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Parliamentary Standing Committee on Public Works
20/05/2015
17th Construction Squadron Relocation Infrastructure Project

BEUTEL, Brigadier Noel Fredrick, Director General, Capital Facilities Infrastructure Branch, Department of Defence

BLAIR, Wing Commander Tony, Commanding Officer, 23 Squadron, City of Brisbane

JOHNSTON, Lieutenant Colonel Amanda, Commanding Officer, 6th Engineer Support Squadron

MUIR, Mr Peter, Project Manager Contract Administrator, Aurecon Australasia Pty Ltd

SMITH, Colonel Chris, Director Plans—Army, Department of Defence

WRIGHT, Lieutenant Colonel Paul Frederick, Project Director, Capital Facilities and Infrastructure Branch, Department of Defence

[13:08]

CHAIR: Welcome. Although the committee does not require you to give evidence under oath, I should advise you that these hearings are formal proceedings of the parliament. Consequently, they warrant the same respect as proceedings of the parliament itself. Giving false or misleading evidence is a serious matter and may be regarded as contempt of the parliament. Brigadier Beutel, would you please make some brief introductory remarks before we proceed to questions?

Brig. Beutel : With your permission, before I make my opening comment I would like to advise the committee of some minor corrections to the statement of evidence as was previously submitted.

CHAIR: Please continue.

Brig. Beutel : Thank you. The first correction relates to the numbers of personnel within the 6 Engineer Support Regiment, or 6ESR as I will refer to it from now on, at paragraph 3 of the Defence submission, statement of evidence. The paragraph states:

With an establishment of more than 600 regular soldiers, 6 ESR is the largest of the RAE regiments …

The number articulated within this paragraph actually reflects the establishment of the 6 Engineer Support Regiment, or 6ESR, prior to the reallocation of one of its squadrons, that being the 1st Topographical Survey Squadron, which was reallocated from 6ESR to the 1st Intelligence Battalion. Not all of that squadron was actually reallocated. Surveyors within that 1st Topographical Survey Squadron actually stayed with 6ESR, but some of the more military geographic and information specialists went across into the Intelligence Battalion. The upshot of that, Senator, is that the 6 Engineer Support Regiment, therefore, has a current and actual establishment now of 450 regular soldiers.

CHAIR: Thank you.

Brig. Beutel : The second correction relates to the environmental offsets described at paragraph 38 of the statement of evidence relating to compensatory planting and wildlife habitats effects and states:

As such, the proposed project landscaping has been designed so that it incorporates approximately 3300 new trees and 200 nesting boxes being provided for wildlife.

Since the submission was put together, further consideration has been undertaken in relation to the aspect of the nesting boxes as part of the offset. The current situation we have—and in discussion with Defence Support Operations and the Regional Environmental Officer—is that we are no longer pursuing 200 nesting boxes, but we are looking at other compensatory actions in lieu of those nesting boxes. The 3,300 trees remain extant.

Some of the alternatives that we are looking at for the nesting boxes proposed to be implemented by the project subject to parliamentary approval could be described as 'installation of shields to lights along the wildlife corridor within RAAF Base Amberley,' on base to prevent light pollution and improve the amenity to some of the nocturnal species within that wildlife corridor. One of the other proposals is to remove all debris and man-made obstacles in the wildlife corridor to improve the accessibility of the wildlife within that corridor, and also to install traffic measures along some of the roads to help reduce the risk of collision between vehicles on the base and some of the local wildlife. The point I am making here is that we are still undertaking compensatory actions, however, the situation is now that the nesting boxes are no longer required and these are the means that would be far more beneficial as far as those compensations and support to the wildlife.

CHAIR: Thank you.

Brig. Beutel : Senator, the final correction relates to the ecological sustainable development principles to be implemented within the project. This is stated at paragraph 93, sub-paragraph (f) which states:

photovoltaic cells (solar panels) will be installed to the HQ buildings to supplement the electrical supply;

Our correction is that the actual photovoltaic cells, or the solar panels, will now only be installed in the squadron headquarter building to supplement the electrical power supply. To make it very clear, though, there are other solar panels going in on other buildings within the proposed facilities to support hot water—so solar powered hot water—but as far as power generation to feed back into the grid or to support the facilities, it is only within the proposed squadron headquarters that those solar panel, photovoltaic cells will actually be included.

That concludes the corrections to the statement of evidence. With your permission I would now like to make my brief opening statement.

CHAIR: Please do.

Brig. Beutel : Thank you, Senator. This proposal seeks to gain parliamentary approval to construct facilities at RAAF Base Amberley in order to support the relocation and collocation of the 17th Construction Squadron with its parent unit, the 6th Engineer Support Regiment, and its sister unit, the 21st Construction Squadron. The collocation and relocation of 17 Construction Squadron at RAAF Base Amberley will provide opportunities to enhance the command and control of Army engineer units in South-East Queensland, to improve the overall operational and training effectiveness of the 6th Engineer Support Regiment, and to look to gain unit-wide efficiencies through the implementation and provision of a mature, operational support, shared services model. Such shared services will include the management, repair, supply and sustainment of the many unit vehicles, plant and equipment and also stores that the regiment holds. To harness these opportunities the project proposes to provide purpose-built and adaptively re-used facilities that are fit for purpose, compliant and provide value for money. To provide such facilities the project also requires the conduct of some demolition works, civil works, infrastructure or essential service works, and landscaping. The proposed works will also provide a workplace that is fit for purpose and allows personnel to undertake their duties, roles and responsibilities in an environment that meets their designated tasks. The proposed works will also improve personnel morale and have a positive impact on recruitment and retention, which will ultimately support the engineering and construction capability of the Australian Defence Force—not just Army. The total cost of the proposed works is $71.8 million, excluding goods and services tax. The cost estimate includes construction costs, project management fees and design fees and charges, furniture, fittings and equipment, together with appropriate allowances for contingencies and cost escalation. Subject to parliamentary approval of the project, the construction is expected to commence in mid-2015, with construction to be completed by late 2016 to align with Army's January 2017 posting cycle—that is, in order to allow, subject to parliamentary approval of the facilities, the soldiers and the families of the 17th Construction Squadron to relocate from Sydney to Ipswich in that normal posting cycle. That concludes Defence's opening statement. The witnesses are now ready to answer any questions from the committee.

Mr PERRETT: I want to go back to those nesting boxes. Why the change? Were the 200 nesting boxes for possums or birds? I have not really dealt with nesting boxes before.

Brig. Beutel : I will make a few brief comments in answer to that. I am also not an expert on nesting boxes. I do have the appropriate people here to ensure that I provide the right information. The real driver behind why we have gone looking at other requirements, as opposed to the nesting boxes, is that, as you would have read in the statement of evidence, the Chief of Army directed the co-location of 17 Construction Squadron in 2010. Following that direction, Defence commenced its development process to develop and design the facilities, which we culminated in 2012. At that stage we were looking to take this project to government and to the committee for consideration. However, due to changes within the major capital facilities budget and reallocation and reprioritisation of funding within the major capital facilities budget, this project has been delayed to where we are now. During that period of delay from 2012 we have had other approved projects undertaken on RAAF Base Amberley that have also had requirements for compensatory offsets. Some of those projects have undertaken those requirements for the nesting boxes. It is only in a more recent discussion that my project team has had with the regional environmental officer that we have said: 'These are no longer required. However, there is a requirement for compensatory offsets. What else can we look to do?' I will just confirm that quickly.

Mr PERRETT: I might add a question that you might be able to answer. I assume nesting boxes are when there are no mature trees for birds to nest in? They are temporary? I am getting a nod from the back. If there are mature trees that have nesting capabilities, you do not need to put in a temporary nesting box.

Brig. Beutel : That is what I am being advised. Also, I am being told they are for mammals—possums.

Senator GALLACHER: I get that the Chief of Army has determined that you are going to co-locate this unit up here. What is that based on, given that your paperwork says that 17 Construction Squadron have never had a permanent home? It has not stopped you being effective and efficient. Is there a business case that underpins this, or is there an operational case? If the Chief of Army says, 'Do it', you can follow your orders, but we need to test whether that is value for money.

Brig. Beutel : Following the direction of the Chief of Army, through our—

Senator GALLACHER: But how did he make that decision? Did he make it on the basis of a business case or an operational case? We have not seen either.

Brig. Beutel : I will refer that question to Colonel Smith from Army Headquarters. Ultimately, it is a combination of both. The Chief of Army would have been provided advice to look at on the operational aspects of it.

The actual business case and the justification for that is developed on the infrastructure side of things as we go through our gates. As you are aware, our corporate support infrastructure requirements, strategic screening, strategic business case development and detailed business case development goes to government for approval before coming to PWC. So it is a combination of both. I will refer to Colonel Smith from Army Headquarters, who is representing the Chief of Army.

Col. Smith : Business case, I think. He was aware that the facilities in Holsworthy were substandard.

Senator GALLACHER: As a result of Moorebank?

Col. Smith : Yes, partially. Certainly, Construction Squadron now sits across what are Coral Lines and what are Jordan Lines. Coral Lines are masonry, permanent facilities; Jordan Lines are demountable, temporary facilities, if I am not mistaken, as a function of the Moorebank project.

Brig. Beutel : Sorry—I just need to clarify here a little. It is a bit of a long history, but—

Senator GALLACHER: The Public Works Committee made a decision about Moorebank. What I am trying to work out is whether our decision there has caused further expenditure down the line.

Brig. Beutel : No, it has not. And, just to be clear, again, a little bit of history—if you could just provide me with a bit of leeway here. The lines that 17 Construction Squadron and the existing lines—not the interim facilities that were approved under the Moorebank Units Relocation Project—were basically the result of the majority of the squadron headquarters facilities burning down in 2002. I happened to be the officer commanding of that squadron at that stage. I must admit that I was not in the location during that.

Subsequent to that we moved into some equivalent but even older lines, which were the old lines of the 1st Combat Engineer Regiment, which had relocated from Sydney—Holsworthy Barracks—to Darwin, located in our Robertson Barracks with Headquarters 1 Brigade. The squadron remained split between their old existing facilities and the one for the 1st Combat Engineer Regiment facilities for a number of years until the government's decision to support the intermodal terminal project. There was then the requirement for the Moorebank Units Relocation Project for that.

Because of the dilapidation and the WHS issues in those old lines the elements of the squadron that were working in the old 1st Combat Engineer Regiment lines had already moved into those existing lines, which were there predominantly for an artillery unit as opposed to an engineering unit. They had already moved up into those existing lines and they were adaptively re-using those, with no additional costs to the Commonwealth or to Defence for those facilities.

The requirement for facilities to be funded under the MUR project came because the elements of 17 Construction Squadron that were still in the old Holsworthy lines, where we were proposing to build the new School of Military Engineering under the Moorebank Units Relocation Project, had some specific requirements. They were mostly plant troop; it was the workshop people—our Royal Australian Electrical and Mechanical Engineers—who had some specific requirements for some facilities that we did not specifically already have in existence to adaptively re-use in Holsworthy.

That is what the Moorebank Units Relocation Project had paid for. Those facilities were always only going to be interim. Again, I think we took MUR to the committee in 2011-2012—I think it was 2012. In parallel with that the Chief of Army's direction had come in 2010. As I said, we had actually pretty much developed the project to this stage in 2012 so we were never going to expend large funds on those interim facilities for that period going through.

That was a longwinded story, I am sorry, but there are a few bits and pieces to this. It has always been a longstanding requirement, to co-locate 17 up here. Again, because of delay—or even if there had been no delay—we still had to have interim facilities under the Moorebank Units Relocation Project.

Senator GALLACHER: If you look at the approvals sought—the dollar amount and the number of soldiers involved—it comes out at quite a high per capita sum. But are you telling me that the facilities are extinguished at Holsworthy? They are all totally written off? There are no vacancies arising out of the shift?

Brig. Beutel : The current facilities that 17 Construction Squadron are located in at Holsworthy Barracks are still occupied. They are still operating; they are still having to operate through there. Subsequent to parliamentary approval, the construction and them relocating up here, those facilities will remain—including the existing facilities and the interim facilities that were developed under the Moorebank Units Relocation Project. They will remain on the Defence register of assets. Again, there are no final plans confirmed yet but Army is looking in relation to how those existing vacant facilities and new facilities could be utilised by other Army elements at Holsworthy Barracks. That is not in any detailed planning, but perhaps Colonel Smith could provide some details of those proposals. But those facilities are not going to be demolished. They will be maintained on the register with the intention of re-using them.

Senator GALLACHER: So you have got a replica of what you want to do on site at the moment and you have explained that there have been some issues that require a bit better foresight. One of the difficulties we have is to be able to compare it with any like sort of project. Here we have a mirror image almost of what is on site. So on the original project everything was within contingency, everything was within scope and budget, and there were no unforseen problems? You did it there and you are going to mirror it

Brig. Beutel : I just want to confirm that you are referring to the construction of facilities for 21 Construction Squadron under the enhanced land force stage 1.

Senator GALLACHER: Yes.

Brig. Beutel : So the out-turn cost in 2010 for the facilities at 21 Construction Squadron, which you viewed this morning, was approximately $73 million. As I said, it was out-turned or delivered in 2010. As I stated in my opening statement, the current out-turn cost estimate for this project is $71.8 million, or almost $72 million, so you can see that initially that it is about $1 million less than what we built for 21 Construction Squadron in 2010. However, you need to also consider that out of that almost $72 million a portion is for the fire training area—and I am happy to give the figure of the fire training area. If we want to compare apples with apples, 17 to 21, then we probably need to take out the dollar cost for that fire training area—and I can tell you that in the in camera hearing. When you look at the two—from now looking to potentially starting construction in 2015-16, 10 years on—we are at a minimum almost $1 million better off and that figure is even larger when you take into account the fire training area. We have to take the fire training area out if we want to compare what we paid for the facilities that we built for 21 compared with what we are proposing to build for 17, particularly in the squadron headquarters.

Senator GALLACHER: On the earlier project what percentage of expenditure sustained the local economy? Did you use local contractors, builders, electricians and plumbers?

Brig. Beutel : I will have to quickly take on notice the percentage numbers as to what actually occurred. Hopefully, we can get an answer back to you before the end of this hearing. I do not have that detail now but that project—

Senator GALLACHER: But that is your intention, isn't it?

Brig. Beutel : Sorry. The 21 squadron project was outsourced, taken to the open market. That is normally what we do for these major capital facilities projects. Our intent for this project also is to go to market, in this case under a head contract form of approach to the market. Again there would be an expectation that a number of local small to medium and potentially even large enterprises would have opportunities to participate in that tendering process.

Senator GALLACHER: It is the 17th Construction Squadron. Why don't you just build the fire training area yourself?

Brig. Beutel : Senator, that is a possibility. The 17th Construction Squadron does have the capabilities to undertake those types of works. There are a couple of points to answer your question. The first is that, apart from having these capabilities and being able to do those works, the squadron has those capabilities because of an operational requirement—and CO 6ESR can provide some further detail on that, but she has some confidential preparedness directives, notice to move timings for what she needs to be able to provide to the Chief of the Defence for certain scenarios that may be. So there is always a requirement to have a squadron or elements of a squadron basically ready to do that.

We also have an AACAP, the Army Aboriginal Community Assistance Program, obligation through Prime Minister and Cabinet. In any one year we will always have one of the squadrons—17 or 21—actually deployed. In this case, as we briefed this morning, 21 Construction Squadron has just commenced its deployment to the Northern Territory for AACAP. Between the operational requirements and the preparedness aspects of it and also the ongoing commitment for AACAP, there is limited capacity for 17 to undertake a large scale of works such as the fire training area.

My final point about the fire training area is that the fire training area and the reconstruction of the fire training area is on the critical path for this project. What I mean by the critical path is that we cannot commence construction of 17 Construction Squadron because that is the preferred location for the existing fire training area, and the fire training area has to be reconstructed to ensure that there is no loss of capability for the firefighting capability at RAAF Base Amberley before we can start construction. The project's time line is at a level of risk. It is a fairly tight program already, so that would just compound that.

Senator GALLACHER: The asset is only 10 years old and you put in for another considerable amount of money to rebuild it, given its limitations. So, firstly, there was a lack of foresight in the original build. And it is only 10 years old and it is concrete, so it will last for 50 years. Do you actually test any of these projects with your existing pattern of operation? I accept you have operational reasons and you have ACAP, which is an immensely valuable program, but do you actually put it in the mix or are you telling us that you are too busy to do that?

Brig. Beutel : Regarding the project's development—I will have this confirmed—I do not believe it was looked at as an option when this was being looked at. That said, though, I am advocating and I am pushing more and more with my senior leadership within the Defence Support and Reform Group for Army, or even Airforce—because Airforce also has some construction capability—for Defence to undertake some of these devolved works. There are some examples where we are already doing this. Lieutenant Colonel Johnson's regiment last year undertook some devolved works for the Defence estate, and we have another Army organisation, the 19th Chief Engineer Works, which is a design and project management agency, which is currently undertaking design and project management works for the facilities to support the relocation of the 2nd Cavalry Regiment from Darwin to Townsville, which was, again, was advised to the committee under medium works. Particularly for these major capital facilities projects, sometimes it is very difficult because of the time—looking at years or the period—to get a unit to commit to that type of period. Where we can, I will be looking to try to undertake that a lot more.

Senator GALLACHER: Wing Commander Blair, you said you pay Airservices Australia when you use civilian airports.

Wing Cmdr Blair : Yes, from a flying point of view.

Senator GALLACHER: They charge that levy in order to provide air-traffic control and fire services. Why don't you just get Airservices Australia to do your fire training and do your fire support at Amberley?

Wing Cmdr Blair : To provide the entire capability or just the training part?

Senator GALLACHER: The entire capability.

Wing Cmdr Blair : I will talk to the entire capability first. Our firefighting capability is a deployable capability. Our general policy in Defence now is that, if it is a deployable workforce, it needs to be in uniform, essentially, so we are able to do that later on. That is why we would not contract out all of our firefighting services. There are a couple of locations where that is done. At bases where there is a shared airport, for example, it has been contracted out. A certain proportion—

Mr PERRETT: Sorry, Chair. Williamtown and Townsville?

Wing Cmdr Blair : Yes.

Mr PERRETT: So people in uniform would not deal with Defence equipment if there were a fire?

Wing Cmdr Blair : They are Airservices—

Senator GALLACHER: They seem to be more about Darwin.

Wing Cmdr Blair : I will confirm the locations. In some bases, it certainly is a contracted-out capability.

Senator GALLACHER: Basically, it is because you deploy people. You need them trained to be able to deploy them.

Wing Cmdr Blair : Yes, that is right. That is why we would want to keep some of those firefighters in uniform—being part of the Defence Force and not contracting them all out to Airservices. That would be a simple solution but not an option if we want to have them deployable.

Senator GALLACHER: It might be a monetary solution but it is not a deployable solution.

Wing Cmdr Blair : That's right.

Brig. Beutel : Just to add a little bit to that: there are certain bases where I can give examples. There is RAAF Base East Sale. The firefighting services down at East Sale are fully contracted. I am fairly confident about saying that, having spent a fair amount of time at RAAF Base East Sale in recent years. I think part of the solution, or the mix of what Chief of Air Force looks at when he understands what is going to be contracted and what is going to be uniform people, is also based on the nature of the airfields that we are operating from. RAAF Base Amberley, as you are aware, has fast jets. It has the Super Hornets there. They are seen as a strategic asset for Australia. The C17s are now also based there. Again, as we are seeing, they are becoming a more and more important strategic asset for Australia. The tankers, the KC30s, are now also based there. They are seen as a strategic asset because they are critical in providing air-to-air refuelling to the Super Hornets, because of their shorter range for that. So I think it comes down to understanding the risk with this. Again, when you start looking at all the strategic assets that are at RAAF Base Amberley—and I am not saying anything about our contracted firefighters—there is an operational requirement for military Air Force firefighters so that you can maintain that operational capability. You cannot have it across every single air base, so you look to prioritise. I think a lot of the priorities are based on that strategic importance. Hopefully, Tony will not correct me too much on that.

Mr PERRETT: So the pilots that are being trained at Sale are not assets in the way that a C17 is.

Brig. Beutel : That is true, but it is not exactly what I meant.

CHAIR: In 2009 this committee approved a project similar to this one. That was the construction of the 6th ESR. Is that correct? What lessons were learnt from that particular project that informed this project?

Brig. Beutel : Just to clarify: there were two projects. The 21st Construction Squadron was first off in 2009. That was provided under the Enhanced Land Force Stage 1. The second project which you referred is, I think, the 6th Engineer Support Regiment. They were in existing facilities at Gallipoli barracks in Enoggera and then moved into purpose-built facilities out at RAAF Base Amberley. That was the second project. It was under Enhanced Land Force Stage 2.

I will look to hand to Peter Muir from AURECON, who is familiar with those projects as well as this project. But I can say before he gives you the details of it that the design that we looked at for this current project was not a bespoke design. We looked at the existing designs and we did a number of workshops to understand the lessons learnt from those facilities and we brought that forward into the current designs. So, with that, I will hand to Peter as our PMCA to provide some details, particularly some of those lessons learnt.

Mr Muir : I would like to expand on that and make the point that the design team and the project management team have been lucky enough to be involved right back through to 9th Force Support Battalion project, which was on the way to the site you saw today. The build and design has evolved from that project through 21 construction, through 6 ESR and then onto 17 construction.

The philosophies in terms of ESD and the like is all very similar. Through each of the projects we have learned lessons; they have been passed on. They are about optimising the design to make it, as Noel said, not bespoke but fit-for-purpose; it is functional. As the projects have been progressed, we have learned about such things as the louvres, which are to allow the natural ventilation in the mixed-mode setting. They have been made larger just to make sure that we are maximising the flow through the non-office areas such as the workshops, the ablutions and the like. In the common areas that we saw today where the soldiers go to use their computer terminals and to have their lunch there was a small area of resilient flooring next to the wash area. That has now been extended across the entire area. That is to help whole-of-life cleaning costs et cetera, because it is far easier to clean the resilient flooring than it is to continually clean the carpet.

The concrete floor strength has been adjusted through various projects just to try and minimise localised shrinkage cracking, because, as we know, Amberley does have quite reactive clay soil. Even though we have lots of measures to mitigate that, we still did witness localised shrinkage cracking in previous projects, so that has been addressed as we went through.

In other areas, it is a steel portal frame, so it is basically connecting bits of steel prefabricated off site, delivered and erected. The size of this steel has been reduced to allow smaller cranes to be used, and that has a direct impact on day-to-day flying, because we have to use thing called a NOTAM, which is a notice to airmen to advise that there is an obstruction, and that helps minimise that impact by having smaller cranes. So it is small construction things and obviously final facility things that have been learned and passed through all the projects into the 17th Construction project.

CHAIR: Are you able to quantify for us what is the saving that has been achieved because you have been involved or because each of the projects—21 Construction Squadron, 6 ESR and now this one—has been informed by the previous project? Are you able to identify what saving that might represent to government? Let me put it another way: given the fact that we are not pursuing a bespoke design model, are we able to quantify what saving that has meant?

Brig. Beutel : Yes, I can give one example of some potential savings. These details are not in the public, but the actual design costs for this project, which have been advised to the committee through our confidential cost estimate, are significantly lower than what we would expect on our benchmark or our rule of thumb rules for looking at design versus out-turn capital costs. The reasons for that, again, is that we did not allow our designers to get 'designy' on us—that is a phrase I use. So there have actually been savings I can point to within the design because of that approach with taking those existing designs and building upon them.

CHAIR: If you are more comfortable, Brigadier, we can do that in the in camera session.

Brig. Beutel : I can give you some actual figures on that.

CHAIR: I just want to turn to the issue of contamination at the existing FT—oh, sorry, Senator Gallacher.

Senator GALLACHER: Still on the costings, I accept what you are saying—that you have got this learned experience—but are the savings in the actual building costs or in the estimation of contingency?

Brig. Beutel : No. 1, there are savings in our up-front development costs. I think that there will also be savings in the trade costs, and again we can have a talk about that a little bit more. The contingencies—

Senator GALLACHER: Well, if you have done it once and you do it twice, it makes sense.

Brig. Beutel : Yes, and again I am more than happy to talk about the contingency and the percentages. But again some of our contingencies, though, are there for—how shall I put it?—the 'unknown unknowns' aspect of it. But I can provide some more detail about that.

Senator GALLACHER: Thank you.

CHAIR: Before I go to the issue of contamination, Mr Muir, what proportion of the project is prefabricated?

Mr Muir : In terms of prefabrication, all of the structural buildings are framed in steel. All of that steel is fabricated off site, so that means that the majority of the shelter structures, for instance, are fabricated off site, brought together and put onto the footings, and the roof is put on. The building fabric itself is largely metal sheeting, so it comes in large lengths pretty much cut to site to put on there. Steel cold formed purlinsform the roof and lots of hard surfaces—easy, resilient surfaces. So it is all pretty standard construction stuff, but mainly the steel.

Senator GALLACHER: Is it sourced locally? We are not bringing this from China or somewhere? Is it sourced locally in Queensland?

Brig. Beutel : Senator, if I can answer that question—

CHAIR: It is fine to come from China, by the way.

Mr PERRETT: There are not a lot of steel mills in Queensland, I am sorry to say.

Senator GALLACHER: No, you have plenty of steel works.

Brig. Beutel : No. Within the Defence suite of contracts, our head contract, there is a requirement to look to—we do not specify that it has to all come from Australia. We do not put those caveats on. There is an intent, though, to support, again, the government's policy about small to medium enterprises for that.

Ultimately, though, what the government wants us to do in the delivery of these projects is comply with the procurement rules, which are driving for value for money. Again, I can give an example: the Moorebank Units Relocation project. A majority of the steel that we actually used for the construction of those facilities there proved to be better value for money, coming from China—inclusive of the shipping costs—as opposed to what we could locally source within Australia and of equivalent—

Senator GALLACHER: The 21st squadron—was that imported framework or was it fabricated here?

Brig. Beutel : Again, I do not have that detail here, unless Mr Muir does.

Mr Muir : The actual source of the steel, I would have to check that; but the fabrication was done locally. It was done by a local supplier. The fabrication itself was done locally and the same with the 6ESR project. There was a local fabricator. The source of the steel I cannot confirm.

Senator GALLACHER: Yes, I understand that.

Brig. Beutel : Senator, just to quickly follow up this line of questioning here now, and to come back to Senator Gallacher's question which I took on notice, in relation to how much local involvement there was on the previous 21 Construction Squadron project. Our PM/CA for that project has advised that currently, within the time frame we have, they estimate that up to 60 per cent of the procurement contracts—not value, but procurement contracts—went to local trades from the immediate Ipswich area. I think that is quite significant.

Again, we are not finished the Moorebank Units Relocation project, but I know that we were advised last week that we are tracking around the 60 per cent mark for trades—for procurement and contracts to support that—from within a 50 km radius of the Holsworthy Barracks. That is starting to be our benchmark—we are looking to do that.

CHAIR: This issue of contamination on the existing FTA site: can you talk to what has been done to identify the level of contamination, and what mitigation strategies are being considered?

Brig. Beutel : Again, I will make some introductory or more broad comments on that and then I will look to hand over to Mr Muir again to provide the detail. As advised in the statement of evidence, we did undertake testing of the fire-training area, noting what the fire-training area is used for. That testing resolved that there was contamination. There was some contamination in the soil, but there was also contamination in the groundwater—levels that were above what would be required. From those assessments—and this is wider than just this project—the Defence Support and Reform Group, through Defence Support Operations and the local regional base people, have been undertaking a water quality testing and monitoring program, which was completed in 2014, to look at the impact of potential contaminants in the water across the base. That was one aspect of it. It is wider than the project.

For the project itself, throughout the construction and when we do the demolition, there will be a testing regime put in place—and a monitoring regime as well, as we go through construction. If we have to remove soil that is contaminated, there will be approaches as to how we can do that. There are a couple of different ways we could approach that but, ultimately, if we find contaminated soil or contaminated water that we need to treat, we will look to treat that in accordance with the regulations and requirements.

CHAIR: What are the options for treating the contaminated soil?

Brig. Beutel : I will hand over to Mr Muir from Aurecon to provide you those details.

Mr Muir : In terms of treating the soil, if we talk about AFFF, the PFOS and PFOA, the 21st construction squadron project did encounter some of that soil as part of that work. That soil went off to lined landfill because the AFFF is very dependent on the level of concentration of the particles in the soil itself. The levels that we found at the proposed 17 Construction Squadron site were actually below the allowable levels. At the 21st, they were just marginally over. It was a very low-level concentration, so that was able to go off site to a local landfill facility as a lined landfill. There was obviously a cost premium to that, which we can expand on later on.

Brig. Beutel : What Mr Muir is referring to is that we have looked at the costs of those potential risks within our confidential cost estimate.

CHAIR: That was where I was getting to. Is it the relocation of the construction squadron that is driving this project or is it the need to relocate FTA site that is driving this project? I am curious to know what the reasons might be for not having constructed the buildings to the south of the existing buildings, rather than constructing the buildings to the north and therefore over the FTA site.

Brig. Beutel : I will answer that question. The proposed location for 17 Construction Squadron, which happens to be where the existing fire training area is—I am sorry, I will go back to answer the first part of your question. The driver is 17 Construction Squadron. That is the driver for this project, to gain those improvements in command and shared control, operational and training effectiveness and also to realise some of the operational services, the mature shed services, are the gains we are looking at. I am very clear that is the driver. The proposed location for 17 Construction Squadron, which is in location of the existing fire training area, was looked at through a formal Defence Site Selection Board process where we look at options for where we can actually place these types of facilities. The options that we looked at during that Site Selection Board process were limited. If you are referring to land south of 6 CSR's line, you will note that in the building that we provided that brief today, that is sort of common use area. But if you looked at the back of that building we then border straight up on another regimental sized unit, referred to as 9 Force Support Battalion, which is an element of the 17th Construction Squadron—I am sorry, the 17th Combat Service Support Brigade. There are too many 17ths and CSs in there. That organisation pretty much pushes all the way down to the boundary of that army area that we showed you.

The other aspect of why it is important to actually—or that location that we have chosen for 17 is the ultimate option for us is, again, we were talking about those efficiencies, the command and control aspects. Where 6th Engineer Support Regiment headquarters is currently located with 21 Construction Squadron on the southern side, you will have 17 on the northern side of that. Lieutenant Colonel Johnson, as the commanding officer, has that direct relationship back to each of her squadron headquarters for that. There are also gains in efficiencies as far as having the location of 17 Construction Squadron in that area because we are looking to, under the shared services model, the 17th Construction Squadron to share or to be supported by the operational support squadron which is also currently in the existing ESR compound. We want to try to put the regiment completely, both construction squadrons plus the operational support service squadron, in that footprint. That is why the fire training area and the land adjacent to it, that is the naturally wooded area that we showed you, was selected.

CHAIR: Perhaps you will take this on notice, Brigadier. I am keen to understand this. Just to be very clear: using this diagram, the aerial shot that shows what looks like vacant land, why was that not considered as suitable for the construction of those buildings that we saw? By constructing it here, you remove not just the cost but also the risk of the demolition of the FTA. If the contamination issues turn out to be much more serious then you anticipate, that will interrupt your January 2017 posting cycle which I understand is a hard end to this particular project. Is that correct?

Brig. Beutel : Just back to your first question in relation to why that area was not suitable for that. I am advised here that is a part of the wildlife corridor that we referred to. I also note that—and I hear what you are saying that we could, potentially, by going down there not with the FTA not incur the costs of having to reconstruct the fire training area, that we do not potentially have those risks involved, as you said. But, ultimately, that has to be balanced with, okay, what we are trying to do is gain efficiencies in operational effectiveness and how the squadron is operated. I know it is far better to have the squadron here in Amberley—even if we were not allowed to build in that wildlife corridor, we were precluded from doing that, it is good to have them that close. It is better than Holsworthy. But, again, if we are moving them all the way from Sydney to Amberley, we would want to have them actually in the location, next to their parent unit, to gain those efficiencies.

With respect to the risks of schedule and also potentially dollars, in relation to the fire training area, again I am more than happy to talk to you in some detail in the in camera hearing. The reason I prefer to talk about it in the in camera hearing is that, particularly with the dollars, we do have costs that are related to risks and, again, with the form of contracting that we are approaching, which is a head contract, a hard contract, a fixed sum, it would not behove the Commonwealth at the moment to start talking in detail about the allocation of risk and those dollars in a public forum.

CHAIR: If there are delays in-project, can you shift the January 2017 posting cycle time frame, or do you have to compress the construction in the period before January 2017?

Brig. Beutel : I will hand over to CO ESR, Lieutenant-Colonel Johnston, in relation to what flexibility she has in relation to posting cycles and the difficulties of that, and then I will look to Mr Muir to address how we could potentially manage delay within the program.

Lt Col. Johnston : As you can appreciate, the Army posting cycle is deliberately aligned to things like schooling. If we are going to move approximately 70 families, 140 people, ideally it will line up with new schooling years and things like that. The other main reason it is preferred in the December 2016-January 2017 time frame is to align into the year between AACAP cycles. You can appreciate the amount of focus and time away from home spent on that project. 17 Construction Squadron will be responsible for the 2016 and the 2018 AACAP cycles, so you can see that the preferred year for this major change would be the 2017 time frame. They are the two main considerations in that preferred time frame. Ultimately, if there is project delay we can always get around that as required, but it is the preference that this major change occur in the January 2017 posting cycle.

Mr Muir : We have split these works into several stages—they are called contractual stages. Essentially they are smaller projects within the project. The first stage is the fire training area, because that is obviously the primary factor that has to be relocated. That has a period of roughly five months, which takes it through to February 2016 for completion. Until that is done we cannot commence stage 3, which is a 17 Construction area; however, in parallel with that we have stage 2, which is operational support and the workshops—they are on the western side of the corridor—which can commence. While the fire training area is still operational, we can start the workshop C, the workshop B, the Q store and start to form up the deployment area. That gives us the flexibility where if there is some delay in the fire training area and we have to commence the 17 Construction element later, at least that element for the operational support will be ready and they will have an area of land for vehicles, temporary storage et cetera. When we get to 17 Construction, what we will target is the headquarters building first, then the various troop buildings. I would be very surprised if a contractor does not tackle it the same way as it was tackled with 21 Construction—they start the HQ building, they do the foundations, then that group of people moves onto the next building and do the foundations, and they go down the line. Then the steelwork follows through, then the finishings. The headquarters will be finished first and then all of the troop buildings. After that, and if we are further pushed for time, the shelters will be the last thing to be done. The key thing is to get people into the office space and accommodation, so that will be the priority of attack. We will manage that through the risk register, a live document, that we will continually monitor as we go through to minimise any delay and the impact on the user.

CHAIR: Is there anything about the contamination of the site that keeps you awake at night when you think about having to manage this project? Because I do not want to be kept awake at night.

Mr Muir : All the testing that has been done to date indicates that it is all below the allowable levels. You cannot physically test every square metre of soil before you start, so to mitigate that we have got a testing regime in place for the contractor. Basically every scoop of soil that comes out has to have some form of testing done. It is stopped and held temporarily until the test results are confirmed and then we deal with. Contingencies are there to deal with that exact issue. Even though it is well-investigated site, it is still a reasonably high risk for us. There is nothing currently known there that gives me any concern.

Brig. Beutel : I will just add one more point. We have spoken about our construction periods starting from mid 2015 needing to be completed by late 2016. That is the total period. When we go to market, we will be expecting the contractor to provide back a schedule for us to do that. That will be part of our consideration for the selection of that contractor. I also note that within that period of time, and I am happy to talk about it in camera, there is an amount of float within the schedule that Defence will hold in relation to that timeline as well. Again, as far as mitigating some of these risks that you have highlighted.

CHAIR: And making sure that Defence holds onto that floating part of our remit as well. This morning, Wing Commander Blair, you were very eloquent at talking about the changing requirements at RAAF Base Amberley, as to new aircraft being used and you operating from the base. Could you share those comments for the record, because I think it does inform why we do need to go to an improved fire training facility.

Wing Cmdr Blair : Historically, Amberley has had strike aircraft operated from the base, which were relatively small aircraft. In that era, we had the previous version of firefighting vehicles. Over recent times, we have had larger aircraft now operating in Amberley, so the C17. Six of those are there at the moment and another two are coming. Also, there is the KC30. There are five of those operating there.

Mr PERRETT: Sorry, for the punters out there, could you just give an idea of the difference between a C17 and an F-111?

Wing Cmdr Blair : There is a massive difference. The F111 and now the current Super Hornet are two-seat aircraft. They are relatively small. To put some parameters on it, the F111 had a wingspan with the wing swept of just 35 feet and it was about 70 feet long, which even in strike terms is a pretty large aircraft. But it is very small if you park that beside a C17. Most of the local people around here would be well aware of it, because they have seen it fly around.

Mr PERRETT: There are people listening from all over Australia.

Wing Cmdr Blair : It is much larger, so now you are talking about large, airliner-type sized aircraft.

Senator GALLACHER: What is the payload?

Wing Cmdr Blair : I actually do not know the figure for the payload off the top of my head for a C17, but one of the guys behind me will grab that while we think about it. The point is that though is that the type of aircraft operated at Amberley has changed dramatically over the last five years or so. With that change, we have had to keep up with our firefighting response. To fight and be able to react to those larger aircraft, we now operate the Panther fire vehicle, which we have had since about 2008. Having the Panther or a larger fire truck allows you to have less trucks online to react to those larger aircraft, essentially. That Panther is about 50 per cent bigger, so it is larger, it is heavier and it has a bigger turning circle compared to what we have had in the past.

The fire training area that we currently have and that we use at the moment is a product of pre-Panther days, so it is relatively small. As we discussed this morning, it has got a 63 metre diameter. We use that fire training area at the moment. But to make sure we do not have any of the foam contamination issues, it artificially restricts training at that current fire training area. That is the main issue with the current fire training area. It is just a product of days when we had smaller fire trucks.

Mr PERRETT: And smaller planes that you had to concern yourself with.

Wing Cmdr Blair : The two go together; that is exactly right. To summarise that: whilst we have a fire training area that we can use at the moment, we will always manage the foam as a priority but restrict our training in that respect. If the fire training area was replaced, you would not replace it with something the same size; you would replace it with something that is fit for service for the current fire vehicles we use and that would also be fit for purpose for the fire trucks we see in use for the foreseeable future. So the current Panther's life of type is at least another 10 years, with possible extensions beyond that. When I talk to the SMEs at the fire section, they do not see trucks getting smaller in the future, but they have also advised me that it is probably about the right size; they do not see, for example, the next generation being massively bigger again and us running into the same problem with it in 10 years time. So, to the best of our knowledge, the current size is about where we will be at in the future.

Senator GALLACHER: We will get these facilities built, hopefully, and they will be all ready to go. Where do the people go when they get here? Is there accommodation for them, and how does that all work, or do they just find their own?

Brig. Beutel : Again, I will hand to CEO 6ESR.

Senator GALLACHER: Is that another project, is it, to house them?

Lt Col. Johnston : The move has been planned since 2010, subject to, obviously, approval in this forum for the facilities. But it has appeared, therefore, in the Army's master migration plan, which is the strategic document that we provide to Defence Housing Australia so that they can do their planning, and Colonel Smith, if he wishes to, can elaborate on how that is done. A large number of married quarters and other service residences have been provided now for the expansion to the base, across the board, not specifically for 17 Construction Squadron but for the overall expansion. Members are able to use those as entitled. Single members or those with families will potentially choose to live in adjacent areas such as Brisbane and will be able to purchase their own properties—basically, as it is now.

Senator GALLACHER: So there is no issue with another 70 families coming into Amberley?

Lt Col. Johnston : No, there is not.

CHAIR: Are there any other questions?

Mr PERRETT: Yes. I think in your opening remarks, Brigadier Beutel, you mentioned solar panels. On our inspection tour, we saw lots and lots and lots of roofs—I think I saw one roof with a significant array of solar panels. I was just wondering whether the costs are there yet for the military to install solar panels at construction, and about the benefits that would flow from that.

Brig. Beutel : Yes, Mr Perrett. So, just to confirm: as to having solar panels to generate power back into the grid, that is only going on the proposed Construction Squadron headquarters facilities, to feed back into the grid. There are no other photovoltaic cells that are being placed. There are actually hot-water solar panels being placed on certain buildings to support those facilities that have those ablutions and a requirement for hot water. You are correct in that there is potential to put on more of these photovoltaic cells because of the huge roof space for that. At the moment, though, in Defence we are only starting our journey in relation to looking at those more renewable energies. The technology is improving, as you know. So, as to the potential for this project—

Mr PERRETT: I recall well that when Labor got into government there were 7,000 homes with panels on their roofs; when we left, I think it was 1.3 million. So it has changed significantly—the cost efficiency.

Brig. Beutel : So as to the potential for this project: no. I also note, when we look at the cost estimates for this, Defence's size as a purchaser or a customer for retail energy. We do actually negotiate our own rates for that. I do not have the details or the cost-benefit analysis of this aspect. But I would like to get on record that, as far as renewable energy is concerned, Defence is currently undertaking a feasibility study for a large solar farm to generate energy into the grid in the vicinity of RAAF Base Tindal. As I said, it is very early days and we are looking at the feasibility aspects of that. What we are looking at, as you are probably aware, are limitations in the power supply from Darwin down the Darwin-Katherine corridor, also some big expanses of open ground and lots of sunlight. So, Defence have said, 'We are not on this project, but we are very interested in it', and we are starting to look at that process.

CHAIR: Thank you. Are there any other questions?

Brig. Beutel : Sorry, Senator, I have just one request. Cognisant of your comments about risk and time lines I would, with your permission, like to submit to the committee a request for concurrent documentation, specifically request to the committee for approval to issue tender documentation to allow us to commence the request for tender process for the 17th Construction Squadron project prior to parliamentary approval, noting, though, that the documentation, subject to approval, is caveated strongly and heavily and that it is subject to parliamentary approval. The act allows us to request this, and this is one of those other mitigation measures. So, with your permission, I would like to table that letter.

CHAIR: We will consider that. Would a member like to move that the brigadier table the document?

Mr PERRETT: Yes.

CHAIR: Thank you, Mr Perrett. We will consider that in the normal way, so thank you very much. As no other witnesses have anything to add, I will close this public hearing.

Resolved that these proceedings be published .

CHAIR: I ask those who are not authorised to attend the in camera hearing to leave the room.

Committee adjourned at 14:11