so that we have a better understanding—

Mr Nightingale : It is incorporated into the policy. If you look at the policy under 'national and international agreements' at the top of page 6, the wording there is consistent with the advice we have received from the Crown Solicitor.

Senator XENOPHON: I understand that but is it possible to get a copy of the legal agreement that led to it being crystallised in that form?

Mr Nightingale : We provided the policy to the Crown as we adapted each section of this and sought their advice on each section of the policy. They came back saying that that policy is consistent with our obligations as a country.

Senator XENOPHON: Insofar as that has been reduced to writing in terms of an opinion or advice could you take on notice whether you could provide a copy of that to the committee, if need be in confidence?

Senator KIM CARR: I will put it slightly differently. Presumably you will get further advice from within government on questions such as that. If it is not possible to provide legal advice, is it possible to provide policy advice on a confidential basis, so it would be a confidential supplementary submission?

Mr Nightingale : I would prefer to provide that policy advice to the committee but I would like to take that on notice.

Senator XENOPHON: I would prefer you to provide the legal advice.

ACTING CHAIR: Having taken it on notice, I thank you, Mr Nightingale, for very interesting evidence this afternoon. I daresay we will see you at the airport. We welcome you to stay on and listen. Thank you for your continuing role in the prosperity of South Australia.