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Wednesday, 27 September 1972
Page: 1275


Senator COTTON - Like the honourable senator, I read this report this morning. I was surprised, as he was, and concerned. I was also slightly mystified when I read that only 3 countries -had tendered - Japan, West Germany and Holland - and I wondered why Australia had not been a tenderer. Was it that our manufacturers or our steel producers had not sought to do so or had not been asked to do so? Accordingly, I thank him for this question. As 1 said earlier, I also share his concern. I shall direct the question to the responsible Minister to see whether anything can be done, and try to find out whether Australian manufacturers arid steel producers were invited to tender arid, if ' they were not invited to tender, why they were not invited to tender.

STEEL PIPE


Senator WEBSTER - With your permission Mr President, I wish to direct a short supplementary question on the same matter to the Minister representing the Minister for Customs and Excise. Will the Minister assure the Senate that proper investigations will be carried out into the request for by-law entry from Japan of 220,000 metric tons of 34 inch diameter steel gas pipe and assure the Senate that by-law entry will not be granted under item 19 of the Customs Tariff unless the Minister for Customs and Excise is assured that an Australian made suitable equivalent is not available?


Senator COTTON - The honourable senator may be assured that his question will go direct to the Minister for Customs and Excise.

STEEL CONTRACT


Senator WEBSTER - I direct a question to the Minister representing the Minister for Trade and Industry. I refer to matters which I raised in the Senate earlier in this year and again in the earlier part of this week, and to the reported placing by the Australian Gaslight Company of an order with Japanese suppliers for 220,000 tons of gas steel pipe. Can it be accepted that the Minister feels confident that the AGL has given every opportunity lo Australian manufacturers to submit a quotation for the supply of this substantial order? Should it be established that at no stage has the principal given a proper specification upon which a quotation could be submitted by the Australian suppliers of steel or the manufacturers of pipe, would the Minister consider it reasonable for the Federal Government to intervene in this matter? If it could be established that at no stage the principal invited a quotation from Australian manufacturers for the supply of 34-inch diameter steel pipe, would it be reasonable to expect that the Federal Government would intervene in this matter.


Senator COTTON - My knowledge of this matter does not allow me to answer with precision many of the queries raised in the honourable senator's question. It appears to be clear that Australian manufacturers had an opportunity to tender. From what I can find out, it is said that they believed their prices would have been competitive but they do not know the level of the other price. This is what is said. Also, it is said that the quality of steel called for in the pipes was such that they believed they could manufacture it. It would appear that there is still some slight doubt in the minds of the consultants who were advising the purchasing company whether this is the case. The only thing that seems to me to be really precise in this matter is the comment made this morning by a company public relations spokesman that the Australian pipemaking capacity of this diameter pipe is only about 50 per cent of the potential demand rate. I admit that these things are imprecise. I think that the honourable senator will agree that in a case of this magnitude when he asks whether the Government will intervene, itis a proper matter for the responsible minister in the other place and the Government to consider. He can be assured by me of my interest and concern.


Senator WEBSTER - This matter breaks into a number of areas. Australia has the potential to manufacture this pipe. That is established. It was mentioned by an earlier speaker that Australia had supplied pipe to various areas. That is so. I was disappointed that the Minister could not find information on which to advise me that there were manufacturers, other than Tubemakers of Australia Ltd. There are 2 major manufacturers of steel pipe of this grade in Australia. One is Tubmakers of Australia Ltd which, for the interest of the Senate, is owned 50 per cent by Broken Hill Pty Co. Ltd plus a public shareholding, with the other 50 per cent held by the British Steel Corporation and Tube Investments Ltd. The other substantial steel pipe manufacturer in Australia is Steel Mains Pty Ltd, which is owned 50 per cent by Tubermakers of Australia Ltd and 50 per cent by Humes Ltd, which is a totally owned Australian corporation. The fact that Australian industry can supply this pipe is undoubted. In respect of the Bass Strait contract, 2 major volumes of Australian produced pipe of the diameter of 42 inches, 38 inches, 36 inches and 30 inches but not of 34 inches were supplied. 1 am surprised this information showing that Australia has the capacity to produce this pipe is not available. Newspaper publicity would give one the opposite view.

The Australian industry has had scarcely sufficient specification on which to quote at any stage. I wish to read from a document, which is now in the hands of the Department of Customs and Excise, a statement by one of the manufacturers.I shall ask for leave to incorporate portion of this document in Hansard. The relevant section is approximately one foolscap page, from which I will read a paragraph. This section is entitled 'Comments on Tender Documents'. The relevant paragraph reads:

The documents issued by Williams Bros. - CMPS are marked 'Preliminary'. They are not dated. They are not in consecutively numbered pages. Some paragraphs are crossed out by hand. There are no General Conditions, so that tenderers do not know what is required with regard to Terms of Payment, delivery periods, who is the purchaser and hence who undertakes to pay for the good's supplied. There is no clearly identified date of tender call, nor of a proper closing date for the tender. Several attachments are mentioned in the Specification, but are not attached, so that tenderers cannot judge their significance or content. The Specification is not bound, so that loose pages can be lost or added, without any form of control. 1 now ask for leave to incorporate the section that I have mentioned.

The ACTING DEPUTY PRESIDENT (Senator Lawrie) - Order! Will the honourable senior supply the matter to be incorporated?


Senator WEBSTER - I have shown it already to the President. He told me to produce it in the Senate and that would be it.


Senator Keeffe - What is in it?


Senator WEBSTER - I ask Senator Keeffe not to interrupt me, please. 1 asked the President about this incorporation and he said that if I indicated in the Senate what was in it I would get approval to incorporate it. I would appreciate it if Senator Keeffe would not interrupt me as I have little time in which to deal with this big subject. I ask for leave to incorporate the document.

The ACTING DEPUTY PRESIDENT (Senator Lawrie) - Order! Is leave granted? There being no objection, leave is granted. (The document read as follows) -

8.   Comments on tender documents (Attachment IV)

Most organisations when calling public tenders for works of some magnitude, establish a proper administrative procedure, for their own protection as well as that of tenderers. One of the most elementary steps is to issue a proper description of the General Conditions of tender, a proper specification of the work to bc done, and a full set of appendices where the specification refers to the existence of such appendices.

The documents issued by Williams Bros- CMPS are marked 'Preliminary'. They are not dated. They are not in consecutively numbered pages. Some paragraphs are crossed out by hand. There are no General Conditions, so that tenderers do not know what is required with regard to Terms of Payment, delivery periods, who is the purchaser and hence who undertakes to pay for the goods supplied. There is no clearly identified date of tender call, nor of a proper closing date for the tender. Several attachments are mentioned in the Specification, but are not attached, so that tenderers cannot judge their significance or content. The Specification is not bound, so that loose pages can be lost or added, without any form of control.

It must be stressed that this unconventional method of documentation makes it possible for different suppliers to receive different tender documents, either by mistake or intentionally. There is no guarantee whatever that the overseas suppliers have been asked to tender for the same Specification as the Australian pipe makers.

With regard to delivery requirements there is no mention anywhere in the Specification. In early discussions (prior to March 1972) the clients had indicated they were thinking in the order of 8 to 10 months from date of order to final delivery. As it would require 2 to 3 months from date of order to receipt of the first shipments of steel plate, this would have left only about 6 months actual manufacture time. In th: 'Tentative Project Schedule' (see Attachment II) this delivery period has been extended to 3 months lead time plus 11 months production, giving 14 months from date of order to final delivery.

Even this 'extended' delivery period would only allow the Australian industry to supply about 50 per cent of the pipes needed. It is important to note that any further extension of time adds more than pro-rata to the quantity which local pipe makers can make. Steel Mains offered to make about 84 miles in 14 months, or an average of 6 miles/month for the period. But in a further 4 months it could make 32 miles, or 8 miles/month. Assuming TOA's output ls about 4 times as great, the total local content would then be closer to 75 per cent of the project.

The significance of this point is that there is a legitimate question with regard to client's ability to use the products within the specified period This ability does not depend on the number of pipe-laying 'spreads' which can be brought into the country, but on the number of competent qualified welders available in Australia. Past Australian experience on major pipeline construction would appear to indicate this to be the real determining factor. It cannot be ignored that simultaneously with the construction of the trunk main there will be other spreads engaged on the laterals (e.g. to Newcastle and Wollongong) on the construction of the gathering lines in the field, and large numbers of welders would work on the upgrading of the gas distribution system in Sydney and on the process plants at Gidgealpa.

We do not claim any expert knowledge in the construction of natural gas pipeline systems, to express an opinion on the timing of the project. However, it appears lo us that sufficient grounds would exist to warrant a thorough questioning on this point.

It is evident that a longer period of full plant utilisation on a single contract is financially more advantageous, and the award of a greater tonnage of pipes would allow us to quote the client a reduction in price per ton. However, even if the longer delivery period did not induce the client to place more work with Australian pipe makers, it would make the conditions of the contract less rigorous, and confer a real benefit on the suppliers.


Senator WEBSTER - I thank the Senate. Referring to the paragraph which I quoted, I point out that the Federal Government knows these things. Why do we not have a statement in the Senate tonight in relation to this matter? I am unable to understand this failure.


Senator Georges - Whose side are you on now?


Senator WEBSTER - I am attempting to disclose the facts in relation to this matter. I have said that within Australia there is a competence to supply this information. At no stage were Australian manufacturers given the final specification. Whilst some final specification may have been given to overseas contractors, the original call for quotation on this pipeline was for 700 miles of 30 inch diameter pipe with a 36 inch rise going over the Blue Mountains for a length of about 80 miles. At no stage was a quotation called for in respect of a 34 inch pipeline. One can readily understand, as the Minister for Works (Senator Wright) must, the great difference that there would be in calling a specification for a pipe of that size with a 2 inch difference in diameter.


Senator Wright - I would not call the document that you describe a specification.


Senator WEBSTER - Thank you, Mr Minister. That is a most constructive comment. I mention what the newspapers have said in relation to this matter. I rang the Melbourne 'Age' and complained about one comment in its editorial of Saturday last. That newspaper reported:

The 'Age' believes the Government should not invent' a tariff barrier against the pipes.

What a stupid comment. The tariff is not an innovation. It has existed for decades. The manufacture of steel pipe in Australia was looked at by the Tariff Board in 1965- 1966. and has been considered in subsequent years. The Tariff Board found Australian manufacturers to be most efficient, economical and worthy of sustaining.

My main concern is that what has been done is in accordance with law. I believe that the principal to this contract should be able to buy in Australia or overseas, whichever he prefers. The ability of Australian industry to supply is dealt with in item 19 of the customs tariff which refers to a suitable equivalent not reasonably being available in Australia. Those words must be adhered to. 1 ask the Minister, firstly, to verify the date on which the Australian steel suppliers and the pipe manufacturers received a complete and detailed final specification. Secondly, what was the date on which the Australian pipe manufacturers received information that the main body of pipe was to be 34-inch? It is known that the Australian pipe manufacturers learned that it was to be a 34- inch pipe on 21st September 1972 at a meeting held in the Department of Customs and Excise at which all parties to this agreement were present. I tell the Minister that while I believe that this great Australian company, the Australian Gas Light Co., should be permitted to buy wherever it desires - that it should have this freedom - nevertheless in this case it appears to me quite strongly that Australian industry was not given sufficient and appropriate specification upon which to quote.







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