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Tuesday, 16 November 2004
Page: 90

Senator Chris Evans asked the Minister for Defence, upon notice, on 18 June 2004:

(1) How much was spent on internal and external legal services for the 2002-03 financial year.

(2) What is the proposed expenditure on internal and external legal services for the 2003-04 financial year.

(3) How does this compare to expenditure in the past 4 financial years.

(4) What is the reason for the differential in the figures provided to the Australian Labor Party under a freedom of information (FOI) request, showing that the department's expenditure reported to the Government's review of legal expenditure (the Tongue Report) was much lower than stated in the FOI request.

(5) Has the Minister acted to correct the record of figures provided to the Attorney-General's Department for the purpose of the government review.

(6) How did this mistake occur.

(7) (a) When did the department become aware of the massive discrepancy in its reporting to the Attorney-General's Department for the purposes of the Tongue Report; and (b) what actions, if any, were taken to remedy this discrepancy, and when.

(8) What guidelines does the department follow in the contracting out of legal services.

(9) What reporting arrangements are in place to account for this expenditure.

(10) How is legal expenditure estimated for the forward years.

(11) Why is this not publicly reported anywhere in the department's annual report or portfolio budget statements.

(12) Can a list be provided of the five external legal firms to whom the most money was paid, and how much was paid to each, in the 2001-02 financial year.

(13) What amount was allocated to each of these firms in the past 5 years.

(14) With reference to the review process being conducted by the Australian National Audit Office (ANAO): (a) has the department contacted ANAO with any reform ideas or other proposals; and (b) has ANAO raised any concerns with the department about its legal spending, or accounting of legal spending; if so, what concerns were raised.

(15) Is it correct, as reported in the Financial Review on 11 June 2004, that the department: (a) spent $61 million on legal services in the 2002-03 financial year, up from $44 million the previous year; (b) is conducting a reform of its in-house legal services; and (c) predicts that its legal costs overall will fall in the 2003-04 financial year by 13 per cent, including a 4 per cent drop in the cost of in-house legal services.

(16) (a) What are the terms and scope of the review and reform of in-house legal services; and (b) what reform is regarded to be desirable.

(17) (a) When will this review be complete; and (b) will it be publicly available.

Senator Hill (Minister for Defence) —The answer to the honourable senator's question is as follows:

(1), (2) and (3)

2003-04 $61.0m ($22.3m internal and $38.7m external).

2002-03 $61.3m ($22.5m internal and $38.8m external).

2001-02 $41.8m ($18m internal and $23.8m external).

2000-01 $19.1m (external only. The external figure includes sessional fee payments which, from 2001-02, have been included in internal legal expenditure. Internal figures are not available.

1999-2000 $17.0 (external only. The external figure includes sessional fee payments which, from 2001-02, have been included in internal legal expenditure. Internal figures are not available.

(Note: All the figures provided have been obtained from interrogation of the relevant legal codes in Defence's financial management information system. External legal services include professional fees, disbursements and other related expenses.)

(4) See my response to (5) and (6) below.

(5) and (6) Defence provided estimates to the Tongue Inquiry in response to a set of questions. Those estimates were subsequently combined with estimates provided by Defence in response to a different set of questions on a Parliamentary Question on Notice No 3182. The combined figures are claimed to support the proposition that there has been a discrepancy in Defence legal costs. Defence has, subsequently, sent a letter to the Attorney-General's Department to avoid further confusion.

(7) (a) Defence became aware of this issue in the figures when investigating the claims of the Australian Financial Review articles in late May and early June 2004. (b) See my answer to questions (5) and (6) above.

(8) The guidelines in Defence for the use of the Legal Panel are: Defence Procurement Policy Instruction: 3/2001 - Defence Legal Services Panel, and subsequent Defgrams 234/2002 and 180/2004. In addition, the primary reference document for all Defence procurement is the Defence Procurement Policy Manual. It incorporates the Commonwealth Procurement Guidelines and Best Practice Guidance and is intended to be used in conjunction with other Defence documents such as the Defence Chief Executive's Instructions, contracting templates, the Legal Services Directions issued under the Judiciary Act 1903 and required legislation, such as the Financial Management and Accountability Act 1997 and Regulations.

(9) In accordance with the Commonwealth Procurement Guidelines and Best Practice Guidance, all agencies subject to the Financial Management and Accountability Act 1997 are to report certain procurement activities in the Commonwealth Purchasing and Disposal Gazette.

The Defence Procurement Policy Manual provides an outline of the requirements for reporting of procurement activities undertaken by Defence. These requirements mandate that procurement of legal services is to be reported, as per all contracts that are valued at over $2,000, on the Gazette Publishing System.

Additionally, the Defence Policy Procurement Manual also mandates that any contracts or purchase orders that are valued over $100,000 are required to be reported on the Buy Australia Website and in accordance with the Senate Order No. 192.

(10) Legal cost estimates for the coming financial year are based on historical expenditure profiles, adjusted for known activity-level changes or efficiency targets, with the capacity to adjust estimates if emerging pressures arise during the financial year.

(11) Defence produces financial information in its Portfolio Budget Statements and Annual Report in accordance with the Finance Minister's Orders, which are underpinned by the Financial Management and Accountability Act 1997 and guidelines prepared by the Departments of Finance and Administration and Prime Minister and Cabinet respectively. There is no requirement to specifically disclose legal costs, although Defence did disclose legal compensation costs, which includes external legal service provider costs, at Note 4B p227 of the 2002-03 Annual Report.

(12) The five external legal firms to whom the most money was paid, as recorded against the relevant legal codes, in the Defence financial management system for the 2001-02 financial year were: Australian Government Solicitor ($12.7m); Clayton Utz ($4.9m); Blake Dawson Waldron ($2.0m); Phillips Fox ($1.0m); and Minter Ellison ($0.046m).

(13) Defence does not have a set allocation for each firm. Funding is dependent on demand from year to year with services sourced from the most appropriate firm available in accordance with established guidelines for the use of the Defence Legal Panel.

(14) (a) No. (b) No.

(15) (a) No. Actual figures were $61.3m in 2002-03 up from $41.8m in 2001-02. (b) Yes, an internal review was completed last year. (c) No, Defence's overall legal costs have fallen in 2003-04 by about 0.5 per cent including an approximate 1 per cent drop in internal legal service costs.

(16) (a) A review was conducted to improve governance and management arrangements to better meet Defence's in-house legal requirements. (b) Desirable reforms include improvements in customer focus and overall productivity.

(17) (a) The review was completed on 31 March 2003. (b) No.