Mark Butler (Port Adelaide, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Standing Committee on Public Works, I present the committee’s seventh report of 2008, entitled Update report: the Christmas Island Immigration Detention Centre Project.

Ordered that the report be made a parliamentary paper.

This report presents the committee’s views on the planning and construction of the Christmas Island Detention Centre by the Department of Finance and Deregulation. The committee of the 40th Parliament reported on the original proposal for the centre back in December 2003. At that time, the total cost of the proposal was estimated at $276.2 million. In January 2008, the Department of Finance and Deregulation advised the committee of a cost increase for the project of $120 million. This brought the total value of the project to $396 million, or about a 43 per cent increase. Finance briefed the committee on the reasons for the cost increase at a public hearing on 26 June 2008.

There have been some positive lessons for project planners as a result of these very significant cost overruns. The current two-stage approval process for public works provides much greater cost certainty for project proposals. But, overall, the committee was not satisfied by the department’s justifications for the cost overruns. The key factors cited, such as the breakdown of the port crane, the isolation of the location, the high transport costs, competition with the booming mining sector and project design expenses, should have been foreseen. The committee was also concerned with other cost overruns such as the budget for sundry fees, design and project management. The committee considers that it was presented with a poorly costed plan in 2003 which was then inadequately managed.

The Department of Finance and Deregulation asserted that the project did include adequate planning for risks associated particularly with the port crane. However, the committee is unable to agree with that assertion in the absence of clear evidence of an appropriate risk assessment process. This highlights the need for the committee to be provided with rigorous risk assessment documentation as part of the inquiry process.

The committee has also expressed its concern about the project to the Auditor-General, whose agency, the Australian National Audit Office, is currently undertaking an audit of the project.

I would like to thank the committee for its work in relation to the review of the Christmas Island immigration detention centre project, and I commend the report to the House.

Peter Lindsay (Herbert, Liberal Party, Shadow Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

I concur with the report of the chair of the committee tonight. This year, the Department of Finance and Deregulation wrote to the Public Works Committee regarding the increase in budget for the Christmas Island immigration detention centre project. While the final project cost increase was approved in August 2006, the PWC was not informed until January 2008, some 18 months later. These are serious matters.

The original budget for the works increased from $276 million at the time that the PWC reported in 2003 to almost $120 million more, and the Department of Immigration and Citizenship and the Department of Finance and Deregulation offered to brief the committee on the project. This report is a result of that briefing.

Finance claimed that cost overruns were due to the initial underestimation of the cost of works, the delay in the project design documentation by the main works contractor, the failure of the port crane and other matters. The evidence given on 26 June this year was disturbing for the committee. During the briefing—and this is in the Hansard transcript—I asked Mr Rick Scott-Murphy, the First Assistant Secretary and Manager, Property and Construction Division, Asset Management Group, Department of Finance and Deregulation, a number of questions. I asked Mr Scott-Murphy:

Going back to the start of all of this, you have given evidence that when you came to the committee originally you did not really know what the project was going to end up costing. Is that right?

and Mr Scott-Murphy said:

We had a very dim, obscure view of what was entailed in the project.

Mr Scott-Murphy went on to confirm that the department did not know accurately what the cost might be. I then indicated that the committee is charged with determining whether projects are value for the Commonwealth of Australia in its expenditure of money. I asked Mr Scott-Murphy:

How could the committee have done that without knowing what it was that they were actually approving? The answer is that they could not; is that right?

Mr Scott-Murphy said:

I think at the time they could not, with accuracy, know that.

Not surprisingly, the committee reports to the parliament tonight that we have not been satisfied with the justifications offered by the Department of Finance and Deregulation. Neither have we been satisfied with the compensation agreement reached between the department and the main work subcontractor, because the agreement is beyond public scrutiny.

However, some good has come of all of this. Finance has now introduced a two-stage approval process that does provide clarity. Future projects will have scope definition at a functional design brief quality. They will have a schematic design that defines what it is that is being delivered and a cost estimate based on the definition of scope and schematic design. The order of accuracy that will be presented now in the two-stage approval process is roughly 80 per cent certainty of out-turn cost. Finance will then provide the contingency in the budget to give greater certainty that the costs will not blow out.

The committee has used two other avenues available to it to underline its concerns that have surfaced as a result of this report and I can assure the parliament that the Public Works Committee, under the chairmanship of the member for Port Adelaide, is well and truly doing its job on behalf of the Commonwealth of Australia.