Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Hansard source

I want to speak briefly with respect to the report and endorse the comments of the chair of the committee, with the exception of one matter that he alluded to in his remarks—that is, the matter with respect to the Department of Immigration and Border Protection headquarters project. That project seeks approval from the committee to fit out four leased buildings in Belconnen and the Canberra Airport precinct areas of the Australian Capital Territory. The estimated cost of those fit-outs is around $255.3 million, excluding GST.

The Department of Immigration and Border Protection currently leases 100,000 square metres of office space in 12 properties across four Canberra locations. According to the department, the current leases are all approaching the end of their terms, which I understand expire between 2017 and 2020. This project is important in order to meet the evolving requirements of the integrated department. The headquarters project was therefore initiated. The benefits of consolidation will include providing long-term lease savings to the Commonwealth at a reduced office rent rate and a reduction in the number of buildings in the department's ACT lease portfolio from 12 separate tenancies down to five. That is the basis for the project.

The $255 million that is being asked for is comprised of around $212 million in lease incentives offered by the building owners, $25 million of Commonwealth funds provided through the 2014-15 budget and $18 million of internal costs from the Department of Immigration and Border Protection. The department states that consolidation into the four properties will result in a $236 million saving over the life of this project of about 30 years. This was based on a cost-benefit analysis provided to government by Synergy Group Australia in April 2016—that is, about a year ago. The $212 million lease incentive is made up of $136.4 million in building owner contributions and $75.9 million in up-front capital funding, amortised over a 15-year period. That, in essence, is how the $212 million incentive is made up. The cost-benefit analysis was based on a 30-year analysis, which, indeed, differs from the lease arrangements for this project, which provide for a 15-year initial term with two five-year rights of renewal thereafter. The analysis is also based on assumptions which include the department's long-term needs and operations and future market rental rates. Labor members of the Public Works Committee did not support this proposal. Whilst we did not have the opportunity to provide a dissenting report, we nevertheless wanted to make it clear that this was a project that we would not have supported and that we do not support.

The fit-out costs for the 32,924-square-metre airport precinct are $72.55 million or $2,204 per square metre. For the Belconnen precinct, the cost is $109 million or $1,964 per square metre for the 55,518 square metres being leased. Labor members of the Public Works Committee were not convinced that the proposal represents good value for money. Advice provided to the committee about incentive payments was confusing and inconsistent with other interpretations about the term 'lease incentives'. In fact, that point was made clear in subsequent cost-benefit analysis that was provided to the committee only recently, and that could have been made clearer in the first instance by the department.

The lease rate for the airport precinct in particular appears high when all factors are taken into consideration. Our understanding is that that particular building has been vacant for many years. The costs being paid per square metre would appear to be high under the circumstances, and we believe a better deal could have been reached. The projected 30-year savings of $236 million are very speculative and based on matters which are subject to continuous change. Not only do they extend beyond the 25-year possible lease period but they also clearly take into account speculation or assumptions about the needs of the department in 10, 20 or 30 years time. Those needs may well change. As we have seen in recent years, they have changed, and it is very likely there will be changes with respect to the lease rates that are available for properties in the Canberra area. So making assumptions about what might or might not be needed and what might or might not be the costs in 10, 20 or 30 years time was not convincing to Labor members of the committee.

Finally, the evidence to justify the proposal and expenditure was also at times vague and failed to address matters raised by committee members at the hearings. The current buildings that the various departments are located within, in our view, may well have been appropriate for future use as well. Again, we were not convinced that they needed to be relocated. Lastly, on the issue of refurbishment and costs, again, when compared with other floor space leased by the Commonwealth in other buildings, they would appear to be high. Again, Labor members were not convinced by the arguments put to the committee that those costs were reasonable under the circumstances and that the Department of Immigration and Border Protection required additional refurbishments that generally caused costs to be much higher. For those reasons, we opposed that particular proposal, but we supported all the others.

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