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Eighty-First Annual Report (2017)
1. 1. Annual Report
1.1
Under Section 16 of the Public Works Act 1969 (the Act), the Parliamentary Standing Committee on Public Works must table in each House of the Parliament a report of its proceedings from 1 January to 31 December for the preceding year.
1.2
All public works that have an estimated cost exceeding $15 million must be referred to the Committee. Public works cannot commence until the Committee has reported on the works to Parliament and the House of Representatives resolves that it is expedient to carry out the works.[1]
1.3
The Act states that in considering and reporting on a public work, the Committee shall have regard to:
the stated purpose of the work and its suitability for that purpose;
the necessity for, or the advisability of, carrying out the work;
the most effective use that can be made, in the carrying out of the work, the monies to be expended on the work;
where the work purports to be of a revenue-producing character, the amount of revenue that it may reasonably be expected to produce; and
the present and prospective public value of the work.[2]
1.4
During 2017, the Committee reported on 24 works. The combined cost of works approved was approximately $2.033 billion. A list of the works and their individual costs is at Appendix A.
1.5
The Committee also requires proponent entities to notify it of proposed expenditure on public works with an estimated value of between $2 million and $15 million (medium works). This practice has arisen because, in the past, some proponent entities divided proposed works into several smaller components, each costing less than the referral threshold, to avoid scrutiny.
1.6
The Committee reviews medium works notifications to determine whether it has any concerns or objections to works proceeding. Medium works must not proceed until the Committee has given its approval. In 2017, there was an increase in numbers of medium works submitted to the Committee which is discussed later in this chapter. A list of medium works approved by the Committee is at Appendix B.
1.7
In 2017, the Committee held a total of 45 meetings comprising private meetings, inspections, public and in-camera hearings. Of these meetings 29 were in Canberra, 11 were interstate, with the remaining meetings being conducted by teleconference. A list of all Committee meetings and hearings held during 2017 is at Appendix C.
1.8
For referrals made after 2010, the Committee expects to receive post-implementation reports on completed projects. These reports indicate whether projects have been delivered within the advised scope, cost and timeframe. A list of all post-implementation reports received in 2017 is at Appendix D.
1.9
The Committee’s website provides information on all past and current projects referred to it for inquiry, a regularly updated list of medium works approved by the Committee and information on project delivery for completed projects where post-implementation reports have been received.[3]
1.10
The Committee’s website also features a copy of the Act and the Public Works Committee Procedure Manual. The Procedure Manual provides guidance for Australian Government entities involved in delivering public works. It presents information to help entities understand:
their obligations to the Committee;
the information that must be provided to the Committee; and
the Committee inquiry process.[4]
1.11
The Public Works Committee Procedure Manual is regularly updated to provide additional information and clarifying information. In December 2017, version 9.1 of the Procedure Manual was made available on the Committee’s website.

Inquiries and Reports

1.12
The Act requires that the Committee consider and report on each referred work ‘as expeditiously as is practicable’.[5] The Committee takes this very seriously and acts to ensure that referred works are scrutinised and reported on in a timely manner and without compromising the rigour of the scrutiny.
1.13
The standard inquiry process allows time for public comment on proposed works and opportunities for the Committee to inspect the proposed work site(s), should it wish to, prior to holding public and in-camera hearings.
1.14
When planning inquiry timetables, the Committee and proponent entities must consider the parliamentary sitting calendar. Generally referrals are initiated only when the House is sitting, and reports need to be tabled in both houses of the Parliament.
1.15
2017 was expected to be a busy year for the Committee and the number and total amount of referrals attested to this. The Committee scrutinised 24 referrals which was higher than the seven referrals of the 2016 election year. By comparison in 2015 the Committee dealt with 22 referrals.
1.16
The Committee tabled eight reports and one annual report in 2017.

Medium Works

1.17
The Committee must be notified of proposed public works projects with an estimated cost between $2 million and $15 million (excluding GST, unless GST is not recoverable). These projects are referred to as ‘medium works.’
1.18
This is a longstanding practice of the Committee and one where the process requires proponent entities to provide less information in the notification process than that required for a full referral. The process also usually has a faster approval cycle but this is dependent on the Committee receiving all the necessary information up front.
1.19
In 2017 there were 147 medium works approved with a combined value of $718 million. In 2016 the Committee approved 66 medium works with a combined value of $371 million and in 2015 approved 37 medium works with a combined value of $235.3 million.
1.20
The statistics show that there has been an increase in the number and value of medium works notifications to the Committee. This is due mostly to a change in processes in the Department of Defence.
1.21
This significant increase in notifications has resulted in the Committee spending considerable time in the scrutiny of medium works notifications, particularly as the combined value of these works is $718 million. The Committee is considering refinements to its process to address this increase in medium works notifications and will advise relevant agencies in due course.

Community Consultation

1.22
Public Works projects may often have an impact on local communities and as a result the Committee may receive submissions from members of the community, local councils and other interested parties regarding a particular project. These submissions may not be against the project but may raise an issue or present a factor for the consideration of the Committee.
1.23
During 2017 several of the referred works under scrutiny by the Committee received submissions from members of the local community close to the proposed works. These projects included the Yongah Hill Immigration Detention Centre Security upgrades, hardening works at the Melbourne Immigration Transit Accommodation Hardening Project and HMAS Moreton Unit Relocation project.
1.24
Two of these projects related to the Department of Immigration and Border Protection’s review of its immigration detention network and resultant changes to detention facilities. The changes were required to address an increase in higher risk populations in immigration detention, in some cases close to residential areas.
1.25
The other project, HMAS Moreton Unit Relocation, was the relocation of a naval site which was adjacent to a site proposed to be disposed of by the Department of Defence close to the centre of Brisbane.
1.26
The Committee noted that they received a larger than usual amount of submissions in relation to these projects and many of the submissions were from members of the local community. A consistent theme within the submissions was the lack of consultation with the local community particularly in the early stages of the project. The Committee noted that in one of these projects the proponent entity’s attempts at community consultation were ‘severely lacking’.[6]
1.27
It is not the intention of the Committee to revisit the specific issues from these projects but rather to draw attention of proponent entities to the importance of community consultation from the outset.
1.28
The Committee is concerned that the community consultation being undertaken by proponent entities may not be appropriate for the project or context. In some cases, the level of consultation was minimal and only addressed after direct intervention from the Committee.
1.29
The Committee expects that details of any consultation with relevant stakeholders, including the local community, should take place at early in the process, should recognise the environment that the project is taking place in and should be provided to the Committee in the submission under the ‘other issues’ section.
1.30
The Committee notes that failure to pay attention to community consultation early in the project has the potential to lead to delays in project scrutiny until appropriate consultation has taken place or may require ongoing scrutiny by the Committee during the project lifetime.

Office Fit-out

1.31
Office fit-outs are one of the defined works that are under consideration by the Committee, as per Section 5 of the Act.[7]
1.32
The Procedure Manual notes that additional information is required for fit-out projects, including an estimate of occupational density and fit-out costs presented as a ‘per square metre’ estimate.[8]
1.33
The Committee has noted that some submissions from proponent entities do not follow the requirements as listed in the Procedure Manual. Particularly, the submissions do not exclude costs from the ‘per square metre’ cost such as non-construction contingencies, relocations and fixtures and fittings. The Committee is then required to seek clarification from the proponent entity which can add time to the scrutiny process.
1.34
Of greater concern to the Committee are the submissions that present higher than recommended per square metre cost for a fit-out without adequate explanation. The Committee has an expectation that a standard office fit-out in metropolitan areas in Australia should fall between $1,200 and $1,800 per square metre. Explanations for variance from this range should be provided in the initial submission and should give appropriate detail and justification why such a variance is necessary.
1.35
The Committee wishes to stress to proponent entities the importance of ensuring that fit-out costs are within the acceptable range as the case for variations to this will need to be made strongly.

Lease incentives

1.36
Owners of office space, particularly in the central business districts of the major capital cities of Australia, often provide incentives to induce businesses to enter into leases of the premises. Lease incentives include provision of a rent free period, a cash payment towards a fit-out or a cash payment not linked to a fit-out.
1.37
Lease incentives are often included as part of a submission from a proponent entity as part of overall project funding, either to fund an office fit-out or as a reduction in the overall lease cost.
1.38
The Committee is particularly interested in how lease incentives are used by proponent entities and how they contribute to the overall project funding. In most instances, this has been clearly indicated in the submission and the proponent entity has demonstrated how the lease incentive contributes to the effective use of the ‘moneys to be expended on the work’.[9]
1.39
During the course of the Committee’s inquiry into the proposed Department of Immigration and Border Protection Headquarters project, it emerged that a large portion of what was reported to the Committee as being a lease incentive was an interest-bearing loan being used towards funding the proposed works.
1.40
The Committee does not consider an interest-bearing loan to be a lease incentive in any case and has accordingly made clarifications to the Procedure Manual noting:
Such incentives or loans can lead to hidden ongoing costs to proponent entities, and in the Committee’s experience, could be used to understate the costs of the project to the Commonwealth.[10]
1.41
Proponent entities are required to provide details of lease incentives in cases where a lease incentive has been used to finance a project. Further, the Committee expects that proponent entities provide an analysis of the benefits gained by financing though a lease incentive, rather than utilising proponent entity funds.[11]
1.42
Proponent entities who are considering lease incentives are encouraged to contact the committee secretariat who can provide additional advice.

Procedural

1.43
In December 2016 the Committee was referred the proposed Department of Immigration and Border Protection Headquarters project. This was a large, complex project with a budget of $255 million to fit-out four buildings in Canberra, constituting the largest office fit-out conducted in the Committee’s history.
1.44
The Committee undertook an extensive scrutiny process with a greater than usual number of hearings and submissions from the proponent entity. This was in response to the extensive scope of the project and the need for the Committee to obtain pertinent details that were lacking in the initial submissions from the then Department of Immigration and Border Protection.
1.45
Pursuant to Section 14 of the Public Works Committee Act 1969, the Committee divided on the inclusion of the relevant Chapter relating to the DIBP project in Report 4/2017 of the Committee. Upon request from the non-government members and pursuant to Section 14 (3)(a) of the Act, the way that each member voted was recorded in both the minutes and the Committee’s report.[12]
1.46
In May 2017 following the Chair’s tabling statement, the Deputy Chair also spoke to the report. During this statement, the Deputy Chair told the House that the non-government members were primarily unconvinced on the second and third points listed in Section 17(3) of the Public Works Committee Act 1969; specifically that they did not believe there was a need for the works, and that they remained unconvinced that the proposal represented the most effective use of public money.

Conclusion

1.47
The Committee considers that 2017 was a busy and productive year, and the Committee thanks all those who have assisted or participated in its inquiries over the period for their cooperation and efforts to facilitate the work of the Committee.
1.48
The Committee would like to register its appreciation of the work of Mr David Coleman MP who was a valuable member of the Committee until December 2017.
1.49
The Committee appreciates the assistance provided by the Department of Finance as well as the proponent entities who participated in the scrutiny process.
Mr Scott Buchholz MP <LineBreak> </LineBreak> Chair

[1]     

Public Works Act 1969, Part III, Section 18(8). Exemptions from this requirement are provided for work of an urgent nature, defence work referral of which is contrary to the public interest, repetitive work and work by prescribed authorities listed in the Regulations.

[2]     

The Act, Part III, Section 17(3).

[3]     

Parliament of Australia, viewed at www.aph.gov.au/pwc

[4]     

Parliamentary Standing Committee on Public Works, Procedure Manual, Edition 9.1.

[5]     

The Act, Part III, Section 17(1).

[6]     

Australian Parliament, Parliamentary Standing Committee on Public Works, Report 2/2017, ‘Chapter 3: Yongah Hill Immigration Detention Centre Security Upgrades’.

[7]     

The Act, Part I, Section 5.

[8]     

Parliamentary Standing Committee on Public Works, Procedure Manual, Edition 9.1, p. 26.

[9]     

The Act, Part III, Section 17(3)(c).

[10]     

Parliamentary Standing Committee on Public Works, Procedure Manual, Edition 9.1, p. 31.

[11]     

Parliamentary Standing Committee on Public Works, Procedure Manual, Edition 9.1, p. 31.

[12]     

Australian Parliament, Parliamentary Standing Committee on Public Works, Report 4/2017, Appendix C.