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Monday, 20 August 2001
Page: 29749


Mr BYRNE (5:49 PM) —I draw to the House's attention tonight an article written by Gerard McManus in yesterday's Herald Sun, which highlighted the ineptitude and corruption that exists within the Defence Estate Organisation and its head contractor Asset Services. It is a story of truly terrifying proportions. A brief summary of the shameful behaviour in the Defence Estate Organisation includes a state-of-the-art naval hospital at Cerberus, which has no safe drinking water five years after opening. This same hospital, in the minister's electorate, has a leaking roof, a leaking floor slab and numerous other structural flaws. There is a new sewerage pipe at Cerberus, which for three years has pumped raw effluent towards inlets leading to the Western Port bay.

This is sadly the tip of the iceberg. What we need—and this is the fourth time I have called for it—is an independent inquiry to be carried out by anyone outside the defence department. The defence department just cannot be trusted to manage its own affairs. The last internal audit report, completed by the Inspector-General's Management Audit Branch in September 2000, has not been acted upon. The basic finding was that half the allegations, such as those listed above, were proved correct. With the other 50 per cent, the paperwork simply did not exist to work out what was happening. You have to ask: why hasn't anyone been sacked or sued? Some people, whom we know have been involved in this mismanagement, were actually promoted after September 2000. My particular interest in this matter has been drawn by the treatment of a local company, Ridgewell. I want to touch on some of the concerns that I addressed to the minister and on the minister's response. I allege again here tonight that the minister has been misled by departmental officials who have a vested interest in the outcome of this inquiry.

I will summarise the problems with this local proprietor: there were continuous alterations to the scope of work required under the contract by Asset Services, which took 12 months to rectify and delayed the completion of contracted work—this was for remedial works to the Junior Sailors Galley at HMAS Cerberus; non-payment of delay costs by Asset Services to Ridgewell, specified in a Defence short-form contract, has been $250 per day after the nominated completion date and now totals $91,250; victimisation and intimidation of Ridgewell's staff by Asset Services staff; threats from the senior manager of Asset Services to prevent Ridgewell from being awarded future contracts for services if Ridgewell pursued a claim for the delay costs; a request for Mr Ashman to sign a blank short-form contract, in contravention of departmental guidelines; and a request for Mr Ashman's company, Ridgewell, to sign a new novated contracted with the Defence Estate Organisation for a sign-on fee of $24,950. Ridgewell is now no longer on the selected contract listing for the Defence Estate Organisation, which appears to be as a result of Mr Ashman's current complaints.

These concerns were drawn to the attention of the minister, and the minister gave a response indicating that, on the advice of some of his bureaucrats, there was no potential difficulty. I want to address some of those responses in more detail, but I have, as I said, some concerns about the individuals who provided the advice to the minister. The minister responded to my letter on 10 July, and my concern was: did the minister seek the advice of the department solely, or did he seek the advice from Asset Services, the head contractors at Cerberus? Further, did Kitty Marmanidis of Defence Estate Organisation, a principal person involved in this—a person who has already been subjected to allegations of incompetence and mismanagement—provide advice, along with Tony Sullivan, the state manager of Asset Services? Another question I would put to the minister is: was he aware that the aforementioned people both requested Mr Ron Ashman of Ridgewell Pty Ltd at different times to sign a short-form contract which would have covered up previous incompetence and mismanagement by Asset Services and the Defence Estate Organisation? Further, if the minister has received advice from Kitty Marmanidis, was he aware that she was the same project manager who managed the contract for the school of languages at RAAF Base Williams at Laverton, which was built in a hole? What actually happened was that it was flooded, even though the probabilities, as provided by Kinhills engineering, were that it would happen only once every 25 years.

In terms of the responses by the minister to some of the points that I have made about claims of continuous alterations to the scope of works, was the minister misinformed? We have documentary evidence that it took Mr Ron Ashman of Ridgewell 12 months to receive a completed scope of works and contract after winning the tender in November 1999. The Defence Estate Organisation forgot to put in tiling for the Junior Sailors Galley at Cerberus, which cost over $100,000. This was not a minor alteration. I have sighted minutes signed by Mr Ron Ashman of Ridgewell and Peter Barnes on behalf of DEO accepting cost delays of some $24,000. Is this the mysterious sign-on fee everyone talks about when there is a cover-up, or is it really an acceptance of delay costs? Does this paperwork exist anymore in DEO? I expect not.

With respect to the behaviour of Asset Services staff: firstly, the minister has advised me that Asset Services is competent and professional. But that is not what the minister's internal investigation by the Inspector-General suggested. We have evidence of thuggery and threats by Asset Services staff and collusion with DEO. What moved Mr Tony Sullivan, the manager of Asset Services, to write a letter of apology to Mr Ashman of Ridgewell if someone was not behaving unprofessionally? Could it be Mick Swarris's threats to send Mr Ashman bankrupt? There were also threats about future involvement in future contracts. Is the minister aware that DEO offers tenders on a Friday to be completed by Monday—which is a rather unusual practice? But if you are a mate of Asset Services, you get single, select tenders to carry out works in barracks closed some time ago—like Mr Beech, who, amongst other things while working as 21C at Asset Services, appears to now have a very successful business tendering for contracts at Cerberus and other places. We again have evidence that the minister's department is deceiving him and that Mr Ashman was removed from the preferred tender list because he questioned the practices of DEO and Asset Services.

In addition, there was a request to sign a blank short-form contract. I have copies of an email which shows that Mick Swarris and Tony Sullivan of Asset Services requested that Mr Ashman sign a blank short-form contract and that he involve himself in corruption. They went as far as requesting Mr Ashman to price a new scope of works for the same project at Sale and submit a new invoice and issue a credit note for the previously issued invoice. There was also a request to novate an existing contract. The minister advised me in his response that the payment of $24,000 mentioned by Defence Estate Organisation and Asset Services was for works already completed by Ridgewell. The problem for the minister and others is that we have copies of minutes which indicate that this payment was for delays in the project, not for works completed, which is a separate issue. These are the same delay costs that everyone now denies exist. What has happened to Defence Estate Organisation's and Asset Services's copies of the minutes of the meeting? Why did Defence Estate Organisation's solicitors undertake the work for Asset Services when they are meant to be acting for DEO?

There are further issues that I would like to raise. How did Asset Services win the comprehensive maintenance contract after being involved in so many muck-ups in previous contracts for the Defence Estate Organisation? How did Mr Tony Sullivan know in January 2000 that Asset Services had won the contract for the comprehensive maintenance work on the Cerberus when it did not close until February? Mr Sullivan was so certain that he even indicated to people whether they would keep their positions. 1 wonder whether the other tenderers, John Holland and Transfield, had similar foresight. If they had, I suspect they would not have put in a tender. What inside information did Asset Services have that no-one else did?

How did Asset Services win the comprehensive maintenance contract tender even after an inquiry by the Inspector-General's management branch, requested by the secretary of Defence, found that allegations about missing documentation for $235 million worth of work were true? They found that 50 per cent of documentation for contracts for buildings was missing, and they simply could not work out what had happened with the other 50 per cent. Worse, the minister thanked one gentleman involved in whistleblowing in April 2001, but the problems continue. Why hasn't the minister sacked anyone? My understanding is that those who were involved in the fraud have actually been promoted.

What happened to the senior manager of corporate services and infrastructure of DEO, Kitty Marminidis, who built a school of languages in Laverton in a hole? She obtained a promotion, even though the person has no architectural experience. Why weren't the project consultants, such as Kinhills, required to fix their problem? Why was another contract let to fix the problem at taxpayers' expense, and who took responsibility for the flooding of the rooms? The senior managers at Asset Services received bonuses for works completed. Do you think this is dangerous when there exists a temptation to cover over problems to ensure that works are supposedly completed? When Mr Ashman requested delay costs because of Asset Services and DEO muck-ups, he was threatened and told he would never get another tender from Defence. This is apart from the earlier threat to send him bankrupt if he did not sign a blank scope of works and short-form contract to remedy earlier muck-ups of Asset Services. My question to the minister is: why does the department continue to mislead him and deny him accurate information about what actually occurred? It is in the minister's best interests to get to the bottom of this and to have an independent inquiry into the fraud and corruption that exist within this organisation.