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Finance and Public Administration Legislation Committee
28/05/2015
Estimates
FINANCE PORTFOLIO
Department of Finance

Department of Finance

[09:02]

CHAIR: I welcome back the Minister for Finance, Senator the Hon. Matthias Cormann; Ms Jane Halton, the Secretary of the Department of Finance; and officers of the department. Minister, do you wish to make an opening statement?

Senator Cormann: No, thank you.

CHAIR: Ms Halton, do you wish to make an opening statement?

Ms Halton : No, thank you.

CHAIR: We are now going to deal with outcome 2 and program 2.1, which is public sector governance.

Senator LUDWIG: There are a series of measures of around $100,000 a year—for example, 'Aged Care - Home Care Program - increasing consumer choice', and 'National Disability Insurance Agency Full Scheme'. Are you becoming a line agency? What was that for?

Senator Cormann: What do you mean by 'becoming a line agency'?

Ms Halton : We do not have measures in our portfolio.

Senator LUDWIG: There is $100,000 for gateway measures.

Senator Cormann: Dr Helgeby may be able to assist you.

Dr Helgeby : Could I clarify that. Are you referring to the PBS?

Senator LUDWIG: Yes.

Dr Helgeby : In the PBS I think there is a table that lists measures—

Senator LUDWIG: Those measures, yes.

Dr Helgeby : The ones you are referring to—I have not found the page yet—would be—

Senator Cormann: Do you have a page number, Senator Ludwig?

Senator LUDWIG: No.

Dr Helgeby : For example, on pages 21, 22 and 23, there are a number of budget measures. Are they the ones you are referring to?

Senator LUDWIG: Yes. If you go down the list, at budget measures 1.3 it has a family package—

Senator Cormann: These have already been announced since MYEFO.

Dr Helgeby : That is right. These are measures since the MYEFO.

Senator LUDWIG: If you go over the page. I was just interested in what they were—'National Disability Insurance Agency Full Scheme', and so on.

Dr Helgeby : The footnotes for the table actually set out the key issue here, which is that Finance has a component of that overall package, and the footnotes list the lead agencies for all of those packages.

Senator LUDWIG: I see that. So, in No. 1 it says 'the lead entity' for the aged care and so on measure. I suspect that you are not going to be the lead agency in respect of that. I am interested in what the funding is for, more than anything else.

Senator Cormann: If you go into Budget Paper No. 2, obviously whatever is listed there relates to measures that are listed in Budget Paper No. 2. That has the full description. That obviously takes us back into outcome 1 rather than outcome 2.

Senator LUDWIG: If you could provide some information.

Senator Cormann: I am just trying to understand what it is that you are after, because all of the measures that are listed there—

Senator LUDWIG: It is an open question.

Senator Cormann: What is your question?

Senator LUDWIG: What is it for?

Senator Cormann: Everything that is listed there is also listed with a detailed description in Budget Paper No. 2. So if you want me to read—

Senator LUDWIG: Take me to that.

Senator Cormann: For example, if you go into the social services measures.

Senator LUDWIG: Just pick one and then I can be informed.

Ms Halton : The short answer to this, rather than going all the way back through the details of every one of these measures, is that most of these are gateway reviews.

Senator LUDWIG: I understand that. I started off by saying that they were gateway reviews. Are you funded for the gateway review?

Senator Cormann: I will give you an example. You have 'Aged Care - Home Care Program - increasing consumer choice'. The actual measure and the measure description are on page 147 of Budget Paper No. 2.

Senator LUDWIG: I am there.

Senator Cormann: That relates to what is listed in the table on page 21.

Senator LUDWIG: You are missing what I am asking. I understand what the measure is and I understand that if I want to know about that particular measure I would ask Social Services. What I am asking for is this: is the money you are getting to fund the gateway review?

Senator Cormann: That is right. But if I can finish, because I was actually getting to this. If you look at page 147 of Budget Paper No. 2 you see that there is obviously funding allocated to a range of agencies as part of the overall package, the lead agency obviously being the Department of Social Services. You see the 0.1, which is essentially—

Senator LUDWIG: Which is the $100,000.

Senator Cormann: It is the $100,000, which is also reflected in our portfolio budget statement, and as we have indicated it is for the gateway review, which is consistent with what is written in the measure.

Senator LUDWIG: That is all I wanted to know at the start. That leads me to the question of whether it is only to fund the gateway review?

Dr Helgeby : Gateway reviews are one of a number of types of reviews, but they are all of a kind. They may have slightly different names. They may be called 'implementation readiness assessments', but they are essentially gateway reviews.

Senator Cormann: The same as you can have, for example, a forensic audit, or a comprehensive cost review, or—

Senator LUDWIG: Let's not go to the forensic audit! All I was trying to ascertain—and it is not a trick question—is if the money is used for a review of some service—

Senator Cormann: That is right.

Senator LUDWIG: A gateway review.

Senator Cormann: Or an audit.

Senator LUDWIG: I was hopeful of understanding the range of gateway reviews or audits that you do in that measure. Dr Helgeby can take me through some of that, if he wouldn't mind. Just the types of reviews, and then I was going to ask how many others you are funded for to go through the same process. Or are they all the ones listed in 1.3 budget measures on pages 21 and 22.

Ms Halton : Table 1.2, which goes over three pages.

Dr Helgeby : Gateway reviews are not just a single review. They are a sequence of reviews that run from 1 to 6 over a number of gates over the life of a program or project. In fact, they actually run from zero to six in some circumstances.

Those reviews are independent reviews that provide advice back to the relevant department. The funds for those reviews are appropriated to Finance to enable Finance to hire—with the agreement of the relevant agency—independent skilled reviewers who dedicate, typically, a week at a time for each one of these reviews, which occur in a particular sequence. At any one time, we would have projects or programs that are in more advanced stages and some that are starting out. So we might have some who are doing gate 4 or gate 5, and they would have been appropriated in previous budgets. What you see coming on-stream in the new budget is those new projects that have got approval from government and for which a gateway review program is considered appropriate given the complexity and risk profile of that particular activity.

Senator LUDWIG: So then all of the budget measures would not necessitate a finance appropriation for a gateway or a review type. So how do you decide—or who decides—which ones will then attach?

Dr Helgeby : That is actually a decision of government.

Senator Cormann: It obviously depends, on a case-by-case basis, on the extent of the change and the level of confidence that it is a straightforward change or it is one that might need some adjustment in the future, depending on whether the particular approach works well or might be able to be improved. So it really depends. Across government, as you may change or pursue reform, some things are pretty straightforward, but for other things you might want to refine your approach based on the evidence after a period of implementation.

Senator LUDWIG: So is there a list of all of the gateway reviews or reviews that you are currently doing both for this budget, and obviously if they go from gateway 1 to 6—

Senator Cormann: Would you mind if we take that on notice?

Senator LUDWIG: No. By all means, take it on notice. Just so that I can get a sense of which projects have gateway reviews; so new ones, current ones and where the gateway review is up to for the current ones that are in train?

Dr Helgeby : So which stage of the process?

Senator LUDWIG: Yes, please. That really begs the next question: if it shows up a problem, what happens at that point? Do you make a report to government that it is going outside of its financial parameters, that there is an overspend likely to occur, that it is not meeting its targets or that it is not doing what it should do? I guess that is what the review is supposed to monitor and track.

Dr Helgeby : There is an escalation process. Each project that is subject to a review of this type has a senior responsible officer, who would typically be a senior person in the agency there. They are the person who is responsible for the success of a program. The primary audience for a gateway review is that person, because they are the one who is responsible for delivery. So the reviewers report to that person, based on their independent assessment, and make recommendations as they see fit about how to manage that thing. If a sequence of reviews shows up problems and if reviewers find that earlier problems are not being addressed, then there is an escalation mechanism.

Senator LUDWIG: On page 36 of the portfolio budget statement, it says:

90% of senior responsible officials identify that Gateway has contributed constructively to their project.

Is that a guesstimate, is that a historical rate or do you do a survey to get that?

Dr Helgeby : We do a survey. Every time we do one of these reviews, we survey the participants and get their views about how valuable it was or was not, and also seek ideas for improvement in the process more broadly. This is setting out the indicators, but when we come to report against it we would measuring actual data from all of our relevant senior responsible officers.

Senator LUDWIG: So it is not simply a survey of the line department that of course is going to respond positively to any review by Finance, for obvious reasons.

Senator Cormann: We are in a more objective position to assess performance. In a good governance sense, you do not want the person responsible for running a particular program or new approach to assess themselves. We do want to have a level of objective scrutiny and review.

Senator LUDWIG: Do you track the historical rate of the survey responses by the department?

Dr Helgeby : Yes, we do. We have data for that going back a couple of years.

Senator LUDWIG: Can I get that on notice, please?

Dr Helgeby : Yes.

Senator LUDWIG: As for the 90 per cent of gateway review report recommendations, are they actioned by entities? In other words, is there a historical rate for: they make a review, they make recommendations, they action them, and the survey then says line departments have implemented those fully?

Dr Helgeby : We would be able to track that, and certainly the reviewers themselves consider those things. But I will take on notice the detail of that question.

Senator LUDWIG: Then of course the corollary of that is where they are not actioned. In other words, if there are five recommendations and four are actioned and one is not, does that form part of the escalation process where, if there is a problem or a recommendation is ignored—

Dr Helgeby : It can, yes.

Senator LUDWIG: If it is critical, I guess?

Dr Helgeby : Yes.

Senator LUDWIG: If it is not critical then people move on, I suspect.

Dr Helgeby : It can be a part of that process. Sometimes what happens is that there is a bit of a time lag between a review and when it is completed and a series of related decisions, but that would not be the norm.

Senator GALLAGHER: In relation to performance indicators, there is another one related to the gateway reviews, which is '90 per cent of senior responsible officials'. Are they across different agencies?

Dr Helgeby : Yes.

Senator GALLAGHER: So it would be Finance officials and officials from the line agencies?

Dr Helgeby : Finance officials would only be part of this data collection if they were running a project which was self—

Senator GALLAGHER: So it is 'responsible officials of the project' that is being assessed?

Dr Helgeby : Yes.

Senator GALLAGHER: 'Has contributed constructively to their project'—do you track that as well? Well, you would have to, if it is one of your performance indicators.

Dr Helgeby : Yes

Senator GALLAGHER: Just out of interest: why do you not report how you are tracking against your key performance indicators—or do you, in the budget papers, or in your annual report?

Dr Helgeby : This is a very interesting question, which is caught up in another series of changes or reforms under the banner of the Public Management Reform Agenda and under the Public Governance, Performance and Accountability Act. At the moment we have a longstanding problem in the Commonwealth: it is not possible to read clearly between prospective statements of performance and ex post or actuals. We have material turning up in PBSs, which have a particular purpose—in relation to the budget estimates, in this case. We have separate sets of arrangements that apply to annual reports. The governance of annual report requirements is handled separately. What we are aiming to do through those broader reform processes is to create a clear line of sight between all of those things, and to put a stronger emphasis on planning and performance assessment and performance management across the cycle as a whole. So from 1 July next year people will start to put in place corporate plans for all Commonwealth entities which will discuss performance prospectively, and which will provide the basis for retrospective assessment in the annual reports. In that kind of vein, we are trying to work with the Joint Committee of Public Accounts and Audit to figure out what is best placed in which of these documents. At the moment I would regard the yellow books for this year as a kind of a transitional document between the system we have had, which has had this disconnect, and the system that we are trying to get to, which is one where the loops actually close and they close in a transparent manner. But this year's PBSs are transitional and what we would aim to do is get to a clearer situation once we have corporate plans in place. We need to get to a clearer position where parliamentarians and others will always be able to see what performance agencies set out to achieve.

Senator GALLAGHER: From that, it is happening. There is work underway—

Dr Helgeby : Yes.

Senator GALLAGHER: to come up with the best way. I agree there is no perfect science to how you do it—in a way, agreeing on what is to be measured and then measuring it and then comparing it year by year is incredibly difficult and can lead to lots of misunderstandings. It certainly seems you get half of the picture here at the moment, which is that you set yourself your indicators but you do not get any clear measurement of those performance indicators in the papers.

Dr Helgeby : What we would be hoping to see is that, as corporate plans come online, those things will be there, they will be live and you will be able to follow them through, ultimately to annual reports.

Senator GALLAGHER: So internally—Ms Halton, this is probably a question for you—do you track and monitor these key performance indicators in some way?

Ms Halton : Exactly as Dr Helgeby has just said, our preference would be to actually have the corporate plan and then the annual report and be able to actually see that, as he said, clear line of sight. In terms of how we manage internally, it would easier for us to be managing through the one mechanism rather than what I would probably describe as a fairly disjointed approach at the moment. Obviously, we keep an eye on how these things are tracking. I just go back to the question you asked earlier about whether people in line agencies take these things seriously. I have been on the receiving end of these reviews and now I am writing letters to CEOs about these reviews. I can tell you they are taken very seriously. As Dr Helgeby says, we are in the transition period, and we have been having this discussion with the JCPAA about how we ensure that we are accountable to the parliament, but we do not have multiple reporting all over the place and lots and lots of red tape.

Senator GALLAGHER: Yes, I agree.

Senator LUDWIG: That will make annual reports more interesting to read.

Senator Cormann: They are fascinating reading now.

Senator LUDWIG: You would be the only one who thinks that.

Ms Halton : Now, now. I spoke at the annual reports awards very recently.

Senator LUDWIG: I know.

Ms Halton : There were a lot of extremely enthusiastic people who had spent large amounts of time on annual reports. One of the things we said in the remarks we made at that presentation is that there is an opportunity to streamline. At the moment we have got things that are very burdened with lots and lots and lots of stuff which does not necessarily tell people very much, so the challenges are going to be: how do we create that line of sight but also make more explicable what we are doing and why we are doing it.

Senator LUDWIG: Dr Helgeby, the concept as I understand it—correct me if I am wrong—is that, rather than have an annual report which bears no or sometimes very little relationship to the portfolio budget statement and ultimately the direction of government, which is a snapshot of the department, it becomes a line of sight between the financial performance of the organisation, how it is meeting its deliverables and how its programs are proceeding in terms of budget accountability.

Dr Helgeby : Yes.

Senator LUDWIG: That is very good.

Ms Halton : We hope so.

Senator LUDWIG: No—it will make the annual reports far more interesting.

Ms Halton : Yes, I think so.

CHAIR: I have a question outside of annual reports, if you have concluded.

Senator LUDWIG: Yes.

CHAIR: It is about redundancies. Is this the right section to ask about public sector redundancies?

Senator Cormann: You may as well.

Ms Halton : Yes.

CHAIR: In the previous government, there were a range of redundancies for the public sector announced. I understand that you are honouring some of the redundancy payments.

Senator Cormann: It is a bit more involved than that, Senator Bernardi. I think we went through this in the early estimates after the change of government, when Mr Tune was still the secretary of the department. Essentially, the previous government applied various increased efficiency dividends which implied certain public sector staffing levels outcomes which could only be achieved with a number of redundancies, which was determined by Finance at the time to be a 14,500 reduction in ASL numbers across the public sector to which we, of course, added another 2,000. The necessary funding for the redundancies had not been provided by the previous government. You of course know that this government did make a provision through the contingency reserve for funding that agencies were able to apply for, if that was required, to help fund any voluntary redundancies even as required. That certainly has been progressing.

I might just say that you would recall in last year's budget forecast, in 2014-15, we projected that there would be a net reduction in total average staffing levels, excluding military and reserves, of 10,031 ASL from 2012-13. Based on the figures collected for the current budget, the latest projections in fact show a net reduction of 12,542 ASLs, so we are running ahead of schedule. If you refer to page 131 of Budget Paper No. 4, it shows that in this financial year, 2014-15, we have already reached our target, which was a target for next year, effectively, of bringing public sector staffing levels back down to the same level as back in 2006-07, the last full year of the Howard government.

CHAIR: When agencies apply for redundancy funding, do they have to make a case about the consequences of cuts in staff?

Senator Cormann: The short answer is that obviously agency resourcing and the requirements in terms of staffing are the responsibilities of individual secretaries. In terms of applying for redundancy funding out of the pool made available by the government, the case they have to make is that that funding is required and that they are not able to fund the redundancies out of their existing resources, but I might ask Dr Helgeby to add to that.

Dr Helgeby : Senator, the process involved looking at the current and future financial positions of those entities—so if they were going to make a loss, for example, or really to assess whether these redundancies would contribute to making them more financially viable or sustainable. It also looked at their history and how they have managed their finances and their staffing over a period of time, and it looked in particular at their workforce planning or their strategies. So it was trying to establish both a need and also a strategy which government could have confidence would be followed and which would enable those entities to have both sustainable financial positions and sustainable workforce positions. In the absence of the funding, those two things would have been problematic.

Senator Cormann: So the short answer is there is not an automatic ability to access funding for redundancies out of a central pool. There is a level of review to ensure that that is appropriate and required in the specific circumstances of any individual agency.

CHAIR: And the aim of that is to reduce the risk of the redundancies to service provision or the overall health of the organisation—is that right?

Senator Cormann: The aim of not making it automatic is because obviously you want to spend as much as necessary but as little as possible. You want to make sure that the allocation of these limited resources is as efficient as possible and as well targeted as possible, and to the extent that there is capacity within the relevant agency to better manage their affairs and to fund these sorts of requirements from within existing resources, then obviously that is our preference. But, in recognition of the fact that the previous government did not make any allocation to fund the required redundancies to reach their efficiency target which they applied in government, we did make a specific provision, which we announced some time ago and I think which has been the subject of discussion at several estimates hearings in the past. Then of course there is the process that Dr Helgeby has just outlined.

CHAIR: Are there recruitment restrictions as well?

Senator Cormann: Since we came to government in September 2013, there was essentially a—'freeze' is probably the wrong word. What was the terminology that we used, again?

Dr Helgeby : Interim recruitment arrangements.

 

Senator Cormann: There were interim recruitment arrangements which meant that, unless they were really necessary and critically important positions that needed to be filled, there was a slowdown in new recruitment. That has been eased off a bit because we have been able to achieve our objectives. Moving forward, there is going to be a little bit more flexibility now for agencies to make decisions in relation to their appropriate workforce resourcing.

CHAIR: Does that mean that, because the overall employment picture is probably at a more sustainable level, you have relaxed some of the recruitment restrictions?

Senator Cormann: Our focus on coming in to government has been to reduce the size of government. We thought that, under the previous government, the size of government had exploded and bloated too much. We wanted to ensure that government was as efficient, effective and responsive to community needs as possible, so we certainly did set ourselves a target of bringing public sector staffing levels back to the 2006-07 levels. That is what we have articulated in the past. As I have said to you, we have reached that target essentially ahead of schedule. We reached that target in this financial year—2014-15. What we are planning to do from here, through a rolling program of functional and efficiency reviews, is to identify in a strategic and very considered way the opportunities for further efficiencies. To explain that: over the years, what happens in departments is that there is a particular need at a particular point in time and there is a structure that is set up around it. Unless you actually take a step back and pause, that structure will continue to exist and other structures will be built on top of it. You need to take a step back, pause and reflect on whether a particular approach is still required and is still appropriate to be run through government and whether there are better ways of pursuing the same outcomes through the private sector or in other ways. It is quite extraordinary how much duplication can build up over time, not out of any bad intent but just because different people with good intentions start pursuing similar issues from different perspectives.

You need to have a methodical, strategic, ongoing rolling program of reassessing whether certain functions are still required and, if they are required, whether they are still best performed by government or whether there are better, more cost-effective and more efficient ways to deliver them. For example, in the context of opportunities with modern technology, changing community needs and changing community attitudes, that is essentially what we are trying to do. In that context, we believe that there is opportunity to identify further efficiencies, which will obviously, potentially, have a related impact on staffing numbers. The key here is that we are not going into this exercise with a particular target on staffing numbers. We are going into this exercise wanting to have the most efficient, most effective public sector structure in place possible. Obviously, if there are areas of government where public servants are currently working on issues that, on reflection, are now in 2015 comparatively lower areas of priority, then it would be better to free them up from that so that they can focus on what are current higher priority areas. That is the rolling program that we are pursuing.

CHAIR: Minister, you have taken a step back and have a holistic view and yet some agencies are in recruitment mode or are increasing staffing positions. Are they permanent positions or are they temporary positions?

 

Ms Halton : In terms of staffing numbers, agency heads need to make a decision in the context of the allocation that they have. They are responsible for managing their organisation. Everyone makes a series of decisions about how many positions they fill permanently and how many positions they fill with temporary staff.

Now we know that there are some activities that are time limited and there are some activities that are ongoing. So sometimes you will take people into your organisation to undertake a particular time limited task and sometimes you will take people in permanently, depending on the nature of the business. Essentially that is a judgement call that the CEO has to make. Our objective is to hold people accountable in respect of the allocations that they have and against the expectation of government that they will manage in a responsible and orderly manner, but we do not tell them, and no-one tells me how many people I should have on a permanent basis and how many on a temporary basis.

Senator Cormann: To be very clear, though, the objective of the government is to ensure that government is as large as necessary but as small as possible and we are focused on reducing the size of the Public Service. Of course, we have made pretty significant progress through our smaller government agenda, which in this budget is into its fourth phase. I have also now found the reference I was looking for before. The interim recruitment arrangements which the government commenced from November 2013—and I am referring to page 129 in Budget Paper No. 4—have also helped reduced the size of the Australian Public Service in an orderly way. From 1 July 2015—the financial year coming up—new controls will afford agency heads the flexibility to manage recruitment, including graduate recruitment, without the need for external approval. This will be subject to functional requirements and ongoing monitoring by the Australian Public Service Commission. The point here is we do not want to see a reversal of the trend which is a reduction in the size of the Public Service; we do not want to see the numbers start going up again. If anything we would like to be able to bring them down a little bit more, but we will do it in an orderly fashion and in a targeted way based on what the outcomes of the functional and efficiency reviews are going to be moving forward.

CHAIR: Can I take from that there is actually a bit more flexibility in some of the departments and agencies then maybe there was before?

Senator Cormann: Yes.

CHAIR: Subject to—what did you say?—the Public Service Commission or the Public Service Commissioner?

Senator Cormann: So there is a level of scrutiny—

CHAIR: Yes, scrutiny.

Senator Cormann: but the key here is that we set ourselves a target when coming into government to get back to the staffing levels across the public sector that were last recorded in 2006 or 2007. We have achieved that earlier than we had anticipated. So essentially we are now making adjustments to the management moving forward in recognition of that. Our focus on making sure the public sector is as efficient and effective and responsive as possible remains as strong as ever, but we are getting into the next phase now, given the milestone that we have reached in terms of the level of reductions so far.

CHAIR: Thank you, Minister.

Senator GALLAGHER: In a couple of things you said in your answers to Senator Bernardi, you referred to a rolling series of strategic reviews—

Senator Cormann: Functional and efficiency reviews.

Senator GALLAGHER: So you are referring to the functional reviews there?

Senator Cormann: Yes. If you go to page 2 of Budget Paper No. 4 it explains what it is that we are trying to do there. So far we have done functional and efficiency reviews into health and education and in 2015-16 we are planning similar reviews into the departments of Agriculture, Environment, Foreign Affairs and Trade, Treasury, Attorney-General's, Social Services, as well as the Taxation Office and the ABS.

Senator GALLAGHER: So they will just continue on this year?

Senator Cormann: It will be a rolling program and the ones that I have just listed are the ones that are planned for the 2015-16 financial year, yes.

Senator GALLAGHER: And in terms of the overall size of the Public Service, you made several references to the fact that you think there is room to bring it down a bit further. Do you have a view in your mind of what the perfect number is?

Senator Cormann: No. As I have indicated, the objective that we ourselves on coming into government was to bring the size of the federal public sector back down to the level last recorded in 2006 or 2007. We had anticipated that we would reach that target next financial year, but we have in fact achieved it this financial year. The reason for that is that instead of a net reduction, excluding military and reserves, of 10,031 ASL by 2014-15, compared to 2012-13, we have actually been able to reduce the number of ASL, in net terms, by 12,542. If you look at the table on page 131 of Budget Paper No. 4, what you will see in 2014-15 is that ASL, excluding military and reserves, are now down to 167,411. It is expected to stay broadly the same, effectively.

Senator GALLAGHER: Which table was that?

Senator Cormann: Page 131. You see that between 2014-15 and 2015-16, so into the next financial year, it is essentially remaining stable. I cannot pre-empt what the outcomes of processes that are yet to be undertaken will be, but what we will set out to do is to ensure that all of these agencies, after the reviews have been concluded and review recommendations have been adopted by government and implemented—obviously we want to maximise efficiency and that may lead to further adjustments to staffing levels. But we are not putting a numerical target on it; we are saying we want to be as efficient as possible. Wherever there is opportunity to cut waste, to remove duplication, to improve efficiency, then obviously, self-evidently, that is what we will seek to do.

Senator GALLAGHER: Presumably the functional reviews and other reviews across government would also be monitoring capacity to deliver the work that is being asked of government?

Ms Halton : I can certainly tell you that I have spoken to all of the reviewers who have done the existing reviews that we have already completed—the prototypes, if you like—and they were looking at exactly those issues as well.

 

Senator GALLAGHER: It goes both ways, I guess. If you go back to last year's budget, there were particular agencies that took large reductions in staff—the tax office being one. Locally, CSIRO would be another that has taken large job cuts over two years. Have they lost the amount of work commensurate with those positions?

Senator Cormann: The way it works—and this is particularly true with the tax office and, I guess, with DHS—is that a large component of their work is very process driven, very transactional. Obviously with improvements in ICT and so on there is capacity to increase efficiency. Over time, if you do not take a strategic and considered step back to look at what we have done in the past and whether there is a way of doing it better into the future, what happens is that you essentially just keep building on what was there and not tidying up what was there in the past. We believe that there is opportunity to continue to leverage some of the ICT opportunities to achieve the same outcomes but in a less staff-intensive way.

The tax office has well in excess of 20,000 ASL. This is not to make a partisan point because we were supportive of it, but the efficiencies in the tax office were initiated by the previous government. In last year's budget we tried to bring some of that forward by one year, but you will find that in this year's budget, in the context of some of the integrity measures through the tax office, there is actually a reduction in the reduction in staff—not an increase, but a slight reduction.

Senator GALLAGHER: Fewer jobs are going.

Senator Cormann: That is right. It really depends on what the priorities are in the context of a particular set of circumstances that obviously changes from time to time. The key here is that unless you impose the discipline on yourself to pause and reflect on whether what you have been doing in the past is still appropriate and still responding to the changing needs and requirements, there are inefficiencies that build up, not because anyone is trying to do the wrong thing but that is just organisationally what happens. We believe it is very important to have the discipline to assess structures all the time to ensure they are the most efficient they can be.

Ms Halton : Let us also be clear: I think that all of us who run large agencies understand that there continue to be opportunities to do things in new ways—new technology and/or new understandings of how you can apply, from a risk perspective, the resources you have. A lot of the work we have been doing on the PGPA is about saying to people, 'You do not necessarily need to take the same sledgehammer to nuts of varying sizes; you need to calibrate the approach you take and the resources.' The thing about this approach, from the perspective of resourcing and activity, is that it should be much more tailored to the organisation and the work it is responsible for. It enables organisations to ask themselves the question, 'Are we doing all this the best way we can?' or indeed, 'Do we need to be doing all of this?' We are looking at the organisational infrastructure across the service—PGPA et cetera. But then inside agencies we say, 'Given what you are responsible for, are there opportunities?'

Senator GALLAGHER: That all sounds entirely reasonable and part of best practice management.

Senator Cormann: It is good government. It is really about good government.

Senator GALLAGHER: As long as the large job reductions we have seen over two years—I am not sure they have aligned with a strategic view about managing workloads. I think there are a couple of things going on. It might be strategic now, but—

Senator Cormann: If you go to the table on page 131 and you look at the public sector ASL, excluding military and reserves, in 2006-07 and then see how the numbers increase quite rapidly over the subsequent few years—at a time when private sector employment growth was not running at the same rate—then you can see there was an opportunity to improve efficiency. As I have said, we think we have achieved the initial objective we set ourselves. From here on in it is a matter of maintaining the most efficient structure possible—a structure that is effective and as well targeted as possible at changing community needs.

Senator GALLAGHER: You said, Minister, that it was about readjustment from lower priority to higher priority and a shifting of resources. Can you give me an example of work that is gone—that you are not doing anymore, that staff are not required to do?

Senator Cormann: What I can refer you to, for example, is how, on coming into government, we decided to merge the AusAID function into the Department of Foreign Affairs and Trade—because we believed there was an opportunity to achieve a better alignment of foreign policy and foreign aid objectives for Australia. Obviously there were organisational efficiencies that were able to be realised through that process. As another example, the previous government set up the National Preventive Health Agency. This, in our judgement, doubled up on a lot of the work that was already being undertaken by very good people inside the Department of Health and Ageing at the time. While we understood the political objective of having a dedicated agency—it sort of puts up in lights that there is a specific commitment to preventative health, which obviously everyone agrees is a meritorious cause—the question we always ought to ask ourselves is, 'Is this really making an additional difference on top of what is already being achieved through other means?' Across the board, wherever there were double-ups between what was happening in smaller agencies and what was already happening in larger portfolio departments, we sought to align or integrate the structures as much as possible.

If you look at the budget papers, since we came into government we have had tranches of smaller government reforms. What you will see is that a lot of government bodies have been merged into portfolio departments or merged with each other. When we came into government and I had my first meeting with the leadership at the Department of Finance, we discussed the issue of government bodies, and it was also a matter for discussion for the Commission of Audit at the time, and nobody was able to give me an authoritative figure on how many federal government bodies there, were which I thought was interesting. It started at 700 then it became 800 and then 900. In the end, we ended up at about 1,260 or 1,250. We have abolished about 280-odd agencies and, where necessary, integrated the functions that we thought needed to continue into other pre-existing agencies because we felt that the outcomes could be delivered better and more cost effectively in that way.

Of course on top of all of that, there is the program of potential asset sales, which commenced with the sale of Medibank Private in the 2014 financial year. In this budget, we have flagged that we will be exploring the future ownership options for the Australian Rail Track Corporation. Is that still a business that is appropriately owned and operated by government or is that a business that could perform better for the community and for the economy in other ways? These are all the sorts of things that we believe we need to assess and review.

Senator GALLAGHER: At the end of all that, there will be an assessment of workloads and an impact assessment on agencies and the resources available to match-up with the work that is being asked of them?

Senator Cormann: There is an assessment of functions, government priorities and resource to ensure that the resourcing of agencies matches what the government needs to provide by way of services and in alignment with government priorities.

Senator GALLAGHER: Does that include agencies like CSIRO?

Senator Cormann: What I have just said is a whole-of-government proposition.

Senator GALLAGHER: Living in Canberra, I know that with the jobs that have gone from that agency there are quite a number of scientists who have had to leave Canberra and perhaps move to universities and to other opportunities. In regard to CSIRO, I do not know how you measure it, but is there any consideration being given to assessing the loss of that type of staff from the public sector and the impact on what the organisation is able to do in the future?

Senator Cormann: Obviously, questions in relation to CSIRO ought to be addressed to the Industry portfolio. They are responsible for the management of the allocation of resources to whatever the priorities are in that portfolio. There is no functional and inefficiency review in the program at present in relation to the CSIRO. But that challenge in government always is that there is no end of meritorious causes, no end of things that would be nice to do, no end of things that people might want us to fund. In the end, we have limited resources for a potentially unlimited demand for funding. Government is all about making choices and prioritising. Obviously, you have to work your way through how much you can afford given the resources available to you.

Ms Halton : Just on the CSIRO, and I would encourage you to perhaps ask questions of the relevant agency at estimates, one of the things that we know because of the work that we have been doing with them in the property space is they are going through a significant transformation.

Senator GALLAGHER: Yes, I am aware of that.

Ms Halton : We obviously do not get into the details, the bowels, of what they do, but we are assisting them in what they see as a fairly significant transformation, which is partly what is going on in science as well, as you would well understand.

Senator GALLAGHER: Essentially, they are looking at how they can raise funds to do the work they are doing because they do not get it from government. But, yes, I do understand. In terms of the procurement framework—back onto 2.1, is that all right, Chair?

CHAIR: No, we are still on 2.1. I have some questions on that too.

Senator GALLAGHER: I am just looking at the performance indicators, where it says AusTender is available 99 per cent of the time.

Senator Cormann: Are we doing procurement now?

Senator GALLAGHER: It is sort of all in 2.1, isn’t it?

Senator Cormann: Procurement is 2.5, isn't it?

Senator GALLAGHER: It is under 2.1 in mine.

Senator Cormann: Procurement services is 2.5.

Ms Halton : Procurement services is 2.5.

CHAIR: If we look at the program here, that is where we are.

Senator GALLAGHER: I am on 2.1, procurement framework.

Senator Cormann: Two point one is public sector governance.

CHAIR: Dealing with public sector governance; procurement—

Senator GALLAGHER: Okay.

CHAIR: Except for campaign advertising.

Senator GALLAGHER: Well, it has procurement framework—

Senator Cormann: Anything to do with procurement of campaign advertising will be Senator Ronaldson.

Senator GALLAGHER: On page 36 it has it under program 2.1, Key performance indicators.

Senator Cormann: Key performance indicators sounds like governance to me.

Ms Halton : Page 36 of the PBS?

Senator GALLAGHER: Yes, the PBS.

Senator Cormann: If you are talking about key performance indicators, that is a governance matter.

Senator GALLAGHER: I am.

Senator Cormann: But if you want to talk about specific procurements, that is 2.5.

Senator GALLAGHER: I am just asking. I am still on page 36.

CHAIR: Why don't you ask the question and we will see whether it fits.

Senator GALLAGHER: It is a very simple question, so I do not mean to cause drama. I am interested in the AusTender availability: 99 per cent of the time during business hours.

Ms Halton : It was available out of hours last night when we were looking it up.

Senator Cormann: Senator Ludwig was trying to test us, and we passed the test!

Senator LUDWIG: If you are going to send me to the internet, I can send you there too!

Ms Halton : He got there very quickly; he got there faster than I did, actually!

Senator GALLAGHER: Mr Sheridan, sorry—

Mr Sheridan : AusTender is up a very high degree of the time. We have very few issues with its availability.

Senator GALLAGHER: So you meet the 99 per cent?

Mr Sheridan : Absolutely.

Senator GALLAGHER: Historically, how long would that be?

Mr Sheridan : We have been meeting it for a very long time.

Senator GALLAGHER: Sorry to call you in. We will be back.

Senator Cormann: Mr Sheridan will be back, I am sure.

Senator GALLAGHER: I do not know when to ask my procurement questions now—probably in 2.5.

CHAIR: Perhaps I might ask some questions now. I cannot pretend to know much about what I am asking about, but one of my colleagues has asked me to do it. It is in relation to a government business enterprise set in New South Wales called the Moorebank project.

Senator Cormann: Yes.

CHAIR: Firstly, to acquaint myself with it, what are the benefits of the Moorebank project, and what is it?

Senator Cormann: I think Mr Edge will be able to assist you there.

Mr Edge : You are asking about the benefits of the Moorebank company?

CHAIR: Perhaps, for my own benefit, you could tell me what it is as I go through my list of questions later on. So just give a brief summary and the benefits of it.

Mr Edge : Certainly. This project has actually been planned for quite some time. It is intended to meet a need to improve the movement of freight through Sydney and beyond—that is, freight that arrives at Port Botany and then moves to other destinations in Sydney or interstate. The Moorebank project is basically the development of a freight handling facility in Western Sydney. Moorebank is the chosen site for a range of reasons. It was formerly the site of a Defence facility, the School of Military Engineering, which had been established on the site for a long time. It is an area that is close to a relatively new rail line, the Southern Sydney Freight Line, which was developed by the Australian Rail Track Corporation about five years ago and facilitates the movement of freight through the Sydney area. It is also close to the M5 motorway and has good access to that road network as well as a rail freight line. The project that was initiated, I think, in 2010 involved the relocation of the School of Military Engineering to the nearby Holsworthy base to enable a freight terminal to be built on the site.

The freight terminal, effectively, will have two components. It will have what is called an intermodal terminal, which will facilitate the movement of freight in containers by rail from Port Botany to the Moorebank site. Then that freight will be either stored in warehouses that will be developed around the area or put onto trucks and then moved around Sydney or out of Sydney to other parts of New South Wales or further afield. It will also have a facility for an interstate freight terminal, which will allow container-based freight to be transited through Sydney or to be brought into Sydney from interstate—from Queensland, Victoria, or other parts of New South Wales—and then moved from rail onto a truck at that point, or the contents of containers be delivered into warehousing. It is an integrated facility—effectively two freight-handling facilities, interstate and intermodal—and it will also involve the development of warehousing in the precinct.

Senator Cormann: Just to add to this, this whole concept of a strategic transport infrastructure hub around Moorebank actually was first considered by the Howard government. The previous government then made a decision to pursue it through the model of government business enterprise, involving a significant taxpayer-funded equity injection.

On coming to government we assessed where the project was at, and we thought that there was a way to achieve the economic and infrastructure outcome at a much lower cost to the taxpayer by leveraging the opportunity for private sector investment. We went into the market with an expression of interest request to test the market to see what opportunities there might be for the private sector to get themselves involved in bringing this project to fruition. As a result of the work that we have done we are now very confident that we will be able to get this project finalised, which is a very important project in terms of the economic growth opportunities for New South Wales into the future. We will be able to finalise that project at a significantly lower cost to the taxpayer.

CHAIR: Mr Edge, you mentioned there were two stages to the project, effectively, but there is also some advice and confusion out there because there is the public project, which is Moorebank, and there is also a private project being undertaken next door—is that correct?

Mr Edge : The model that is being pursued is one that involves the Moorebank Intermodal Company, which is a government business enterprise which effectively has a lease over the former School of Military Engineering site—it is a site of about 200-hectares. They have that site. They are in negotiations with the Sydney Intermodal Terminal Alliance, which is a private sector organisation which owns a site on the other side of Moorebank Avenue, a smaller site, which is currently used for warehousing.

The negotiations that are underway between the parties will involve the development of an interstate rail freight terminal on the former Defence site and warehousing on that site. The intermodal terminal—subject to this all being agreed—will be developed on the privately owned piece of land which is adjacent. Subject to these negotiations being successfully concluded, the Moorebank company will enter into contracts with the Sydney Intermodal Terminal Alliance to facilitate the project.

CHAIR: I am told, then, that there are traffic volume concerns in some of the media reports in relation to this development. Are the traffic 'numbers', for want of a better term, looking at both sites or just one of the sites?

Mr Edge : There are different traffic effects with the project. You asked earlier about benefits. One of the key benefits for the project overall is to take a large number of trucks off the arterial road network in Sydney. It is estimated that up to 3,000 fewer truck movements a day will be occurring along the M5 and the roads that go from Port Botany to the Moorebank site. There is definitely a very positive impact there in terms of the number of trucks on the roads through Sydney, because that freight will then transit by rail to the Moorebank site as opposed to being on the roads.

There is currently a process underway which was launched in late 2014—it is a consultation process on environmental impacts of the project, and there was an environmental impact paper put out for public consultation. Some of the concerns that were raised by the community in responding to that were concerns about local traffic impacts and what that would mean for traffic volumes around the precinct, Moorebank Avenue and so on.

The Moorebank Intermodal Company is due to respond to those public concerns very soon—probably in the next few days or next week at the latest—to address the community concerns about the impact on the local roads. One key element of the proposal is the widening of Moorebank Avenue, which is the main connecting road from the terminal to the M5 motorway, which would address the concerns about volumes.

CHAIR: I presume this falls under the state planning jurisdiction. Is that right?

Mr Edge : It falls under both, because it is—

Senator Cormann: It is federal land as well.

Mr Edge : It is Commonwealth land and private land.

Senator Cormann: We have authority over Commonwealth land but, obviously, the state government has got a keen interest, and there is state land involved as well.

CHAIR: The state cannot tell the Commonwealth what to do—is that what you are saying?

Senator Cormann: Not on our land, but we have worked in close partnership. Since we have come into government, the federal government and the state government of New South Wales have worked very closely together on where to take this project. It is a very important piece of economic infrastructure but, with these sorts of developments, you always have to manage very carefully the implications and the views in the local community, and that is being done.

The point that I would make, again, is: when we came into government, the intention of the previous government was to inject about $900 million worth of capital for the development of that project—and we have been able to bring that down to about $370 million with a revised approach and with essentially leveraging significant private sector investment and aligning some of the opportunities in that area more strategically.

The other point I would make is: when you come into government, you inherit a certain set of circumstances and you work forward from where you find yourselves at that time. There is the government business enterprise, the Moorebank Intermodal Company, which is managing the Commonwealth's interests in relation to this development. Over time, this is one of the companies that I do not think should remain in government ownership once the project has reached a certain level of maturity, and we would certainly anticipate that this is one of the future opportunities to realise another one of the federal government's assets.

CHAIR: Can I just go back to planning for a second? You do not need the planning approval of the New South Wales government, but the private development would. No matter how close or far-sighted your vision might be about them working in an interconnected manner, it would be assessed absolutely separately and independently from any Commonwealth government assessment.

Senator Cormann: Not in relation to Commonwealth land. That is why it is an integrated approach. The reason the project is being run the way it is, we are essentially de-risking it, because we have got better capacity than a private sector developer on their own working with the state government of New South Wales to work through some of these approval processes. Because of the history of the piece of land, there is a lot of remediation work that has to be pursued. There are a lot of different issues which drive the need to de-risk what is a very important infrastructure project.

CHAIR: Minister, this is for you: the work—Moorebank Intermodal, their negotiations or the private consortium that is doing the other aspects of it—the Sydney Intermodal, I think is what it was called. Is that handled by you, or is it handled at arm's length?

Senator Cormann: The way it works is that the Deputy Prime Minister and Minister for Infrastructure and Regional Development and I are the two shareholder ministers for the Moorebank Intermodal Company. The Moorebank Intermodal Company operates at arm's length—independently. They have got their own board which is chaired by Dr Kerry Schott, and they manage to the highest standards of probity all of the commercial elements of this project. For example, they independently managed the expressions of interest process which led to the competitive evaluation of the various opportunities to involve the private sector in the development of the site. But in the end, obviously, as shareholder ministers we do take a very keen interest in where this is going.

CHAIR: Where is it going in respect to the timetable and costings and things of that nature, Mr Edge—or Minister?

Senator Cormann: We announced on 5 December 2014 that the government would examine a Moorebank development proposal; essentially exploring a proposal by the Sydney Intermodal Terminal Alliance, SIMTA, which you talked about, following that expression of interest process. I think the negotiations are still underway, and we would anticipate that they will be concluded soon.

CHAIR: There is political interest in this, and there have been claims that extra intermodal capacity at Chullora makes the Moorebank proposal unnecessary, or that there should be an intermodal at Badgerys Creek as a superior alternative. What is your response to those claims?

Senator Cormann: We do not agree with this. The important point again is that this Moorebank site was identified as a priority location for a freight terminal development by the Howard government all the way back in 2004. It is a site which, as Mr Edge explained, connects key road and rail networks with major freight markets in Australia and around the world. There is obviously that very important link to Port Botany in New South Wales. There is significant expected growth in terms of freight out of Sydney, and this is a long overdue piece of key economic infrastructure which will help unlock the future potential for the New South Wales economy. I think it is fair to say that the need for the project and the need for the project in that location has had bipartisan support for a very long time. The discussion and the slight airs of disagreement between the government and the current opposition have centred around the way we would bring the project to fruition, but in terms of the actual need for this project to proceed and to proceed in that location, it has had very strong bipartisan support for a long time. That is not to say that we are not conscious of the local sensitivities and some of the community concerns, and the team at Moorebank Intermodal Company and in Finance and the Department of Infrastructure and Regional Development are certainly working through those issues as best they can.

CHAIR: It has been put to me via these questions that the site would be better suited to a residential site. It might be too late for that, but was it suitable for a residential site?

Senator Cormann: We do not believe so, but I will ask Mr Edge to answer that.

Mr Edge : I would not describe it as prime residential land. It is by the Georges River; it is in an area that is fairly industrialised. Across the road from the site, as I explained, is the land owned by SIMTA—that is, warehouses—and there are other commercial and industrial facilities around it. It could have been developed for residential purposes, but it has much higher commercial value as the freight hub that has been identified.

CHAIR: Thank you very much; if there is anything else I will put it on notice.

Senator Cormann: Mr Renwick might add something.

Mr Renwick : We have looked at the site in terms of possible residential. It would need a significant increase in the remediation. The cost of remediation would outweigh the land value and it would also add something like 10,000 cars in the rush hour morning and night to the M5. The current proposal, during rush hour, I think adds about 167 trucks to the road coming off Moorebank—

CHAIR: Versus 10,000 cars?

Mr Renwick : Versus 10,000 cars at peak hour on the M5. The M5 would just come to a standstill. It would be worse than when the Mad Max crew was in town!

CHAIR: Thank you. I am sure that information will be very helpful to the people who have an interest in this. I have nothing further on that.

Senator LUDWIG: I just wanted to come back to program 2.1 and key performance indicators. We dealt with the 90 per cent of the gateway review and then dealt with the AusTender. I also wanted to see what the statistics were on this:

… completion of 50% of all Act of Grace and waiver of debt requests within 60 days and 100% compliance with timeframes—

Ms Halton : Sorry, I actually cannot hear you.

Senator Cormann: That is a consistent problem we are having with Senator Ludwig—you have to talk up!

Ms Halton : No, I think they just need to up his microphone because we cannot hear a word he says.

Senator LUDWIG: In the financial framework, we have dealt with the 90 per cent of gateway review and we have dealt with AusTender. What I wanted to understand was meeting the framework for this key performance indicator:

… completion of 50% of all Act of Grace and waiver of debt requests within 60 days and 100% compliance with timeframes in the Administrative Decisions (Judicial Review) Act 1977; …

Mr Antich : I look after acts of grace. Your questioning was in relation to the current financial year, was it?

Senator LUDWIG: I was going to go back, say, from September 2013—the last two financial years. What would the rates be?

Mr Antich : I can tell you at least for the annual report for the 2014-15 year. As at 25 May, we have completed 56.5 per cent act of grace and waiver cases within 60 days against a target of 50 per cent.

Senator LUDWIG: How many cases in total?

Mr Antich : As at 25 May, for the year we have received 563 claims. Of those, 216 were act of grace, 341 were waivers and six were act-of-grace and waiver requests. That is what we have received in terms of new ones. For finalisations during the year, we finalised a round total of 1,000 claims, and of those there were 239 act of grace, there were 753 waiver of debt requests and eight act-of-grace and waiver requests.

Senator LUDWIG: Do you have the statistics on the payment of act of grace and the amount? I am happy for you to take that on notice.

Mr Antich : No, I have that. The proof of payment under the act of grace provision for the year was $33,878,352.52, and the waived debt was $15,012,722.37.

Senator LUDWIG: And in respect of 'no adverse findings from the Commonwealth Ombudsman': I do not recall any, but have there been any?

Mr Antich : Not that I am aware of.

Senator LUDWIG: There is a bill by senators Xenophon and Madigan on procurement. I note a media release from Senator Xenophon of 7 May, in which Senator Madigan and he were proposing to amend the Public Government Performance and Accountability Act. I do note that it is due for review in 2017. They have sought to:

… require the economic and social benefits of procuring locally manufactured goods, as distinct from those made overseas, to be a key consideration in any procurement decision.

I take it that you are aware of that release?

Ms Halton : That is not these officers. We have gone into procurement proper now.

Senator LUDWIG: I am going to deal with—

Senator Cormann: Which is 2.5.

Senator LUDWIG: I am going to deal with outcome 2, so—

Senator Cormann: As a whole?

Senator LUDWIG: I might jump around, like we dealt with outcome 1.

Ms Halton : The officers will just have to come in and out.

Senator LUDWIG: That is okay. I can put up with that.

Mr Sheridan : We are aware of the matter that you have raised and we have discussed that previously, on a number of occasions.

Senator LUDWIG: Yes. Can you outline to the committee what the current circumstances are under the Commonwealth procurement guidelines or rules?

Mr Sheridan : The Commonwealth procurement rules require procurement to be done with a core principle of value for money and we are also—because of our free trade arrangements, which are reflected in the Commonwealth procurement rules—not allowed to discriminate in procurement on the basis of point of origin, company of origin and size of the company—those sorts of things generally.

Senator LUDWIG: I am going to be careful how I phrase this: are there any impediments to what senators Xenophon and Madigan are proposing? I am trying to get a sense of this: they are seeking to require that the economic and social benefits of procuring locally manufactured goods, as distinct from those made overseas, be a key consideration. They want that to be a key consideration rather than cost, I presume—although I do not speak for them. Have you done any work around this issue?

Mr Sheridan : The challenge with making such assessments is to what level we would limit that consideration. Would one do it locally? Would one look at other industries? Would the effect on one industry in procurement have a detrimental effect on another industry? These are matters that are simply too complex for normal procurement to consider. It would delay procurement, increase red tape and potentially slow things down to some considerable extent. And it is still unlikely to satisfy all the stakeholders.

Senator LUDWIG: And that is why you use cost as the first key principle?

Mr Sheridan : I would point out that we use value for money as the key principle, not cost. Value for money encompasses a broader range of matters. These are detailed in the Commonwealth procurement rules.

Senator LUDWIG: While you are here: there was a release of the Indigenous procurement policy guidelines on Monday 25 May. Who will be monitoring those targets? Is that you, through your office?

Mr Sheridan : No.

Senator LUDWIG: I am trying to work out whether it is PM&C or Finance who will do the work.

Mr Sheridan : As a consequence of what is being given to us with regard to this change, which is a definitive list of Indigenous companies provided by Supply Nation, we will be able to monitor in AusTender all contracts with such companies above $10,000. Because we do not have a definitive list of those companies now, we cannot report sensibly on those things. With this new list—essentially a list of ABNs—we can cross-reference in AusTender and provide reporting accessible to agencies very easily so they can make reports and so it could be monitored by the policy.

Senator LUDWIG: Has that work commenced? Have you requested—

Mr Sheridan : Absolutely—Supply Nation has been tasked to do this as a consequence—

Senator LUDWIG: Who was that?

Mr Sheridan : Supply Nation. It is not a government organisation, but it has been contracted to do this work.

Senator LUDWIG: Was that an AusTender contract?

Ms Halton : No, this is a peak body which has been representing Indigenous suppliers for some time. I think they actually have made themselves known to all agencies inside government. Certainly, I was very aware of them when I ran health. In the work that we have been doing with Prime Minister and Cabinet on procurement, looking around for the way to be able to identify qualifying businesses who actually would meet the Indigenous requirement et cetera, they were effectively the only body who could do that for government.

Senator LUDWIG: So who has contracted them? You have? Finance? Or PM&C?

Mr Sheridan : PM&C, yes.

Senator LUDWIG: What work will you be doing, then? So, PM&C have contracted Supply Nation to develop the list. Is that right?

Mr Sheridan : That is correct.

Senator LUDWIG: And then PM&C will give you the list?

Mr Sheridan : That is right.

Senator LUDWIG: And then you can do what work? What work have you been contracted to do?

Mr Sheridan : Not contracted. We can quite easily match the ABNs of the companies in the Supply Nation list with the ABNs recorded on AusTender and provide a report around what has been purchased from them.

Ms Halton : The idea is not to have to create additional red tape or overhead by being able to use an existing identifier—that is, an ABN.

Senator LUDWIG: I understand that point. I am not trying to cut you off; I am happy for you to finish. The point I am trying to understand, just briefly, is: the work that you are doing is in conjunction with, I presume, PM&C, Supply Nation and Indigenous businesses. Is that not a gateway review but part of ongoing monitoring work that you are financed for?

Ms Halton : The way to think about this is that we are responsible for the procurement rules. Following discussions that I had with Prime Minister and Cabinet about their interest in this area, we did work internally to see how you might be able to manage inside the procurement framework and how we might be able to report on that. That proposal was put to Prime Minister and Cabinet. They then work through the mechanism we have just discussed. In the way that Mr Sheridan has just outlined, we will be able to give them, if they give us this list of ABNs, a report that actually shows them what has happened vis-a-vis the targets and the procurement arrangements as has been proposed. Essentially, we will give them the information out of our generic reporting details—the databases that we hold—to enable them to monitor what is going vis-a-vis procurement.

Senator LUDWIG: Take me through an example of how you would do that with one ABN.

Ms Halton : We will have the courtesy of Supply Nation providing a list of ABNs of qualifying companies. We will be able to extract, from our procurement information, the number of contracts given to companies with those qualifying ABNs as a proportion of total procurements.

Senator LUDWIG: And you would also be able to then list unsuccessful tenders. So, where they have procured a contract, you also know when they did not—

Ms Halton : That is not a metric that is relevant in the policy. It is not about success rate; it is about actual numbers.

Senator LUDWIG: What are the metrics, then, rather than me guessing?

Mr Sheridan : On that matter first, we do not report unsuccessful procurements because that would be information about a company that would be detrimental to their performance.

Senator LUDWIG: That is what I was a bit concerned about.

Mr Sheridan : And we would not do that. We report all the contracts above $10,000 that are signed by the Commonwealth each year. There are between sum is between 70,000 and 80,000 contracts, for about $40 billion worth of procurement annually. We report on the percentage that is given to small and medium enterprises by value and by number. Since last year, we report on the number given to small businesses by value and by number. We report on the number given to Australian businesses identified by ABN and address by value and by number and we report in a range of categories as well.

Senator LUDWIG: Thanks. Is there a target in terms of contracts or you are just simply reporting? Is there a level that you are trying to achieve? It might be PM&C trying to achieve and you are reporting against that.

Mr Sheridan : There are targets in the policy. The targets are on the number of contracts and it is about an increase in the number of contracts over previous years. In 2015-16, agencies are required to get 0.5 per cent of their contracts with Indigenous companies; in 2016-17, it is 1.5 per cent; in 2017-18, it is two per cent; and, in 2018-19, it is 2.5 per cent.

CHAIR: Senator Ludwig, we are scheduled to have a break now. Did you want to conclude this line of questioning?

Senator LUDWIG: I can. I will not be very long.

CHAIR: Okay, then let's continue for the moment.

Senator LUDWIG: So what would the numbers be? The 0.5 and 1.5 per cent—how do you equate those to a number?

Mr Sheridan : Let's assume that there are 80,000 contracts a year across the Commonwealth. One percent of that is 800 and half a per cent is 400.

Senator LUDWIG: I am happy for you to take that on notice. I take it that you do have the exact numbers or close enough?

Mr Sheridan : I think we know the numbers by agency. I think they were broken down in the press release.

Senator LUDWIG: See what you can do, thanks. Noting that there is the encouragement to report eligible contracts which do not meet the AusTender reporting threshold, have you looked at how many such contracts would need to be entered manually in the policy? It says there is encouragement to report eligible contracts which do not meet the AusTender reporting threshold. How do you do that?

Mr Sheridan : That means there are contracts below $10,000 that we do not report to AusTender, so agencies will need to do that.

Senator LUDWIG: So you will not have a role in that?

Mr Sheridan : I do not believe so.

Senator LUDWIG: You do not believe so.

Ms Halton : It is not our understanding at the moment that we will have a role in that.

Senator LUDWIG: Should I ask you next time, just in case?

Ms Halton : You can ask PM&C.

Senator LUDWIG: I can ask PM&C if they envisage you having a role—

Ms Halton : No. We do not envisage us having a role. You can perhaps ask PM&C how they think it is going agency by agency.

Senator LUDWIG: I will rule this out—you have not been asked to collate or collect that information from other agencies below the $10,000 threshold?

Mr Sheridan : No.

Senator LUDWIG: Are you able to outline what has specifically changed between the new policy and the guidelines that were in place under the Indigenous Opportunities Policy? What was the significant change?

Mr Sheridan : I think targets are the most significant change. But all of the targets, the notion of a set-aside arrangement for particular things, the ones that are highlighted in the policy around this and the mandatory minimum contractual requirements for Indigenous employment are also new.

Senator LUDWIG: Thank you.

Proceedings suspended from 10:33 to 10:53

CHAIR: I will reopen the budget estimates hearing for the Finance and Public Administration Legislation Committee. After some consultation with department officials and with senators, and in the interests of allowing as many people as possible to return to productive work, we are going to program 2.1, Public sector governance. Any questions to do with the department's building would come under that. In the interests of facilitating things, we will deal with that discretely. That should then conclude 2.1. We will then move to program 2.3, to deal with any other property and construction issues. That way, those who have completed that area, or if there is any crossover, can leave as necessary. We will deal with the Department of Finance's building first. Senator Gallagher.

Senator GALLAGHER: Could you provide the committee with an update on your impending move to 1 Canberra Avenue?

Mr Murphy : The proposal to consolidate Finance at 1 Canberra Avenue has now been considered, as you are probably aware, by the Parliamentary Standing Committee on Public Works—

Senator Cormann: It has a great chair.

Senator GALLAGHER: Anyone we know?

Senator Cormann: Maybe! He is blushing!

Senator GALLAGHER: He is blushing.

Mr Murphy : The motion for expediency for the works to proceed was tabled and passed in the House of Representatives on 14 May 2015. We are expecting to shortly commence negotiations with the building owner regarding a long-term lease. So that is where we are up to.

Senator GALLAGHER: I note, when the committee was reporting, there was some concern about confidentiality requirements in terms of explaining the reasons for the move. Have they been satisfactorily addressed now—just for my background, because I was not part of that inquiry— in terms of explaining the benefits of moving?

Ms Halton : I do not think there were any issues of confidentiality for the committee. I think some of The Canberra Times journalists were a little miffed that they could not be taken into the committee and our confidence about every single commercial element of the proposal.

Senator GALLAGHER: In terms of public understanding, or public information—

Ms Halton : In terms of the public understanding, we were very clear in the public sessions—and Senator Smith as our esteemed chair knows this well. We are very clear that the arrangement being proposed is a very good financial deal for the department and, therefore, for the government. But the precise commercial nature of the deal, obviously, is not something that we put into the public arena. The committee, I think, was satisfied in relation to that. And this is not unusual, which the journalists seemed to think it was. It is not.

Senator SMITH: [inaudible]

Senator GALLAGHER: Yes, I have been. I have already been initiated into them! Okay. The negotiations now commence with the building owner; is that right?

Ms Halton : On the actual lease.

Senator GALLAGHER: On the lease arrangements. What is the projected timetable for that to be completed?

Mr Murphy : To be honest, a lease negotiation takes as long as it takes. Our aim would be, assuming the lease negotiations are successful, to start moving into the building at the very beginning of next year, but that is a moveable feast, depending on those lease negotiations. January 2016 is when we would like to be moving staff into the building.

Ms Halton : The lease is a priority. It needs to be done as quickly as we humanly can manage it. That is a priority for the owner of the building as well. Obviously, there are a number of things which are contingent on that, such as being able to get the actual purchase of furniture organised, which he has provided as part of the fit-out. Having worked through the relevant issues with Senator Smith's committee, we are very focused now on delivering in a very timely way a concluded lease arrangement and then getting on with the job.

Senator GALLAGHER: The proposed move at the beginning of next year is consolidating a number of sites for you, isn't it?

Ms Halton : That is correct.

Senator GALLAGHER: Sorry to go over, probably, a previous inquiry, but just for my information: it is coming from how many sites?

Mr Murphy : The sites that will be, in effect, emptied will be our presence in the John Gorton Building, which we share with Environment; our presence in the Treasury building, which we share with Treasury; Tourism House, which we share with some other, commercial tenants; and the Burns Centre, which is over near Manuka. We also likely will be moving some staff out of our presence in Fyshwick, where we have our COMCAR facility and some of our IT related facility. Not all those staff will move, but some of them will move. So they are from four buildings, plus some from a fifth.

Senator GALLAGHER: Are any of those arrangements under time pressure? Do you have to be out of those at a certain time and is that dictating the move by the beginning of next year?

 

Ms Halton : The reality of the timetable for us is the budget. In fact, I would be happier, personally, if we started to move before Christmas, but we will see what the logistics actually enable. Obviously, there are always commercial considerations in relation to leasing existing premises. The reality for us is that the work that we are literally absorbed in and consumed by from, really, the middle of January onward is the budget. We do not want, and I do not want, staff to be betwixt and between in terms of buildings when that work is going absolutely full pelt.

Mr Murphy : If I may add: there are not time constraints on our buildings. With John Gorton, we are on a month-to-month lease. With the Treasury building, notionally we are there until September 2016; Tourism House is the same. Burns Centre is early 2017, and our complex at Fyshwick is August 2016. So we will not be homeless on any of those locations.

Senator GALLAGHER: Sometimes these decanting and bringing-together exercises are contingent on a whole range of things happening in a certain time frame, but I guess being a tenant of government facilities, mainly—that would be the large part of your workforce, wouldn't it?—eases some of that.

Mr Murphy : Indeed. John Gorton and Treasury, where most of our staff are, are government owned.

Senator GALLAGHER: Mr Murphy, are you in charge of the move, reporting to Ms Halton?

Mr Murphy : I would suggest that Ms Halton is in charge of the move. I am the acting deputy secretary, and the First Assistant Secretary of Information, Technology and Workplace Division, Roze Frost, has really got the lead role in the move.

Senator GALLAGHER: And so all the governance structures to manage the move are in place now?

Mr Murphy : That is correct: from the negotiations to, obviously, internal consultation with staff—yes.

Senator GALLAGHER: What grade is the building you are moving into? It is the brand-new one, is it?

Ms Halton : That is right.

Senator GALLAGHER: What is the rating? Is it A-grade, but as to an environment star—

Mr O'Loughlin : It is an A-grade building. A-grade is the standard of the buildings that any of the public service departments in the Parliamentary Triangle have moved into in the last seven or eight years, except for the AFP—parts of the Edmund Barton Building are B-grade. The grading of the buildings, though, is set by the Property Council, and it takes into account characteristics of the building—

Senator GALLAGHER: The Green Star rating?

Mr O'Loughlin : Such as green ratings, the location of the building and the efficiency of the floor plan. So really it is a market tool that describes the nature of the building. A-grade buildings allow you to reduce your operating costs quite significantly because they have better environment ratings and the like.

Senator GALLAGHER: Does it have a Green Star rating?

Mr O'Loughlin : The offer from the developer, and we will confirm that in the lease, is that the building will operate at a minimum of 4.5 NABERS stars.

Senator GALLAGHER: How many staff altogether will this consolidate?

Mr O'Loughlin : We have currently a little over 1,400 staff. There will be around 1,300 to 1,350 moving into the building.

Mr Murphy : That is in our Canberra locations.

Mr O'Loughlin : Sorry—in Canberra locations.

Senator GALLAGHER: In terms of the square metreage, there is a rating, isn't there? What is the per-staff square metreage?

Ms Halton : We are the Department of Finance!

Senator GALLAGHER: I know, so I am just waiting for the answer.

Mr O'Loughlin : The government framework is 14 square metres per person on average, and we will meet that target. We have not done the detailed design work with the developer at the moment.

Senator GALLAGHER: So the developer does the fit-out—is that right?

Mr O'Loughlin : The developer is doing the fit-out. That was part of the incentive offer.

Senator GALLAGHER: I know that, in the design of modern office working areas, there is a lot of change underway with space and how space is allocated, with break-out spaces, meeting rooms and hot-desking—all those types of different design elements. Do you get a say in that, in terms of the fit-out?

Ms Halton : We have actually been trialling this, inside the John Gorton Building. We actually refitted part of Budget Group to be—I would use slightly different language, as to that notion of the 'hot desk', which is a little impersonal; I think people find that a bit hard to understand. We think of it of being more like fixed and flexible. There are some activities that are fixed in particular places but there are some activities that are going to be flexible so you have surge at particular times and you want to be able to move people around to work in teams. The design principles that actually enable you very comfortably to get inside the standard that we are the owner of actually enabled that kind of working as well.

In the discussion with the developer, that is precisely the kind of fit-out that we are looking to have—something which is far more generic across the department, recognising that there are bits of the department who do specialised activities and require particular sorts of infrastructure. For many people who are doing policy and other similar kinds of jobs, the infrastructure can look the same regardless of which part of the organisation you are working in. In fact we did this in the John Gorton Building and, in the absolute maelstrom of the budget, those areas were actually very well used and it was terrific for the way we worked.

Senator GALLAGHER: It will certainly be something interesting to watch develop over the coming years, because potentially big savings to government, I think, in terms of how work spaces are configured and the ability to work to work remotely. Having the IT support to do that is going to be more important than square metreage allocation, one would presume.

 

Ms Halton : I have however said to the staff that if you—and you will have done this, I have no doubt, in your former role—go round some of the big consulting firms in Canberra and elsewhere, their fit-outs are such that nobody, for example, has an office; however, if you see where the CEO tends to sit, there is a buffer zone where no one is prepared to sit near them.

Senator GALLAGHER: Everyone needs a buffer.

Ms Halton : Everyone needs a buffer. So I have actually told the staff: we are not doing that, because they do not have to worry that I am going to sit next to them any day of the week. We will find a model of what I would describe as 'modern approaches to working', which takes account of the nature of our work. The fact that a lot of our work is very confidential also constrains some of the things in relation to fit-out and work style, obviously.

Senator GALLAGHER: Is wi-fi going to be available in the building?

Ms Halton : Absolutely.

Senator GALLAGHER: I look forward to seeing it progress.

CHAIR: Are there any other questions on 1 Canberra Avenue? I do not think there are any more.

Ms Halton : Otherwise, I will attempt to answer myself.

CHAIR: The one caveat to that, Ms Halton, is that I did indicate to Senator Seselja that at about 11.15 we might get on to the property section. He is just out of the building briefly. We will see if we can accommodate him when he comes through. We will finish 2.1 and we will move on to outcome 2.3, which is property and construction. We will go to Senator Gallagher again.

Senator GALLAGHER: Ms Halton, could I get an update on the department of immigration's accommodation tender, which I now understand is being run by Finance?

Ms Halton : No, Senator, we are not running the department of immigration's tender. That is a matter for them. There is a policy announced by the government in relation to the utilisation of leased space, and the minister now has a role in respect of the policy approach to the leasing—if I can just sweep it up in that broad category. So the department of immigration will be part of that announced policy.

Senator Cormann: Essentially, we want to ensure that the Commonwealth uses its available space as efficiently as possible. Instead of having large areas sit vacant and then not have individual departments make arrangements to move in to new tenancies, we want to ensure that there are no gaps and no areas that needlessly are exposing the taxpayer to expenditure when the premises could be entirely suitable for the use of agencies looking for new accommodation. It is an efficiency measure.

Senator GALLAGHER: I understand. I presumed Finance was always involved in government accommodation.

Senator Cormann: What Secretary Halton and I have found in talking about this over the past year is that not enough work was being done to ensure that the use of the Commonwealth's property holdings was as efficient as possible. As we work our way right across government to ensure that we maximise the impact of the limited resources provided by taxpayers, we have been finding new opportunities and this is one of the opportunities that we found to improve the efficiency of the application of limited resources.

Senator GALLAGHER: Ms Halton, are you telling me that the Department of Finance does not have a role in the current—

Ms Halton : No.

Senator GALLAGHER: Could you tell me the role that Finance has.

Ms Halton : The role under the former policy was in respect of the certification in terms of value for money. So, the Immigration process—and I do not have the precise dates in front of me—had been operating, as I think was previously enunciated under the previous policy. The reality is that they were mid process, I think, and the policy changed. So we are now working with the minister on exactly where all the delegations are with respect of that under the parliamentary secretary, who would normally take responsibility for these things in the portfolio. So the problem the minister is enunciating is one to do with what happens when agencies work without having a mind to what is going on more broadly. And I think, as you know, there have been a number of buildings that have been left empty, even though they had leases, following on from things like machinery of government et cetera.

The other issue that is relevant here is taking account of broader considerations—so, the value for money, where we were just talking in a procurement context about what constitutes value. The Immigration process was, I think, part way through a trajectory when the policy began taking account of what we have seen about property more broadly and some of the issues about managing that property footprint more effectively. I think Mr Edge—if he is there—has been in discussion with the department of immigration about how they now take account of the new policy context in which they are operating.

Senator GALLAGHER: Mr Edge, could you give me an update on the Immigration process—the accommodation process.

Mr Edge : Certainly. We have been having some discussions with Immigration about their requirements and looking at that in the context of surplus office space that is currently under lease by Commonwealth agencies that may not be required by those agencies and at what options that surplus lease space, which is either surplus now or will become surplus in the next couple of years, might present in terms of Immigration's accommodation requirements.

Senator Cormann: It is colloquially referred to as 'operation Tetris'—wanting to avoid any gaps between moving parts.

Senator GALLAGHER: I have never played the game myself, but I understand—

Ms Halton : It is not referred to in my department as operation anything—but there you go.

Senator Cormann: It is colloquially referred to as such in my office.

Senator GALLAGHER: The minister has named it. It is now 'project Tetris'.

Ms Halton : All I can say, Senator, is that perhaps the minister, having heard about this, will have a look at the icon that reflects it and the imagining, because I do not think it would have passed Mr Pezzullo's dress code.

Senator GALLAGHER: As I understand it—

Senator Cormann: I could not think of a better way to describe what we are trying to do than 'operation Tetris', because you have got the moving parts—

Senator GALLAGHER: There it is, Ms Halton. It has been named.

Senator Cormann: and you want to make sure that there are no gaps. You want to make sure it is all fixed together. It captures it pretty well.

Ms Halton : Isn't it a 30-year-old Soviet-inspired game?

Senator Cormann: That is how it started. It was the most successful export from the Soviet Union to the United States. If you check out Wikipedia, you will find that it is very good for your brain development.

Senator GALLAGHER: Mr Edge, with the tender process, as I understand it—and this is just in very general terms—Immigration went out for, I think, 80,000 square metres of accommodation. It might be more than that.

Mr Edge : It is about that.

Senator GALLAGHER: So they went out to the market, the market has responded, there are various bids that have come in and the bids have closed. I understand the tender evaluation process would get underway before a preferred tenderer would be announced. Then this new policy, 'project Tetris', comes in. Is the current tender process going to have to stop because of that?

Mr Edge : The current tender process has not stopped. It remains underway.

Senator GALLAGHER: But new elements have come in.

Mr Edge : Yes.

Senator GALLAGHER: How can the people who have put forward tenders—whatever they may be—able to comply with the new policy? What opportunity will they have?

Mr Edge : We are currently in discussions with Immigration about how that part of the process might work. That has not yet been resolved.

Senator GALLAGHER: Not having handled tender processes myself before but understanding how they have gone, this does complicate the process that was underway, in terms of the normal level playing field for tender assessment, does it not?

Mr Edge : As I said, we are in discussions with the department about how this requirement will be resolved in terms of the current tender process. We have not resolved that at this point. It is a new consideration to the process, that is correct; and it needs to be dealt with.

Senator GALLAGHER: Will it delay the tender process?

Mr Edge : It is a consideration that is being explored, so I really cannot comment on whether it will delay the tender process; but it is something that we are pursuing with Immigration at the moment.

Senator GALLAGHER: Because the original tender, I think, had the move underway by 2017, was it?

Mr Edge : Yes, I think so. That was the time frame.

Senator GALLAGHER: In a general sense, in handling these things, after the closing of tenders is there a period of time that is usually allocated for tender evaluation and announcement? Is that part of the scope or the specs for the tender?

Mr Edge : Obviously, every tender process is different and some are much more complex than others. I do not think there are any particular reference points around timing commitments in tender documents—that it will be resolved by X time. Clearly, as you indicated, there is a date of 2017. That is still a bit of a way off. But, as far as I am aware, there are no particular commitments around when the outcome of this process would be known.

Senator GALLAGHER: Had there been a date when it was believed a preferred tenderer would have been advised?

Mr Edge : I am not aware of that. I am not aware of any particular date that was advised.

Senator GALLAGHER: One would assume, though, if new buildings had to be constructed as part of the tender, that 2017 is looming in terms of bids that had been put forward. This is just merely a question; I do not know. I am trying to understand—with the way the tender started and the way the bids were based on the specs at the time—how this new policy coming in at this point is going to allow a fair process for those original tenderers.

Ms Halton : That is a thing that we will have to work through with Immigration. The reality is that governments make decisions all the time about machinery of government and policy and all the rest of it. So the fact that an agency had something on foot does not prevent the government doing what it is allowed to do, which is to basically set policy. So we now have a policy and we are working through with Immigration how that affects them and their process. As the minister has indicated, we have been looking—really, nearly the entire time I have been in Finance—at where we had the opportunity to streamline and indeed reduce government outlays, and this issue in respect of property and vacant space is something which for the minister is a priority. So the fact that the policy was announced recently is just a question of timing. The officers have to work through with Immigration how it affects them.

Senator Cormann: I will just pick up on the point the secretary makes, which is very important, related to machinery-of-government changes and flow-on consequences for property arrangements. For example, just before the last election, the previous government entered into a lease worth almost $158 million for the Nishi building to accommodate the climate change department, which was meant to be a new department at the time. That department, as you know, no longer exists, which means that the department of industry inherited the lease but decided this year to move towards vacating those premises. You have to make decisions in these circumstances on what you do with these sorts of available spaces.

When we had a closer look at this, we essentially found an initial 30,000 square metres of current spare office space in Canberra alone, where we have ongoing leases, and about 50,000 square metres of leased space due to expire over the next three years. This is not just a one-off issue here; there is a systemic issue, an ongoing challenge that we need to address to ensure that the resources of government provided by taxpayers are allocated in the most efficient way. That is why we have initiated 'operation Tetris'—because we want to ensure as much as possible that there no gaps between all the different pieces of the public sector when it comes to occupying the available space.

Senator GALLAGHER: I understand. As a local issue, this is getting quite a lot of attention—the potential move of a large number of people from one town centre to another. I guess what I was looking for is whether there is going to be some resolution to that, or some time line for resolution of the uncertainty that is here at the moment.

Senator Cormann: We are working through it as fast as possible and as slowly as necessary.

Senator GALLAGHER: I understand I am not going to get a date today.

Senator Cormann: The thing is you do not know what you do not know, right? The challenge we have is, because the Commonwealth is such a dominant customer in the Canberra office market, you really have to be very careful that you do not end up competing with yourself. There are all sorts of things that you have to very carefully manage and the team at Finance is very focused, obviously, on achieving the objective as quickly as possible but also taking the necessary time to do it the right way, getting the best possible outcomes.

Ms Halton : I think you are aware of the things that should be taken into account in the management of property. We are going to have a much more whole-of-government view of this, which will mean sometimes departments will not be able to always do the thing that they would prefer most, which is about them. At its absolute base level, if it is not in the collective good then sometimes people are going to have to take arrangements which are actually more robust long-term. There is also the issue, which I think we are all conscious of, about local impacts.

Senator GALLAGHER: I was going to come to that, because I think that was part of the announcement around 'protect Tetris'—was it?

Ms Halton : Yes, exactly. Local impacts are important. I know this from when Health occupied a very large amount of space in Woden. At one point there was a suggestion that we would move beyond Woden and we received delegations of people from the local business community indicating what the impacts of that would have been on that local business community. I was very conscious of that when I was running Health, and you would know from your previous history that in fact what we ended up doing was moving into the reconstructed Sirius building. All of those staff members stayed in Woden, so there was a way to meet the need for accommodation with a reasonable commercial outcome for the department. The local impacts component of this is something which I think we also need to be mindful of because, as the minister says, we are such a dominant player.

Senator GALLAGHER: How is that local impact assessment going to be done?

Ms Halton : It is very early to say. This is one of the reasons we are having this early conversation with Immigration—because of the policy which we talked about in the budget context. We need to work through some of those logistics. I understand your point, which is, 'Please could you tell me when people are going to know, because of the certainty issue.' We have a range of considerations in the broader context that I have outlined for you which we will be taking into account, including local impacts, but we have to work through the precise nature of that. As the minister has indicated, we have all sorts of complexities like the Nishi space et cetera. We are moving as fast as we can is probably the best thing I can say to you.

Senator GALLAGHER: In terms of the overall 'project Tetris', because that is more than just Immigration—

Senator Cormann: Absolutely, it is across the board.

Senator GALLAGHER: The announcement that local impact would be part of that and would be part of the Department of Immigration and Border Protection assessment or the decision—how are you going to do that whilst there is a tender process where bids have been submitted?

Ms Halton : That is what we are talking to Immigration about.

Senator GALLAGHER: So you do not know how.

Senator Cormann: That is something that we are working on.

Ms Halton : We are working our way through.

Senator GALLAGHER: So you do not really know how you are going to assess local impact?

Senator Cormann: What we do know is what the process is going to lead us to—what we are currently engaged in.

Senator GALLAGHER: In terms of the Immigration tender, there is a lot of uncertainty at this point in time about how you are going to handle that particular tender process.

Senator Cormann: What we have certainty about is that we want the most efficient allocation of resources and, given the level of available vacant space, we want to ensure that we minimise the gaps. Obviously, we have to make sure that any moves are sensible in the context of whole-of-government considerations. The specifics, as Secretary Halton has indicated, are that we are working our way through, including in relation to the matters impacting the immigration department but also more broadly.

Ms Halton : Let us be clear; the issues around property do not just impact on Immigration.

Senator GALLAGHER: No, there are two things going on here. I understand that. I know you have not reached a decision on how to handle the Immigration tender, but what options are being considered? Are you looking to suspend the tender, to stop the tender or to proceed with the current tender?

Ms Halton : I do not think we can get into even options at this stage. We have only had preliminary discussions with Immigration.

Senator Cormann: The objective is to maximise value from our property portfolio. That obviously has implications for all departments across government that may be considering moving from their current premises. You have to draw a line in the sand somewhere. To the extent that there are practical implications, such as for the Department of Immigration and Border Protection, we are working our way through that in an orderly and methodical fashion.

Senator GALLAGHER: Do you know how much for-lease space you have across the ACT that is currently not occupied?

Senator Cormann: I think I gave you some numbers before.

Senator GALLAGHER: You gave me 50,000—

Senator Cormann: When we looked at this closely we found, without even scratching around very much, an initial 30,000 square metres of current spare office space in Canberra where we have ongoing leases and around 50,000 of leased space due to expire over the next three years. There is obviously significant opportunity there to improve what we are doing and to maximise the value from Commonwealth property leases in the ACT. Essentially, the priority should be to fill any surplus vacant office space promptly before we go into new additional leases in other premises.

Senator GALLAGHER: Can you provide the committee with a list of surplus vacant space across government?

Senator Cormann: We might take that on notice.

Senator GALLAGHER: Also, please provide upcoming lease expiry dates. That would be useful, if you could take that on notice as well. In terms of the department of immigration, how to proceed from here with the tender is in a state of active consideration.

Ms Halton : Yes.

Senator Cormann: The consideration, as we have indicated, will include an assessment of local impacts.

Senator GALLAGHER: It has not been determined how you would do that or how it will work for the Immigration tender. It is yet to be determined.

Senator Cormann: We are working with the department of immigration to ensure that is done in an appropriate way, because, until the point of the government adopting this policy around Operation Tetris, we do not believe that local impacts had been adequately assessed. Again, in the context of the Commonwealth being such a dominant player in the Canberra office market, we do think it is important that, when these sorts of judgements are made, local impacts in local communities across Canberra are also taken into account.

Senator GALLAGHER: I understand that.

Senator SESELJA: My questioning follows on from Senator Gallagher's questioning. I apologise that I was outside, so, if I am doubling up on anything, please let me know. I commend the initiative of including local impacts. I think that is very important and certainly something that many of us have argued for. I am interested in getting a bit more detail on 'operation Tetris'. Did you go into any of the savings questions from Senator Gallagher, in terms of what you expect in savings from this initiative?

Senator Cormann: What I have provided in answers to questions by Senator Gallagher is essentially some high-level overview of the opportunities that we have identified so far. We have not put a dollar figure on it. Essentially, we want to obviously get the biggest possible saving by maximising value from Commonwealth property leases across the ACT. To a degree, we do not have all of the information in front of us just yet to the extent that we do not actually know what all of the intended moves in coming years might be. Our commitment is that the priority is to fill and use the vacant space that is currently there before entering into any new arrangements that add to the property holdings by either leasing or otherwise on top of all of that. Secretary Halton, I am sure, is able to add to that. I have promoted her.

Ms Halton : I do know whether I would regard that as a promotion, actually!

CHAIR: Demoted, I think.

Senator LUDWIG: I think it would be seen as a demotion.

CHAIR: There is nothing better than the Senate.

Ms Halton : Senators for the ACT are here, so let's not follow that on, shall we.

Senator Cormann: They are your local members.

Ms Halton : They are, indeed. If you think about this, this is about expenditure that is already being made, because someone is actually paying for these leases. Regarding the department of industry, I have regular conversations with my colleague about how on earth we can manage what is a significant impost on their running costs, which of course comes at a cost to that department, their staff et cetera, because it is a burden that they are carrying. We have other departments. Infrastructure is a good case in point. In a couple of cases, for other departments—for which machinery-of-government arrangements meant they could argue for a burden share, but all of that property is being paid for; we talk about the number of staff in the public sector—that comes at a cost and that cost comes from a variety of places, including staffing. I do not know whether Mr Edge can actually put a figure on it, but we are talking a lot of money. We are talking tens and tens of millions of dollars which we are currently wasting.

Senator Cormann: Just to give you an example—I indicated this to Senator Gallagher before—

Ms Halton : The Nishi building.

Senator Cormann: Just before 2013 election, the previous government leased the Nishi building for $158 million for a new department, Climate Change. That department of course no longer exists. The department which inherited the lease, Industry, has decided to essentially vacate the building. The lease in place for the Nishi building, 12,250 square metres, goes until December 2027. Obviously, you do not want this space to just sit there and then some other department goes off somewhere else and tries to come up with some new lease holdings elsewhere. By looking at this and doing research into this, what we have become increasingly convinced about is that there are significant opportunities to achieve efficiencies. I think there is no better way to describe what we are trying to do than 'operation Tetris', because what we are trying to do is close the gaps between all of the moving public sector agency parts as far as the property holdings are concerned.

Ms Halton : I would like to make one additional comment. The other thing which I think we need to be mindful of is that, yes, there are some buildings which are potentially reaching the end of their useful life—potentially. Some buildings can be refurbished, but the notion that it is sensible—in this particular case—to leave a very modern building sitting empty is just not acceptable. But also, I do think we have to acknowledge that in this particular market we live in a town that actually has town centres. We do have to think about the notion that you are going to hollow out those town centres and leave ghost buildings sitting there, in terms of the local impacts. This town was planned in a particular way; we are all, as locals, very aware of that. I am certainly aware of that, having been here since school. The reality is that we have to think about how we manage in that total context, which is why things like the local impacts and the using of unoccupied, but leased, space—all of these things—do need to be taken into account. That is what the policy reflects.

Senator SESELJA: I think it is very sensible to be looking for these kinds of savings. Regarding the Nishi example that you use, I certainly raised that with the minister's office some time ago. There is obviously a cost impact for the Commonwealth if you are paying for things you are not using. But that is also another example of a local impact because, effectively, you have an empty building and that impacts on all of the general activity and the business activity that goes on around there.

I think it is very sensible, and I am pleased that the government is going down this path. In particular, the other aspect which you mentioned, Ms Halton—the local impacts on the town centres—is very important, as you know and as all Canberrans know, in how these town centres operate. There is also the fact that it was the Commonwealth which, effectively, put in place this model with anchor tenancies. I think it is a good way to go.

It seems to me—and I might be wrong about this—that up until this decision was taken recently there had been a little bit of departments doing their own thing.

Senator Cormann: This is a new policy. It is a new approach. 'operation Tetris' was initiated by this government.

Senator SESELJA: So this is a government decision?

Senator Cormann: Yes.

Senator SESELJA: I agree with you, Minister. I think 'operation Tetris' is an apt name for it. Whoever came up with it is obviously very clever.

Senator LUDWIG: I thought you came up with it, Minister?

Senator Cormann: I am not saying anything.

Senator SESELJA: I am happy if the minister wants to take credit for it now! I think it is a good name.

Ms Halton : I am going to discuss his dress sense with him later!

Senator LUDWIG: He will talk to you later about this!

Senator Cormann: I just encourage all senators to review Tetris on Wikipedia. It is very interesting.

Ms Halton : I think we now know what the minister did as a teenager!

Senator Cormann: I did play Tetris—absolutely! I confess.

Ms Halton : There we go—you were a Nintendo nerd!

Senator Cormann: I enjoyed Donkey Kong too.

Senator SESELJA: So Tetris prepared you for the job of finance minister! Minister, you talk about it being a government decision and I think that is good. But I am just trying to get a handle on how much this changes what has operated in the past, because it seems to me—and I may be wrong on this—that many departments were broadly doing their own thing without a whole lot of coordination.

Senator Cormann: There was too much of that.

Senator SESELJA: But there would have been some coordination, I assume?

Ms Halton : Actually, no. As the dean of the secretary school—so, as someone who has been running an agency longer than anyone else—we could argue that there are—'fashion' is the wrong word—'trends' in administration. We had a long period where it was basically: give total responsibility for everything, in this case, to secretaries of departments. And people went off and did what they should do, which was run their department.

Remember that we used to have centralised everything. We used to have the Department of Administrative Services, which basically ran everything—not desperately well, because it is very hard to run everything for everybody. So we thought, 'Right, we will devolve it all.' What we are doing now is coming back to what I would describe as a more happy, medium position which acknowledges that whilst there are some things which are completely individual and idiosyncratic to a particular agency and its requirements, there are other things, however, which bind us as the one APS. The simple reality is—and we know this—that if you are BHP Billiton you do not have to have a variety of systems for some of your back office. You can buy something off the shelf. So you will have seen a number of measures in the budget which are about acknowledging that we, as a combined APS, can do some things together to drive better value for the taxpayers' dollar. And we now have a secretary's committee on transformation, which is actually collectively and collaboratively delivering some infrastructure—and there will be more of this—together because we are going to get better value. We should not all be going and purchasing the same thing separately—we are going to pay a higher price.

Senator Cormann: And with individual agencies competing with each other in a very small market.

Ms Halton : Yes. And property is in this category because we do not want to be in the position we currently have. Potentially, we could save, by one estimate, around $200 million over 10 years. If we can save that kind of money, we can use it for other and more productive purposes. This is why we have to have this conversation with Immigration and are talking to a number of departments around town. What we are trying to do is find a way to accommodate their needs without ending up in this position where we have all these empty buildings or all this empty space. Some margin is obviously going to be inevitable. We all understand that, but to have, potentially, a whole new modern building standing completely empty is not acceptable. We have to find a middle ground, and that is what we are working on.

Senator SESELJA: I did not want to focus on Immigration, but obviously that has been canvassed. Maybe this needs to be taken on notice, but it is my understanding that there are the existing large offices in Belconnen and that the car park adjacent to the immigration department—and correct me if I am wrong—is actually Commonwealth land, which is a rare thing. I understand that some of that car park space may actually be Commonwealth—is that correct?

Ms Halton : Yes. I think we will have to give you the precise details of that on notice. I think, from what I am being told, this is quite complex.

Senator SESELJA: Sure. Obviously if that is the case—and thank you for taking that on notice—there are possibly some opportunities that may not have been considered in terms of what model is needed for Immigration there.

Ms Halton : Very possibly.

Senator SESELJA: The numbers there may change, I suppose.

Ms Halton : And what I would say to you is: what we are interested in is as creative a set of solutions to get the best outcome as we can, taking account of all the things we have just been discussing.

Senator SESELJA: That is great. Before I move on to some questions in a related area, just on this review, is there a part of the department that has been tasked with this review? What does that look like, and when are we going to see something concrete in terms of what that looks like?

Ms Halton : I would regard this as being an ongoing exercise now. Ms Elliott, who is acting as the first assistant secretary in the property area but under Mr Edge's guidance, is looking at an ongoing process now of seeing what is vacant and who is coming up in terms of vacancies. We are working with a number of departments and talking to them about their needs. Obviously, there is all sorts of complexity to this. I have actually had a conversation with two of my colleagues—not the Immigration secretary, as it happens—probably in the last week, in relation to the specifics of their needs and, in some cases, the kind of rent that has been signed onto in some of these buildings, and how we are going to burden share, if I can put it that way, across a number of these agencies which is what we are going to have to do.

Senator GALLAGHER: In terms of the local impact analysis, is that going to form part of tender specs in the future?

Ms Halton : As Mr Edge has said, we are still working through the expression of that. In some way, shape or form, acknowledging and considering local impacts will have to be part of how we go forward. Precisely how that will be reflected in terms of tender or other documents, I cannot tell you yet.

Senator GALLAGHER: I think there is a general acknowledgement that it is a good idea to look at local impact, but at this point in time you have really no firm idea on how you are going to measure it?

Ms Halton : Because it is a new policy, I think it would be premature. We have obviously had some internal discussion, but I do not want to speculate until such time as we have come to a view about that.

Senator SESELJA: Moving on to a related issue: the divestment of properties in the Parliamentary Triangle. You have the six that were put out initially for the scoping study, and you have announced that for four you are going to look at divestment and two are not suitable for divestment at this stage?

Senator Cormann: We have decided not to proceed at this stage with any sale of the John Gorton building and the Treasury building. What we have announced—and this is subject to the outcomes of market testing, so it is not going to be at any price under any conditions—is that the government will proceed with the divestment of four properties within the Parliamentary Triangle, namely East Block, West Block, Anzac Park East and Anzac Park West, which includes the restaurant building. Just making the point that these properties will require varying degrees of improvement works. Anzac Park East is in a particular state of disrepair. What we are essentially now doing is assessing how we can ensure that these buildings can go back to their past glories and be useful as part of the Canberra community. Given that too many parts here are vacant spaces, we think that there is opportunity to integrate them in a more useful way back into the community. Of course, all of that will be done consistent with any heritage and planning requirements. Having looked at this very closely, from the government's point of view, we think that this is the right way forward for Canberra.

Senator SESELJA: I am interested in some of these particular buildings. I think Anzac Park East has been vacant for a long time.

Senator Cormann: Twenty years, I think.

Senator SESELJA: Yes. In its current broad condition I imagine it is pretty run-down—

Ms Halton : 'Poor' would be appropriate.

Senator Cormann: I diplomatically said in my public statement that it is in a particular state of disrepair.

Senator SESELJA: Yes, I guess that is what happens.

Senator Cormann: There would be an investment required. I guess that has been part of the analysis, or the forensic audit, that the government has undertaken as part of the scoping study exercise to assess the additional investment that would be required from the taxpayer to bring them up to standard and to balance that with whatever the various uses might be in the future. From our point of view, these are surplus to requirements, but we do not want them to continue to stand empty and continue to deteriorate. We want them to come back into the community as productive pieces of local infrastructure in what is of course a very important part of Canberra.

Senator SESELJA: That is right. It does highlight one of the challenges, I guess, of public ownership. I presume that governments of all stripes have not invested in these buildings for a long time.

Senator Cormann: This is not a partisan statement at all. Governments find it quite difficult to spend money on themselves. I know that that seems to be hard to believe, but it is always politically quite challenging to allocate the necessary resources to the proper upkeep of government properties. There is obviously always a level of public scepticism when government spends money on itself. But, in relation to some of these buildings—I stress it is not a partisan statement; it is something that has happened under governments of both persuasions—insufficient investment in maintenance and upkeep can lead to the sorts of circumstances that we find ourselves in now with Anzac Park East, for example.

Senator SESELJA: Apart from Anzac Park East, do any of the other four need any significant potential upgrades before they would be suitable to go to market?

Ms Halton : We will not be upgrading them before they go to market.

Senator Cormann: We are essentially testing the market on the basis of: 'Here they are: this is the location, these are the properties, this is the current state they are in. You run your own audit, forensic or otherwise, a comprehensive cost review in terms of the investment that might be required to bring them up to the standard you would need in order to be able to use them in a commercial way. If you can make the numbers add up, and if we believe that what you are offering to the Commonwealth is value for money for the taxpayer then we might be able to do a deal.' But we are not going to be allocating taxpayer resources to get them up to a standard for sale. It will be a matter of: 'This is the current state. Check it out and do whatever due diligence you need to do and tell us what the best deal is that you can offer us and what you think could be a productive use of these buildings in the future.'

Senator SESELJA: What did the study suggest in terms of some of the uses? We are not just talking about office uses here are we, potentially?

Ms Halton : Potentially.

Senator SESELJA: We are talking about hotels—

Senator Cormann: We have an open mind. Obviously you have got to be mindful of the fact that these are buildings in the Parliamentary Triangle. We are not going to be having a casino in the middle of the Parliamentary Triangle but we are open minded and we are looking for suggestions. We will be testing the market. We would like to think there is a way forward and these buildings can come back and become a productive part of the Canberra community.

Ms Halton : We have had conversations with the relevant planning authorities about where there might be some appetite for a broader range of use, potentially including residential. Obviously there has been some interest. You would be very aware, as Senator Gallagher would be, that there has been some change, particularly in the Anzac Park space, in terms of where the residential areas are—

Senator GALLAGHER: Campbell 5.

Ms Halton : yes—and trying to make it a more vibrant precinct.

Senator GALLAGHER: You said you have had discussions with the relevant planning authorities. Who does that include?

Senator Cormann: The NCA and the Heritage Commission, I believe, have been involved.

Senator GALLAGHER: But you have not had discussions with the ACT government?

Ms Halton : Yes, we have.

Senator Cormann: Yes, there have been conversations with the ACT government.

Ms Halton : We cannot bind any of them but we have had at least some broad discussions about the kinds of plans they have—and obviously any potential purchasers would need to do due diligence on all of those matters. But I do think there is an opportunity—taking account of trying to inject new vibrancy into some of those precincts—

Senator GALLAGHER: It will be a lively debate.

Senator Cormann: In a very bipartisan spirit, in the Canberra context I think what the Commonwealth is envisaging here with the divestment of these properties actually fits in with what the ACT government is doing in terms of some of the urban renewal along the rest of Constitution Avenue.

Senator GALLAGHER: It may well.

Senator Cormann: Canberra is obviously a very important city for the nation, and it is terrible to have a building like Anzac Park West just sitting there derelict and continuing to deteriorate.

Senator GALLAGHER: Do East Block, West Block, Anzac Park East and Anzac Park West all have heritage constraints on them?

 

Senator Cormann: I will talk just about Anzac Park East. The heritage constraint there is related not to the facade but the airspace it occupies—because it is symmetric with Anzac Park West. The heritage restrictions on that site were designed to permit redevelopment. In relation to the other properties—

Mr Edge : All of the properties are on the Commonwealth Heritage Register. That would obviously need to be taken into account in terms of any alternative uses for the properties or reconstruction on those sites, if that were to happen, particularly in the case of Anzac Park East and Anzac Park West.

Senator GALLAGHER: What does the land use allow at the moment?

Mr Edge : In the case of East Block and West Block, use is restricted to cultural institutions, office accommodation and limited tourism in the Parliamentary Triangle area.

Senator Cormann: Looking at the outcomes of the scoping study, West Block and East Block could certainly be suitable for hotels. East Block is still in good shape as office space, so that could also be a potential use. The study suggest that the Anzac Park buildings would suit mixed residential.

Senator GALLAGHER: The scoping study recommends a land use change?

Mr Edge : The scoping study has looked at a range of things, including alternative uses for the buildings. If those alternative uses for the buildings were to be pursued, there would need to be some variation in the planning to allow for that.

Senator Cormann: We are not getting ahead of ourselves; we are going one step at a time. The next step is to test the market and see what interest comes back to us and on what terms and conditions, and then we will make a judgement on next steps and the best way forward.

Senator SESELJA: What was the NCA's input into the scoping study?

Mr Edge : There was extensive consultation with the NCA. They were supportive of our work in the scoping study and very helpful.

Senator Cormann: I have not spoken to the NCA or the Heritage Commission myself, but my advice is that they have both given positive feedback about the potential alternative uses, recognising that there is a formal and proper assessment that we will have to go through. In terms of looking at what else is going on, the NCA wants to bring alive the Burley Griffin vision through encouraging greater mixed use along Constitution Avenue. That means they are particularly interested in the outcomes of the two Anzac Park buildings, which are up the road from the Australian War Memorial. We really do believe that, with everyone pulling together and thinking seriously about how we can make better and proper use of these buildings, we are going to get a good outcome.

Ms Halton : Anzac Park West is no castle at the moment; no-one is going to occupy it in its current state. Something does have to be done with it. I think we are spending something like $400,000 just to keep the pigeons and rats out. To allow that to go on is a major problem.

Senator SESELJA: And the decision not to sell the John Gorton and Treasury buildings was because it just did not make market sense?

 

Senator Cormann: Not at this time. Considering the finding of the scoping study, obviously it is a decision by government. Considering all of the findings, on balance we thought there was a case to proceed to market testing in relation to the four properties that we have identified. But at this point, in relation to Treasury and the current Finance building, we did not think the case was as strong.

Senator SESELJA: What happens to the Finance building once it is vacated?

Senator Cormann: 'Operation Tetris' will come into play.

Ms Halton : We are not the majority occupier of that building; Environment is the majority occupier.

Senator SESELJA: So there will just be a proportion that becomes vacant, and then there will be a decision about where 'Tetris' kicks in?

Senator Cormann: That's it.

Senator GALLAGHER: I think there is $4.8 million provided in the budget to progress the sale of those buildings. Is that right?

Senator Cormann: Yes, that's right.

Senator GALLAGHER: Can you explain to me what that money will be used for?

Mr Renwick : It will be used for the appointment of a business adviser and a legal adviser to undertake the market testing and take it forward. It also includes a component for staff in Finance to conduct the process.

Senator GALLAGHER: Do you have a time line for divestment?

Mr Renwick : It will go to the market testing and the discussions that we have with the NCA and other authorities and any changes that may be required to the National Capital Plan. The sale process itself would be fairly quick, but it is all the planning and so on.

Senator GALLAGHER: What is the priority for this work? Is this a two- or three-year plan? In terms of your budget bid to get your $4.8 million, presumably you outlined a time line for the sale of these buildings.

Mr Renwick : The funding was over two years, so we are looking at the next 12 to 18 months.

Senator GALLAGHER: But that does not include any changes to the National Capital Plan?

Mr Renwick : The timing would include the changes that are required.

Senator GALLAGHER: You referred to the NCA, the ACT government and the Heritage Council, but is there a formal stakeholder group at that level being pulled together for this?

Mr Renwick : It is more a stakeholder consultation process. We are establishing a steering committee to take this forward and we will invite the National Capital Authority to be part of that committee. Under that, there will be a stakeholder consultation process where we will invite various stakeholders to comment.

Senator GALLAGHER: Can I ask that the ACT government be considered a senior stakeholder in that. In terms of the work on Constitution Avenue at the moment and the expansion at Campbell 5 and some of the plans to activate the lake, it does seem to me that you will get a better outcome if you are recognising the ACT government as being up there with the NCA.

Mr Renwick : That is certainly the approach we took in the scoping study and the approach we are continuing with. We spoke to officials in the ACT government on numerous occasions as part of the scoping study.

Senator GALLAGHER: I guess I am trying to formalise their role. I am aware that you talk to them and things, but they do have quite a bit to offer in terms of understanding of the Canberra scene.

Mr Renwick : Certainly. Because of Constitution Avenue and what is happening there, we need to work closely with them.

Senator GALLAGHER: I still have some questions on property, but I think—

CHAIR: We are going to go to Senator Ketter if you have concluded for the moment on that.

Senator KETTER: Ms Halton, I have some questions in relation to Malabar Headland and, in particular, issues related to the proposed transfer of ownership of parts of that area to the New South Wales government. What is the cost to government for the engagement of Coffey Projects (Australia) Pty Ltd to prepare the initial business case for the divestment of Malabar Headland which was dated 17 September 2014?

Ms Halton : We will have to take that on notice. I am advised we do not have that figure here. You would be aware that there was a change in the policy, so we will actually have to look to see whether and if how much was expended.

Senator KETTER: You say there was a change of policy?

Senator Cormann: There was an announcement on 22 January about the government's policy position for the future of Malabar Headland, and that was that the property be remediated to public open space standard and remain in public hands. There was a further announcement on 18 March, where Minister Hunt and the New South Wales Minister for the Environment, the Hon. Rob Stokes, jointly announced that lot 202 of the Malabar Headland would be transferred to the state of New South Wales and made into a national park. The Department of Finance is working with officials from the Department of the Environment, the New South Wales Department of the Environment and the New South Wales National Parks and Wildlife Service to progress that transfer of lot 202 to the state of New South Wales.

Finance in the meantime will finish the contamination containment works currently underway at the site somewhere by the middle of the year. The works include improvement of the leachate control system on the southern boundary, to address contaminated groundwater migrating across the boundary, and implementation of surface water management measures and upgrades to the current leachate collection and handling infrastructure on the northern boundary of the site. This work will mitigate the Commonwealth's health and safety risks by capturing and containing contaminated water on site before disposing to sewer under a trade waste agreement with Sydney Water, thus improving the environmental values on adjacent land. That is pretty well a summary of the government's current position.

 

Senator KETTER: Thank you very much for that. I will come back to further questions. I was familiar with the release of 18 March. I was not aware of the announcement on 22 January. Minister, perhaps you could clarify what was the actual change in policy that occurred on 22 January.

Senator Cormann: On 22 January we clarified that it was the government's intention for the Malabar Headland property to be remediated to public open space standard and remain in public hands.

Senator KETTER: Prior to that date, what was the policy?

Senator Cormann: Prior to that date, there was no settled position. Prior to that date, we were assessing the various options. On 22 January an announcement was made that this property be remediated to public open space standard and remain in public hands.

Senator KETTER: I understand another firm, by the name of Nation Partners, was also engaged to do work from the government on Malabar Headland. Could you explain the nature of that work?

Ms Elliott : Nation Partners were engaged on Malabar Headland to provide project management and contract administration services and also investigate future development opportunities for the site. That was prior to the announcement on 22 January.

Senator KETTER: What was the cost to government of the engagement of Nation Partners?

Ms Elliott : I am sorry; I would have to take that on notice.

Senator KETTER: Which minister made the decision to engage Coffey Projects (Australia) and Nation Partners, and when was that decision made?

Senator Cormann: That would not have been a ministerial decision. That would have been a decision at a departmental level.

Ms Halton : That would have been a departmental decision.

Senator KETTER: Are you able to provide further information about at what level that decision was made?

Ms Halton : We will have to take that on notice.

Senator KETTER: That decision obviously was not approved by cabinet?

Senator Cormann: No.

Ms Halton : No.

Senator KETTER: Minister, perhaps you could confirm who is the minister currently responsible for carriage of this particular issue if there has been a fluctuation over time.

Senator Cormann: I do not think there has been a fluctuation. Obviously the two ministers with the closest interest in what happens to this property moving forward are the Minister for the Environment and me. Minister Hunt and I work closely together on making the decisions on the best way forward.

Senator KETTER: Going back to the media release of 18 March, the environment minister announced the fact that the ownership would be transferred to the New South Wales government.

Senator Cormann: Of lot 202.

Senator KETTER: Has that transfer occurred?

Senator Cormann: Not meaning to be critical, but I actually answered that question in my opening remarks, when I said that the Department of Finance is currently working with officials from the Department of Environment, New South Wales Environment and the New South Wales National Parks and Wildlife Service to progress the transfer of lot 202 to the state of New South Wales. It is currently being progressed. It has not been finalised just yet.

Senator KETTER: When is it planned to occur? Is there a time?

Senator Cormann: As soon as possible and as late as necessary.

Senator KETTER: Are there any shooting clubs still operating on Malabar Headland?

Senator Cormann: Yes.

Senator KETTER: Which one?

Senator Cormann: The New South Wales Rifle Association, which essentially has a licence to occupy the relevant premises on that site.

Senator KETTER: Are you familiar with whether the association's members use the range on weekends?

Senator Cormann: To be honest, I do not know when they use them. Given that they are their premises, I am pretty confident that they would be using them. I guess if you were a rifle association, it would make sense to use them on weekends. Having said that, I have never been there on the weekend. They are obviously entitled to use those premises. I am aware that the previous government at various times tried to expel them from the property. The New South Wales Rifle Association were able, through the court system, as I understand it, to assert their rights, and so they continue to exercise these rights as per the licence that is in place for them.

Senator KETTER: Can you confirm that lot 202 forms part of the safety exclusion zone behind the—

Senator Cormann: You are testing me now.

Senator KETTER: Perhaps somebody else?

Ms Elliott : That is correct.

Senator KETTER: That is because the targets that the shooters are shooting at—lot 202 is immediately behind that area?

Ms Elliott : It is part of the safety template.

Senator KETTER: Could you explain how the area behind the targets is going to be designated as a national park? How is that going to work so that people do not get shot at?

Senator Cormann: I think you are now going well and truly beyond the scope of the finance department. Obviously the terms and conditions and arrangements for national parks are very much a matter for the Environment portfolio.

Ms Halton : And New South Wales.

 

Senator Cormann: And New South Wales, in particular the Environment portfolio in the New South Wales state government. Finance really has a traditional property interest in this, but, once it is transferred and once it is progressed into a national park, that is really a matter for, in particular, the New South Wales state government to manage and organise.

Senator KETTER: Is the government currently negotiating with the New South Wales Rifle Association to vacate Malabar Headland?

Senator Cormann: No. They are entitled to be there. In the spirit of completeness, what we have recognised, and what I believe the previous government was forced to recognise, is that the only way you could arrange for the New South Wales Rifle Association to vacate the premises there at Malabar Headland is if arrangements were made for suitable alternative accommodation. That was a position that was imposed on the previous government. It is a position that this government voluntarily accept to be the position. But from our point of view, we are quite comfortable that they are entitled to be there and that they are occupying the premises that they are currently occupying. If, in future, there was an attempted to shift the New South Wales Rifle Association from those premises, we recognise that it would be incumbent on the Commonwealth to provide appropriate support in terms of alternative accommodation arrangements.

Senator KETTER: So there are no discussions going on at all with the New South Wales—

Senator Cormann: Sorry, that was not your question. Your question was whether we were negotiating with New South Wales Rifle Association to vacate the premises. The answer to that question is an emphatic no.

Senator KETTER: Are you having discussions?

Senator Cormann: I have personally had a discussion with the New South Wales Rifle Association on the premises at Malabar Headland, which was facilitated by Senator David Leyonhjelm.

Ms Halton : There are a number of discussions which are ongoing with the New South Wales Rifle Association about the use of the space. They are certainly interested in a move—we know that. Those discussions are ongoing in terms of the utilisation of that space. You would know that the space is of interest to a number of groups. We do talk to the other tenants; we do talk to them quite regularly.

Senator KETTER: Just coming back to the information that was released on 18 March going to the $5 million, which the government has now committed to upgrading the central portion of the headland known as lot 301. As I understand it, that funding is to remediate the site so that the equestrian club can return to the headland along with disabled riders, and will also be used to upgrade other facilities on the land and improve safety and amenity. Minister, you are providing some information about that?

Senator Cormann: I have really endeavoured to be as helpful as I can be. As you have rightly pointed out, this is a joint announcement between the Minister for the Environment at a federal level and the minister for the environment for the state of New South Wales. The money that is being allocated here is money out of the Environment portfolio. Neither me nor the officials here are in the right position to deal with questions about that particular issue that you are now raising. The best area to ask these sorts of questions will be in the Environment portfolio.

Senator KETTER: My question related to whether those moneys were going to be used to improve amenities on the existing rifle range.

Senator Cormann: As I have indicated to you, these are matters for the Environment portfolio because it is money that is being spent by the Environment portfolio in relation to matters that they determine. I genuinely do not know what the Environment portfolio is envisaging in relation to the expenditure that is identified in that statement. It is a statement that was made jointly between the federal and the state environment ministers. The most appropriate place to ask these questions would be the Environment portfolio.

Senator KETTER: Did the Department of the Environment seek advice from the Department of Finance in relation to this decision to spend $5 million?

Ms Elliott : There have been ongoing discussions with the Department of the Environment, but we did not determine the $5 million.

Senator KETTER: What discussions have been held there?

Ms Elliott : My understanding is the $5 million is for a number of issues. The discussions have been very general around the actual site because we are the owners of the site.

Senator Cormann: It is an environment department spending allocation. They are determining what they want to do. It is responsibility of the Environment portfolio, which is why the environment ministers at the federal level and at the state level in New South Wales have made that statement. So it would be usual to ask questions about this sort of expenditure in the relevant portfolio, which is the Environment portfolio.

Senator WONG: Ms Elliott, you said there have been discussions. I have not been following this matter, I did see the announcement though. What was the structure of Finance's engagement? Was it normal portfolio-to-portfolio consultation or was there a working group or task force?

Ms Elliott : No working group. It is officer-to-officer level. We are just providing information around the site.

Senator WONG: When was Finance first aware of the announcement to which Senator Ketter referred?

Ms Elliott : Off the top of my head I could not tell you.

Senator WONG: How long before the announcement—ahead of the announcement or upon the announcement?

Ms Elliott : I think it was around the announcement. I could not give you a date.

Senator WONG: Are you the relevant officer? Have you been part of these discussions?

Ms Elliott : My staff have been, yes.

Senator WONG: Could you just let us know whether or not Finance was aware of the nature of the announcement, and the expenditure to which Senator Ketter has referred, before the announcement was made. If so, please let us know approximately when Finance became aware of that decision being made.

Senator Cormann: We might have to take that on notice.

Senator WONG: I assumed that. Could you also confirm for us—I am sure Senator Ketter will put this on notice at the Environment and Communications Committee or that it will be followed up there—who the decision maker around the expenditure was? Was it only Minister Hunt or was there ministerial involvement or departmental agreement with Finance?

Senator Cormann: As you would know, as a former finance minister, when there are new policies being proposed, there is a process that has to be followed. Have other people across government been involved when there is an item of additional expenditure? Sure. But obviously this is very much an item of expenditure that falls within the Environment portfolio which is the responsibility of the Minister for the Environment. It was initiated by him and is something that is best explored at that estimates committee.

Senator WONG: I inferred from that answer that there was no NPP associated with this.

Ms Elliott : There certainly was not a Finance NPP.

Senator WONG: Was there an NPP from the Department of the Environment that Finance was aware of?

Ms Elliott : I believe there were some comments on an NPP very early on.

Senator JACINTA COLLINS: That is not an issue for these officers obviously.

Senator Cormann: This is not our—

Senator WONG: I really enjoy being told by everybody that this is not an issue.

Senator JACINTA COLLINS: Not for these officers.

Senator Cormann: Budget matters are outcome 1, which was yesterday. New policy proposals run through the budget process.

Senator WONG: I was being mischievous—this is true. I will ask on notice, then: when was the NPP on this received by Finance, if there was one?

Senator KETTER: Minister, about 10 minutes ago you were very helpfully detailing the nature of remediation works and various other activities that were going to be undertaken at Malabar Headland. I want to take you back to that because I think we might have been at cross purposes. You were talking about sewage treatment and so on. Could you go back to that?

Senator Cormann: Finance, as I have indicated before, will finish the contamination containment works which are currently underway. We expect that that will finish around the middle of the year. The works include improvement of the v-shaped control system on the southern boundary to address contaminated groundwater migrating across the boundary; implementation of surface water management measures; and upgrades to the current V-shaped collection and handling infrastructure on the northern boundary of the site. The works will mitigate the Commonwealth's health and safety risks by capturing and containing contaminated water on site before disposal to sewer under a trade waste agreement with Sydney Water, thus improving the environmental values of the adjacent land. That is what Finance is doing in relation to these matters.

Senator KETTER: Finance is handling that?

Senator Cormann: Yes.

Senator KETTER: Environment is doing other works in relation to lot 301? I am just interested why there are two different—

Senator Cormann: As I have indicated to you, this is a piece of land where both Environment and Finance have an interest. That is why Minister Hunt and I are working closely together.

Senator KETTER: Can you explain the delineation between what the Department of the Environment is spending money on and what Finance is spending money on?

Senator Cormann: We have got a broader responsibility to non-Defence property holdings of the Commonwealth and the environment department obviously has got an interest in relation to the environmental aspects of this particular piece of land—in particular, in the context of the decision of the government to transfer a part of that land to the New South Wales state government with the intention for it to be made into a national park. So there is an overlap of responsibilities in that context.

Senator KETTER: Thank you.

CHAIR: Thank you, Senator Ketter. Do we have any other questions on outcome 2.3?

Senator GALLAGHER: On property—yes. I have some questions about The Lodge which were referred to Finance from PM&C because you are the owner of the building.

Senator Cormann: We are the landlord.

Ms Halton : Yes.

Senator GALLAGHER: I was asking some questions around the remediation work that is being done. The scope of works has increased over time. I had asked some questions around the increase from just over $3 million to what it is now. I do not know if it was confirmed the other day, so if you could confirm for me the cost of around $8 million—

Ms Elliott : It was $8.842 million.

Senator GALLAGHER: What has led to those increases between the original scoping of the NPP—if there was one—that funded that original to where we are now?

Ms Elliott : The original contract was signed in August 2013 with the head contractor and that was around some urgent work, health and safety and asset make-safe work. It had been identified out of building condition audits that had been undertaken on the transfer of the properties to Finance. That was around the replacement of the roof, the whole electrical rewiring of the 1920s cloth wiring that was throughout the building. We also had to upgrade the domestic kitchen to a commercial-grade kitchen for food preparation standards. We also had to do some work around the mechanical systems as well. We also did a fair bit of asbestos removal in that original scope.

Senator GALLAGHER: There were some security enhancements, I think, as well. Were there?

Ms Elliott : Since then, as the property was vacant, there was a decision by government to take the opportunity to improve the security, the functionality and the liveability of the home and residence. We are now undertaking some further works outside the house to do with the security guard houses.

Senator GALLAGHER: You said it was in terms of the liveability of the house. What do you mean?

Ms Elliott : Some of the features of the house had not been updated since the 1980s. Some of the bathroom facilities were 40-plus years old. Some of the bathrooms had bad leaking, also to do with the age of the property. We took the opportunity to do those at the same time, as well as recarpeting and new paint.

Senator GALLAGHER: Could I maybe get that on notice: what the elements of the work have been for the project? Have security enhancements been informed by another piece of work?

Ms Elliott : The governance arrangements on the project include all stakeholders, which includes, obviously, the Attorney-General's Department, around security infrastructure; the Federal Police, around the security management; PM&C as the tenant; and us as the building owner. We have a working group that informs those works.

Senator GALLAGHER: Do you have a completion date for the works?

Ms Elliott : Yes. The house will be ready in the middle of this year, which is at the end of June. As I think PM&C indicated at their hearing the other day, we will be handing the residence over to them in late June to early July.

Senator GALLAGHER: And once PM&C have it, what happens then? Is it available for use? When you hand it to PM&C, will it be available?

Ms Elliott : There is commissioning and training that will need to be undertaken by the building occupants, as well. Obviously there are new kitchens, new electrical and fire panels and all those sorts of new installations. Then they will need to recant all their furniture, fixtures, artworks, carpets et cetera, and then it will be up to them when they decide to reoccupy.

Senator GALLAGHER: What has happened to the staff who work at the Lodge during the relocation?

Ms Elliott : That is a question for PM&C.

Senator GALLAGHER: I knew you were going to say that. For the Prime Minister to move back into the Lodge, that could be in July some time?

Ms Elliott : I think PM&C indicated at the hearing on Monday that they would probably take three to four weeks at least to recant the house.

Senator Cormann: They have to put the furniture back in; they have to hang the curtains again, remember.

Ms Halton : I think there was evidence about the curtains.

Senator McKENZIE: There was a lot of evidence about the curtains.

Senator Cormann: Which had been cleaned.

Senator McKENZIE: Apparently. I cannot say I have ever actually noticed the curtains, but I am going to look next time.

Senator GALLAGHER: Thank you for those answers around the Lodge. Do you do Kirribilli?

Senator Cormann: Yes.

Senator GALLAGHER: It that house having work done on it?

Ms Elliott : General maintenance works are undertaken on Kirribilli as a matter of property management practice.

Senator GALLAGHER: So is that just normal repairs and maintenance?

Senator Cormann: Yes.

Senator GALLAGHER: In terms of the Lodge and Kirribilli, has any thought been given to going beyond repairs and maintenance?

Ms Elliott : In what sense?

Senator GALLAGHER: At some point an old building needs more than just repairs.

Senator Cormann: Are you asking about the Lodge or Kirribilli?

Senator GALLAGHER: Both of them.

Senator Cormann: With the Lodge, obviously there is a substantial project that has just been underway, which is well and truly over and beyond care and maintenance.

Senator GALLAGHER: Was it?

Senator Cormann: It has been a significant refurbishment, which was initiated under the previous government and is just being completed now.

Senator GALLAGHER: I am not disputing the work. I think it is more repairs. It was about getting to the liveability stage.

Senator Cormann: The Lodge refurbishment is a substantial project—

Ms Halton : It is very significant.

Senator Cormann: including, now, obviously, some security upgrades which have come into scope in more recent times. In relation to Kirribilli, the work that is undertaken at Kirribilli is care and maintenance.

Senator GALLAGHER: I will be interested in that question on notice concerning the breakdown.

CHAIR: That concludes outcome 2.3, property and construction.

Proceedings suspended from 12 : 28 to 13 : 30

CHAIR: We will resume proceedings for the Senate Finance and Public Administration Legislation Committee budget estimates. We are dealing with program 2.2 under the Department of Finance—transforming government. Senator Gallagher.

Senator GALLAGHER: I have some questions, to begin with, on Defence Housing Australia, which I think we determined was in 2.2.

Senator Cormann: We can talk about Defence Housing. It is all good.

Senator GALLAGHER: I note that Finance is receiving $4 million to undertake reform of Defence Housing Australia. I think I read somewhere that a decision had been made not to sell off Defence Housing Australia. Is that correct?

Senator Cormann: The first point to make is that we initiated a scoping study into potential future options for Defence Housing in the 2014-15 budget.

Senator GALLAGHER: Yes.

Senator Cormann: And you are right; I announced on 11 May, just before the budget, that the government would not be proceeding with a sale of Defence Housing at this time. However, the government will review Defence Housing Australia's accounting information technology and business reporting systems to improve the transparency of the cost of providing services. It is also important to point out that there will be no change at all to the entitlements of Australian Defence Force members.

Now, the scoping study did identify a number of structural challenges for Defence Housing and the services it provides into the future, and essentially our reforms are designed to put Defence Housing Australia business model on a strong and sustainable foundation for the future. I guess one of the challenges is that Defence Housing is a government business enterprise, for want of a better term, that has one customer only, the Defence community; and that, over time, has led to certain structural developments that we believe need to be adjusted to ensure it operates in the best possible way. But Mr Edge might be able to assist you with some more detail there.

Senator GALLAGHER: Okay. Thank you. Mr Edge, the minister alluded to challenges that were identified in the scoping study. He identified one of those as having one customer for your product. That was one challenge. What were the other challenges?

Senator Cormann: All of the other challenges are essentially related, in one way or another, to that reality. Obviously, the fact that Defence is the sole customer of the Defence Housing authority is a reality. But, over time, that has led to some practices that we think are in need of reform to ensure that Defence Housing has a strong future.

Senator GALLAGHER: Okay.

Mr Edge : One of the areas that we are looking at is the funding model and how Defence Housing funds the provision of houses that it develops for its Defence customers. It has been running a very successful and widely marketed sale and lease-back funding model, whereby houses are constructed and sold to investors, and then there are commitments to long-term leases. That funding model has been widely accepted and successful, but it may not be the only option in terms of funding and sources of capital for Defence, going forward. So there are some things to look at there in terms of how that works and how that might go forward. There are other things that we will work through with DHA and Defence in terms of how the provision of services by DHA to Defence is organised, going forward. They have contracts to provide services to Defence, and we will be working with all of the interested parties on how those contracts will go forward and what they will deliver.

Senator GALLAGHER: If the decision has been not to sell, and the one customer presents challenges, is consideration being given to—

Senator Cormann: Sorry, I would not want you to go away with the impression that the one customer presents challenges.

Senator GALLAGHER: No, it is not a challenging customer.

Senator Cormann: What is presenting challenges is the fact that there is only one customer—

Senator GALLAGHER: Yes, I understand.

Senator Cormann: who has, obviously, quite a degree of influence over the running of the business that is providing services to that customer. In these sorts of circumstances, it is always important, in relation to the things that I have mentioned like transparency of the cost of providing services and sustainability of the business model—given that the business model has historically been used to provide housing to Defence personnel—to ensure that there are proper governance rigours and transparency arrangements in place. These are some of the issues that we will be addressing over the coming months.

Senator GALLAGHER: The end of my question was really: are you looking to expand the business?

Senator Cormann: We are looking to ensure that the business model is sustainable over the medium to long term. Defence Housing started with a significant level of housing stock or land stock initially, and over time obviously that has reduced, and the level of debt is now much higher than it used to be within that business. There is work to be done to ensure that the business model that is being used is sustainable into the future.

Senator GALLAGHER: In relation to the language you have used, and I think it is in the budget papers, around looking at 'DHA's accounting, information technology and business reporting systems to improve transparency of the cost of providing DHA's services', what is the transparency issue? What is the concern you have? Is it that it is not transparent? And, if it is not transparent, not transparent to who—to government?

Mr Edge : I think the aim of the exercise is to ensure that we have the best possible understanding of what it costs DHA to deliver its various services to Defence. We are not starting from the position that we do not have some visibility of that, but what we are doing through this exercise is to get the best possible view of what it actually is costing for these services to be provided by DHA and also, as the minister said, looking, with a better understanding of the cost of the particular services, at how those things may be funded going forward.

Senator Cormann: Essentially, you have a circumstance where a government authority provides services to a government department. In these sorts of circumstances, you have to make sure that you are very clear on what the actual costs are and what the actual remuneration arrangements are. Obviously, a significant part of the business model for DHA in recent times has been the sale and lease-back program, which obviously has implications in terms of how long that can be sustained in the current format. So, across a whole range of areas, it is making sure that we understand exactly what the costs are and that the remuneration and funding arrangements are appropriately aligned with actual costs.

Senator GALLAGHER: I think the answer there is that it is improving the transparency to government. I am not casting a judgement here.

Senator Cormann: No, no.

Senator GALLAGHER: It is just that, in terms of the information that you have available to you as the finance department on the cost of running services, and some of the information that goes into business plans, the $4 million that you have been provided is going into improving the level of information that you have.

 

Senator Cormann: The $4 million goes into Finance working with Defence Housing and other stakeholders to ensure that we improve transparency and other matters that have been identified in the course of the scoping study, business reporting and the like. That is also to improve the information to inform decision making by the DHA board, for example, as they make judgements on the best way forward and as they make judgements on the future business model.

Senator GALLAGHER: Were DHA aware that you were going to be doing this work?

Senator Cormann: Yes. This was obviously a measure in last year's budget. In last year's budget there was the announcement that we would be doing this scoping study and—

Senator GALLAGHER: Yes, but the—

Senator Cormann: sorry, if I can finish—the scoping study was received. Obviously, all the way through the scoping study process, Defence Housing were consulted and were part of the process. Obviously, before we made this announcement, they were made aware that we would not be proceeding with the sale and that we would instead be proceeding with the various reforms that we have announced.

Senator GALLAGHER: The board was informed around this budget measure before the budget was released?

Senator Cormann: The board had the announcement about the budget measure in the usual way that these sorts of boards have announcements of budget measures, but they are certainly aware of what we are wanting to do and why.

Senator GALLAGHER: I just see that there is a comment from the managing director. Are they are a non-voting member of the board? The managing director is the day-to-day executive?

Mr Edge : He is a member of the board.

Senator GALLAGHER: Peter Howman was reported in The Australian as saying that he did not know why the government was now planning to do this work.

Senator Cormann: We are doing it because of issues that were identified in the scoping study process with the way Defence Housing is currently operating. Obviously, Mr Howman is currently running the business, so he would have a particular view, but, as is always the case with any audit that assesses what is being done and how it can be improved, the reason you run objective and independent audits is that sometimes people who are dealing with matters day to day might not see some of the structural challenges that are developing in the same way. That has certainly been our assessment and our judgement in relation to this.

Ms Halton : Certainly I can tell you, Senator, that I spoke to both the chair of the board and the managing director through the course of the process of the review on a number of occasions.

Senator GALLAGHER: Of the review that was announced in last year's budget?

Ms Halton : Yes. But in terms of—

Senator GALLAGHER: My comments are around the big announcement here.

Ms Halton : Yes. But my point is that they were very aware of our views—

Senator GALLAGHER: Yes, I understand.

Ms Halton : in terms of some of the issues that were emerging.

Senator GALLAGHER: They might not agree with them—that is what you are saying—but they are aware that you hold them.

Ms Halton : Absolutely. Unambiguously.

Senator GALLAGHER: In relation to the Australian Rail Track Corporation Ltd and the scoping study that was done, can we just flow on? Is that okay?

Ms Halton : Yes.

Senator Cormann: I am keen—and we might need to get some other people to the table—to provide you with some more information about some of the concerns we have about the sustainability of the business model as it currently operates and why we think there needs to be some reform effort into the future. So we might be able to get back to this a little bit later.

Senator GALLAGHER: With Defence Housing?

Senator Cormann: Yes.

Senator GALLAGHER: Okay, sure. I think the Australian Rail Track Corporation is in Budget Paper No. 2 at page 92—the scoping study?

Senator Cormann: I can confirm that the government is going to undertake a scoping study in 2015-16 on options for future management, operations and ownership of the Australian Rail Track Corporation Ltd and, as has been the case with previous such exercises, the recommendations from the study will be considered as part of next year's budget process. When we meet here this time next year, we will be able to discuss what the government intends to do—or before.

Senator GALLAGHER: I look forward to it already!

Senator Cormann: I know!

Senator GALLAGHER: This may have been one of the discussions we had yesterday about how the dashes appear in the budget paper, but is there money being allocated for this study? I think other studies have the money appearing in the papers.

Senator Cormann: Obviously, conducting the scoping study will involve some expenditure.

Mr Renwick : In this case, it is being absorbed by the department.

Senator GALLAGHER: So it is a real dash?

Ms Halton : It is a real dash.

Senator GALLAGHER: Okay.

Senator Cormann: So it is not an NFP; it is like 'no additional resourcing'.

Ms Halton : Let us be clear, Senator: I personally loathe the word 'absorb' because there are only two ways to do that. You either find an efficiency or you stop doing something else, and we are finding an efficiency.

Senator GALLAGHER: Do you have any idea what the cost of that will be?

Senator Cormann: We may have to take that on notice.

Senator GALLAGHER: Okay.

Mr Renwick : I think we have allocated $1.7 million.

Senator GALLAGHER: I think it came up in the Commission of Audit, didn't it—this matter of the potential sale, the privatisation, of the ARTC?

Mr Edge : Yes, I think that is correct.

Senator GALLAGHER: Is the decision to go for a scoping study looking at the potential sale just implementing one of the Commission of Audit recommendations, or have you formed your own view on what some of the issues are that would necessitate its sale?

Senator Cormann: Obviously the Commission of Audit findings, as we discussed at great length this time last year, were one of the inputs into the government's consideration of the right way forward. In relation to the specific decision to initiate a scoping study into the Australian Rail Track Corporation at this time, that was a decision taken by the government in the course of the current budget process.

Obviously, you would be aware that we have an ongoing Smaller Government Agenda. We have an ongoing agenda where we are reviewing and assessing what should be and what should not be done through government. We believe that there is an opportunity here to explore whether this asset could perform better in private hands and of course whether there is an opportunity here to realise and release the capital that is currently tied up in that asset so it can be recycled and reinvested in productivity-enhancing greenfield infrastructure elsewhere.

We are not pre-empting what the findings of the review will be. We have a genuine interest in assessing whether there is an opportunity here for a further asset sale. But obviously a whole range of things have to be right. The business has to be in the right shape. Market conditions would have to be right. There are a whole range of assessments that would have to be made to help inform the government's judgements in the context of next year's budget.

Ms Halton : You mentioned the Commission of Audit, Senator, but the other thing to remember is that the Productivity Commission did an inquiry into public infrastructure, and they also suggested that the government have a look at this particular issue.

Senator GALLAGHER: Can you provide a list to the committee of all the leases that the ARTC holds, the value of the leases and when they are set to expire?

Senator Cormann: We might have to take that on notice.

Senator GALLAGHER: Yes, sure. On notice is fine.

Ms Halton : And we will have to refer that, obviously, in getting the information, because we do not hold that information.

Senator GALLAGHER: You might by the time you finish this scoping study.

Ms Halton : We might, but in terms of answering the question, obviously—

Senator GALLAGHER: At the moment, yes.

Ms Halton : yes, it will have to come from another portfolio.

Senator GALLAGHER: Have there been discussions with the board of the ARTC about a potential future sale and the timing of it?

Senator Cormann: Obviously the Deputy Prime Minister and I are the joint shareholder ministers for the ARTC. This, as you have indicated, has been a matter for public discussion for some time. It was something that we looked at and decided not to proceed with in last year's budget, at that time. We decided this year to proceed with it. The day-to-day relationship is managed by the Deputy Prime Minister, so I can take on notice whether he has had any specific conversations prior to this issue being finalised. Personally, I have not had any conversations with the management of the board in the lead-up to this year's budget.

Senator GALLAGHER: But the board will have some involvement, no doubt?

Ms Halton : Of course.

Senator Cormann: The board will obviously be consulted in the context of the scoping study. In the context of a scoping study, everyone and anyone who has anything to contribute and has an interest will have the opportunity to make their views known and provide information.

Senator GALLAGHER: If you could confirm about the Deputy Prime Minister, that would be useful. Have terms of reference been decided upon for the scoping study?

Senator Cormann: That work is currently being progressed, and of course as soon as it is finalised I will be making the relevant announcements, as I have done on previous occasions.

Senator GALLAGHER: But you would expect that to be in the next quarter or so?

Senator Cormann: Essentially our intention is for the scoping study to be initiated early in 2015-16 and for the findings to be available for consideration in the 2016-17 budget process, which commences in the second half of this year.

Senator GALLAGHER: Will the scoping study include impacts on the delivery of the inland rail project?

Senator Cormann: The scoping study will assess all relevant matters: economic, social—you name it; everything that is relevant to future decision making by government in this context.

Senator GALLAGHER: Everything.

Senator Cormann: Everything that is relevant, yes.

Senator GALLAGHER: That is a pretty broad scope for a scoping study.

Senator Cormann: That is why it is a scoping study. Obviously we engage advisers who are expert in these sorts of matters, and these sorts of experts are very experienced in providing the sort of advice and information that owners of these sorts of assets need to make informed decisions.

Senator GALLAGHER: With that as the general overarching answer—everything that is relevant—can you just confirm that it will look into the inland rail project, existing rail upgrades that are underway and also the options about addressing non-commercial routes?

Senator Cormann: I can confirm for you that the scoping study will consider everything that is relevant.

Senator GALLAGHER: That is probably as far as we are going to get on that, isn't it?

Senator Cormann: Well, I think that is an overarching, all-encompassing, very precise answer, and I do not think I can assist you any further today.

Senator GALLAGHER: I accept that. On Australia Post, there was an answer provided from the February estimates—No. F105—regarding Australia Post forms. It says that Finance and Communications received and assessed information on the financial implications of various pricing scenarios. Did Finance assess any information relating to the effect that any efficiencies would have in relation to Australia Post jobs?

Senator Cormann: This is another one of the government business enterprises where I am a joint shareholder with another minister, in this instance with Minister Turnbull. Obviously as a shareholder minister I have been involved and have received advice from my department on matters related to the reforms that were recently announced. I will get the officers to assist you on the specifics.

Mr Edge : Sorry; just so that I understand—

Senator GALLAGHER: Did you assess information relating to the effect that any efficiencies would have on Australia Post jobs?

Mr Edge : In terms of the assessment we have referred to, and looking at pricing scenarios, we obviously would have looked at the impact of different pricing scenarios on the costs of running the Australia Post business. Clearly labour costs are relevant there. We would have looked at the cost impacts of what was being proposed, which would have included labour costs.

Senator GALLAGHER: Is there any more you can provide the committee on that, such as the effect on jobs with the proposed changes, and particularly effects on regions versus metropolitan areas? Was that looked at?

Mr Edge : I believe the analysis would have covered a range of things to do with costs, and the proposal that we were reviewing and that led to the announcement was around a different, two-tiered, pricing structure for Australia Post mail deliveries. The impact of that on costs, labour and employment and all the relevant factors would have been considered in terms of our analysis of the proposal.

Senator GALLAGHER: Is there anything you can tell me about that analysis?

Mr Edge : I think we would need to take any detailed questions about the analysis on notice. I am not able to respond at this point.

Senator GALLAGHER: We might put them on notice then.

Senator Cormann: I might just add something to the discussion on Defence Housing Australia. The key issue that is a concern to the government in terms of the findings of the scoping study is that the current business model, the well-established business model over a long time, is based on new sales and lease-back by drawing down their current stock of housing. The number of properties owned by DHA has dropped from 24,000 to about 3½ thousand over the past 30 years. Liability growth as assessed by the scoping study is outpacing equity and profitability. The off-balance-sheet debt has grown fivefold over 12 years. The DHA business model relies on land proximate to bases, often in metropolitan centres, which is increasingly hard to find. At the same time, the current business model means that it has to take on larger and riskier developments in order to meet its objectives to recycle its capital for funding. So, the funding source is increasingly narrow, and therefore vulnerable—the sale and lease-back from individual investors and requests for government equity, essentially. So the current sale and lease-back activity is dependent on house prices holding up to sustained recycling of sales revenues back into the model. And a turn in the property markets—if there was a change in property market conditions—could reduce the expected revenue from property sales, affect investor confidence and make it more challenging to lease as many properties as have been planned for Defence.

If we look at the most recent quarterly report for Defence Housing, it shows a 20 per cent increase in the planned level of sale and lease-back transactions, which demonstrates to us that the organisation is finding it more difficult to align its capital planning with its work programs. Essentially we think that in terms of the way they are pricing their services, in terms of the way they are managing the commercial relationship between Defence Housing and Defence, the provision of that particular service needs to be reviewed, and it needs to be ensured that there is more transparency around all these interactions so that we know it is genuinely on a sustainable basis. That is very candidly sharing with you some of the concerns we are currently working our way through.

Senator GALLAGHER: So, it is holding at the moment, but it is—

Senator Cormann: They started off with a lot of land, and they have essentially been selling it down to investors, and they are using the sale proceeds to essentially recycle. The new capital purchases are getting harder to find and are getting more expensive. And obviously if the sales start to become less profitable then all of a sudden there is a real issue in terms of how sustainable that sort of business model will be into the future. We are particularly concerned about the level of off-balance-sheet debt, which has grown very significantly over the past 12 years.

Senator GALLAGHER: But am I right to take from what you have said that the board does not necessarily share your concerns as a shareholder minister?

Senator Cormann: We have essentially sent the auditors in. The scoping study, in a way—to go back to the conversation yesterday—you could call a forensic audit, or you could call it a comprehensive cost review, or you could call it an assessment analysis. We have looked at all the risks and all the opportunities, at the business model, how it currently operates, what is likely to happen into the future and the trend over the past few decades. And looking at all of that together, taking an objective view of it, we believe that there are some issues that we need to consider very carefully on how that can be better structured into the future. It is not necessarily surprising that the organisation itself, in particular given the very close relationship between the service provider and the customer, might not have reached that same conclusion spontaneously. But we have essentially taken an outside look in and we are now working with them to essentially go on a journey with them into a stronger position.

Senator GALLAGHER: I think I get that. It will be interesting to watch as the work goes.

Senator LUDWIG: I have a question about the contestability. Have the measures to take $106 million from the Department of Health, $131 million from the Department of Education and Training, $54.2 million from the Attorney-General's Department and $168.1 million from the Department of Immigration and Border Protection all been the result of the functional and efficiency reviews conducted as part of the contestability program?

Senator Cormann: Sorry—what is the question?

Senator LUDWIG: All of that money that I read out, taken from the various departments—

Senator Cormann: Which page are you referring to?

Senator LUDWIG: I will start again. The $106 million from the Department of Health, $131 million from the department of education, $54.2 million from the Attorney-General's Department and $168.1 million from the Department of Immigration and Border Protection: are they as a result of—

Senator Cormann: Perhaps I can pause you there. I think we went through this yesterday in outcome 1. At this stage the only two functional and efficiency reviews that have been undertaken are into the Department of Health and into the department of education. The efficiencies that you have listed in relation to Health and Education certainly come from those reviews. In relation to Education, it is only phase 1 of the efficiencies that have been identified. As a result of the same review there will be a second phase of efficiencies that we believe can be realised.

In terms of Attorney-General's and Immigration, I will take them in turn. The Attorney-General's Department and the broader portfolio obviously has incurred additional expenditure—for example, in the context of our increased efforts to counter terrorism—and it is part of the offsets that have been identified by the Attorney-General to help fund additional expenditure on other, higher-priority, areas. And the same principle applies in the immigration department. The immigration minister, Minister Dutton, and I sat down in our respective departments and worked together on identifying efficiencies that would help fund higher policy priorities for the government.

Senator LUDWIG: I should have asked yesterday when I was listening, but the functional reviews: are they available to the committee? Are they going to be released or made publicly available?

Ms Halton : They are actually considered by the cabinet as part of the budget process.

Senator Cormann: The short answer is that, consistent with the practice of the previous government and the government before that and governments all the way back to the beginning of federation, cabinet submissions are confidential.

Senator LUDWIG: Okay; if it is a cabinet document, I do not have a problem. I am certainly not going to go through that.

Senator Cormann: These have informed public deliberations as part of the budget process.

Senator LUDWIG: So, all the functional reviews that you intend to do will form part of the cabinet deliberation for the May budget?

Senator Cormann: That is right.

Senator LUDWIG: And that includes the functional efficiency reviews—

Senator Cormann: To the extent that decisions are made to act on any findings and recommendations, obviously they will be announced in the ordinary course of events, as they have been in relation to Health and Education in this budget. But obviously there is a lot of deliberative work of government that goes on to feed into that decision making.

Senator LUDWIG: Curiously, I thought some of them might have been available in terms of those which are summaries of the functional review. It would be helpful—

 

Senator Cormann: In order to get the best possible outcomes of these sorts of reviews, and in order to get the best possible advice to cabinet in making decisions in the context of these sorts of reviews, I think cabinet confidentiality is a very important feature of the process. If people thought that these things were going to be on the front page of The Canberra Times, I do not believe that we would get the best possible advice to make the best possible decisions in the national interest.

Senator LUDWIG: The difficulty always then is that it is very hard to do any analysis as to what the impact of the functional review or the efficiency review might be.

Senator Cormann: I disagree. Once a decision is made and that decision is reflected in the budget papers, you are free to ask whatever questions you would like to explore in relation to the outcomes of the efficiency reviews that have been acted on, to the extent that they have been acted on. We are quite happy to answer questions in relation to the decisions we have made, but I am not sure that that is in this space; it was probably more a matter for outcome 1 yesterday. And we did actually traverse a lot of this ground yesterday.

Senator LUDWIG: I do recall that. Sometimes it depends on where you want to ask the question, whether it is in 2.2, Transforming Government, or whether it is in outcome 1. The questions I had went more to, given that the functional review is not available—I am not cavilling with that decision if it is a cabinet decision—is there available, once the decision has been made, so with two departments, a breakdown of where those savings are going to come from, whether they are going to come from reduction in staff, whether they are going to come from various sections within the department or divisional areas?

Senator Cormann: I think we might have taken these questions on notice yesterday.

Senator LUDWIG: I am happy for you to take them on notice.

Senator Cormann: To the extent that we did not take these questions on notice yesterday, I am very happy to look at the measures that are reflected in the budget as a result of the functional and efficiency reviews into Health and Education and see what sort of breakdown we may be able to provide. Then we might be able to take it from there at the next estimates.

Senator LUDWIG: In providing that on notice, also could you tell me whether the service standards or the key performance indicators have changed as a consequence, because you can always—I am not suggesting you are doing this—drive down an efficiency by lowering the service—

Senator Cormann: Cut efficiency and drive down waste.

Senator LUDWIG: Yes. That would be fine but you do not want to drive down employee numbers and then drive down standards and then—

Senator Cormann: You do not want us to cut muscles and bones; you want us to cut fat, and that is certainly what we want to do.

Senator LUDWIG: I hear you say that. I want to test that by looking at those efficiencies and seeing whether they accord with—

Ms Halton : One of the things I can tell you is that, in respect of both of those functional efficiency reviews, there are a number of reductions in government outlays. They are all associated with either tangible, measurable improvements vis-a-vis efficiency, as in finding a different way to do the business, or a reduction of function. Following on from Senator Gallagher's question earlier on today, in a couple of cases it will be a programmatic change and in a couple of cases it will be how you run the business change. It is not about reducing standards or quality, if that makes sense.

Senator LUDWIG: What I wanted to do was have a look at those areas and satisfy myself. In terms of the cost of the undertaking of the reviews, are you budgeted for that or is that—

Ms Halton : The costs are actually borne by the department, so, to the extent that there is support required—and our departmental officers do provide support to the departments when they are undertaking these activities—we do that as part of our normal supporting the efficient operation of government work. But, in terms of the departments who are undergoing this processes, they actually cover the costs of doing these reviews out of their resourcing.

Senator Cormann: For us it is core business and what we ask the relevant departments to do is to invest in being more efficient and saving money.

Senator LUDWIG: We asked yesterday which agencies were subject to the reviews and which were going forward. So there was a time line—

Senator Cormann: Would you like me to give you the list again?

Senator LUDWIG: No. If you gave it—

Senator Cormann: If you go to page 2 in Budget Paper No. 4, the second dot point right at the bottom, it actually lists them all. I also listed them in my press release on 11 May, which you can find on my website.

Senator LUDWIG: And I thought we went through them yesterday as well, so I was not going to ask that question. What I was then going to go on to ask was when do of the employees of the various departments get consulted? Do they get consulted when the department is undertaking the review or do they get consulted at the end of the review after the budget deliberation and the government decides to implement?

Ms Halton : It is really a question for the department in terms of how they are managing their review. I am aware from, and I think I mentioned this yesterday, speaking to the three principal reviewers who did the two reviews—one of them had two and one of them had one—that they did talk to staff as part of their consideration of a range of issues. The two reviews came at the thing from slightly different perspectives. I think said yesterday that these were by way of—'pilot' is the wrong word but they were—an early experience of how these could actually be conducted and we have learnt a series of lessons, which we are now feeding to the other departments who are about to follow on. I am absolutely confident that there were discussions in both of those departments. The extent of them you would have to talk to the departments themselves.

Senator LUDWIG: I accept that.

Ms Halton : The reviewers certainly relayed to me that that is one of the things that as part of this they were doing.

Senator Cormann: While there is some consistently across the board, there are also some specific circumstances in relation to each organisation. The way it worked with the functional and efficiency reviews in Health and Education was the relevant portfolio minister and I reached an understanding of how the review was to be initiated and the sorts of minimum things that we wanted to see happen. You would expect that any function and efficiency review that considers how you can improve the operation of a department and the operation and administration of government would talk to the relevant people in the relevant departments, and that is certainly my expectation.

Senator LUDWIG: And it would be correct for me to say that if I wanted to know whether or not contractors were employed by the relevant department, I would have to ask them; you would not necessarily require them as part of the functional review to outsource or seek a contractor.

Senator Cormann: If you have a review, you generally have a reviewer. That certainly was the way it worked in terms of the function and efficacy reviews into Education and Health. As Secretary Halton has indicated, that was very much managed with a level of oversight from the Finance portfolio to ensure that the appropriate standards were met in terms of the qualities of the review. But that was certainly managed by the respective departments themselves.

Ms Halton : But we do expect the reviewer to be independent.

Senator LUDWIG: So, by necessity, it generally means it would have to go out to a contract.

Senator Cormann: Sure.

Senator LUDWIG: The contractor would have to be employed and that underpins the independence and the ability for them to undertake the efficacy and function review. So, if I wanted to de-pack that, I would have to ask questions on notice to the relevant department?

Senator Cormann: Sure.

Senator LUDWIG: You did not contract them?

Ms Halton : No, we did not contract them.

Senator LUDWIG: Yes, and so if I sought the costs—

Ms Halton : I think, you will find they are on next week, Senator. You can go and have a chat.

Senator LUDWIG: No, I do know I am right for them.

Senator Cormann: For example—just to assist you—the function and efficiency review into Education was conducted by Jennifer Westacott. So you would expect that, in similar ways in different departments and portfolios, there would be an independent reviewer that would go through the organisation and make findings and recommendations, and the governments might adopt some and not adopt others. That then gets considered through either the process leading into MEYFO or the process leading into the next budget.

Senator LUDWIG: Yes. So the only issue I wanted to explore, but I will not explore it with you, was effectively the cost of the function review as against the outcomes obtained from the function review post implementation.

Senator Cormann: You might want to put those questions on—

Senator LUDWIG: Yes.

Senator Cormann: Let me tell you, it was a very good return on investment.

Senator LUDWIG: And so to the asset registry.

Senator GALLAGHER: On page 93 of Budget Paper No. 2 is the sale of it—or its market testing. Have you made the decision to sell this registry?

Senator Cormann: What we have decided is what I announced on 11 May as part of my release on a smaller government transforming the public sector.

Senator GALLAGHER: I read it; I got it.

Senator Cormann: What I said then was that the government will undertake a competitive tender process to test the market on the capacity of the private sector to upgrade and operate the ASIC registry. The government will maintain ownership of the base data, so we will not be selling the base data; that is certainly a decision that we have made on that. In terms of the ASIC registry more generally, we essentially take the view that we could get better value out of the ASIC registry, potentially. We have not made, obviously, a conclusive decision. This is now all going to be subject to further market testing, but, based on the findings of the scoping study, we think there are opportunities there for a private operator to upgrade and operate the ASIC registry for us and to develop value-added products based on registry data. I might just give you a few of the key facts and then we might be able to take questions from there.

Senator GALLAGHER: Okay.

Senator Cormann: The competitive tender process will be undertaken over the next 12 to 18 months, with processes for necessary legislative and regulatory changes to occur in parallel. If we are able to identify an appropriate private sector provider, there will be a transition phase that would run until late 2018. Obviously, until any formal changes are decided on or start to be implemented, the ASIC registry will continue to operate on a business-as-usual basis. I just say again that the government will maintain ownership of the base data, and I also hasten to add—because I have had representations directly from Darren Chester, the local member representing the Latrobe area, and some representations directly from some of the local mayors in the Latrobe region—that any negotiations with a new private sector provider will include discussions about employment in the Latrobe Valley region. ASIC employees will be kept fully informed and treated in a fair manner throughout the process, as we did in the context of progressing the sale of Medibank Private. I might just leave it there, to start off with, and see where you want to take us.

Senator GALLAGHER: So when you say 'the ownership of the base data', can you just explain that to me?

Senator Cormann: It is self-explanatory, really.

Senator GALLAGHER: But what does it mean? I do not know that much about the ASIC registry, so I am trying to understand what you would keep under government ownership and what would go, under a sale arrangement.

Mr Edge : I could explain a little bit about how the registry operates, and then we can get to your point.

Senator GALLAGHER: Thank you.

Mr Edge : The registry is not a single set of information; it actually contains a number of subregistries. It covers a really diverse range of things: several million records of, say, company office holders; millions of records about proprietary limited companies in Australia; millions of records about other companies. It contains a register of Australian business names and smaller registries about company auditors, credit licensees and liquidators. It is a very diverse collection of individual sorts of datasets.

In terms of not selling the base data, what that really means is that the Commonwealth would retain proprietary rights over that information because that is essential information that ASIC needs to do its job. So the ownership of that information set would remain with the Commonwealth.

Senator GALLAGHER: Thank you. In relation to the jobs that the minister touched on, how many people work at the registry?

Mr Edge : It is over 200, and a large number of those people are employed at Traralgon in Victoria. They do a variety of things from IT to call centres to other administrative.

Senator Cormann: Just to be really clear, the government is very conscious that ASIC is an important employer in that region, and similar to the discussion we had earlier in the context of implications of government decision-making in Canberra, we are very conscious of the local implications in terms of the way forward on the ASIC registry service, so this matter will be subject to a very constructive discussion with potential operators. The way I look at this, it is actually an opportunity to grow employment to make this business more successful and stronger by giving them the freedom and the opportunity to expand into other areas by providing value-added products. I see this very much as an opportunity, including an opportunity for the Latrobe region, but there are, understandably, some anxieties that we will seek to address as we work through this process. We will work very closely through these issues with the local member Darren Chester and local community representatives.

Senator GALLAGHER: You touched on it before in one of your responses, I think, around employees. Is it your intention to have employment or to be able to provide some employment security for employees currently there as you go through this process and subsequently in those negotiations if you decide to sell?

Senator Cormann: At the moment obviously everything is business as usual—

Senator GALLAGHER: As much as it can be when you are going through a process like this.

Senator Cormann: You have to remember this is not the first time that we have gone through a process like this. We went through a process like this with Medibank Private, which is a very sizeable business, and it was literally business as usual all the way through until such time as the sale was executed. At the moment everything is business as usual. In terms of the way you structure any potential divestments or opportunities for private sector operators to contribute, to help upgrade and operate the ASIC registry, obviously, as a government that controls the asset you can put terms and conditions in place to help ensure that the interests of employees are properly taken care of.

Senator GALLAGHER: If you are prepared to.

Senator Cormann: If I can go to the precedent of the Medibank Private sale, we made that a very specific sales objective. We made a very specific sale objective to provide, in the context of the sale, that employees had to be treated fairly throughout the process, and that would be our intention to make similar provisions in the context of this process.

Senator GALLAGHER: So it sort of stops short of a job guarantee, but you are saying that they will be considered as part of the next steps for the market testing.

Senator Cormann: Very much so. Where I sit now I cannot tell you things I do not know, but what I can tell you is that, in the most recent, significant sale that we managed and in considering other opportunities, we have always included as part of the objectives the fair treatment of employees throughout the process. It would be our intention to do exactly the same in the context of this particular process, and we are very mindful that the ASIC registry service is a very important employer in that region.

Senator GALLAGHER: In relation to the $11.6 million, it seems a large amount in one financial year. Is it expected that you can expend that money in one financial year for this work? It is a lot of consultancy, somewhere, I imagine.

Senator Cormann: You have got to look at it in terms of the size of the transaction. From memory, the allocation in last year's budget for the sale of Medibank Private was about $90 million, but that was in the context of a $5.7 billion transaction. In terms of this particular opportunity it is expected to be a sizeable transaction, so you have got to always look at the level of investment in proportion to the size of the transaction.

Senator GALLAGHER: So the answer is yes, you do believe you can expend that in one financial year?

Senator Cormann: Obviously that is why we have indicated that that is when it is expected to be spent.

Senator GALLAGHER: Does the ASIC registry return any revenue to government?

Senator Cormann: The ASIC registry brings in revenues to government as a result of charging taxes and fees to customers for the registration, lodgement and retrieval of business information. Obviously the question is whether, in the context of value added services being provided, there is an opportunity to increase the level of revenue generated by the business, which then would potentially enable the government to release the up-front capital from those future opportunities. There are various models that we will assess in the context of the market testing, but the short answer is that we believe the business could generate more revenue by providing better services in a different configuration, and certainly that is what we will be exploring further.

Senator GALLAGHER: I understand that is your point, but is there somewhere in the budget papers that you can point me to which shows how much revenue that is, or can you answer it now for me?

Senator Cormann: There is obviously no specific measure reflecting the revenue from the ASIC registry service, but it would be reflected in Budget Paper No. 1 in the context of non-tax revenue received by the government—but it is not specifically identified.

Senator GALLAGHER: Can you tell me what it is—just indulge me?

Senator Cormann: I can tell you on notice. I do not want to be unhelpful, but ASIC is actually in the Treasury portfolio so it is actually revenue; that is part of the Treasury portfolio.

Senator GALLAGHER: You may have touched on this before in your answer, but would the market testing examine sale, lease arrangements or a variety of options?

Senator Cormann: Essentially what it will explore is what I said it would explore in my statement of 11 May, which is the capacity of a private operator to upgrade and operate the ASIC registry—and of course the government would maintain ownership of the base data. Within those confines, we are looking at what the market is prepared to put forward as possible opportunities, and if there is value for money and a deal to be made, then we would like to make it.

Senator GALLAGHER: I have a few questions around the Digital Transformation Agenda, improving whole-of-government ICT.

Senator Cormann: I just have to say right up-front that the Digital Transformation Agenda, of course, is the responsibility of the Minister for Communications. It is the Communications portfolio that has lead responsibility for this, but we will see whether and to what extent we may be able to assist you with aspects.

Senator GALLAGHER: I am happy to be redirected where it crosses into areas that are someone else's responsibility. In the setting up of the Digital Transformation Office, I think there have been some functions that have come from Finance. Is that right?

Senator Cormann: That is right, yes.

Senator GALLAGHER: So that is something that Finance could answer, about what functions are being transferred, when or whether that has occurred, and whether staff have transferred?

Ms Halton : This is under that well-known acronym MoG; it is a machinery-of-government change. The final, formal expression of that MoG has not happened yet, but for all practical purposes it has. As you indicate, there have been a number of parts of different agencies that have been MoGed into the Digital Transformation Office, also referred to as the DTO. A small number of people from my agency have been MoGed, and the officers can probably give you a pithy summary of what that looks like, recognising it has not been finalised yet, but we are in the process of a final discussion with Prime Minister and Cabinet about that.

Senator GALLAGHER: Thank you.

Ms Pensko : On the number of positions that are transferring to the DTO as at 1 July, there are a total of 12 positions transferring.

Senator GALLAGHER: Does Finance retain some ICT expertise within agency?

Ms Pensko : We do, yes. Finance has a policy role, it has an assurance role and it has a procurement role.

Ms Halton : Those roles are not changing as part of this. We just had that conversation about the reviews and the money. I think it was Senator Ludwig who was asking why all of a sudden we were responsible for consumer directed care.

Senator GALLAGHER: So this is 12 positions. What is the nature of those positions? What skill set are going from Finance into the DTO?

Ms Pensko : Primarily they are administrative roles, with ICT experience. They are primarily some policy roles, and there will also be some technical expertise—a small amount.

Senator GALLAGHER: When I look at page 68 of Budget Paper No. 2, under 'Stage One and establishment of the Digital Transformation Office', I am just trying to read this table. Maybe it is easier to ask the question this way.

Senator Cormann: There are two elements to it, and this is now getting into the Communications portfolio. You have the Digital Transformation Office as an executive agency, but then you also have the digital transformation agenda. In terms of the Digital Transformation Office, there are various contributing sources towards that. As the secretary said, it is a machinery-of-government change, but then there is the broader agenda. Of course, the Digital Transformation Office will operate across relevant parts of government, including, say, the Social Services portfolio, the Treasury portfolio, in particular ATO, DHS—you name it. As there are relevant projects that relate to the Digital Transformation Agenda, as opposed to the office, obviously there are going to be further portfolio-specific contributions towards that.

Senator GALLAGHER: So what does the $3.4 million that you get over the forwards to Finance as part of this measure enable you to do? I think it is $0.8 million.

Ms Halton : Sorry?

Senator GALLAGHER: I am looking at the table on page 68 of Budget Paper No. 2. It shows the Department of Finance. It looks to me like you are getting $800,000. Am I reading that properly?

Senator Cormann: I think that Dr Helgeby might be able to assist you here.

Dr Helgeby : This measure is about the establishment of the DTO. The establishment is funded by two means. One is machinery-of-government transfers, which the Secretary has discussed, and the other is financial contributions to meet the cost so that the impact is budget neutral.

Senator GALLAGHER: So you are not getting that money? You are providing that. Okay. It is just me interpreting new budget tables.

Dr Helgeby : I can just clarify it a little bit. There are a number of things going on here. MoG goes in, contributions go in, and then some of the agenda that is being pursued under the digital transformation agenda is effectively undertaken in portfolios.

Senator Cormann: There are a couple of moving parts.

Dr Helgeby : That is right; there is more than one moving part.

Senator GALLAGHER: Money goes in, and then some is allocated back out to deliver particular functions?

Dr Helgeby : Yes.

Senator Cormann: We are technically back at outcome 1.

Senator GALLAGHER: Just indulge me. It is all going so well.

Senator Cormann: I am very happy to indulge you. In the spirit of indulgence, I am happy to indulge you with the ASIC registry revenues as well, if you are interested.

Senator GALLAGHER: I am.

 

Senator Cormann: $430 million in annual review fees, which is about 59 per cent. There are $3 million in revenue from annual return fees, $95 million from company incorporations, $70 million from late payment fees, $17 million from late lodgement and late review fees, $43 million from business name registration and renewal, $7 million from other prescribed fees. Information and search fees make up the remainder—$52 million information broker fees, $5 million other search fees—for a total annual revenue in financial year 2014 of $723 million. That gives you a bit of a flavour. Given that we believe that there is opportunity to grow that revenue substantially in the context of value-added services being provided, it also gives you a flavour for the size of the transaction in the context of releasing some capital value up front in the context of whatever contract we may be able to enter into.

Senator GALLAGHER: Your late payment fees there are a pretty lucrative part of the business. Pay your bills on time!

Senator Cormann: It is a fee that you can, of course, avoid.

Senator GALLAGHER: Yes, exactly. I think I understand the ins and outs of the DTO. With respect to the outs, what is Finance's job with the digital transformation agenda?

Dr Helgeby : The 'out' part of that agenda, as it relates to Finance, is in relation to grants programs and the way in which they are run.

Ms Halton : A bit more detail, Dr Helgeby.

Dr Helgeby : At the moment there are many grant-giving institutions across government.

Senator GALLAGHER: So the consolidation of grants?

Dr Helgeby : Yes. They all run on different systems.

Senator Cormann: We are trying to increase efficiency by having essentially the same platform across the board for grants management across all of the Commonwealth. That is the intention—to have a more standardised approach.

Ms Halton : You remember I talked before about how we were attempting, wherever sensible and possible, to have shared infrastructure. When I was in Health, I was in the process of—and they have now, I understand, finished—moving all of the grants administration onto the platform that is provided by DSS. So, instead of, yet again, building a new grant system at tens of millions of dollars of capital investment, saying, 'Actually, I might as well', in that role, 'use that existing infrastructure.' It is that principle: making a grant is making a grant. Why do you need to continue to remake, over and over, systems to do what is largely a common function?

Senator GALLAGHER: Understood. On page 70 of BP No. 2 there is a line on public sector savings—enterprise resource planning systems. Is this a Finance matter?

Ms Halton : Yes it is. It follows on exactly from that last thought.

Senator GALLAGHER: Can you tell me what an enterprise resource planning system is.

Ms Halton : Back office for HR.

Ms Pensko : Ms Halton is correct. It is our back office function. An example of an enterprise resource-planning system is our HR, and also our financial systems and our recruitment systems.

Ms Halton : We have done, probably, more work in this area across the service. I mentioned the collaborative work being done amongst all the secretaries. This is probably more mature than a number of other areas. The minister talked earlier about a number of those things we looked at—that list in BP 4; you will remember when we were discussing that earlier. This is one of those areas where we can drive more efficiency across the service by having a more standard approach to the business, rather than building many different bespoke versions of something that is largely going to perform the same kind of activity. This anticipates that we can take a saving across all of the departments by doing this, but it is not for a few years out, so we have time to do the work.

Senator GALLAGHER: The savings that are identified there, you have two financial years to build up and implement the new system—is that right?

Ms Halton : That is right.

Senator GALLAGHER: Two years before you start reaping the savings from it. Where it says 'cross portfolio'—that $31 million is attributed on a shared pro rata kind of allocation?

Ms Halton : Yes, it will be. That is right.

Senator GALLAGHER: Presumably, they would mainly be jobs?

Ms Pensko : It is a system.

Senator GALLAGHER: Okay.

Ms Pensko : It is IT.

Ms Halton : Yes, IT.

Senator GALLAGHER: So you are not paying for your license fees and things like that?

Ms Halton : And we are consolidating. There are over 200 ERP systems currently operating within the public sector.

Senator GALLAGHER: That was going to be one of my questions. So you are going to look to go from 200 ERP systems—is that the short version?

Ms Pensko : Yes, sorry.

Senator GALLAGHER: That is all right. It took me a while to work out the PBSs are not health related!

Ms Halton : You are like me—you will have to be fluent in several different sets of acronyms, and the contexts decide what they actually mean! I swap seamlessly! It is all fine; you will get there.

Senator GALLAGHER: There are 200 ERP systems and you want to come down to—

Ms Pensko : We want to reduce that.

Ms Halton : Significantly.

Senator GALLAGHER: Do you have a figure in mind that you want to reduce it to?

Ms Pensko : There is no target but certainly, as Ms Halton said, we want to reduce it to significantly less than 200.

Senator GALLAGHER: Are you going to do that incrementally over the two years?

 

Ms Pensko : Yes. There are some opportunities where there will be expiring systems. There will be opportunities where agencies look to work more cohesively together, and they will make those decisions over the next couple of years. When a system expires, rather than going for a new system, they might join with somebody else. There will be some early opportunities. Agencies are already doing that.

Senator GALLAGHER: Does Finance have the lead with this?

Ms Pensko : We have the lead coordinating role, so we will work with agencies to consolidate.

Ms Halton : To give you an example of the work that has been done collaboratively amongst the secretaries, there is a working group of deputy secretaries who are looking at, amongst other things, this particular issue. Whilst we have a lead coordination role—and that is reflected in the secretaries' committee on transformation, which I chair, and the head of the communications department is the deputy chair—we try to engage with the officers of relevant and interested departments. In this particular case, we have a deputy secretaries' working group who are looking at the issue and doing good work.

Senator GALLAGHER: Good. That will be interesting to watch. The ICON scoping study.

Ms Halton : Yes.

Senator GALLAGHER: Can I get an update on that?

Senator Cormann: The high-level update is that the government will consider the recommendations of the scoping study later in 2015. The scoping study is currently underway. It has not yet been received or considered by government, so there is probably going to be a limit to how much we can talk to you about that, given that it is currently still underway.

Ms Halton : We have appointed a number of advisers, and that work is, as the minister says, progressing. But clearly, until the work has progressed and concluded and then government has considered it, all the general principles about scoping studies apply in terms of anyone with a relevant interest being consulted. There is probably not a vast amount extra—I am looking at Mr Renwick in case he wants to say anything extra—but it is underway, using the usual methodologies. That would probably be the right way to describe it.

Senator GALLAGHER: So the recommendations are currently before government?

Ms Halton : No.

Senator Cormann: No. What I actually said, very specifically, was that they are expected to come before government later in 2015.

Senator GALLAGHER: I am sorry, I misheard you.

Senator Cormann: But they have not been received as yet.

Senator GALLAGHER: Can you just advise when they were due?

Senator Cormann: Later in 2015.

Ms Halton : This did not start until basically, I think, late March or early April.

Senator GALLAGHER: This year.

Senator LUDWIG: I thought there was a media release in March saying that they would be considered in the first half of this year?

Senator Cormann: I cannot be held responsible for what the media says. My public announcement says explicitly in black and white that the scoping study on the future ownership of the Intra Government Communications Network will be considered by the government later in 2015. It is currently underway. I made an announcement initially when the contract was let for the scoping study and we expect to consider the recommendations of the scoping study later in 2015. If you want to draw information on these sorts of matters it is always better to prioritise my press releases ahead of The Canberra Times.

Senator GALLAGHER: That great journal.

Ms Halton : Of repute. I am sure that all of the journalists working on public sector matters are watching, and there seem to be quite a number of them.

CHAIR: I read a very enamoured review this morning, Senator Gallagher.

Ms Halton : That was The Fin Review. It was Verona—

Senator Cormann: Burgess—

Ms Halton : providing great compliments.

Senator Cormann: and having a crack at me in the process.

Ms Halton : You were a postscript!

Senator Cormann: I thought I was being really nice and friendly to you. She was saying I was—

CHAIR: Very helpful, you were. I am sorry for derailing you, Senator Gallagher.

Senator GALLAGHER: I have nothing to say! Just for my background, how much does it cost to operate ICON—you cannot really say 'ICON network'—or the network?

Ms Halton : To operate ICON?

Senator GALLAGHER: Yes.

Senator LUDWIG: I apologise; this is your press release of 31 March 2015. Just so the record is clear about this, it says:

The Government will consider the recommendations of the scoping study in the first half of the 2015 calendar year.

Senator Cormann: I am reading to you the press release of 11 May 2015 and I am quoting directly:

The scoping study on the future ownership of Intra Government Communications Network is underway. The Government will consider the recommendations of the scoping study later in 2015.

That was an announcement that was made about 17 days ago.

Senator LUDWIG: So you had changed your tune.

Senator Cormann: We have provided updated advice to the market.

Senator LUDWIG: So just to be correct: the press release released by you on 31 March said it was going to be in the first half of 2015. You have updated that since then, in May, to say it is all running a bit slower than you expected and you will see it in the second half of the day.

Senator Cormann: As I announced on 11 May 2015, it will considered later in 2015.

Senator LUDWIG: It was not The Canberra Times; it was you.

Senator Cormann: As I have said, on 11 May we made it very clear that it will be considered in the second half of 2015, later in 2015.

Senator LUDWIG: I am sorry about that.

Mr Sheridan : ICON costs about $8 million a year to run, Senator.

Senator GALLAGHER: The service itself for government departments is basically free; is that right?

Mr Sheridan : It is a user pays arrangement so we charge agencies for that. We recover the costs from them.

Senator GALLAGHER: So that $8 million is fully recovered through user-pays arrangements?

Mr Sheridan : Largely it comes from the agencies, yes.

Senator GALLAGHER: So in the scoping study we would be looking at what the costs to government would be if a private operator provided that service?

Ms Halton : The scoping study has been considering all options in terms of what might happen in terms of the management, ownership, leasing and whatever. There are a range of options that could be considered—or indeed the no-change option—depending on what the scoping study illuminates. We have found now time and again that very often a scoping study is the only place where you actually gather together all of the information about a particular organisation. So that is what this is doing.

Senator GALLAGHER: So the answer is yes? It will look at that?

Ms Halton : Yes.

Senator GALLAGHER: In terms of information that is transmitted over ICON, are you able to transmit classified information on ICON or are there constraints?

Mr Sheridan : ICON provides a service that is physically certified to protected level. The Information Security Manual provided by the Australian Signals Directorate says that agencies should take into account what their needs are and conduct, essentially, a risk assessment for each use of a communications system. In this case, we have a range of agencies who rely on the physical security of ICON and do not encrypt their information. We have others that encrypt information despite the physical security. Above protected level, you would need to encrypt it; at protected or below, it is a decision that agencies make on the basis of their business risk.

Senator GALLAGHER: So you would not transmit cabinet documents—

Mr Sheridan : Encrypted you would, indeed. So essentially the link would be encrypted.

Senator GALLAGHER: Going back to The Canberra Times, there was an article, I think in April this year, about the previous attempts to sell ICON. The article stated that private telecommunications companies were saying back in the early 2000s that ICON:

… was depriving them of more than $100 million in bills each year …

Did you see that article?

Mr Sheridan : Yes, I did.

Senator GALLAGHER: What, if any, are the circumstances that have changed since 2001? Is the figure of $100 million in bills each year something that would be roughly correct today?

Mr Edge : That is obviously a very old article.

Senator GALLAGHER: Yes. It was redone, I think, in April this year.

Mr Edge : As the minister said, through the scoping study we are looking at options for the ongoing delivery of the ICON service. As part of that, we are obviously looking at the costs to deliver commercially the services that are currently provided by ICON, and taking that into account in the analysis.

Senator GALLAGHER: So that forms part of the scoping study again?

Mr Edge : Yes.

Senator GALLAGHER: Back on the PBS, there is a KPI—

Senator Cormann: Sorry, we are back in 2.1, are we?

Senator GALLAGHER: In program 2.2 key performance indicators, page 39, improving whole of Australian government ICT, it says:

75% of relevant entities access the internet through their shared internet gateway;

Is that KPI being met?

Mr Sheridan : To date, in the internet gateway consolidation program, about 75 per cent of the agencies have followed the program and are up to the stage that they should be at this stage. There is some lag. A range of agencies have not yet met the target for the program. That is because of changes in machinery of government and other arrangements that have meant we have had to move some things around and adjust things since the original target was set.

Senator GALLAGHER: But you are meeting that target—the 75 per cent?

Mr Sheridan : We are at 75 per cent now in fact.

Senator GALLAGHER: And then, presumably, that is going to go up, is it?

Mr Sheridan : Eventually, all of the agencies will be compliant with the arrangement.

Senator GALLAGHER: Do you update these KPIs in budget years? Are these reviewed annually? Sorry, that is probably a question for Ms Halton.

Ms Halton : Yes. We have a look at it every year.

Senator GALLAGHER: Okay. Which of the agencies are not accessing the internet through the gateway? You said it is machinery of government changes mainly which has caused that?

Mr Sheridan : Generally speaking, there is at least one agency that was a non-corporate Commonwealth entity when the program was set in place; it is now changed to become a corporate Commonwealth entity and is therefore no-longer mandated to do it. There are a range of adjustments that we have made because of the changes in organisations in particular circumstances, but generally it is related to machinery-of-government changes.

Senator GALLAGHER: In terms of the second dot point under that whole-of-government ICT, 70 per cent of students annually who are accepted for a government ICT premiership program remained in the government after one year and 50 after two years. Is that KPI being met?

Ms Pensko : Yes. We want to monitor that internally on a quarterly basis, and I think we are at the third quarter. I will just refer to my notes. I think we are at an average of 91 per cent of participants having remained in the Australian government after one year.

Senator GALLAGHER: And then after two?

Ms Pensko : Eighty-four per cent of participants remain in the Australian government after two years.

Senator GALLAGHER: That's excellent. Do ICT apprentices come in at entry level?

Ms Pensko : Yes. Agencies engage and place the participants directly and we manage the program on behalf of the Australian government.

Senator GALLAGHER: How many ICT apprentices are there?

Ms Pensko : In 2015, a total of 32 ICT apprentices commenced, with 39 ICT cadets and 31 ICT graduates commenced in the program.

Senator GALLAGHER: So you go from apprentice to cadet to graduate?

Ms Pensko : You are right.

Mr Sheridan : There are three different forms of entry. You can be an apprentice, a cadet or a graduate.

Senator GALLAGHER: You can enter at any three?

Ms Pensko : Yes, at three different levels.

Mr Sheridan : It is not a progression. Apprentices join in order to become a tradesperson. Cadets join whilst they are doing their degrees. Graduates join after they have completed their degrees.

Senator GALLAGHER: After the apprentices have finished their apprenticeship, they go into a cadet—

Mr Sheridan : Once an apprentice qualifies, they would continue to work for us if that was their desire, as a tradesperson, in their particular area of skill.

Senator GALLAGHER: Are they located across the service?

Ms Pensko : Yes.

Senator LUDWIG: Remind me when the telepresence was first implemented.

Mr Sheridan : The first stage was completed in the middle of 2009, I think.

Senator LUDWIG: How many sites are now operating telepresence?

Mr Sheridan : I do not have the figure in front of me but I think it is 39 rooms and about 90 desktop video conferencing units at the moment.

Senator LUDWIG: The desktop video conferencing are the ones by CISCO, which are not like a room. They are still the same secure system, though?

Mr Sheridan : Absolutely, it is the same, high-definition video; it is the same secure system; it is obviously a smaller screen.

Senator LUDWIG: After the initial rollout, what was the target number?

Mr Sheridan : In phase 1, which I think was the 39 rooms, we have rolled out all of those that we intended to. Phase 1 was complete—I think, as I said—in 2009. It may have been 2010. Last year we completed the initial rollout of the desktop version NTS2, and we have rolled out 84 or 85 to date.

Senator LUDWIG: What is the target for that?

Mr Sheridan : We have some more that we are able to roll out as we are asked to do and we have the opportunity. We will roll more of those out. We can do more.

Senator LUDWIG: Is that phase 2?

Mr Sheridan : We have done phase 2, but we have the ability—essentially as part of business as usual—to grow the network more as is required.

Senator LUDWIG: What is the cost to date? I am happy for you to take that on notice.

Mr Sheridan : I would need to take that on notice. I do not have a figure up to date.

Senator LUDWIG: Do you keep statistics on the rate of usage?

Mr Sheridan : We do.

Senator LUDWIG: Do you have graphs that demonstrate that or can you make those available to the committee?

Mr Sheridan : I can provide the number of meetings conducted, the amount of travel that essentially has been substituted for—

Senator LUDWIG: I was going to come to that.

Mr Sheridan : I have those statistics, so we can provide them.

Senator LUDWIG: I note that on the Finance portfolio budget statement, on page 40, it states that usage should increase 10 per cent annually. Do you have a graph or a table that shows—

Mr Sheridan : I can provide that. We are certainly meeting that requirement.

Senator Cormann: It is very practical, particularly for those of us who live far, far away.

Senator LUDWIG: Where would that be?

Senator Cormann: In the great state of Western Australia.

Ms Halton : I think some of us have been privy to more back-wall views of ministers' offices, courtesy of this particular capability, than—

Senator Cormann: It is fantastic. It is good.

Ms Halton : Some people have penchants for hats; other people have children's artwork, but I can tell you it is being very well used.

Senator LUDWIG: And the personal videoconferencing units—they were the phase 2 rollout, were they?

Mr Sheridan : That is right.

Senator LUDWIG: Is there a discrete cost for those?

Mr Sheridan : You mean in terms of project—

Senator LUDWIG: Yes, so phase 1, phase 2.

Mr Sheridan : Yes. We have two different project costs. I can provide that detail as well if you would like it.

Senator LUDWIG: Was there a review that led you to the phase 2 personal videoconferencing? How did that come about?

Mr Sheridan : We had an NPP approved.

Senator LUDWIG: What was the driver for that? Who brought that forward?

Mr Sheridan : Within Finance. As part of further development of the system, it was clear to us that we could do more and thus there was a proposal put forward. It was approved and funded.

Senator LUDWIG: When was that? I am happy for you to take it on notice.

Mr Sheridan : It was the 2013-14 budget.

Senator LUDWIG: And the cost per unit of the desktop?

Mr Sheridan : The installed cost is under $8,000. But I would not mind taking that on notice to confirm, please.

Senator LUDWIG: Please, yes. You have indicated that you can provide a table of the savings to date for meetings or airfares and the like. Is there any consideration for a phase 3 at this point?

Mr Sheridan : Within my division our planning is to continue to roll out the sorts of equipment provided in phase 2 and then to consider we have some technical refresh, essentially equipment refresh, that we have been doing on the phase 1 systems as well. But we are not planning or proposing a phase 3 at the moment.

Senator LUDWIG: Is Cisco still the main supplier?

Mr Sheridan : Cisco provides the equipment, yes.

Senator LUDWIG: Is that the one contract that has continued on or has it been renegotiated?

Mr Sheridan : We had two different contracts for both phase 1 and phase 2. I think the service contract is now one consolidated arrangement.

Senator LUDWIG: Is that ongoing or is it over three years, over five years?

Mr Sheridan : I do not have the details of the contract in front of me. It certainly has some time to run, I believe, and then we would consider on the basis of value for money what to do then.

Senator LUDWIG: As to the personal video conferencing service, is it the preference, as part of that phase 2—having rolled those out—not to roll out any more of the conference rooms?

Ms Halton : It comes down to the business need of the different parts of the government. Say you are a secretary of a department, and you decide you want to pay to install some of this capability. I can tell you, having had one in Health: everyone else wanted to use it all the time. We installed it for a particular business reason—there was a very good business case to do it. So I do not think you would want to prejudge now what people's appetite might be for the technology. And the truth of the matter is: as Mr Sheridan has indicated, at $8,000 on a desktop, you do not have to have too many transnational flights to have paid for that. Certainly inside individual departments, particularly those ones that have large footprints, this technology is really incredibly good value. So I do not think we would want to say it is a question of our planning one way or the other.

Mr Sheridan : Absolutely not. We have got a lot of room in the back end. We can take more rooms, physically, within the operating system, and more desktop units.

Senator LUDWIG: That is effectively what I was trying to get to. I guess maybe it was a poor question. So you have not ruled out doing rooms or shifting to desktops—you have got both options still available? It depends on cost, design—

Ms Halton : And demand.

Mr Sheridan : As the secretary said, business need and demand.

Senator LUDWIG: Demand and value.

Ms Halton : Exactly.

CHAIR: Do we have anything else on outcome 2.2? We have finished with 2.2.

Senator GALLAGHER: I have one on 2.3; it is really quick.

CHAIR: Sure. So we have finished with outcome 2.2.

[15:06]

CHAIR: Let us just go back to 2.3 for one really quick question.

Senator GALLAGHER: My question is in relation to project Tetris again. Will that have some role in looking at ideas about relocating jobs around Australia from a leasing point of view?

Senator Cormann: No, the project is entirely about maximising the value from property holdings in the ACT by making sure that, before agencies go off and enter into new leasing arrangements and increase the leased property holdings of the Commonwealth, all of the existing vacant space has been properly allocated and utilised. Consistent with the 'operation Tetris' brand, we want to ensure that, as much as possible, there are no gaps between the various pieces of the public sector jigsaw. When it comes to the utilisation of property holdings, we want to ensure that all of the existing property holdings are properly utilised before entering into any additional contracts. The workforce requirements are whatever they are, but obviously there are related property requirements. It is essentially making sure that we have the most efficient use of the existing property footprint—the leased property footprint in particular, but the property footprint overall. It is part of an effort to keep government small and efficient.

Senator GALLAGHER: I understand that. I had heard that this morning. Then I was thinking, in terms of, say, a situation where a lease had been entered into for 10 years and then there was some desire to move those jobs somewhere else, which would leave a lease for 10 years, say, in Canberra, would not that fall within maximising the best use possible of the leases that have been entered into? That is why I ask if it crosses into 'project Tetris' or 'operation Tetris'. Would Finance have a role in decisions that were taken about relocation and essentially freeing up leases?

 

Ms Halton : We would regard this as being an inside-the-Beltway—to use that charming Americanism—activity. Would you consider going across the border into Queanbeyan? Possibly, because I have worked in departments that have been spread across the border. But we are talking within the Canberra region. This is not about a broader view. At some point we will turn our mind to what is going on in Sydney et cetera, because there are a series of lease issues in some of the big capital cities. But I do not think we should confuse that with any decisions departments might take about where they actually operate from. It is in the context of where they currently sit.

Senator Cormann: And the most significant issue that we have identified is in terms of the way lease property holdings are currently managed in Canberra. Obviously, if 'operation Tetris' is successful in Canberra, which we expect it to be, it might well be that it is expanded nationally down the track. But we do not believe, based on our current indications, that the issues are as acute nationally.

Senator GALLAGHER: Okay. Thank you.

CHAIR: Let's move to program 2.4, Insurance and risk management. Is there anything on 2.4?

Senator LUDWIG: There is. On page 94 of Budget Paper No. 2—no, I guess that is more 2.5, really, isn't it?

Ms Halton : Yes. It is certainly not under this program.

Senator LUDWIG: No. I am happy to move to 2.5.

[15:11]

CHAIR: Okay. Let us go to program 2.5, Procurement services—excluding government campaign advertising; that will come later.

Senator LUDWIG: So I am on page 94, Budget Paper No. 2, measure relating to whole-of-government procurement arrangements. Can you describe to the committee what the whole-of-government procurement arrangements for ICT products and services involve? I am happy or you to take a little bit of time—a matter for us, I guess. What arrangements were in place? I do recall that this issue was floated around for a while as to how it would occur.

Mr Sheridan : We have some existing whole-of-government ICT procurement arrangements—quite a number of those. They incorporate some of the things that you have heard about already today: ICON, the Telepresence system and related activities. We also have coordinated procurement activities for things like Microsoft licensing, for desktop hardware, for data centres, for cloud services, for mobile phones and for internet based network connections. We have some related things around major office machines and, of course, outside of ICT procurement we have coordinated procurement arrangements for a range of travel related matters, for stationary and office supplies, the fleet advertising and some others.

This measure is designed to expand the work that we are doing in ICT procurement and to look at new activities, principally in the area of software and services, with a view to expanding what we have done successfully with the Microsoft whole-of-government agreement, seeing what we can do to apply those same procedures and processes to other software-licensing arrangements in the first instance and then also looking at other ICT services to see what we can explore there.

Senator LUDWIG: Does that mean you have Medicare off OneNote?

Mr Sheridan : That would be the responsibility of Human Services.

Senator LUDWIG: But you moved into Microsoft for whole-of-government purchase?

Mr Sheridan : The Microsoft whole-of-government arrangement now provides a single contract for some 125 entities. It went some time ago from 42 contracts supporting 41 agencies to one contract supporting 125 entities, and since that was put in place in 2009 we have saved a considerable amount of money in Microsoft licensing.

Senator LUDWIG: What products would be available in this measure? When you talk about ICT products and services, it is not software?

Mr Sheridan : This measure is about software essentially. It will begin in software—that is the first target. What we need to do as part of a coordinated procurement procedure is conduct a scoping study. In other words, we need to test to make sure we can actually get some benefits out of this and that will involve initially looking at software supplies from companies other than Microsoft, the large software supplies to the Commonwealth—IBM, SAP and Oracle—to see whether or not we can get similar coordinated arrangements to reduce the costs both to the Commonwealth and, as a consequence, perhaps reduce the cost of selling to the providers with a view to getting a benefit for the Commonwealth consequently.

Senator LUDWIG: Are you able to then say from the commencement through to 2018 for the coordinated procurement arrangements that are currently in place? You have got one system in place already, then you have got Microsoft, and this is a later iteration of more coordination, I take it?

Mr Sheridan : The coordinated procurement arrangements began in 2008. Essentially, a coordinated procurement arrangement is where we mandate that non-corporate Commonwealth entities must participate in the arrangement.

Senator LUDWIG: So how is this one different to the one that is currently in place?

Mr Sheridan : It expands the work. It is more work in that area. Each of these arrangements are done one at a time and they have a separate mandate, a separate decision to support them.

Senator LUDWIG: You have lost me. What is new to this one?

Mr Sheridan : It is allowing us to explore new arrangements with different providers—

Ms Halton : And a broader range of software than is currently the case.

Senator LUDWIG: But did you not do that before and then end up with Microsoft?

Mr Sheridan : We did it just with Microsoft before.

Senator LUDWIG: Give me an example.

Ms Halton : Instead of 25 different departments purchasing their Microsoft products individually, we purchase once.

Senator LUDWIG: I get that.

Ms Halton : So what we are going to do now is look at other products. That was not a question of saying, 'Let's compare Microsoft with Lotus with blah, blah, blah,' all the options, and then choosing Microsoft. It was: for people using Microsoft, how can we purchase?

Senator LUDWIG: Now that makes sense.

Ms Halton : Got it?

Senator LUDWIG: So Medicare could still be on Lotus?

Ms Halton : I hate to tell you this—

Senator LUDWIG: Dear me. So now you are going to do a scoping study that might look at something like that and move it accordingly?

Ms Halton : We will not mandate with this measure. Medicare must move, because, at the end of the day, there are a whole series consequences and costs.

Senator LUDWIG: Value for money and costs.

Ms Halton : If there were, and there are, other people using that particular piece of software—not that I am saying we are doing that with this particular measure—I would say we are going to purchase once and therefore drive better value.

Senator LUDWIG: I understand that this is a slightly different nuance. So you can have a look at a wider range of different types of software that are available currently in the market and do a scoping study as to where the greater usage is and you can then pick the low-hanging fruit where there are telephony services by 10 different phone companies. You can consolidate that into one purchase. You get greater purchasing power.

Ms Halton : Essentially, there are several arms to the things that we are doing in terms of greater efficiency and better purchasing, one of which is how we service ourselves to run our businesses in a more streamline way. We talked about that a little earlier with that ERPs. Senator Gallagher is now completely au fait with that particular acronym. But then there are other activities such as where we purchase commonly—travel, office machines et cetera. Here, in this particular initiative, we currently get savings and therefore better value because we purchase Microsoft once and once only on behalf of everyone. How else can we extend that approach in the software area to get better value?

Senator LUDWIG: I accept that. The $15.6 million provided in this measure, that is to fund scoping studies and what else?

Mr Sheridan : It is to provide the staffing to do the work. Assuming a scoping study demonstrates that we can make savings, we will then recover those costs over time. All the coordinated procurement arrangements are essentially cost recovered.

Senator LUDWIG: The $15.6 million is a big lump of money. There is obviously a view that there is a great opportunity to consolidate some of those software purchases out there in the market and recover that plus more.

Mr Sheridan : We have looked at how much we are buying in these software areas and we have calculated how much we think we can save as a consequence.

Senator LUDWIG: Have you got a ballpark figure for that?

Mr Sheridan : It is the sum of what is in the measure.

Senator LUDWIG: I see, all right. I note that on the Finance website there is a flyer for a whole-of-government travel exhibition being held by Finance on 2 July—so no telepresence there. Can I confirm that this exhibition is for government officials only or is it open to the general public?

Mr Sheridan : It would be for government officials.

Senator LUDWIG: Who did the invitation flyer go to? Is there a distribution list?

Mr Sheridan : We have a network called the senior procurement officers reference group. We would have sent it largely to that distribution list.

Senator LUDWIG: So I take it that it was sent by email?

Mr Sheridan : I would imagine so.

Senator LUDWIG: It would not have been sent by post?

Ms Halton : We are a very modern little department.

Senator LUDWIG: You are Finance; you would not have bought a postage stamp—I did not say that.

Ms Halton : Notwithstanding the minister's shareholding, no, that is probably true.

Senator LUDWIG: I am trying to get a sense of the showcase in products and services. Is there a list of organisations that are sponsors that will attend and the products and services that are then designed to be exhibited?

Mr Sheridan : In the travel coordinated procurement arrangements, we have recently signed up a provider of travel management services; the company is QBT. We are in the process of moving all the agencies involved in that arrangement across to the new provider. This event is designed to show users of those systems what can be done.

Senator LUDWIG: So this is effectively for travel services?

Mr Sheridan : Indeed.

Senator LUDWIG: Does that apply to us as well? We use FCM, I think.

Mr Sheridan : The contracts apply to the arrangement, but this is done through MAPS.

Ms Halton : The answer is that you have your own special arrangements for the moment.

Senator Cormann: This is actually a part of a different outcome that we are dealing with later after eight o'clock, outcome 3—support for parliamentarians.

Ms Halton : Yes, but at the moment you have your own special arrangements.

Senator LUDWIG: I know that. So you are doing a travel exhibition. The design of the travel exhibition is, as you said, to coordinate and centralise all the purchasing using QBT and it was to exhibit that to all your senior people right across government. So the question was: does it or does it not include—

Ms Halton : It does not include because, at the moment, you are still different and special. But that is a conversation we need to have.

Senator LUDWIG: I do not know how different or special I am but, nonetheless, it is separate.

 

Ms Halton : I have a view about that. But as you understand, probably better than most—and, if Senator Ronaldson was here, he would probably arch a knowing eyebrow—we need to have a conversation about whether we can get better value for parliamentarians in the arrangements that we have established for the rest of government. That is something I would like to have a look at, but we are not there yet. So this exhibition is for those people inside the broader government sector who will actually be using these arrangements so that they are well informed as we manage that transition.

Senator LUDWIG: And so the rationale for the exhibition is to bring those senior people together, inform them of the arrangements and obviously to do a demonstration about how it works. There must be a computer system or back-end that they can play with? Is that the concept?

Mr Sheridan : There is an online travel tool that QBT provides. The other providers involved in our travel arrangements, airlines, hire cars and things like that, are presenting as well.

Senator LUDWIG: And that is because the significant change to the product could be QBT or, in other words, a new centralised travel provider. Is that the aim?

Mr Sheridan : It is indeed. But we also find that awareness of services is a useful thing for the people who use them.

Ms Halton : To give you an example, we have set up now a whole-of-government arrangement for this purchase. But it still does come down to the behaviour of the individual booking and purchasing travel in terms of the value that we get. So whilst we can have the most effective and efficient offering, it then still comes down to the choices that people booking travel actually make. We want to make sure that people understand how all that works. There are several ways of doing that, one of which is to have these kinds of arrangements to show practitioners what is what. But another way to do it is for me to provide—we talked about performance measures before—colleagues, as secretaries, with information about the purchasing in their agency.

Senator LUDWIG: I understand that.

Ms Halton : Giving them information to ask management questions internally about whether they are driving these whole-of-government arrangements to get maximum value inside their agency is another tool that we have.

Senator LUDWIG: So it also means that there are some government departments or agencies that are not effectively utilising the system?

Ms Halton : No, they are utilising the system. The issue is what they purchase using the system. The questions are: are they always purchasing best fare of the day? Are they maximising the opportunity to drive value? There are some times when you cannot use the best fare of the day because the restrictions on the fare may be such that your business needs are not appropriately met. But there is a whole series of things about purchasing travel that you can take account of to get best value. Remember we talked earlier about—

Senator LUDWIG: Yes, I understand that.

 

Ms Halton : not always being the cheapest, but the best value. We need to make sure that the decision making process and the people who use systems and the delegates who are approving travel are thinking about those things when they are making those purchase decisions.

Senator LUDWIG: And what is the cost of that?

Ms Halton : The cost of which?

Senator LUDWIG: The exhibition.

Mr Sheridan : I do not have the figure in front of me but I imagine that, as is usual, we will charge the vendors taking place. There will be a cost per booth so we will recover some of the cost as a consequence of that.

Senator LUDWIG: If you have got some projected costs, I am happy for you to take that on notice.

Mr Sheridan : We will take it on notice.

Senator LUDWIG: Include the event hiring, the advertising publication costs and the like.

Mr Sheridan : Yes.

CHAIR: Do you have anything further, Senator Ludwig?

Senator LUDWIG: I do not think I do in 2.5.

[15:27]

CHAIR: Okay. Just for the benefit of the committee, we will move to 2.7 now, which I am informed should not take too long, with the aim of maybe concluding that before we go on a break. We have contacted Senator Ronaldson's office and said he should preferably make himself available immediately following the break, around four o'clock.

Senator GALLAGHER: I have got some questions on the Medical Research Future Fund, on table 8.3.

Senator Cormann: Can you tell us which budget paper?

Senator GALLAGHER: Sorry, Budget Paper No. 1.

Senator Cormann: What page?

Senator GALLAGHER: Page 526. Is there a line somewhere in the budget that cross-references that saving line, savings invested in the MRFF?

Senator Cormann: Essentially, there are a number of different sources. You have got the uncommitted balance from the Health and Hospitals Fund, which it shows there as $1 billion. The savings invested in the MRFF like the $2.4 billion, $2.1 billion and so on are essentially the health portfolio related savings out of the 2014-15 budget, which, as indicated at the time, would be reinvested into the Medical Research Future Fund. As for the footnote, footnote A, it also includes $76 million in 2013-14 savings. Other than that, they are essentially all 2014-15 budget savings in the health portfolio. If you wanted to find the exact source you, would have to go back to the budget measures in the 2014-15 budget, bearing in mind that there have been some adjustments because the government has since decided not to proceed with some savings measures and, as such—

Senator GALLAGHER: Yes, it is hard to go back. Is there some way you would be able to provide me with what those savings are?

Senator Cormann: Yes, we can; we will give you a list.

Senator GALLAGHER: Thank you. The additional funding line—can you just explain to me.

Senator Cormann: Essentially, the way this is expected and designed to operate is that recurrent savings are capitalised into the Medical Research Future Fund until such time as the Medical Research Future Fund reaches $20 billion in capital, which is expected to happen within a six-year time frame. What we have said is that we would invest the net proceeds, the net investment returns, from that Medical Research Future Fund—which is to be managed by the Future Fund, incidentally—into additional recurrent funding for medical research.

The line at the bottom there, additional funding from medical research, shows you how much we expect to allocate in each financial year: $10 million in 1015-16, rising to $224 million in the final year of the current forward estimates. As we have previously indicated on the public record, by the time this has fully matured, we would expect that this would help boost investment in medical research to about $1 billion a year, which would double the current investment in medical research and it would do so in a fiscally sustainable basis.

It is important to remember here that we are not proposing to eat into the capital, we are not proposing to deploy any capital gains; we are only proposing to allocate the net investment returns so the capital would be preserved in perpetuity.

Senator GALLAGHER: Are any of the earnings premised on the savings that are currently before the parliament?

Senator Cormann: Yes. For example, the budget measure that we discussed yesterday, I believe, in relation to the increase in the co-payment for pharmaceutical products is one of the measures—

Senator GALLAGHER: Although, that might be off.

Ms Halton : And we discussed that yesterday.

Senator Cormann: We discussed this in great detail yesterday. That measure of course remains on the table. We will provide you with a list on notice but ,essentially, at a high level, the savings that are intended to go into this capital fund are savings in health portfolio in the 2014-15 budget that are passing the parliament.

Senator GALLAGHER: What is the assumed rate of return for the MRFF? Is it the standard—

Ms Halton : It is managed by the Future Fund.

Senator Cormann: We have got a degree of difficulty here, because obviously the legislation to set up the fund has not been set up yet. Once the Parliament approves the establishment of the Medical Research Future Fund, then obviously the government will engage with the Future Fund in relation to an investment mandate which will provide the framework around what is expected. Dr Helgeby may be able to provide some additional flavour to that answer.

 

Dr Helgeby : As the minister has explained, for a fund like this to be set up it is normal, that the government will set an investment mandate. The investment mandate will take into account the degree of liquidity that is required in the fund and, given that this is a fund which will build and preserve capital but be used on an ongoing basis, there will be a relative degree of liquidity there compared to, say, the Future Fund itself.

Senator GALLAGHER: So, it is to be determined?

Dr Helgeby : Yes.

Senator GALLAGHER: When you read the section from the health portfolio in Budget Paper No. 2 it says that health savings will be going into other policy priorities or the Medical Research Future Fund. Are the numbers that appear in this table solid? Are they what you expect will be going in and not diverted into other health priorities?

Ms Halton : That is right, I think the government's commitment in the last budget in terms of directing funds into the Medical Research Future Fund was clear. Obviously there has been a range of decisions since then. Probably the easiest thing to do would be for us to give you on notice that list and then you can see.

Senator GALLAGHER: Okay. In relation to the line 'savings invested in the MRFF' of $2,406 million and $2,182 million—from your point of view are those figures not negotiable?

Senator Cormann: Which figures are not negotiable?

Senator GALLAGHER: They are negotiable with the parliament, but in terms of the language in the health section of Budget Paper No. 2 it says savings from health will be going into other health policy priorities or the Medical Research Future Fund—it has two, so if they make things over and above—

Ms Halton : What I said was that it was not this most recent budget when this was announced, and that was the savings commitment, but of course the profile does not include savings from 2015-16. That is why I am saying that it is easiest for us to give you the list and you will be able to see what falls where.

Senator Cormann: There is actually an additional answer to this—any savings in the health portfolio in the 2015-16 budget are redirected within the health portfolio into other priorities. So you will find that the net contribution in terms of net savings comes entirely out of the 2014-15 budget with a small contribution out of the 2013-14 budget. If you look at the various moving parts in the health portfolio in the 2015-16 budget there is essentially no net save.

Senator CAMERON: I want to go to page 22 of Budget Paper No. 2—that is the cap for salary sacrifice, meal and entertainment—

Senator Cormann: That is a Treasury measure and will be addressed Monday and Tuesday next week.

Senator CAMERON: Thank you.

Senator GALLAGHER: In relation to Budget Paper No. 1, page 543, box 6, when is it anticipated that the Asset Recycling Fund will commence?

Dr Helgeby : Depending on legislation, 1 July 2016.

Senator GALLAGHER: Is there some committed spending already?

Senator Cormann: Yes there is. The ACT, New South Wales, and we believe that there are some other bits about to come forward from some of the other jurisdictions.

Senator GALLAGHER: Are you able to provide the individual projects for the ACT and New South Wales?

Senator Cormann: I will take that on notice.

Senator GALLAGHER: Is the committed spending of $2.1 billion in 2015-16 funded through appropriations?

Senator Cormann: This Asset Recycling Fund measure is funded from various sources. First, from the uncommitted balance from the Building Australia Fund, which is about $3 billion. Then there is the uncommitted balance from the Education Investment Fund, which is another $3.6 billion. Then there are the Medibank Private sale proceeds, which amount to about $5.7 billion, which is due to be credited to the Asset Recycling Fund on 1 July 2016, six months after its establishment.

Senator GALLAGHER: What is the rate of return assumed for the Asset Recycling Fund?

Senator Cormann: It is the same issue here as with the Medical Research Future Fund. Once the parliament has approved the legislation obviously we have these conversations with the Future Fund about the investment mandate. But the risk profile here will be somewhat different, because the funds will have to be much more liquid because there is an expectation that the funds will literally be recycled. It will be a quasi in and out account where funds come in and go out.

Senator GALLAGHER: Do you have an estimated rate of return? Do you need that in order to determine the interest earnings—

Senator Cormann: There would be some assumptions underpinning this, but these are Treasury assumptions.

Senator GALLAGHER: Before, you referred to using the proceeds of Medibank Private to reduce its borrowing requirement and thereby reducing public debt interest.

Senator Cormann: As we said when we announced the sale of Medibank Private, it is the intention of the government that all of the proceeds are reinvested in productivity-enhancing economic infrastructure. But the Asset Recycling Fund has not been set up yet. There is about $6.6 billion worth of capital that is available from the Building Australia Fund and the Education Investment Fund. The sale was concluded towards the end of the last calendar year. The situation at the moment is that the full amount of the Medibank proceeds will be used by the Australian Office of Financial Management as part of the financing task to pay down debt. That means there is a saving in terms of public debt interest for the Commonwealth, pending the full amount being credited to the Asset Recycling Fund, on 1 July 2016, which is six months after the expected establishment of that fund on 1 January 2016. The date of crediting is to allow sufficient time for the Australian Office of Financial Management to make an amount equal to the sale proceeds available for crediting to the Asset Recycling Fund. So we may actually be able to assist you. We can provide information on the assumed rate of return, bearing in mind that we have not actually finalised the investment mandate yet.

Senator GALLAGHER: It is an estimate, yes.

Mr Smyth : We are using the rate of return that is based on the nation-building funds at the moment.

Senator GALLAGHER: Do you have a figure?

Mr Smyth : It is around 3.07 per cent.

CHAIR: As there are no further questions on outcome 2.7, I thank witnesses for their cooperation. We will take a short break and resume with Minister Ronaldson with outcome 2.5 on procurement services on government campaign advertising and then proceed to the Australian Electoral Commission.

Proceedings suspended from 15 : 44 to 16 : 00

CHAIR: I recommence the proceedings for the budget estimates hearing for the Senate Finance and Public Administration Legislation Committee, where we are going to be dealing with the Department of Finance and responsibilities that come under the Special Minister of State. I welcome Senator the Hon. Michael Ronaldson, Special Minister of State. We are going to begin with government campaign advertising, which sits under departmental program 2.5, procurement services. I welcome you, Minister, and I ask: do you have an opening statement?

Senator Ronaldson: Thank you for your welcome, Chair. No, I do not.

CHAIR: Thank you. We will go to Senator Ludwig.

Senator LUDWIG: Thanks. The process to make the appointments to the Independent Communications Committee—would you like to step us through that please?

Mr Smyth : Senator, the Independent Communications Committee appointments were made by the senator earlier this year. They were announced by Special Minister of State on 2 April. There were some procedural issues that we had to go through in relation to those members—getting them signed on, confidentiality agreements and the like—and they met for the first time through a ministry arrangement on 17 March this year.

Senator LUDWIG: Were the positions advertised? I wanted you to take me through the selection process as well.

Mr Smyth : No, they are appointments that are made by the Special Minister of State.

Senator LUDWIG: So, Minister, were they your buddies? How did the process go?

Senator Ronaldson: Sorry, what was the first bit? Were they my what?

Senator LUDWIG: Buddies.

Senator Ronaldson: Buddies?

Senator LUDWIG: How did you get to appoint them? I take it is an individual ministerial appointment.

Senator Ronaldson: Yes. I think the use of the word 'buddies' has been used a bit loosely, given I am sure that Alan Hawke was appointed by the former government to chair the ICC—and you have been a minister yourself, and we make ministerial appointments. I put out a press release. Have you seen that, Senator, or not?

Senator LUDWIG: I am asking the questions. What other—

Senator Ronaldson: It would save me reading through it. Have you seen the press release of 2 April regarding the members? There is some brief background. Obviously you have not, so I will—

Senator LUDWIG: What I would like you to do is answer my question, which was: how did they get to be appointed? Was it an individual choice by you? Did you have a process in place? Did you get a call from the department to give you some names—which is the one, I think, you are trying to rule out? You just did not ring up people you knew and appointed them? I just wanted to understand that process.

Senator Ronaldson: Senator, you are questioning the process. The process was that we made the appointment. The people and their backgrounds were indicated in my press release on 2 April, and we believe they are appropriate people to undertake the task as both chair and members of the ICC.

Senator LUDWIG: You said 'we'. Was it an individual appointment by you?

Senator Ronaldson: It is a government appointment.

Senator LUDWIG: Did you take—

Senator Ronaldson: Hang on; let me finish. You asked me a question. The government appointed these three individuals. I detailed in my press release of the 2 April the background to these three individuals and the government believes that they are appropriate people to undertake the task of the ICC.

Senator LUDWIG: So did you take those names to cabinet?

Senator Ronaldson: You seem to be completely tied up with the question of process.

Senator LUDWIG: As I can be.

Senator Ronaldson: These are government appointments, no different to appointments made by you or the former government in relation to these matters. The government has made these appointments. I am not going to sit here and—nor would you expect me to—discuss cabinet or other processes.

Senator LUDWIG: No, I did not ask you to discuss cabinet. I asked: did you take it to cabinet?

Senator Ronaldson: I am just saying—

Senator LUDWIG: That is a different question, which you have not answered.

Senator Ronaldson: My answer to your question is that the government has made these appointments.

Senator LUDWIG: And I am entitled to ask whether or not it went to cabinet. I am not asking the content of cabinet. I am not asking cabinet deliberations. I am entitled to ask: were they cabinet appointments?

Senator Ronaldson: They were appointments made by me pursuant to the executive power that I have to do so.

Senator LUDWIG: So they were not cabinet appointments?

Senator Ronaldson: No, they were not.

Senator LUDWIG: So they never went to cabinet?

Senator Ronaldson: Well, if they were not cabinet, they would not have gone to cabinet presumably.

Senator LUDWIG: All right. That is clear. So it is not 'we'; they were your appointments?

Senator Ronaldson: Well the government has appointed these people to the ICC. I was the one who formally appointed them as SMOS but, clearly, the government has made these appointments to the ICC.

Senator LUDWIG: So it is not a royal 'we'. Was the appointment off a short list that was provided to you by the department? In other words, now we know you made the appointment, how did you select those individuals?

Senator Ronaldson: I am not going to go through the internal process with the appointment of these three individuals. I believe and the government believes that they are appropriate people to be fulfilling these roles with the ICC and I have got no intention of discussing the process any further than that. I mean if you have got issues with them—if that is what you want to get to—why do you not just come out and say 'well I do not think they are appropriate people for the task'. If that is the situation ,well, that is an entirely different debate.

Senator LUDWIG: You may think that; I have not asked that question. In terms of their individual qualifications, you say they are set out in that press release. For instance, Mr Greg Williams FCPA has been a senior public servant of the Department of Finance and PM&C and recently he was the chair of the Victorian government's advertising oversight committee. Ms Chris Faulks has been the Chief Executive Officer of the Canberra Business Chamber for the past seven years. Prior to this role, she was the general manager of Diabetes Australia. Mr Malcolm Hazell CVO, AM, FAICD headed the cabinet secretary in the Department of the Prime Minister and Cabinet. They are all very senior people. Is Mr Greg Williams continuing his role with the Victorian government? In other words, these are part-time appointments I take it?

Senator Ronaldson: These are part-time appointments.

Senator LUDWIG: So is he continuing his role with the Victorian government?

Mr Smyth : We would have to take that on notice. I would have to approach Mr Williams to ask him for that information.

Senator LUDWIG: I assumed you would have asked what his continuing employment was when he took it over, but I am happy for you to take it on notice.

Senator Ronaldson: We will take it on notice.

Senator LUDWIG: Has Mr Conde from the Remuneration Tribunal responded to your letter regarding the salary for the chair?

Senator Ronaldson: Yes, we went to the Remuneration Tribunal for some advice. We acted on that advice, and I decided that $2,200 for the chair was an appropriate figure and $1,500 was an appropriate figure for the ICC members.

Senator LUDWIG: I accept that but my question was: you sent a letter; did the remuneration tribunal respond to that letter and, if they did, is that letter available to the committee?

Senator Ronaldson: I do not think you would expect—

Senator LUDWIG: It is from the Remuneration Tribunal.

Senator Ronaldson: I do not think that you would expect me to release a letter that I have written to the Remuneration Tribunal about appropriate salary ranges for people. It is $2,200. Allan Hawke was on $4,400 a day so it is approximately half of what Allan was on, and I am not reflecting on the amount that Allan was paid. I have made the decision but I think for the chair $2,200 was an appropriate amount.

Senator LUDWIG: Yes, but my question again was: why shouldn't you release the letter? I am asking for it.

Senator Ronaldson: I went to the Rem Tribunal as the minister seeking some advice from them. On the back of what I received back from them, I made a decision that $2,200 was an appropriate figure. I do not know whether it was you that appointed Allan Hawke or not, but whoever it was presumably thought that $4,400 a day was appropriate. I am not reflecting on the decision of the former minister, whether it was you or someone else, about how much it was. I think $2,200 is in my view an appropriate amount to pay the chair. Your government made a decision that $4,400 was an appropriate amount. That was your call and $2,200 was my call.

Senator LUDWIG: So was that the recommendation from the Rem Tribunal?

Senator Ronaldson: No. As I think you are aware, I wrote to them and sought some advice generally in relation to appropriate salary ranges. I have got no intention of providing you with advice that I received from the Rem Tribunal in relation to these matters, and nor would you as SMOS have given me those letters either.

Senator LUDWIG: No, but I am entitled to ask.

Senator Ronaldson: Of course you are entitled to ask. I went to the Rem Tribunal because I thought it was appropriate for me to go to the independent umpire to get some guidance in relation to a possible salary range. I do not know whether the former government wrote to the Rem Tribunal in relation to Allan Hawke's—

Senator LUDWIG: You should have asked. I am asking.

Senator Ronaldson: You asked? Were you the minister?

Senator LUDWIG: No, I am asking you a question and if you do not want to answer it—

Senator Ronaldson: Well, I have told you —

Senator LUDWIG: then say, 'I'm not going to answer it,' which I think you have got to.

Senator Ronaldson: I think I did, about five minutes ago. But I do not know whether or not you or your government went to the Rem Tribunal—that is entirely your call. I decided that was the best way of approaching this: to go to them to seek some guidance in relation to an appropriate salary range. As I say, I do not know whether or not your government did likewise, with Allan Hawke at $4,400 a day, and quite frankly that was a decision of your government. I respect your decision and I went to the Rem Tribunal to get some independent advice about possible salary arrangements.

Senator LUDWIG: Except for the salary arrangements, are the arrangements for members of the ICC the same as the previous government arrangements?

Senator Ronaldson: I do not pretend to have an intimate understanding of—

Senator LUDWIG: I am happy for you to take the question on notice. It is a question of whether the arrangements are the same or different or whether they are new arrangements, or you can take me through the arrangements.

Senator Ronaldson: We would probably need to go back and see if we have some historical information on previous arrangements. Otherwise we will just take it on notice.

Senator LUDWIG: Is it per meeting?

Mr Smyth : It is up to a daily maximum rate. It is an hourly amount, up to a maximum daily rate of about $2,200 for the chair and $1,500 for the other members.

Senator LUDWIG: And they are provided with secretarial support?

Mr Smyth : The secretariat for the ICC is provided within my division, yes.

Senator LUDWIG: Yes, and so how many people do that?

Mr Smyth : There are really only a couple of people who are working on that, but again it is not a full-time task for those staff.

Senator LUDWIG: How often is it envisaged to meet? Well, there are two parts to this. How often has the ICC met and how often is it proposed that it meet?

Mr Smyth : It has met on six occasions and it is envisaged that it will meet on an as required basis in relation to campaign activity as proposed by—

Senator Ronaldson: It is a bit hard to answer that question, which you would appreciate as a former SMOS, but they will be meeting to fulfil their roles under the advertising guidelines. Clearly that will motivate their meeting times.

Senator LUDWIG: Of the six times they have met, were they considering government advertising at the time? Is it the intention to release a synopsis of their meetings or make their meeting records available?

Mr Smyth : They are the internal deliberations of an independent committee. The outputs of those meetings are the review letters that are posted up on the finance department website once a campaign that has been agreed goes live.

Senator LUDWIG: So you will do what the previous government did—you will post the outcome?

Mr Smyth : That is already occurring, yes.

Senator LUDWIG: Prior to the ICC in place, were there any campaigns that needed approval—in other words, between when you had the previous system and now the new system?

Mr Smyth : The guidelines came into effect as of 1 February this year. Like I said, the first meeting to consider a campaign by the ICC was 31 March this year. Those campaigns that had been initiated under the interim arrangement for campaigns—

Senator LUDWIG: Yes, I was searching for the name—thanks.

Mr Smyth : progressed under those interim arrangements. Campaigns that were initiated post the meeting of the ICC, effectively, have been undertaken under the new guidelines.

Senator LUDWIG: Are you able to say which campaigns are now current and being initiated under the new guidelines?

Mr Smyth : There are currently three campaigns: there is a Department of Social Services campaign on pensions, there is the Department of Health ice campaign and there is the phase 2 of the Intergenerational report small business campaign.

Senator LUDWIG: I have not looked at the website. Have they been approved yet?

Mr Smyth : They have; those letters by the ICC are posted up on the finance department website, and the chief executives of the entities responsible for those campaigns have placed up their certification of those campaigns.

Senator Ronaldson: They could not have commenced without the compliance being ticked off by the relevant departmental secretary—the campaign cannot proceed until the secretary provides that compliance order.

Senator LUDWIG: The new rules look very familiar to me; they are almost identical to the ones I did.

Senator Ronaldson: Yes.

Mr Smyth : I think you were taken through some of the minor amendments that were made to the guidelines in previous estimates.

Senator Ronaldson: This was all discussed a couple of times.

Senator LUDWIG: I was not going to go through that again. Perhaps I can identify this through phase 1 of the campaign, the third one that you spoke about. Was that done under the interim guidelines?

Mr Smyth : That is right; the first phase of the Intergenerational reportwas done under the interim guidelines.

Senator LUDWIG: So that is what is colloquially called Dr Karl?

Mr Smyth : That is correct.

Senator LUDWIG: Take me through how that was approved.

Mr Smyth : Under the interim guidelines, provided the responsible entity had financial authority, appropriation, to bring forward that campaign, their minister would seek the authority of the Special Minister of State. The entities responsible would still have to comply with the interim guidelines, such as they were, and that still had the five principles that were required to be met. Then the responsible chief executives would certify against those principles and the responsible minister would then seek the approval of the Special Minister of State.

Senator LUDWIG: In respect of the phase 1, when were the dates for that—the date for the executives and then subsequently the date from the minister and the minister's response?

Mr Smyth : The final endorsement in relation to that particular program—I was just taking you through the interim process as it was—would go to other deliberations of the cabinet committee, and I would refer you to the Department of the Prime Minister and Cabinet in relation to those. I think you will see that, as the Special Minister of State noted in one of his media releases, the government had retained the SDCC arrangements.

Senator LUDWIG: What's SDCC?

Mr Smyth : That is the Service Delivery and Coordination Committee of Cabinet arrangements.

Senator LUDWIG: Step me through the process for the Dr Karl phase 1 approval process. How did it get approved?

Senator Ronaldson: It got approved by me under the interim guidelines on the back of a request from the responsible minister, but with certification from the departmental secretary. I could not approve a campaign without the certification of the departmental secretary.

Senator LUDWIG: When was that done—the date? Just to be clear: am I right to say there is a letter from a departmental secretary from—

Mr Smyth : That is correct. The Secretary of the Treasury certified the intergovernmental report campaign that was compiled under those interim guidelines. He certified that on 6 March—

Senator LUDWIG: And then—

Mr Smyth : and then the advertising materials that the campaign launched, on 8 March. As I referred to you earlier, the ICC was not constituted effectively until 17 March.

Senator LUDWIG: And then the letter from—

Senator Ronaldson: The others commenced under the interim guidelines. That is why phase 1 was under the interim guidelines. Phase 2 was under the guidelines that I released pursuant to my media release of 23 December last year, which I am sure your staff have got there for you.

Senator LUDWIG: It is all here. Then the letter from you approving it was on what date?

Senator Ronaldson: We will take that on notice.

Senator LUDWIG: I am happy for that. It was up and running. The new guidelines were implemented from 1 February—

Mr Smyth : That is right.

Senator LUDWIG: But this was done before 31 March.

Mr Smyth : That is right. The Independent Communications Committee met for the first time to consider a campaign, and as per their review letter—that was the DSS campaign I mentioned earlier—campaigns that had commenced their process under the interim guidelines continued to progress under the interim arrangement guidelines. Campaigns that commenced post that 17 March have been under the remit of the ICC to be involved in that campaign.

Senator Ronaldson: Senator, just so that I can be clear in case this is what you are asking: there was nothing commenced under the new guidelines that the ICC was not part of the process. So the three campaigns that Mr Smyth referred to before were commenced after 1 February when the new guidelines were put in place. There was no extension of the interim rules, if you like, between 1 February—

Senator LUDWIG: I have not asked for that. Nothing has led me to not believe the evidence given by the officer. That is consistent with what the officer has said. What I was then going to ask was: how many campaigns commenced under the interim guidelines that were still on foot from 1 February that were then finalised under the interim guidelines?

Mr Smyth : Six campaigns.

Senator LUDWIG: Can I have a list of those, please.

Mr Smyth : There was the Australian Customs and Border Protection Service. There was a No Way campaign. There is the MoneySmart campaign by the Australian Securities and Investments Commission. There is defence recruiting campaign that goes to the issue of diversity in the Defence Force. There is a BreastScreen Australia campaign and a National Bowel Cancer Screening campaign under Health.

Senator LUDWIG: And phase 1?

Mr Smyth : Phase 1 is the intergenerational—

Senator LUDWIG: So seven in total.

Mr Smyth : Six, I think I had, that had not been—

Senator LUDWIG: I have Customs, No Way, MoneySmart, Defence

Mr Smyth : Immigration and Border Protection are No Way.

Senator LUDWIG: Yes.

Mr Smyth : And then—

Senator LUDWIG: Breast screening and then—

Mr Smyth : Breast screening, bowel screening, Defence recruiting and MoneySmart.

Senator LUDWIG: So will the Intergenerational report be the seventh?

Mr Smyth : I would have to check exactly when that one was initiated. I think it was initiated back in December, but I would have to check. I think it was, and it was finalised after the new guidelines. But it actually—

Senator LUDWIG: It was initiated prior to—

Mr Smyth : It was prior to 1 February.

Senator LUDWIG: Yes. So your rule was that anything initiated prior to 1 February would finish in with the interim guidelines?

Senator Ronaldson: Anything that was started under the interim guidelines would be finished under the interim guidelines.

Senator LUDWIG: Anything started after 1 February would be finalised from there. And you can take on notice just the dates the executives sent the letter and the date the minister approved those campaigns as well. Thanks. And then—I may have asked this in a roundabout sort of way, but I am happy for you to take it on notice—how many campaigns are currently underway? So the total number of campaigns.

Senator Ronaldson: Until a campaign is launched, there is never discussion at estimates about—

Senator LUDWIG: No, those that are—

Mr Smyth : The ones that are currently in the media?

Senator LUDWIG: Yes.

Mr Smyth : There are currently 10 advertising campaigns by non-corporate Commonwealth entities that are running in the media.

Senator LUDWIG: All right. I am happy for you to give me a list of those on notice, thank you. And then the staffing profile of the Communications Advice Branch and the procurement management branch—is that available? I am happy for you to take that on notice: just how many staff and what their current profile is over the forward estimates.

Mr Smyth : I do not have a profile over the forward estimates as such.

Ms Halton : There is not a profile over forward. We can give you current.

Senator LUDWIG: That would be fine.

Mr Smyth : It is about seven staff.

Senator LUDWIG: The Intergenerational report went through the interim guidelines. We have established that, and we have established, Special Minister of State, that the Treasury secretary wrote to you, you responded and you are going to come back with the dates on that. And the date the campaign was started—

Mr Smyth : I think I referred to you—

Senator LUDWIG: I think it was the eighth.

Mr Smyth : I think on 8 March it actually commenced. It was endorsed on 6 March and certified by the Secretary of Treasury on 6 March.

Senator LUDWIG: So it was after the guidelines were established but before 31 March, when the ICC met?

Mr Smyth : For the first time to consider a campaign; that is correct.

Senator LUDWIG: And so was there any consideration given to having that campaign subject to the new guidelines?

Senator Ronaldson: That was commenced under the interim guidelines, and it remains with them. We made it quite clear that anything that was commenced under the interim guidelines would remain with the guidelines, because otherwise it was impossible to—

Senator LUDWIG: But the interim guidelines were made on 1 February, so it was commenced after the guidelines were made.

Ms Halton : No, the interim guidelines had preceded that. The issue here is that this was commenced under the interim guidelines, so the rule that was followed was that anything that commenced under the interim guidelines finished the race under the interim guidelines. For anything that commenced after the finalisation of the guidelines, that new process applied if it commenced after that date.

Mr Smyth : And this process for the Intergenerational report had commenced in December 2014.

Senator LUDWIG: Right. You gave me a 6 March date.

Mr Smyth : No. The process to develop the campaign had commenced back in December 2014.

Senator LUDWIG: Right.

Mr Smyth : The certification by the Secretary of Treasury was on 6 March.

Senator LUDWIG: I have got you.

Mr Smyth : And it was launched on 8 March.

Senator LUDWIG: I see.

Senator Ronaldson: And that is why phase 2 is under the final guidelines and phase 1 was under the interim.

Senator LUDWIG: So it still holds. The new guidelines were introduced on 1 February, the first committee—

Mr Smyth : But the ICC was not in place, effectively, to consider a campaign until 31 March.

Senator LUDWIG: There were those couple of campaigns that were commenced after 1 February but before 31 March.

Mr Smyth : Yes, there were those campaigns.

Senator LUDWIG: And they were still done under the interim guidelines?

Mr Smyth : They were interim. As the secretary said, once you had started that race, you finished that race under those arrangements.

Senator LUDWIG: So effectively the rule was: anything prior to 31 March was done under the interim guidelines. Is that correct?

Mr Smyth : Because we did not have an independent communications committee in place, we needed to operate under the interim guidelines.

Senator LUDWIG: So it is correct to say that anything done prior to 31 March was done—

Mr Smyth : I will provide on notice, if I could, the exact dates of those things.

Senator LUDWIG: Please correct me if I am wrong. I just wanted to make sure that no campaigns commenced after 31 March were done under the interim guidelines.

Mr Smyth : No, not at all.

Senator LUDWIG: Are the costs of those campaigns provided to you?

Senator Ronaldson: Until a campaign is finalised, obviously we cannot provide you with the full costs. I think the full details will be released in September or something.

Mr Smyth : That is right; we will be updating the 2014-15 financial year campaign advertising costs later this calendar year.

Senator Ronaldson: Before next estimates, anyway.

Mr Smyth : Yes, most definitely.

Senator LUDWIG: The Treasury portfolio supplementary additional estimates statement states that the Treasury has been allocated $32.6 million to engage with the community on economic challenges, particularly those highlighted in the 2015 Intergenerational Report. If I wanted to ask questions about that expenditure, I should ask them not of you or of Finance but of Treasury.

Senator Ronaldson: Yes.

Senator LUDWIG: I only see two campaigns that have been approved, but I think we agreed earlier that there were three.

Mr Smyth : That is right. The small business campaign component part of the Intergenerational Report launched a few days ago. In fact, I think it might have been yesterday or the day before—it was on Tuesday.

Senator LUDWIG: If I wanted to ask about the funding being allocated to those campaigns, I should ask the relevant departments.

Mr Smyth : I would refer you to the relevant departments, yes.

Senator LUDWIG: I think I have covered everything of what you do. The budget campaigns that I assume are currently being developed—

Senator Ronaldson: I do not think you should assume anything, nor have we ever at estimates discussed campaigns that are either planned or may be in the making.

Senator LUDWIG: It was worth a try.

Senator Ronaldson: It was worth a try, I suppose, yes.

CHAIR: Are there no more questions on program 2.5, Government campaign advertising?

Senator LUDWIG: I think we are good.

[16:34]

CHAIR: We will move on to outcome 3, Support for parliamentarians and others as required, dealing with program 3.1, Ministerial and parliamentary services.

Senator GALLAGHER: Could you please provide an updated government staffing profile for the committee which would include staff numbers; which office they are assigned to; classifications; and whether there are any non-standard home/work bases?

Senator Ronaldson: We have got all that here for you.

CHAIR: Are you intending to table it?

Senator Ronaldson: Yes, I will.

Senator GALLAGHER: I think at the last estimates there were three temporary non-standard home bases at that time. Do those three arrangements still exist, or can you provide an update?

Ms Moy : Temporary non-standard work bases: we currently have two.

Senator GALLAGHER: What is the definition of 'temporary'?

Ms Moy : There is an approval end date.

Senator GALLAGHER: So, they are all for finite periods of time?

Ms Moy : Finite periods of time—that is correct.

Senator GALLAGHER: That could be extended, if those requirements are still needed.

Ms Moy : That would be at the approval and application to the Special Minister of State.

Ms Halton : And it is not that common. I know, because I watch them go through.

Senator GALLAGHER: Senator Ronaldson, you have to approve those, do you, individually?

Senator Ronaldson: Yes.

Senator GALLAGHER: Luckily, there are not that many. One of my questions I can answer myself with this table around the changes, because I think the February estimates had one table as well, didn't it? There was a similar document.

Senator Ronaldson: It is the same. Since Adam was a boy, it has been in the same form, from recollection.

Senator GALLAGHER: At the February estimates the MOP(S) enterprise agreement negotiations had not commenced. Could you provide an update on that—have they commenced; is it currently with you, Senator Ronaldson?

Senator Ronaldson: It is not with me at the moment.

Ms Halton : We had this discussion in relation to the department earlier on. As you know, we have to find offsetting savings and we are in the process of considering what options there might be available in terms of a potential matters that are being considered. We need to give some advice on that to the SMOS and, having done that, at some point we will have to formulate a basis on which those negotiations and discussions can occur. We are in the early process of that at the moment.

Senator GALLAGHER: When did the agreement expire?

Ms Moy : The agreement has not yet expired.

Senator GALLAGHER: So then it is later than the APS-wide one?

Ms Moy : Yes, that is correct.

Senator GALLAGHER: I did not realise they had different expiration dates and that Finance have started the negotiation. You have not progressed to the point of conclusion, but—

Ms Halton : No, this is actually well behind in terms of the time date.

Senator GALLAGHER: Is it a year?

Ms Halton : It would be a year.

Ms Moy : 19 June 2015 it expires—just short of the year.

Senator Ronaldson: I think a number of departments have got different expiry dates.

Senator GALLAGHER: A lot expired on 30 June 2014, I think. I just presumed these aligned.

Senator Ronaldson: No.

Senator GALLAGHER: So it has obviously been negotiated after the settlement of the last APS wide?

Ms Halton : That is right. Exactly.

CHAIR: I am just having a look at this document. I appreciate you providing it. I am looking at the personal positions of the Australian Greens. This says 1 May. I cannot remember when they had their leadership change exactly. There are a number of positions allocated to the leader and one to the deputy leader, but there are also some specifically allocated to Senator Di Natale and Senator Siewert. I just want to confirm something. Is there a group allocation of 13 in total for the Australian Greens and they can allocate them as they see fit?

Ms Moy : Yes, that is correct.

CHAIR: So it may be that it no longer goes to Senator Di Natale. I presume it came before—

Ms Moy : That is correct.

CHAIR: the coup?

Ms Halton : The change in leadership.

Ms Moy : The date of this was 1 May. The change of leadership was 6 May.

CHAIR: You use more verbose language than I do. I will go with 'coup'.

Ms Halton : Yours is a shorter word; I will acknowledge that.

CHAIR: Indeed, it is. Thank you, I was interested in that.

Senator GALLAGHER: As the agreement has not expired, you would not be looking to start negotiations soon?

Ms Moy : Negotiations will commence. That process will commence once we have provided advice to the government and the government has considered its bargaining position.

Senator GALLAGHER: So the MOPS agreement has to go through the same process to the Public Service Commissioner for approval prior—

Ms Moy : Yes.

Senator GALLAGHER: So that actually has to happen prior to starting negotiations?

Ms Halton : Yes, as we discussed.

Senator GALLAGHER: I was not clear on that. I knew you had a role in vetting it.

Mr Murphy : I will just clarify that. We do not need the approval of the commissioner to commence the negotiations. It is the approval of the relevant minister. The approval of the commission comes later in the process around remuneration offers.

Senator GALLAGHER: That is what I thought. So you could start negotiations prior to a remuneration offer being put?

Mr Murphy : Very much so. That is normal practice.

Senator GALLAGHER: Could you provide a list of the number of DLOs for the ministerial and parliamentary secretary offices?

Ms Moy : We do not have visibility of the departmental liaison officers. Each department is responsible for providing DLOs—

Senator GALLAGHER: So I would have to ask that individually of each department?

Ms Moy : That is correct.

Senator GALLAGHER: There is no centralised information system for that?

Ms Halton : Not that is done by us.

Ms Moy : No. A DLO is a departmental officer rather than—

Senator GALLAGHER: So you have no idea?

Senator Ronaldson: I am not aware of any synchronised database for those. Each department makes its own decisions in relation to them. I have one, if that helps.

Senator GALLAGHER: How many staff are in the Coalition Advisory Service?

Ms Moy : If you go to page 3 of this report—

Senator GALLAGHER: I have not had time to read it.

Ms Moy : it says it has nine allocated staff.

Senator GALLAGHER: Where is that?

Ms Moy : It is on page 3, about halfway down under 'special units of government'.

Senator GALLAGHER: Yes, I see it.

Ms Moy : It says the Coalition Advisory Service has nine allocated positions.

Senator GALLAGHER: Okay. You are very organised. It is making the afternoon go by very quickly.

Senator Ronaldson: Can I just clarify a comment I made before. I understand that actually the number of DLOs comes out of the Prime Minister's office. I do not want to mislead you in relation to this.

Ms Halton : Departments work with ministers on the allocation of DLOs. The maximum number of DLO positions you may have is usually specified by the Prime Minister's office or the Prime Minister. That has been the case under successive governments. So you cannot have 10 DLOs in a large portfolio. There is always a maximum limit put on the number of DLOs.

Senator GALLAGHER: So that question, rather than going to individual agencies, could go to PM&C or the PMO?

Ms Halton : I think you will find it is a question of what ministers and departments choose to do in filling those positions. I do not know that they keep a record. There is a maximum limit put.

Senator GALLAGHER: So there is no easy way of getting the answer to that?

Ms Halton : Certainly, not that I am aware of.

Senator GALLAGHER: There are no staff positions allocated for the Coalition Advisory Service. Are they all currently occupied?

Ms Moy : I believe they are, yes.

Senator GALLAGHER: I think there has been a change since the February estimates, because there was a change in relation to the position of Mr Ruddock, to the individual staff in that unit. Could you say how many continued on in that role? Do you have that information?

Ms Moy : I do not have that with me.

Senator GALLAGHER: But you could answer it? I do not want individual names.

Ms Moy : I can provide it to you on notice.

Senator GALLAGHER: Is that the area on the ground floor?

Senator Ronaldson: Just so we are absolutely clear, Ms Moy will go through and explain to you what our role is in relation to the Coalition Advisory Service. The Chief Government Whip is responsible for the operations of the CAS and we are not in a position to answer any questions in relation to that. So it might just be useful for Ms Moy to go through our role in relation to the CAS.

Ms Moy : The Department of Finance provides home department service to CAS, as it would for a minister's office. Because we are the administrators of the MOPS employment, we also manage staff contracts, pay for their travel and pay for administrative items for normal MOP staff employment.

Senator Ronaldson: That is the extent of our role in relation to the CAS.

Senator GALLAGHER: If I ask a question you cannot answer, just refer me to whoever can. That is fine. To go back to the question I had before, is the Coalition Advisory Service accommodated on the ground floor of this building? I think I walked past an office area that had 'Coalition Advisory Service' written on it.

Ms Moy : Yes.

Senator GALLAGHER: So they are Canberra based positions?

Ms Moy : Yes, that is correct.

Senator DASTYARI: I have some questions on the Coalition Advisory Service table. Thank you again for providing this quite fantastic table. I want to check one or two things. There was an announcement yesterday or the day before by the Prime Minister about new ministerial arrangements to do with Minister Keenan and Senator Fierravanti-Wells. I was wondering if there has been any advice given on change to staffing allocations as a result of that that may have happened after this document had been prepared.

Ms Moy : Not to my knowledge.

Senator DASTYARI: Is it fair to say, then, that at this point in time—and, again, things may change, and I understand some of these are matters for government—the staffing allocation for Mr Keenan has not changed? And for Senator Fierravanti-Wells, who now has a dual parl sec role as the Parliamentary Secretary to the Minister for Social Security and also the Parliamentary Secretary to the Attorney-General—I think that was the official title that was announced—

Senator Ronaldson: These are the figures as at 1 May. At the next Senate estimates, anything that might happen as a result—and I do not know whether it has or has not to date or will or will not happen in the future—will be reflected in the tabled statements.

Senator DASTYARI: Perhaps you could take this question on notice, because it is a bit more relevant. The Prime Minister also made an announcement regarding a special role for Mr Ruddock. I was wondering if there was a staffing allocation associated with that.

Senator Ronaldson: I am not aware—

Ms Moy : We have not received any information in that regard for the moment. There are no contracts.

Senator DASTYARI: So at this point in time there is no staffing allocation for that additional role or responsibility, but that may change.

Ms Halton : That we are aware of—that is correct.

Senator DASTYARI: I understand, Minister Ronaldson, that at the next estimates we will get a new table. Because this announcement was made prior to this estimates hearing happening today, if there is a sudden change in the next week or so, can you take on notice whether there is any allocation that will change this document as a result of the Prime Minister's announcement earlier this week?

Senator Ronaldson: We will look and see what we can or cannot provide you with.

Senator DASTYARI: I want to ask about the tax white paper unit. There are five additional staff assigned. Are they working out of Mr Hockey's office?

Ms Halton : Are we talking physically or metaphorically?

Senator DASTYARI: Both.

Ms Halton : I think the answer is that they would not physically fit.

Ms Moy : I cannot advise you of where they physically sit but, yes, they have been allocated to Mr Hockey.

Senator DASTYARI: When did they start?

Ms Moy : I would have to have a look at that separately. I do not have the date here with me. It would have been since the last estimates.

Senator DASTYARI: That is exactly the point I am making. I do not recall them being in this document at the last estimates. I have only just got the document, so I have not had a change to compare it to the previous document. The team of five working on the tax paper—

Senator Ronaldson: Just so we are clear, these are not additional positions. They have come out—

Ms Halton : They are.

Senator Ronaldson: They are, are they?

Ms Halton : Yes.

Senator DASTYARI: Just to be clear, they are additional positions?

Senator Ronaldson: Yes, they are. My apologies.

Senator DASTYARI: So there is an allocation for a team of five. Are you saying they are a distinct unit? How does that work? Explain that to me. Is it temporary or is it—

Ms Moy : Our role is to process the contracts and pay the staff. In terms of the activities of the unit, I would suggest that is probably something you would ask of the Treasury.

Senator DASTYARI: We can ask the Treasury when we have them before us at estimates next week. You have one senior adviser, one senior media adviser, two advisers and one assistant. Where would I be able to find all the information? Do you have a figure on what all of this unit costs?

Ms Moy : The salary rates are published in the MOPS enterprise agreement.

Senator DASTYARI: For us to calculate that we would need to calculate when the start date is, which you are taking on notice. Have you been advised of an end date for this unit yet?

Ms Moy : Not to my knowledge.

Senator DASTYARI: Is the assistant adviser position for Mr Entsch on the Joint Select Committee on Northern Australia a new position since the last estimates?

Ms Moy : No, that has been there for quite some time.

Senator DASTYARI: So the only thing that seems to be new here is the five additional positions for the tax white paper unit. I will be asking about what they are doing and their role. They are questions for me to ask Treasury next week?

Ms Moy : That is correct.

Senator GALLAGHER: I want to ask about the recent changes to entitlements that were announced in the Budget Paper No. 2 on page 92.

Ms Halton : The simplification measures?

Senator GALLAGHER: Yes. I think there was a session this week—

Ms Halton : That is right.

Senator GALLAGHER: on this matter, but I was not here. I am not pursuing individual interests here at all.

Senator Ronaldson: I had a bipartisan briefing on Monday regarding this, yes.

Senator GALLAGHER: Could you confirm how the budgets will be calculated and how often this information will be provided to senators and members. For example, will the printing and communications section of the office budget continue to be indexed annually?

Ms Moy : There is no change to the current indexation arrangements for each of the components of the budget. The actual component of the budget for the electorate support budget is the ESTB, which is the electorate staff travel budget, which is calculated as it is now, which is the 20 return economy fully flexible fares, including taxi fares and 110 nights of travel allowance at the Canberra rate, plus a component based on whether you are a senator or a member, so that calculation will not change. Included in that budget is the relief staff budget, which is 150 days salary at the base salary of the electorate officer B and the additional 50 days salary at the base salary if there is a second electorate office. Those two calculations will not change; the two amounts will be combined to create the electorate support budget which can be used for any of the things that either of those budgets can be used for now—so employing staff or electorate staff travel. So that is one budget.

Senator GALLAGHER: So the only change is essentially the streamlining of those budgets; it is not around how the indexation is being calculated, the timing of allocations?

Ms Moy : You will still receive a report every month which will tell you what your expenditure has been against your budget and what your remaining budget is. Then each senator and member keeps their records of how much they spend for your budget management, and the department reports to you on how that expenditure has been spent each month. And then every six months we do the publications.

Senator GALLAGHER: Will the parliamentary entitlements regulations have to be altered in any way to allow for these changes?

Ms Moy : There will be some changes to the regulations in regard to the first budget, which is the office budget, and that is to be able to combine those budgets into one—so there are five coming into one.

Senator GALLAGHER: Is that work underway?

Ms Moy : Yes.

Senator GALLAGHER: Have you got a date for when the changes will come into effect?

Ms Moy : The proposition is that it will be 1 July.

Senator GALLAGHER: To tie it in with the financial year?

Ms Moy : Yes.

Senator GALLAGHER: Has there had to be any consultation with the Remuneration Tribunal on these changes?

Ms Moy : Not in relation to those two changes, because they are in regard to the Parliamentary Entitlements Act. The discussions that we are having with the Remuneration Tribunal will be in regard to the travel components of the simplification of the budgets.

Ms Halton : However, I can tell you that the preparation of this, what is a new policy proposal, I actually consulted with the chair of the Remuneration Tribunal about the entire package.

Senator GALLAGHER: And subsequently does the travel component need to be discussed with them?

Ms Halton : Yes, indeed; it is a formal relationship in relation to the travel component. But, given obviously the Remuneration Tribunal does not operate in a vacuum, it was important. As I said, I spoke with the chair about the entire package before the decision was made.

Senator Ronaldson: Those things that we have needed to discuss with the Remuneration Tribunal, because it is part of their remit, clearly we have commenced those discussions. For those that do not then clearly we will not.

Senator GALLAGHER: Do you have to have those discussions with the Remuneration Tribunal finalised before 1 July?

Ms Moy : No, the travel arrangements are not tied to the budget, so to speak. The office budget and the electorate support budget can be done independently. The travel changes can be post 1 July if necessary. It will be up to the Remuneration Tribunal to provide a date on that.

Senator GALLAGHER: Okay. But it is presumed that it would be preferable to have the changes start on the same date. Would that be your preference?

Ms Moy : I think it is always our preference. We are asking the Remuneration Tribunal to consider the changes. The government is asking for consideration of the changes.

Senator GALLAGHER: I note that there was an information session held this week. Is there formal guidance being prepared?

Ms Moy : Yes, there is, and we will be out to talk to offices and, where necessary or where required, we will be able to have an entitlements manager talk directly to individual offices or senators and members.

Senator GALLAGHER: That would be in the lead-up to 1 July?

Senator Ronaldson: The reason that we have done this is to try and simplify the process. We have got a plethora of budgets. It does create difficulties for electorate offices and we are trying to streamline that process.

 

One of the other things I have raised with MPs and senators from both sides is the inflexibility in relation to accessing local suppliers. We want to provide the opportunity for members and senators to go to their local small businesses and make sure they have an opportunity. If people want to stay with the OfficeMax system, they will be able to do so, but there are a number of senators and members who have local small businesses and this has been an issue for a number of years now. Not everyone will do it, but we want to provide the opportunity for local small businesses to supply to members and senators.

Senator GALLAGHER: I can understand that. In relation to the increase in stamp prices which has been announced—I think Minister Turnbull has announced a two-tiered pricing scheme for letter deliveries—has any analysis been done of how this may impact on members' and senators' communications budgets?

Ms Moy : Yes, we are looking at that at the moment. I understand the changes will not come into place until around September, but we are looking at how the two-tiered scheme would impact on the budget, because the budget is currently calculated using the price of a normal stamp—75c.

Senator GALLAGHER: You have said yes, you are looking at the impact. Presumably as part of that you are looking at how to move to the new arrangements. That is part of it?

Ms Moy : Yes.

Senator Ronaldson: The stamps, of course, are a different matter to the entitlements changes. I think the issue with the stamps is determined in April. Is that right? Is it April?

Ms Moy : I thought the date of commencement was September, but I would have to go and check.

Senator Ronaldson: No, that is the new one. But the stamp price which is reflected in the communications allowance is different.

Ms Moy : Yes, it is.

Senator Ronaldson: Perhaps you could briefly explain that.

Ms Moy : The price we use to develop the ongoing budget for 2015-16 is the stamp price in April. However, with these changes occurring in September, we are looking to see what impact that will make on the 2015-16 budget.

Senator GALLAGHER: I have a couple of questions in relation to if there have been any extensions to the settling out period for MoP(S) employees following any ministerial changes or reshuffles since September 2013.

Ms Moy : Since 2013, there have been on a number of occasions and we have reported them at previous estimates.

Senator GALLAGHER: Okay. For my benefit, could you update that?

Ms Moy : There have been a number. I do not think I would remember them all offhand, but as a general rule we could take that on notice.

Senator Ronaldson: I can say to you that, following the passing away of former Prime Minister Gough Whitlam and former Prime Minister Malcolm Fraser, there was some extension of their staff. We can give you a more detailed answer in due course, but those are two that immediately spring to mind.

Senator GALLAGHER: Thank you. I think the other budget measure for this area is the IT security enhancements. In Budget Paper No. 2, page 95, there is an allocation of $12.9 million over four years.

Ms Moy : That is correct.

Senator GALLAGHER: Could you just tell me a bit about that?

Ms Moy : Certainly.

Senator GALLAGHER: Is that a capital allocation and then a recurrent allocation?

Ms Moy : There is a capital allocation of $6 million and a recurrent allocation. So the amount of $12.9 million is in regard to changes that will occur within the electorate office IT—primarily capital replacement of aged equipment. Just for context, the electorate office IT is undertaken and administered by the Department of Parliamentary Services on behalf of Finance. The Special Minister of State provided authorisation to the Presiding Officers for electorate office IT. DPS then administer that for the Presiding Officers. The $12.9 million is allocated to Finance and we provide the drawing right to the Department of Parliamentary Services to undertake the work. The Department of Parliamentary Services will actually undertake the work for the replacement of the equipment and for the updating of secure Wi-Fi in each electorate office.

Senator GALLAGHER: Had this come out of a review of capability?

Ms Moy : This area is the responsibility of the Department of Parliamentary Services, so it is probably more correct to speak to them on the detail, but there was a review of IT by the Department of Parliamentary Services for electorate office IT. I think this comes more out of the fact that the equipment requires replacement for maintenance and warranty purposes.

Ms Halton : Or, as it was put to me recently by a certain other senator, 'Our IT is out of the ark.'

Senator GALLAGHER: I do not think I have been around long enough to make that judgement.

Ms Halton : It is fair to say that it seems to have exercised people quite significantly, because it has been raised on a couple of occasions.

Senator GALLAGHER: Your own learned experience is informative, I think. Will that be going out on contract—a procurement process?

Ms Moy : That would be a question for the Department of Parliamentary Services, who will undertake the work.

Senator GALLAGHER: I find some of the arrangements relating to this building, the demarcation between DPS and Finance, a bit confusing at times. DPS will undertake the procurement exercise but the money has been appropriated to Finance?

Ms Moy : It has been appropriated to Finance because it is under the Parliamentary Entitlements Act.

Senator GALLAGHER: So you probably cannot tell me when the work will be commencing or how long it is expected to take?

Ms Moy : The information I have is that they expect the work to commence in the next six months, with rollout commencing next calendar year.

Senator GALLAGHER: With the rollout, who gets what first? Management of the rollout—that is a matter for DPS?

Ms Moy : Yes.

Senator GALLAGHER: Ms Halton, I think you covered this: the capacity for wireless internet in the electorate offices is part of it?

Ms Halton : Correct.

Senator DASTYARI: I have a follow-up on something I was asking about earlier, Ms Moy—and perhaps a question for the minister. I am not sure if this is the right place to ask it. I asked a question you have taken on notice: whether there was any staff allocation associated with the new role for Mr Ruddock. Can you also take on notice whether there are any remuneration or other associated benefits? Is it a role that has been given to him by the Prime Minister or is it a formal role—an executive appointment?

Senator Ronaldson: We will give you what information we can in relation to it.

Senator GALLAGHER: Senator Ronaldson, in your answer about tax white paper unit, I think I heard you say there are five new positions from the last reporting period. Is that correct?

Senator Ronaldson: I think we decided that was the situation, yes.

Ms Moy : That is correct.

Senator GALLAGHER: So Mr Hockey has been given five extra staff to work specifically in the tax white paper unit?

Will that flow on to the opposition staff? Is there a ratio that if the government increases its staff numbers by five there is an acknowledgement that the opposition should have a commensurate increase in its staff numbers?

Senator Ronaldson: I will take that on notice.

Senator DASTYARI: Is there a ratio?

Senator Ronaldson: I think there has been a longstanding ratio, yes.

Ms Moy : Around 21 per cent.

Senator GALLAGHER: So that should mean there should be at least an extra staff member allocated to the opposition.

Senator Ronaldson: It is a good try, Senator. I said I would take it on notice and provide you with an answer. I am not going to pre-empt what the response will be.

Senator GALLAGHER: We look forward to you implementing the longstanding ratio.

Senator Ronaldson: I am not going to be pre-empt what the response might be to your question, which I have taken on notice.

CHAIR: Are there any other questions in outcome 3?

Senator GALLAGHER: Yes. In relation to COMCAR, are there set arrangements for guests of government visits? Are there guidelines?

Ms Moy : Guidelines in what regard? For COMCAR?

Senator GALLAGHER: Yes, for COMCAR. In terms of guests of government, who is eligible for them and what they are eligible for—the number of cars, trips?

Ms Moy : That is determined by CERHOS in PM&C.

Senator GALLAGHER: Okay. I was sure they referred to stuff about COMCAR here. Maybe they did not; it is all blurry.

Ms Moy : We provide the service but it is at the request of CERHOS.

Senator GALLAGHER: So CERHOS would be the area that you would talk to about guidelines for usage?

Ms Moy : No, CERHOS would come to Finance and say that they had a guest of government visit in a particular period and that there are this many people and they need this many cars and this is what they want to occur.

Ms Halton : To give you an example, Senator, in considering guest-of-government status, sometimes they initiate it and sometimes a minister will write and say, 'I would like to extend government status to so and so.' Then the issue is what will be provided under the guest-of-government arrangements. Sometimes it is the entire package and sometimes it is small amounts of facilitation. If PM&C have decided, in consultation with whomever, that it is relevant to a particular guest-of-government arrangement, a decision by them that there will be transport provided would come to us as the provider.

Senator GALLAGHER: The interest is that it does seem that arrangements for different countries are unclear. I am trying to think of the dignitary that I was hosting at the Arboretum when I was Chief Minister. I remember having a discussion. Some of the issues about the visit were delayed because there was concern around eligibility for COMCAR. I do not want to prosecute that at all. I guess the question I have is this: is there clear guidance in terms of 'we have a dignitary coming from this country; they are entitled to this many cars under these arrangements' or is it case by case?

Ms Halton : We do not decide that. PM&C decide that. So you would have to ask them what the rules they apply are.

Senator LUDWIG: Are you able to tell us about the Netherlands visit a while ago? I think they spent about $20,000 or more on COMCAR in one day. Are you able to tell us how many cars were on their itinerary?

Ms Halton : That is not a figure I have ever heard. Given it is a large figure and knowing people will be watching this, I think we should be a little cautious. I do not know how you would spend that much money in a day. Can we put that to one side?

Senator LUDWIG: All right; put it to the side then. Are you able to then detail for us the visit by the Netherlands—what COMCAR usage was undertaken—and the same for New Zealand? Is this information available to the committee?

Ms Moy : I do not have the information with me. Do you have a specific visit? We have quite a few New Zealand visits.

Senator LUDWIG: The last visit by the Netherlands.

Ms Halton : Well, the Netherlands is a country. Which particular individual do you have in mind?

CHAIR: I think Senator Ludwig was referring to a visit by the Dutch Prime Minister—

Senator LUDWIG: The Prime Minister, yes.

CHAIR: both here in Canberra and Sydney, I think. There was a figure provided to us which did seem quite a lot for a 24-hour visit.

Senator Ronaldson: We will have a look and see what information we can or cannot provide you with.

Senator LUDWIG: I am aware of the sensitivities that might be around it.

Senator Ronaldson: Exactly.

Senator LUDWIG: But I thought I should ask.

Senator Ronaldson: That is why, I think, we will take it on notice and we will see what we can or cannot do.

Senator LUDWIG: I want to ask about the arrangements pertaining to the conduct of ministerial staff. The ministerial staff are subject to the statement of standards for ministerial staff which is on your website. That is correct?

Senator Ronaldson: Yes.

Senator LUDWIG: Are there any restrictions on the code of ministerial staff employed by the current government beyond those contained in the statement of standards for ministerial staff? In other words, are there any additional requirements or undertakings that are required, other than the statement of standards for ministerial staff?

Senator Ronaldson: Every ministerial staff member is required to comply with those standards. I am not too sure what else there would be that you are referring to.

Senator LUDWIG: I am not referring to it. I am asking: is there any other? In other words, is the statement of standards for ministerial staff the only document that they are required to meet in terms of the standard of ministerial staff?

Senator Ronaldson: That is certainly the only requirement.

Senator LUDWIG: When they separate, when they conclude their employment with the relevant minister, are there any other restrictions or documents that they have to provide in the undertaking, other than meeting the code of ministerial staff?

Senator Ronaldson: Once they leave, there are some requirements, I think, in relation to undertaking post-employment work, aren't there?

Senator LUDWIG: Is there any requirement other than the statement of standards for ministerial staff? I have got the statement of standards for ministerial staff. I have that in front of me. I can read that. What I am trying to ascertain is if there is any other requirement in addition to that.

Ms Halton : Perhaps I can help you. To start with, whilst we pay people, these arrangements are not ours. Prime Minister and Cabinet would be the place to go and ask these sorts of questions. The one thing I can tell you—

Senator LUDWIG: No; it is here that I ask them. These are all questions that go to the Special Minister of State's role.

Senator Ronaldson: The only role that I have in relation to this is that those who are existing ministerial staff are required to comply with the statement of standards. I have no other involvement.

Ms Halton : But any staff member who is governed by national security provisions, for example, or any legislation that pertains in terms of official secrets et cetera, clearly, as with any other official who is employed in an environment which exposes them to those kinds of matters, would continue to be bound under those pieces of legislation.

Senator LUDWIG: Yes. I am asking for documents created by the Special Minister of State in relation to employment, such as the ministerial standard. I am not asking about whether or not legislation would apply. But I think that is a helpful clarification.

Senator Ronaldson: I can only answer your question in relation to my responsibilities and I think I have done that.

Senator LUDWIG: Is there a requirement for a cooling-off period following employment as a ministerial staff member before commencing employment with a commercial entity in a related area?

Ms Moy : In terms of when there is a post-employment prohibition, so to speak, that would be Prime Minister and Cabinet. Prime Minister and Cabinet own the statement of standards. The portion that the Special Minister of State has is the public interest declarations and the conflict of interest during the period of employment. For anything that is post employment it would be the owner of the entire document, which is Prime Minister and Cabinet.

Senator LUDWIG: So I should ask Prime Minister and Cabinet?

Ms Moy : That is correct.

Senator LUDWIG: Thank you. I apologise, Ms Halton; you are right.

Ms Halton : Thank you, Senator.

Senator LUDWIG: The statement of standards of ministerial staff employed under this government says that they must comply with all applicable Australian laws. It goes through 'behave honestly and with integrity in the course of their employment'; at point 15, 'maintain appropriate confidentiality about their dealings with their minister'; at point 18, 'comply with any authorised and reasonable directions'; and at point 19, 'comply with all applicable Australian laws'. That is all phrased in the positive during employment. Is that correct?

Senator Ronaldson: My understanding is that these ministerial standards are the same as the former government's.

Senator LUDWIG: They do look the same to me.

Senator Ronaldson: The only addition is item No. 3. We have had considerable discussion about this at previous estimates. But otherwise, with I think another minor change at 21 or something, they are the same standards.

Senator LUDWIG: Have there been any current or former staff employed during the term of the current government that have breached the statement of standards and remedial work or remedial action had to be taken? If so, can you detail—not their names, obviously—the number and the nature of the incident?

Senator Ronaldson: These are obviously internal matters, so the staff are required to comply with that. If they do not then there are mechanisms. I do not intend to discuss internal matters, nor would I have asked you a similar question, I have to say. The code is there and the government's expectation is that they will be complied with.

Senator LUDWIG: What I wanted to look at in a little more detail was 'Defence adviser joins sub suitor'. I am happy to provide that for the minister. I have highlighted the area which I was looking at: 'A spokesman for the Special Minister of State, Michael Ronaldson, said rules regarding the employment of members and staff do not regulate post-government employment of the individual under the MOP(S) Act.'

Senator Ronaldson: That is right. This is the answer I gave before. I am happy to answer questions that are within my portfolio, but anything that happens post that is not a matter that is in within my bailiwick. You will need to go and ask those questions elsewhere. They are not matters that I have responsibility for or carriage of.

Senator LUDWIG: So you do not have an interest? Mr McPhedran reports that Sean Costello, the chief of staff to the former defence minister, David Johnston, is now employed as chief executive officer of DCNS Australia, the Australian arm of DCNS Group, which is participating in the government's so-called competitive evaluation process for our future submarines. I take it you are aware of that issue? I have provided that article to you.

Senator Ronaldson: I think what that article said is that I do not have any responsibility for MOP(S) employees post their employment. I think that is what that article said. Hasn't this question been canvassed elsewhere this week? I think it has been canvassed quite extensively. This is—

CHAIR: It was canvassed during—

Senator LUDWIG: I am just closing all the loops.

Senator Ronaldson: I know you want to have another bite of the cherry. I do not have that responsibility, but always with these things one has to be a little bit careful about the questions that are asked. I remember there was a former Chief-of-Staff to Prime Minister Rudd who went straight off to work for another very large organisation. So I think that when asking these questions you have to be a bit careful that they do not come and bite you on the backside. I would be a bit cautious about pursuing that. In any event, these are not matters over which I have responsibility.

Senator LUDWIG: I remember the confected outrage that you performed over that particular one, but you missed out on one important fact. At that time, in response to the questions I have just asked, the then Special Minister of State did in fact gain an undertaking from that particular person in question. That is what I am trying to zero in on: whether or not you have actually been derelict in your duty and did not get any undertaking from this person who has left. In that earlier case, the undertaking that was given was a written assurance that he understood his obligations of confidentiality with respect to government information and the undertakings he had signed regarding his duty not to disclose any official information acquired by him in the course of employment, and for the next 12 months he will not be lobbying the government on any policy issue concerning the company or the industry that the company works in, that he has any official dealing with as Chief-of-Staff to the Prime Minister. Firstly, it appears that, in answer to my earlier questions, you did not seek any undertaking. Why did you not seek any undertaking?

Senator Ronaldson: It is not my role as the Special Minister of State to seek undertakings. The secretary has already advised you that there may well be other acts of parliament whereby there are security and other reasons where undertakings or other matters have to be given. I do not know what role the person you are talking about has taken on and I do not know whether the gentleman's name has been mentioned during these Senate estimates. Have they, Chair? Perhaps you could give me some guidance.

CHAIR: Mr Costello, you are referring to—

Senator LUDWIG: It is in the paper.

CHAIR: It has been referred to, Minister, and I think he has taken on the role as chief executive officer. But I would say this: the standing order has been drawn to my attention. I understand that where the minister says the questions are outside of his portfolio responsibilities, it is not appropriate to continue the line of questioning. So I would ask you to either be particularly specific or be particularly careful.

Senator LUDWIG: I was doing both.

CHAIR: Yes. Mindful of the standing order, which Senator McKenzie has pointed out to me—

Senator LUDWIG: And I had that clearly at the front of my mind—

CHAIR: I know you did.

Senator LUDWIG: when the response was, 'It was not within my portfolio,' so then—

Senator McKENZIE: Yes.

Senator LUDWIG: I was harking back to the time when it was within the Special Minister of State's portfolio responsibility previously and the now minister did kick up a fuss about that particular issue, which Senator Faulkner at the time—

CHAIR: Reminiscing and all of those things.

Senator LUDWIG: I know.

CHAIR: I remember the glory days of the Howard government when we had no national debt and all those things, but, nonetheless—

Senator Ronaldson: We all do love the way it is. The point was made at the time when I first raised this, but I can only repeat: I can only talk about those matters that are in my portfolio responsibilities and this is not.

Senator LUDWIG: Just to be clear then, within your portfolio responsibility, you have not and did not seek any undertaking from Mr Costello not to, in working with—

Senator Ronaldson: I am not entirely sure how many times you are going to ask the same question and get the same response.

Senator LUDWIG: I think I have only asked it once—this particular question.

Senator Ronaldson: I will give you a 7½ out of 10 for having a crack at asking the same question multiple times. I can only comment on matters that are within my portfolio and I am not going to comment on hypothetical matters outside that.

CHAIR: That is entirely consistent with the standing orders, Senator Ludwig.

Senator LUDWIG: I shall ask in PM&C

CHAIR: Indeed, are there any other questions for outcome 3? There being none, I thank you for your attendance and your cooperation. We will now move on to the Australian Electoral Commission.