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Tuesday, 19 June 2001
Page: 27999

Mr BYRNE (9:18 PM) —I rise to speak tonight on the Appropriation Bill (No. 1) 2001-2002 with particular emphasis on defence appropriations. The important thing that we should focus on when discussing the budget is accountability for money appropriated, particularly for defence. We should focus like a laser beam on where the appropriations go and how expenditure of these appropriations is monitored. This is what the taxpayers want, justifiably.

It is our jointly held belief that expenditure of taxpayers' money should occur in a way that is accountable and transparent. Unfortunately, in this portfolio there is a body of evidence that in certain areas money is being spent in ways which are not accountable or transparent. It is our duty as representatives of the people to ensure that a light is shone in areas such as these where there is not sufficient accountability, and I will do so tonight.

Tonight I will detail, as I have indeed touched on previously, evidence of systemic corruption and incompetence by a government agency, the Defence Estate Organisation, and its head contractor, Asset Services. I will also, if time permits, detail threats, harassment and intimidation experienced by those who spoke out about the corruption which appears to be endemic within the Defence Estate Organisation, particularly with respect to the area of building contracts and maintenance.

The system employed is so corrupt and out of control that millions of taxpayers' dollars are being squandered by a mates network that exists within the DEO and Asset Services. This matter was first brought to my attention at a meeting that I had with the managing director of a Dandenong based company, Ridgewell Pty Ltd, which is a building subcontractor. The company was established in 1987 and employs 36 subcontractors. It is a company which has undertaken much work for the Defence Estate Organisation in the past. Indeed, it has been requested to undertake work at the Portsea safe haven for Kosovo refugees because the company was considered so good at its work. Mr Ashman, who is the managing director, came to my office as his company was imperilled due to harassment and victimisation experienced for detailing his concerns about the DEO and Asset Services and the way that tenders for work on DEO properties, particularly HMAS Cerberus, were undertaken. It actually went so far that Mr Tony Sullivan, the state manager of Asset Services, sent a personal letter to apologise for the threats made by his employees. Further, when Ridgewell made a claim in February 2000 for cost delays, he was told he would be sent bankrupt by Asset Services if he took it any further.

Mr Ashman has had first-hand experience of a tender process which appears to be completely out of control. Most tenders are poorly presented without the proper scope of works and detailed drawings for contractors to work off. This is costing the taxpayers millions of dollars. His particular experience was as follows: his company, Ridgewell Pty Ltd, entered into a contract with Asset Services for remedial works to the junior sailors gallery cafeteria building at HMAS Cerberus in November 1999. After he signed his contract he experienced a continuous alteration to the scope of works by Asset Services, taking 12 months to clarify. This delayed the completion of the works required. To compound this frustration, there was then a non-payment of delay costs by Asset Services to Ridgewell totalling some $91,250 as of 11 May 2001. For raising this issue, all that he and the company received was victimisation and intimidation of Ridgewell staff by Asset Services and threats from Asset Services' senior managers to prevent Ridgewell from being awarded future contracts for services if Ridgewell pursued claims for delay costs. A request by Asset Services for Mr Ashman to sign a blank contract to cover up previous mismanagement by the head contractor and DEO was obviously ignored by Mr Ashman and refused, and for that he was the subject of further intimidation. He was then requested to sign a new novated contract for the DEO removing Asset Services as the head managing contractor for a sign-on fee of $24,950. My source within the department informs me that this is the standard sign-on fee when things have been bungled and then everyone is part of the mess.

Sadly, the experience of Ridgewell is not unique. I was lucky enough to come across a gentleman who provided me with further information which completely corroborated the information that Mr Ashman from Ridgewell had provided. I am sad to inform this chamber at this moment that this gentleman appears to have been removed from the Defence Materiel Organisation today due to the fact that he is not prepared to see this cosy gravy train continue. The victimisation of those who speak out is an outrage and should not be allowed to continue. Those who support the best interests of our community seem to be blackballed by the senior executives of the DEO and Asset Services. I will further detail matters relating to this harassment at another time.

The latest in the ongoing harassment experienced by Mr Ashman is that he has been asked to remove his sheds, which have been there for some period of time, from Cerberus. It appears that this is deliberate as the sheds are used by Mr Ashman's subcontractors when undertaking work contracts. The person who requested this is a Mr Peter Smith, formerly an employee of Asset Services who now works for the Defence Estate Organisation—of course, there is no conflict of interest there! It is alleged Mr Smith phoned Mr Ashman and threatened him, but to cover his tracks he sent a nicely worded letter.

Additionally, Mr Ashman received about a tender about two weeks ago which appears to have been as loosely constructed as the others. Firstly, the tender for works on the No. 10 block Cerberus tiling contract was given to Mr Ashman on a Thursday afternoon. The tender closed on the following Monday morning. He had to price this contract over the weekend. There were no drawings of the work to be undertaken, nor was the scope of the works finalised.

Normal tenders in this process close on Tuesday at the very earliest or more normally on a Thursday. It is well known that contractors know better than to ask for further information from Asset Services about tenders after they are set because, if they do seek information for these tenders, they are deemed not to be team players and a nuisance. However, we now know that the winners of tenders can be predicted because of connections with either Asset Services or the DEO. The successful tenderer in the case that I just mentioned was a Mr Noel Beech, a former Asset Services employee and the man who was brought in to take over the maintenance work of Ridgewell when the company was blackballed for speaking out. Mr Beech was seen to be having a personal inspection of block 10 the morning after the tender closed at 9.30 a.m. No other tenderer was given such an inspection. Why was Mr Beech there?

The problem appears to be that many contracts, apart from Ridgewell, have been mismanaged continuously. I will give you an example of the hospital at HMAS Cerberus shortly. It appears as though the roofs of virtually all the buildings at Cerberus need to be tied to dead weights because they keep on flying off. The whole floor of the hospital which had been constructed had to be jackhammered up because of the contractors' and consultants' muck-ups. These consultants were never asked to repair their mess but instead were asked back on a new tender to have another go. The roof of the hospital has now had to be replaced three times. The last time, it blew off in 29-knot winds. In total, there have been 12 scopes of works for this particular hospital contract. To date, the costs of the works of the hospital have been $9 million without the new tenders being included—which are approximately $3 million. So, we have $12 million worth of contracts.

I understand that the rectification works are being undertaken by a contractor, a Mr Beech, who I have just mentioned and who was an employee of Asset Services. With respect to Mr Beech, remember that he was a 2IC at Asset Services. Can someone explain to me how we appear to have managed a close-down of the Portsea barracks yet I now find out that Mr Beech has just won a selected tender for $90,000 to undertake further work at the barracks? One must ask this question: is he fixing up another problem covered over or is it just a tender to keep a mate happy?

On the basis of the evidence before me and numerous others, it appears that contractors who have not met their obligations are not asked to draw upon their warranties to fix their mistakes but instead are given a new contract to fix up their problems. Sadly, the taxpayer is paying for this malfeasance. The problem with the hospital is an ongoing one that the minister, Mr Reith, is well aware of, having had many of his Flinders subcontractors raise the issue directly with him.

One of the weirdest foul-ups in this whole process was a building, which was a school of languages, that was built in a hole in Laverton air base. It was meant to flood only once in every 25 years according to Kinhill engineers. Sadly, Kinhill, which have former Defence Force personnel on their staff, got it wrong. Carpets had to be replaced at a cost of $40,000 after it flooded and pumps had to be installed to remove the water from the site. Also, another contract was farmed out at the taxpayer's expense to fix the problem.

You would think that there would be some inquiry into a farce like this, but what has happened is this: the senior manager of corporate services and infrastructure, who oversaw the project and who built the school in the location, obtained a promotion on the basis of this fine work, even though this person had no architectural expertise, which is normally required for a position of this nature. But why would you need this when you are putting buildings in holes that flood? It is also an absolute scandal that those responsible for the rorts, the incompetence and the harassment receive bonuses for these works that have been completed. Don't you think that, if this occurs, what happens is that there is a structural incentive to cover over problems to ensure that works are supposedly completed? Where is the independent ongoing assessment of this shonky process? Just see what happens when decent people like Ron Ashman, who was threatened and told he would never get another tender from Defence because he requested delay costs for DEO and Asset Services stuff-ups and for detailing that variations requested by Asset Services do not even appear to be documented draw attention to those things, as in the case of Ridgewell.

There are other examples that I could raise with respect to this but I will finish the speech on this, given I have run out of time. This is an unacceptable situation. I call upon the minister to seriously investigate the claims made by Ridgewell and to ensure that transparency and accountability are restored to the contract process undertaken by the Defence Estate Organisation and its head contractor, Asset Services. I will continue to rise to speak on this matter time after time until this atrocious situation is rectified.