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Monday, 6 December 1993
Page: 3866

Senator COLLINS (Minister for Transport and Communications) (4.15 p.m.) —I agree with Senator Short that this is a useful report. The differences between the Auditor-General's examination of this matter and ours are not very great at all. We agree with the Auditor-General that with constant attention further efficiencies can be achieved. That is the attitude that we take constantly.

  A comprehensive response has been provided in that report and I am surprised that Senator Short has not read it. Throughout the report individual references are made to DOTAC's responses to various matters raised. A comprehensive response is contained as an appendix to the report. I see Senator Short nodding, so I assume that he has seen that.

  We believe the concentration should be on outputs rather than inputs. If there is any difference between our views, that is where it lies. The fundamental situation is, and I have no intention of changing it, that the Commonwealth provides the money for these projects. We have just been talking about $225 million that was provided for a magnificent piece of work. We got very good value for money for that project and it came in well and truly under budget and on time with the opening of the F3 freeway at Newcastle. We are concentrating on getting value for money for our outputs.

  I advise Senator Short that a major survey has been done by an independent business organisation which comprehensively indicates that we are achieving world best practice in Australia with the construction of roadways. As I said during question time today, these projects are world class and price competitive. That is the bottom line. Although we provide the money, the work is managed largely by state government traffic authorities.

  I point out to Senator Short that we have a group of 30 officers in the department who are responsible at the Commonwealth end for administering the national highway system. The Victorian state government administers an equal length of road—that is, 18,500 kilometres; a useful benchmark—with a group of 1,500 bureaucrats, not 30. If people want to go down this track, it is perfectly possible that the Commonwealth could set up a much larger bureaucracy with its own in-house engineers. We could set up our own pavement testing systems. Senator Short will acknowledge that that is mentioned in the Auditor-General's report. But we choose not to do that. The best results that can be achieved for taxpayers in Australia, and we can demonstrate this, is by not duplicating what state government authorities already efficiently provide.

  We provided every cent of the $225 million in funding for the F3 freeway project but the project was managed by the New South Wales department of works. It managed the project very efficiently. In past years there have been fixed allocations to the states and there has been the provision that where projects come in under budget the money is retained by the state and rolled over into other road projects. As Senator Short well knows, there is never any shortage of road projects on which we can effectively spend taxpayers' dollars.

  I think that has provided a very efficient in-house efficiency measure on state government road authorities—that is, in order to stretch the Commonwealth dollar for the states' own benefit as far as possible, they have been able to bring projects in efficiently under budget, retain that money and spend it on additional road projects. I can give a dozen examples off the top of my head of where that has happened in all states and territories of Australia. The Northern Territory is very efficient at spending the Commonwealth dollar as, I might add, is Western Australia. We do it with great alacrity. We probably have a better record for spending it quicker than anybody in the country and getting value for money on it.

  I do not think it is efficient for the Commonwealth to increase dramatically the level of bureaucracy that we have, which we keep deliberately small, by duplicating the control and management functions that are already efficiently provided by state government road authorities; they do it very well and they have been doing it for a long time. We do not want to set up a separate system of road maintenance and checking.

  The Commonwealth has insisted—and this is where we have given the lead—that state governments implement procedures such as pavement testing systems to test the efficiency with which road maintenance is carried out. It has been largely at the insistence of the Commonwealth government, as part of the conditions for these grants, that state authorities have moved to do this. So the Commonwealth has a very good track record of keeping the efficiency with which the state government authorities construct the roads at a very high level.

  In terms of getting value for money—having seen it in my own electorate in the Northern Territory and in projects that I have personally been involved with on the road side of it—by and large, I think the state authorities do a very effective job of competently administering these road projects, and that is how it is set up. I feel, with the greatest respect to the Auditor-General, that to go to the extent that is required in terms of the inputs into the dollar of setting up a duplicate bureaucracy at Commonwealth level with our own engineers and so on testing the maintenance on the roads when state government authorities do it, we think, in a very efficient fashion would be very inefficient and provide a poor return for the taxpayer.

  I will give one example of the kind of thing I am talking about which can produce off-the-top-of-the-head figures of $20 million, which Senator Short quoted. A fixed percentage fee is provided with contracts from the Commonwealth to cover all the unattributed costs that go into road projects—and they are significant—such as pre-planning procedures; all these things have to happen and they have to be paid for.

  As Senator Short has correctly said, that figure is set at four per cent. It has been set at four per cent for 20 years. We are currently reviewing it. Where the Auditor-General got his $20 million from is very simple. The Auditor-General has simply recommended that that four per cent figure be reduced to three per cent. Arithmetically, we cannot argue with that—if we use three per cent instead of four per cent, we save $20 million. Whether we can or not is another question.

  We are negotiating that with the states at the moment. Senator Short has quite properly said that we are setting up a new arrangement for funding from next year on with us being responsible for the national highway system and state governments being responsible for roads outside of that with untied grants from the Commonwealth. We are now reviewing that figure. I confidently expect the states will say that the real cost of doing all of that is eight per cent instead of four per cent. I might be out a percentage point or two but I expect them to at least double it because of additional demands.

  When plucking figures out of the air, it is just as easy to say that it should be eight per cent instead of four per cent as it is to say that it should be three per cent instead of four per cent and save $20 million. All I am saying is that those assumptions have to be tested a little more scrupulously than simply saying instead of four per cent it should be three, and we save $20 million if it is three. The states would contest that it has to be double what it is now, I have no doubt, but we will arrive at a figure which I think reasonably reflects the real costs of these unattributed costs for projects which are there. They have to be paid for by somebody, and we pay for them.

  By and large, I think we are well served with the management that is provided by both state and territory road authorities. They are a pretty committed bunch of people; they are highly experienced. They do it on our behalf and, frankly, I think they do it far more efficiently than the Commonwealth could by setting up a duplicate system of checks and balances which the Auditor-General suggests we do.

  I conclude by commenting very briefly on the matters that Senator Tierney raised. They do not relate to the report, nevertheless, he raised them and they should be responded to. We acknowledge the need to complete the rest of the roadworks. I apologise to Senator Panizza for mishearing his interjection at question time today; he made the correct comment that every time we provide these roadworks they help. Certainly, they create other problems. The obvious one is that at any particular point in time a bottleneck will occur at the end of the particular section just finished—at a cost of $225 million—and the next bit.

  As Senator Tierney has acknowledged, the amount of work that we do unquestionably benefits the area. As I said during question time today, the important contribution that this new freeway extension from Sydney will make to Newcastle is that the connecting road between the city of Newcastle and the F3 freeway—and it is a magnificent piece of road, if honourable senators ever get a chance to look at it, from a scenic as well as an engineering point of view—has been brought forward two full years in order to coincide with the opening of the freeway so Newcastle can get the maximum benefit from this faster link to Sydney.

  What was said at the opening of that road—and I think it is true—was that it is quite extraordinary when one thinks that the first road connection that existed, a dirt road, between Sydney and Newcastle was only completed 63 years ago. When one has a look at what is there now in some of what is without question the most difficult terrain in which to build roads in Australia—just in that short 19 kilometre section there are 23 major bridges and a whole stack of road cuts and so on that have to be put in as well—it is a pretty significant enterprise.

  The Commonwealth is well aware that the work has to continue. We are not going to unnecessarily spend taxpayers' dollars on ploughing money into what are acknowledged as being temporary links. We are conducting a major environmental impact study into the permanent link between the F3 and the New England Highway. That is considering at least five major options for the routing of that road, and that is not an easy thing to do. It involves, for example, compulsory acquisition of land. It is not a simple task to determine where to put something as big as that. That will take at least 12 months. At the completion of that EIS we will have a firm decision on the preferred route for the permanent link and work will then commence on constructing that link.

  Question resolved in the affirmative.