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Monday, 22 September 2008
Page: 8161

Mr LINDSAY (8:42 PM) —I concur with the report of the chair of the committee tonight. This year, the Department of Finance and Deregulation wrote to the Public Works Committee regarding the increase in budget for the Christmas Island immigration detention centre project. While the final project cost increase was approved in August 2006, the PWC was not informed until January 2008, some 18 months later. These are serious matters.

The original budget for the works increased from $276 million at the time that the PWC reported in 2003 to almost $120 million more, and the Department of Immigration and Citizenship and the Department of Finance and Deregulation offered to brief the committee on the project. This report is a result of that briefing.

Finance claimed that cost overruns were due to the initial underestimation of the cost of works, the delay in the project design documentation by the main works contractor, the failure of the port crane and other matters. The evidence given on 26 June this year was disturbing for the committee. During the briefing—and this is in the Hansard transcript—I asked Mr Rick Scott-Murphy, the First Assistant Secretary and Manager, Property and Construction Division, Asset Management Group, Department of Finance and Deregulation, a number of questions. I asked Mr Scott-Murphy:

Going back to the start of all of this, you have given evidence that when you came to the committee originally you did not really know what the project was going to end up costing. Is that right?

Mr Scott-Murphy said:

We had a very dim, obscure view of what was entailed in the project.

Mr Scott-Murphy went on to confirm that the department did not know accurately what the cost might be. I then indicated that the committee is charged with determining whether projects are value for the Commonwealth of Australia in its expenditure of money. I asked Mr Scott-Murphy:

How could the committee have done that without knowing what it was that they were actually approving? The answer is that they could not; is that right?

Mr Scott-Murphy said:

I think at the time they could not, with accuracy, know that.

Not surprisingly, the committee report to the parliament tonight that we have not been satisfied with the justifications offered by the Department of Finance and Deregulation. Neither have we been satisfied with the compensation agreement reached between the department and the main work subcontractor, because the agreement is beyond public scrutiny.

However, some good has come of all of this. Finance has now introduced a two-stage approval process that does provide clarity. Future projects will have scope definition at a functional design brief quality. They will have a schematic design that defines what it is that is being delivered and a cost estimate based on the definition of scope and schematic design. The order of accuracy that will be presented now in the two-stage approval process is roughly 80 per cent certainty of out-turn cost. Finance will then provide the contingency in the budget to give greater certainty that the costs will not blow out.

The committee has used two other avenues available to it to underline its concerns that have surfaced as a result of this report and I can assure the parliament that the Public Works Committee, under the chairmanship of the member for Port Adelaide, is well and truly doing its job on behalf of the Commonwealth of Australia.