Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download PDFDownload PDF 

Previous Fragment    Next Fragment
Rural and Regional Affairs and Transport Legislation Committee
26/02/2018
Estimates
INFRASTRUCTURE AND REGIONAL DEVELOPMENT PORTFOLIO
Infrastructure and Project Financing Agency

Infrastructure and Project Financing Agency

CHAIR: We will now resume the Senate Rural and Regional Affairs and Transport Legislation Committee additional estimates for 2017-18, and I welcome officers from the Infrastructure and Project Financing Agency.

Dr Kennedy : Chair, this agency is a ppearing in front of me for the first time as well.

CHAIR: We 've got maidens all over the place today.

Dr Kennedy : T he agency moved from Prime Minister and C abi net across to this portfolio as part of a machinery of government change.

CHAIR: Welcome, and we'll be as gentle as we can be. We will start with questions from Senator Sterle.

Ms Frew : Excuse me , C hair, would it be possible to make a n opening statement before the senator commences?

CHAIR: Yes ; that will be fine.

Ms Frew : Thank you . I'm the CEO of the Infrastructure and Project F inan cing Agency, and I have with me today Bill Brummitt, who is a member of my leadership team . W e're very pleased to be here today to support the process.

As Dr Kennedy said, this is our first time before this committee, so I thought I would give you a brief introduction to myself as well as to the agency. I have had a career that spans over 25 years in infrastructure, finance and advisory and have held a number of positions in both the private sector and private sector organisations. Prior to joining IPFA, I spent the last five years leading New South Wales Treasury teams who provided commercial and financial advice to the New South Wales government in respect of their infrastructure, delivery and services commissioning program. Before my time in New South Wales Treasury , I had a number of senior leadership roles in global investment banks as well as the Commonwealth B ank.

IPFA is an independent executive agency within the infrastructure portfolio, as mentioned by Dr Kennedy . We were established on 1 July 2017 as a whole - of - government resource that supports the Australian government in its investment decisions in the infrastructure portfolio and it supports the portfolio agencies in implementing those decisions for government. We are an advisory agency . We do not take a lead role in the project delivery or in project selection. These remain the responsibility of the portfolio agency and government. We have a very distinct role from I nfrastructure Australia , which has a clearly defined statutory role involved in determining the merits of individual projects. We do, h owever, work very closely with I nfrastructure Australia to ensure that government receives holistic and independent advice not just about what projects should be delivered , when and why —which is I nfrastructure Australia's role —but also how those projects should be delivered , which is our role. Unlike NAIF , the C E FC, or Efic, we d o not have a n investment mandate or a balance sheet , but we do again to look with those projects and those organisations , because some of the projects that we consider may become investment opportunities for them.

Our role is to provide independent and specialist commercial and financial advice to support the Australian government infrastructure projects in their delivery. Our pipeline of work is determined by the I nvestment , I nnovation and I nfrastructure C ommittee of cabinet , and other committee cabinet subcommittees may also seek our advice such as energy, water or education.

We are here to assist with the S enate estimates process and look forward to your questions.

CHAIR: All right. Thank you. Senator McCarthy?

Senator MCCARTHY : Thank you, Ms Frew. In his budget speech, the Treasurer claimed:

Our new Infrastructure and Projects Financing Agency will help us make those right choices, recruiting people with commercial experience to ensure we use taxpayers' money wisely.

Following the reshuffle late last year, the agency was transferred from the Department of the Prime Minister and Cabinet, which you've explained to us. Its role is to identify transformative projects, develop and assess financing options, provide stand-alone advice to the cabinet on suitable financing options and provide a stand-alone report to the cabinet on all innovative financing opportunities. You mentioned that you've got a statutory role. Is it, in effect, granted the same role as Infrastructure Australia on financing but without that statutory independence?

Ms Frew : That's correct. Infrastructure Australia is set up as a statutory entity. We are set up as an executive agency. However, we both provide advice to government.

Senator MCCARTHY : But with only advisory capacity?

Ms Frew : Pardon?

Senator MCCARTHY : With only an advisory capacity?

Ms Frew : In an advisory capacity—but we provide detailed advice in respect of financial and commercial arrangements to support government decision-making.

Senator MCCARTHY : Has the IPFA changed its reporting line, or does it still report to the Prime Minister?

Ms Frew : As part of the machinery of government changes, we now report to the infrastructure minister, as confirmed, I understand, by the charter letters sent to ministers last week—a few weeks ago.

Senator MCCARTHY : Okay. So what projects is IPFA working on, or what is it currently working on? What have you worked on? What are you currently working on?

Ms Frew : Our current program of work involves cross-government projects of national significance for the government, in particular for the Infrastructure portfolio. We're working with the department in respect of the Inland Rail, particularly on the PPP aspect of the Inland Rail project, as well as looking at providing advice to the department in respect of some of the intermodal terminals work that it's considering at the moment. We're also supporting the Cities Division within the Infrastructure portfolio in respect of the Townsville city deal that was signed last year, as well as providing advice in respect of the current discussions around the Western Sydney city deal, in particular around Western Sydney Rail. With the energy portfolio, we are supporting them in respect of the consideration around the Snowy investment as well as the government's commitment to the Port Augusta solar thermal project in South Australia.

Senator MCCARTHY : On the City Deals, what about Launceston and the University of Tasmania?

Ms Frew : I believe at the last estimates my predecessor, the acting CEO for IPFA, made mention of the Launceston city deal as something that IPFA was looking to get involved in. As time has transpired that has not been a city transaction that we've had any active involvement in.

Senator MCCARTHY : Do you think you will, though? Is it a case of where that project's at, or is it a complete no?

Ms Frew : We're a resource that is available for the agencies and government to pull us in on particular aspects of those city deals as they come to fruition. As I've mentioned, to date, on the Launceston city deal, we haven't been called in to do that. Should the department or the minister in the future decide that that's something they would like to seek specialist commercial advice on then we're a resource that's available to them.

Senator GALLACHER: You specifically referred to 'detailed advice' which you do that other people don't do. Am I wrong there? You said, 'We provide detailed advice.' Are you saying that Infrastructure Australia doesn't provide detailed advice?

Ms Frew : Not at all, Senator. I was—

Senator GALLACHER: What's your role then? What are you actually doing?

Ms Frew : I was actually referring to the senator's question around how Infrastructure Australia considers financing and funding in their business case evaluation and where they consider the merits of a particular individual project. Certainly, as part of their process, as Mr Davies explained this morning, they do consider the funding and financing aspects in final business cases that have been put forward by the various states or project components.

Senator GALLACHER: So Infrastructure Australia provides advice to government?

Ms Frew : Correct.

Senator GALLACHER: And you provide advice to government.

Ms Frew : Correct.

Senator GALLACHER: What's the different between the two organisations?

Ms Frew : As I mentioned in my opening statement, what Infrastructure Australia predominately focus on is providing advice to government around the projects and their individual merits, so what projects, when they should be delivered and why they should be delivered to support government's decision-making.

Senator GALLACHER: What's missing?

Ms Frew : We provide specialist advice on how to get those projects actually delivered, the commercial arrangements that will enable their delivery and, to the extent that it has financing involved—

Senator GALLACHER: You could be a broker for Macquarie Bank; is that what you're telling me? You bring big finance houses to the table; is that what you're telling me?

Ms Frew : We could.

Senator GALLACHER: So this is a funding issue?

Ms Frew : Financing or funding.

Senator GALLACHER: So if you could find a JBWere or a Goldman Sachs who had $100 million to invest in infrastructure, and if you saw an opportunity for the government to finance it that way, you would bring it to the table. Is that it?

Ms Frew : What we bring to the table is experience and expertise that helps government appreciate whether or not that funding can be brought to the table and how best to bring that funding to the table.

Senator McCARTHY: Further to that: you mentioned the Townsville Stadium. I am trying to understand what you did in relation to the Townsville Stadium in terms of the advice that you guys gave. Infrastructure Australia said today that their role was to evaluate the project, so what did you do that was different?

Ms Frew : I have to correct your question. We were not and have not been involved in any provision of advice on the Townsville Stadium. We have been involved in providing advice to the department and to cabinet in respect of aspects of the Townsville City Deal.

Senator McCARTHY: What aspects of the Townsville City Deal were you involved with?

Mr Brummitt : We've been engaged in two broad areas of the Townsville City Deal. The first is in relation to the TEARC, Townsville Eastern Access Rail Corridor, where Building Queensland essentially ran the business case on that. We came into the picture reasonably late and provided advice within the Commonwealth government in relation to that.

The second is in some of the stakeholder engagement work, which we've undertaken together with our cities colleagues in Queensland. One of the issues that came up in discussions was in relation to the Townsville port expansion. They are basically the two areas.

Senator McCARTHY: Does IPFA pay standard Public Service rates?

Ms Frew : The short answer is: yes. At the moment we have 12 staff in respect of IPFA—11 not including myself. Out of that 11 we have eight Australian public sector ongoing employees, and their arrangements are consistent with the Australian public sector structure in terms of their employment benefits and conditions. We also have at the moment three contractors who have gone through the normal Australian government procurement processes where we targeted specific specialist private sector commercial and financial experience.

Senator McCARTHY: Where are they located?

Ms Frew : We have two offices, one in Canberra and one in Sydney. We have six people based in Canberra and five people based in Sydney as well as myself.

Senator McCARTHY: Any Indigenous staff?

Ms Frew : Not at the moment.

Senator McCARTHY: Given the agency has no statutory independence, what protections are in place to ensure the commercial advice it gives to the cabinet is not tainted by political considerations?

Ms Frew : I think one of the benefits that we have in the way that we have set up is that we provide advice directly to government. We certainly sit within the infrastructure portfolio and are very grateful to the infrastructure department for the shared services that they provide us to support us as a small executive agency. We provide our advice directly to cabinet and to government, not through the department, and that's one way that enables our advice to be independent in the provision to government.

Senator McCARTHY: Given that Infrastructure Australia is required by legislation to identify both transformative projects and any financing opportunities, why is the government duplicating Infrastructure Australia's role with this agency?

Ms Frew : I cannot speak to why government potentially decided to set up Infrastructure Australia versus IPFA, which I run, but I can elaborate on our objectives. As I mentioned earlier, that is to enable the infrastructure projects that Infrastructure Australia has identified as having merit, that government has decided should proceed, that government funding will be available towards and that the department is supporting the delivery of that project. Our role is to support government and the agencies to deliver those projects and make them a reality.

Senator McCARTHY: Can you give an example of any current public infrastructure project that is on the IA priority list, or any other project or list, where taxpayer equity or government loans have been requested by state government or project developers?

Ms Frew : I think Infrastructure Australia is probably best placed to provide you with that sort of detail, or the agency. The projects that we are involved in have been specifically put to us by government and all of them represent nationally significant projects for government.

Senator McCARTHY: So you only go ahead with what you are directly tasked to look at. Is that correct?

Ms Frew : Correct.

Senator GALLACHER: You mentioned the thermal project in Port Augusta. What is your role there? Are you bringing in venture capital or funding? What is going on there?

Ms Frew : As you may recall, the government made a commitment last year to put $110 million towards that project. That is the responsibility of the Department of the Environment and Energy to consider the best way to put that forward. We are working with the energy department to provide them advice around the commercial arrangements that they could consider, to then provide that advice up to government around that particular investment.

Senator GALLACHER: I didn't get a lot out of that. What does that mean?

Ms Frew : We are helping the Department of the Environment and Energy look at the best way to put that $110 commitment the government made into that project.

Senator GALLACHER: To leverage, to get more financing?

Ms Frew : Not necessarily. In this particular instance it is a commitment that government has made, and now the commercial arrangements need to be put in place so that that commitment can be delivered. We are helping energy to structure those commercial arrangements.

Senator GALLACHER: That basically is core business of Treasury and Finance. Why do they need you?

Ms Frew : Government has identified a specific need—

Senator GALLACHER: This is like a boutique sector. There must be an opportunity here somewhere. You have created a tiny niche of analysts, is it? Two contractors or three contractors and six or eight public servants. What niche are you looking at? Where is the gap that is not there?

Dr Kennedy : Perhaps I can help here. I was involved in the earlier conversations to create IPFA. You are correct that the Department of Finance and the Department of Treasury and our own department are already providing advice around some of these aspects of projects. Often we sought that advice by having to contract out externally to get that commercial advice. We are still able to do that. What the government saw was a need for an in-house capability to do that, which is Ms Frew's agency. We may still contract out to other parties to provide us advice on how best to do a contract. Many of us—I would include myself in this—are long-standing public servants who don't have the commercial expertise, so we seek to bring that commercial expertise into play when we are implementing the policies. The government saw a need to have a stronger in-house capacity for that commercial element of these contractual arrangements or financing or funding arrangements. But, you are quite right, it was already doing it. But we were contracting that out a lot and this brings it in-house.

Senator GALLACHER: So there is a saving here, is there?

Dr Kennedy : In practice, with our in-house team we will contract out less. Certainly, from my perspective in the portfolio we found the advice of Ms Frew and her agency already very valuable, and frankly even valuable in that process of seeking external advisers, because, as you can tell from Ms Frew's background, they know these advisers and know their capabilities and that they can help us, people like myself, to make those judgements.

Senator McCARTHY: Ms Frew, this morning Infrastructure Australia gave evidence to us that a lot of the projects are still needing a business plan to progress with some of the territories and states. I am trying to understand your role in this. Can you help expedite some of those plans? You said that the government gives you the task to look at, but I am also wondering whether you become more involved in trying to help with those business plans to get them up and running, because there are many that just aren't moving at the moment.

Ms Frew : To date we have not been asked to provide support to states or the Commonwealth, or Infrastructure Australia for that matter, in respect of getting the business cases up. The business cases are documents that enable the definition of the project. Our role, once the project has been defined, is to work with the relevant state and territory government portfolio agencies to then deliver the project. So infrastructure and ourselves occupy two very different parts of the lifecycle of an infrastructure project.

Senator McCARTHY: How much will this agency cost in total for the next four years, including its rent and establishment costs?

Ms Frew : We have an ongoing budget of $4.2 million per annum. At the moment about 80 per cent of that cost, given the nature of our business as an advisory business, is in our labour and contracting costs. The remaining amount is what we spend on expenses, accommodation and other operating expenses.

Senator McCARTHY: What return to the Commonwealth is expected on this significant investment?

Ms Frew : As an advisory agency, where the value of us is determined by the quality of our advice and by the outcomes that we enable to be delivered, whether it is projects that are delivered well or potentially elements that were thought about earlier, most of our KPIs, which are included in our corporate plan, which was published last week—I have a copy here if you would like to see it—our KPIs and our performance measures are very much struck around trying to find measures that will enable the value of the agency and the value and the quality of the advice the agency provides. A second-order—not really less valuable—function we have taken on is to strengthen the Commonwealth's capability in the provision of commercial advice. Another one of our KPIs, which you will see in the corporate plan, focuses on how we create a stronger Commonwealth capacity in respect of commercial evaluation and financial evaluation and delivery of projects. We have only just completed our corporate plan and we are on track to ensure that we are collecting information to ensure that we deliver on our reporting that is required later on in the year. Certainly, they are the measures we have in place to determine our value.

Senator McCARTHY: Ms Frew, seeing that you are going to give us the KPIs, do you want to just identify one or two KPIs. If you have $4.2 million per annum and the return to government is your advice, what would be the number one KPI then?

Mr Brummitt : As identified in the corporate plan, I will just run through them. First, that 'our partners seek our commercial and financial advice'. Second, that 'our involvement improves outcomes for and our advice is valued by all stakeholders'. Third, that 'our contribution increases confidence in the Australian government’s infrastructure investment decisions and processes'. Fourth, and this gets to the point that Ms Frew mentioned a second ago: that 'our work strengthens the commercial and financial capability of the Australian government' as a whole. That is part of that sort of broader role.

Senator MCCARTHY : So you don't put in your KPIs that you expect to be a part of seeing the establishment of X amount of projects as well? All of this confidence in the sector and partners seeking your advice—do you have anything about the actual projects themselves and the establishment of them?

Ms Frew : We have the priority projects that have been given to us by cabinet to focus on and, as you can appreciate, those projects are long-life and have many commercial and financial milestones along the way. As an agency of 12 people, the ability for us to spread ourselves too thin without affecting the quality of what we do and therefore the quality of the delivery of those projects is the consideration that we take into account. At the moment, the focus is on delivering the six projects that we're working with the relevant agencies on and ensure that they are receiving the best high-quality advice possible in terms of the commercial and financial arrangements that they will look to enter into over time.

Senator MCCARTHY : What partners are seeking your advice now?

Ms Frew : The department of infrastructure as well as the Department of the Environment and Energy.

Senator MCCARTHY : So they're government departments?

Ms Frew : Correct.

Senator MCCARTHY : What consultations were undertaken by officials with the infrastructure sector or infrastructure businesses on the establishment of IPFA?

Ms Frew : Dr Kennedy, can I refer to you on this one, please?

Dr Kennedy : I'd have to take that on notice and take it back to Prime Minister and Cabinet because that's where the agency was established, but I'm happy to take it on notice.

Senator MCCARTHY: Thanks, Dr Kennedy. What consultations were undertaken by officials with state treasuries and state government agencies, and what was said?

Dr Kennedy : I'll take that one on notice, too.

Senator MCCARTHY : Thank you. Are there any examples of the infrastructure industry or states asking for a federal financing agency?

Ms Frew : No is probably the short answer in that the states themselves actually have units within their broader government structures that are units like the Infrastructure and Project Financing Agency. I mentioned that I used to lead that same unit within the New South Wales Treasury that provides that function for the New South Wales government. There was also one in Victoria and has been one in Queensland. So it's a common practice to bring that in-house commercial skill in the states and the territories. Where we are with the Commonwealth at the moment, given its delivery agenda and its infrastructure agenda, is establishing that capability that's for the benefit of the Commonwealth government.

Senator MCCARTHY : Okay. Will IPFA advise the government on tax-funded equity, government loans or non-grant based allocations?

Ms Frew : If that's something that the government seeks our advice on, then we will be in a position to provide that.

Senator MCCARTHY : If they do, what protections are in place for the taxpayers' interests, given that it is an executive agency reporting directly to the executive government?

Dr Kennedy : The decisions that are taken on any of those projects, how they're funded or financed are ultimately a matter for government. This is not an agency that stands apart from government in terms of taking a project and delivering it itself or financing or funding, as Ms Frew mentioned. It's different to the NAIF or the Clean Energy Finance Corporation that have an investment criteria and invest according to their board in that criteria. This is an advisory function to government for the government to make its decisions. It is an executive agency, as Ms Frew said, whose advice does not pass through me, my department or any other department; it passes directly from Ms Frew through to the relevant government decision-making processes, but it is an advisory process to government.

Senator GALLACHER: Sorry, I couldn't follow that.

Senator MCCARTHY : Government's receiving a lot of advice.

Senator GALLACHER: Where's the potential conflict of interest dealt with?

Dr Kennedy : Which conflict of interest?

Senator GALLACHER : If there's a proposal to do a financial tax-funded equity, a government loan or a non-grant based allocation, where are the protections in all that from an executive body going directly to the Prime Minister and Cabinet?

Dr Kennedy : Whose conflict are you referring to, Senator?

Senator GALLACHER: A potential conflict.

Dr Kennedy : Of the agency itself?

Senator GALLACHER: Well of the advice that's coming in. You've got people dealing with the private sector. Where's the probity guidelines and all that in there?

Dr Kennedy : These are public servants, supported as Ms Frew said by some specialist expertise of cross-contractors but who are also expected to provide their advice in exactly the same way that all public servants do. So if there were any parties that were conflicted because of their own commercial interests or any other thing, that would have to be dealt with in exactly the same way that any public servant has to deal with it.

Senator GALLACHER: So the specific question is: what protections are in place for the taxpayer interests, given that it is an executive agency reporting directly to the executive government? That doesn't present an issue for you?

Ms Frew : We're an executive agency, absolutely, and we're required to comply with the requirements under the PGPA Act, which, as you're aware, has a number of requirements and obligations on us in respect of our conduct and the way that we present ourselves. I take those obligations extremely seriously. One protection is that we're required to comply with that act in respect of the way that we conduct ourselves. We are one advisory voice to government, albeit a very specialist piece of advice that we're providing directly to government. And part of our role is to enable government to have many sources of advice to make holistic and informed decisions.

Senator GALLACHER: Thank you for that. Don't take any offence at this; this is just explaining, or at least trying to explore, why we have created a boutique advisory service in place of a much broader advisory service which was contained in finance, Treasury, the department and any number of places and then examining how it does its work, that's all.

Dr Kennedy : Yes I understand, and your earlier characterisation of that advice coming from other departments is correct. It will still be coming from other departments. In any decision making—

Senator GALLACHER: This will only be one line of advice that will be considered in the broader context of the decision-making process?

Dr Kennedy : Yes, correct.

Senator GALLACHER: That was the answer we were looking for.

Senator McCARTHY: Dr Kennedy, you mentioned NAIF. Ms Frew, what interactions do you have with NAIF, if any?

Ms Frew : So we do have some interactions with NAIF. As I mentioned, it's important for us to have relationships with NAIF, with the CFC and with Efic, and to really understand the types of investment opportunities that they are considering, because some of the projects that we look at may present themselves as investment opportunities for them.

Senator McCARTHY: So what's your role there, then, if you're looking at their investments?

Ms Frew : Referral to them if our projects—

Senator McCARTHY: Referral to NAIF? Okay—walk me through that. The government appoints you to look at particular projects and then you can also contribute towards what NAIF is doing, is that correct?

Ms Frew : No, I'm not sure what you mean by 'contribute', Senator.

Senator McCARTHY: You said that you can be involved with the types of investment opportunities at NAIF. So I'm just trying to work out what that means. How are you involved with those investment opportunities?

Ms Frew : When we were set up, one of the objectives of the government in setting us up was to give government options for the use of taxpayer dollars and to enable the taxpayer dollars to support the different infrastructure projects in those commercial arrangements. Some of those projects are able to attract financing products that may or may not be able to be provided by organisations such as NAIF. So when we look at—

Senator McCARTHY: But how do you know? How do you know whether NAIF requires that? What is the interaction?

Ms Frew : Our interaction is to understand what the type of projects are that NAIF are interested in investing in and what the types of commercial arrangements are that they need to have—the terms and conditions of those commercial arrangements they need to have that will therefore fit their mandate.

Senator McCARTHY: Does NAIF approach you, or does NAIF approach the government, which then approaches you? How does it work?

Ms Frew : It could be either of those scenarios.

Senator McCARTHY: Really?

Ms Frew : The role that we play is really to provide advice. If we see an opportunity, perhaps, that fits the investment mandate of NAIF, then we may suggest to NAIF that it's something that they might be interested in looking at.

Senator McCARTHY: So you currently—

Ms Frew : It is up to NAIF to decide, under their investment mandate and their governance, whether that is truly an opportunity for them that they wish to proceed forward with.

Senator McCARTHY: And you're doing that at the moment—looking at investment opportunities?

Ms Frew : Not at this point in time, although we are having some discussions with them in respect of opportunities in Townsville.

Senator McCARTHY: Thank you.

Senator GALLACHER: Where does Efic fit in all of that?

Ms Frew : Efic similarly, I suppose, is an organisation that has a role in the provision of funding for their projects.

Senator GALLACHER: But aren't they providing expertise to the NAIF? Don't they have seconded people in there to give financial—

Dr Kennedy : They run their back office.

Senator GALLACHER: Efic are an export finance corporation, who are in NAIF, and there's still a shortfall that's met by you; is that what we're saying?

Dr Kennedy : Part of what Ms Frew's talking about is government just being coordinated across these activities. So the entities like Efic and the NAIF, as Ms Frew outlined—and the CEFC, for that matter—make their decisions through an independent board against investment criteria. It's as simple as saying that, if I had asked Ms Frew for advice around a city deal in Geelong or wherever it might be, because there was some infrastructure that we were looking at perhaps contributing to jointly with the state government or the local government, and in looking at that she said, 'This is a project that might fit under a Efic investment mandate or not,' Ms Frew would let Efic know that it's there. I don't want to overplay this. It's about us being effectively coordinated across those various entities. Those entities may look at that project and say, 'Look, that doesn't fit our investment mandate, but thanks for letting us know,' and we move on. Or they may say, 'This could be a project; we'll investigate,' at which point we don't have any role in that project, because they are entities; they're not an advisory entity inside of government in the same way. They operate with independence around their decision-making.

Senator McCARTHY: NAIF has not spent any of its money in terms of a project at this stage. Were you given directions to work directly with NAIF to ensure that it moves along a lot quicker?

Ms Frew : Not at all, Senator.

Senator McCARTHY: Thank you.

Senator STERLE: With the creation of the Infrastructure and Project Financing Agency—you mentioned your KPIs and so on—you're out there to get the best bang for the Australian taxpayer. Correct?

Ms Frew : That's certainly our objective.

Senator STERLE: Obviously we were outsourcing a lot of this work as a nation; is that right?

Dr Kennedy : Sorry, that was the language that I used. I should be cautious in my language. A lot of public servants were involved in providing advice about how a project may be funded or financed, but it was common practice to often seek external commercial advice as part of that.

Senator STERLE: Like through a KPMG or an Ernst & Young—is that right? Something like that?

Dr Kennedy : Correct.

Senator STERLE: So now are we safely saying, with projects that IPFA are investigating or working on for and on behalf of the taxpayer—I don't care who the government is—that you won't have to go external; you have the expertise in there so we don't have to pay whopping big dollars to these big companies that used to have a bit of a ball doing work for us?

Ms Frew : Certainly, with the limited resources that we've got—12 people—our ability to completely fulfil those roles is limited in terms of resource and capacity. But, where we can defray, I suppose, some of that expenditure or focus the scope of that expenditure for those particular consultants on particular areas where they may be better placed to provide that advice, that is certainly one of the objectives that we have.

Senator STERLE: Well, this is good because, if we've got the expertise in house, we don't have to make Ernst & Young, PWC and all of them any richer on the Australian taxpayer. Is that correct?

CHAIR: That's not what they're saying.

Senator STERLE: Well, that's why I'm asking, because then Ms Frew will be able to explain to me, because I'm not as sharp as you, Senator O'Sullivan.

CHAIR: I'm not as sharp as you either. My understanding is that the agencies that you serve still have a capacity to go outside.

Ms Frew : Absolutely.

CHAIR: They could come to you, and, if it's a fit for you and you have the resources, you'll do it. Otherwise you may, on occasions, assist them to identify the external consultants specialist in the field.

Ms Frew : Correct.

CHAIR: Does that sort of wrap it up?

Dr Kennedy : That's exactly it.

Senator STERLE: If that's the case, you should have a lot more than 12 people on a budget of $4 million, if the dollars are better spent in-house and we are saving the Australian taxpayer. I'll let you into a little secret while no-one's listening: I haven't got a gotcha moment up my sleeve—I've got no idea; I just want to find out what you're doing.

CHAIR: I imagine it's a bit like medicine with so many specialist fields. Would you regard yourselves as—generic's not the word—a reasonably generic agency. You've got the big-end skills but, if we decide we're going to put a satellite up, you may well look outside, or advise the agency to, to get that advice?

Ms Frew : In respect of a satellite, I'm not sure we'd actually be asked to get involved in that kind of project.

CHAIR: Not in the project; I'm saying to finance a project. I'm interested in this too, without interrupting these guys. One's got to imagine that there are savings in here somewhere, right? If you guys supply 1,000 hours a month of advice to government that would otherwise have to have been bought at $1700 an hour, I imagine that there are some savings. I know Senator McCarthy was asking whether you have any empirical data that says, 'We used to do it at $1700 an hour, but we've been able to do it'—I don't know what you guys are on, probably a couple of hundred an hour—'in-house for much less.' Is there any empirical evidence on that? Are we looking at the budget of what we spend? I know it's apples and apples, and tomatoes, and there are busy years and less busy years, but have we got any empirical data that would say, 'Look, this is working in-house. There are some savings'? I imagine Dr Kennedy is able to pick the phone up, ring you and not have to wait and make an appointment for a week's time. There's vertical integration, but all those things are beneficial and hard to measure. Is there any empirical data? I think that's what Senator McCarthy was chasing with your KPIs. Have you got any data that says, 'We used to spend $10 and now we spend $7.20'?

Ms Frew : It is one of my objectives in the coming months and years to ensure that we are tracking that sort of empirical data. I agree with the senators on the committee that that is something that we should be looking for in data, if we're putting ourselves out there as being able to provide this particular service and value. I'm not aware—although I'm sure my colleagues could perhaps correct me, if I'm wrong—of any data that currently exists at the moment in respect of our value add, because we have only been around since 1 July last year, and the value attributed to that versus the current expenditure on consultants.

Dr Kennedy : Maybe I could give an example to help the chair. The ARTC spoke earlier about engaging the PPP dimension of the Inland Rail, which will require them to engage specialist capability into the ARTC that they previously have not had extensive experience in. One of the things we've done in that exercise is ask Ms Frew and her agency to directly support the ARTC in engaging that experience. Ms Frew and some of her employees have been directly engaged in that market in the past, so they will assist ARTC's decision to engage that person, et cetera, but we now have a higher lever of capability supporting that part of government moving to the next stage of that PPP. Ms Frew won't deliver that PPP, but she stands there as an additional piece of assurance and advice as that private-public partnership is settled.

CHAIR: Dr Kennedy, sorry, if you don't mind—

Senator STERLE: No, no, keep going.

CHAIR: Assuming that an hour of advice, or energy required to give advice, was required and this agency provides it, and they're not otherwise sitting with their feet up on the desk, prima facie, at that low-economic level, we're better off. We're going to spend less money out of the coffers to these consultants, as we've said.

Dr Kennedy : I haven't quantified it from my own agency's perspective, but I take—

CHAIR: Just on that principle formula it must equal savings.

Dr Kennedy : Yes. I was going to say, I take your point and I certainly feel, from my own agency's perspective, that we've had the opportunity to approach Ms Frew already on a number of matters that we may well have had to go outside on previously. They could even be small matters, but they, as you said, save us time and money by being able to pick the phone up and access our internal capability. To the other senator's point—and I think it's a very good point—over time we should have metrics to give the committee confidence—

CHAIR: The sort of things we're looking for.

Senator STERLE: That's exactly where I wanted to go.

Dr Kennedy : that this is an exercise that is genuinely saving some.

Senator STERLE: Dr Kennedy, you see hypotheticals, which we don't deal in. But, if there was a change of government, an incoming infrastructure minister said, 'What's this $4.86 million going to?' and you didn't have the ability to say, 'Well, this is what we've saved. Over the years this is what it's cost us,' you wouldn't be able to blame an incoming new minister for saying, 'Well let's defund that one.'

CHAIR: We've got a few people bright enough to see the benefit of this, I'm certain.

Senator STERLE: That's were I was heading.

CHAIR: For them metrics.

Senator STERLE: You what, mate?

CHAIR: No I'm just having a jab at you, mate.

Senator STERLE: No I missed it; sorry.

CHAIR: I'm just having a jab.

Senator STERLE: I missed it. You'll have to tell me later.

CHAIR: Is it fair? My favourite movie is The Castle. There's a vibe about this. Some of the benefits would be very hard to measure and put a dollar value on, like the development of relationships and having the knowledge of how agencies work. I imagine that sometimes with external consultants there's sort of a lead time where they try and get their head inside the rail corp and understand how it all works—'What are your objectives?' None of that will be necessary now. You've got that, haven't you—or you will develop that corporate knowledge over time.

Ms Frew : That's right.

Dr Kennedy : The advisory services that my department provides to a minister are difficult things to quantify. Is the minister satisfied? Are they satisfied with the range of options? Even for consultancy services, we find consultants survey us after the fact. Were we happy? Beyond whether they are winning market or winning jobs, they have a qualitative element or, as you said, a vibe about them. I suspect that, over time, given the early successes of this agency, we'll be able to have a series of quite powerful case studies that show how they've added value to particular projects.

CHAIR: Just one final qualifier if I can, Senator Sterle. Ms Frew, if we call this a market—this advice, right, whether it's from Treasury, state treasuries or wherever. You're only dealing with a small fraction of that market, I imagine. We already know that agencies have got the right to brief out, and you'll brief out for them and advise them. Do you have any sense that, if there used to be 100 cubits of this sort of work or advice required, you're doing five, 10 or 15 of them now with this agency? I imagine it's still a small percentage when you look at government as a whole or a whole-of-government need for this sort of advice.

Ms Frew : Certainly it is really an element of, as I mentioned, the resources and capacity available in terms of where our focus and our ability to provide the advice is being structured at the moment, which is why we have been brought in on government priority projects. They're the projects where, through the benefit of our advice, the biggest impact can be had for the small number of resources that we've got.

CHAIR: Yes, but just go back to the focus of my question. I don't want you to guess, but someone must have made the case for this. Someone sat down, made the case for it, developed the idea and took it through cabinet. At some stage they must have said, 'Look, they're not going to do 100 per cent of our work; they're probably going to help us in the space of six or seven per cent, if that, in terms of this type of work required.' Is that fair enough? Is that a fair assumption? I don’t mean the six or seven per cent.

Ms Frew : It could be fair enough, but I'm probably not the best person to answer that question, as I wasn't around at the time that those were developed.

Dr Kennedy : It was a sense that, with the Commonwealth investing in its own infrastructure projects directly—Western Sydney Airport and Inland Rail are two prime examples, and there were some potential other projects. And also one part of the partnership agreement we have with the states when we're looking to jointly fund projects is that we do ask the states to look at alternative financing arrangements for these infrastructure projects to minimise the call on the taxpayer. And the states often do do that.

CHAIR: Like toll roads it or something to that effect in the PPP.

Dr Kennedy : It could be. Or they could charge local landholders around new stations for a light rail, or whatever the case may be. In addition to further quality advice on the Commonwealth's own direct projects, it was also to look at the veracity of the state proposals around those types of projects. It may well be that Ms Frew, through her advice, could see an enhanced opportunity and we would go back to the state and say, 'Maybe you can do a bit better here and we can minimise the cost to the taxpayer.'

Senator BROCKMAN: Is the concept of value capture something you are looking at directly?

Ms Frew : Yes.

Senator BROCKMAN: Have you done any work on that as yet, or is that something that is in development? Do you do that project by project? Do you look at Inland Rail and value capture for Inland Rail?

Ms Frew : In respect of the projects we have been allocated, the Western Sydney rail project was identified by government for us to investigate those opportunities. Those investigations are still continuing and we are working closely with the department of infrastructure in respect of those.

Senator BROCKMAN: Would you look at value capture on all projects that are referred to you, or is part of the reference to look at value capture? Is that part of your remit for every project that is passed on to you, or is that something you will look at if government asks you to?

Ms Frew : A bit of both.

Senator BROCKMAN: If it is appropriate you might include it, or it may come from government?

Ms Frew : If it is appropriate, we will certainly provide advice to government that that is a consideration which could or should be pursued as part of the discussions with the states that those projects are part of.

Senator BROCKMAN: Putting the issue to one side—because it is a debate—there is a sense that Australian superannuation funds have underinvested in Australian infrastructure, partly because there has been nobody joining the dots between the money that is sitting in super funds and infrastructure projects and the returns they can deliver. It is part of your remit to create that link, or would you just suggest that may be an avenue of funding? Do you have a direct role in talking to the superannuation industry about whether there are potential funding opportunities, or is that done at the agency level?

Ms Frew : That's predominantly done at the agency level. But we will look at the funding requests on the infrastructure projects and we will investigate those to see if they are structured in a way that that money is able to be accessed by government and, therefore, reduce the amount of up-front taxpayer funding that might need to be contributed by the Commonwealth.

Senator GALLACHER: Chair, Senator Brockman has just put a statement on the public record that super funds, industry funds, are not investing in infrastructure.

Senator BROCKMAN: No, I prefaced it by saying—

Senator GALLACHER: The sole objective of a trustee director is to act in the interests of members' retirement, not sectors of investment.

Senator STERLE: He knows because he is a director of a super fund.

Senator BROCKMAN: I did preface it with some words. I'm happy to have a chat with you about it later.

CHAIR: No more sugar over lunch! Thank you to the witnesses. That was a very good hit out; you have done very well. Thank you very much and have safe travel back to your destination.

Senator Scullion: Chair, I have an answer to Senator McCarthy's question earlier this morning on Indigenous employment. Senator McCarthy, I had a look at the Hansard. You asked a question of Dr Parkinson. You asked him to take it on notice. He said absolutely and then went on to give you the answer, which is why you might not have got an answer to the question on notice. But that is okay because that sort of wandered a bit. In there, you did go on to talk about Indigenous employment—this is on the Tanami Road. You again asked whether he could find that out and he said he could certainly ask the question. You went on to talk about Indigenous employment. What you were really asking about was the Shire of Halls Creek and their workforce. He indicated that you can get those numbers, and he said he could certainly ask. I can understand why that wasn't specifically taken as a formal question on notice. For your benefit, I have some answers to those questions in any event.

Senator McCARTHY: Have you got it with you?

Senator Scullion: I have an answer I can provide you now. There are two aspects. One is the Northern Territory government, which was part of the proponents. The other one specifically mentioned is Halls Creek. From what we can find out today, I understand that 13 of the 55 employees in Halls Creek are Indigenous. That is some 24 per cent. I know you will then ask me the indigenous population of Halls Creek. That is 67 per cent. In terms of pursuing with the Northern Territory government what they have done about Indigenous employment on the Tanami Road, I am prepared to write to the Northern Territory government, or the committee can write to them. The reason I have answered in this way is that I think it is one of those things where, while it may not have been taken as a question on notice specifically, that is all the information I can have. If someone later decides that we did write to the Territory government, we will find that and provide that. If not, I am more than happy to write on your behalf or the committee's behalf.

Senator McCARTHY: You would probably do that as Indigenous Affairs minister anyway, wouldn't you?

Senator Scullion: Either/or. I am happy to do that. If you accept that, I will cc a letter to the committee.

Senator McCARTHY: You can cc me in. That would be great.

CHAIR: Jeez, this outbreak of—

Senator Scullion: It's because you're chair!

CHAIR: Surely this can't last!