Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I commend Senator Bishop on his assiduous pursuit of this issue—it is the proper role of oppositions. But I do think he has confused two different concepts—and he is not the only one to have done so. I think there is a misunderstanding of the difference between the capital costs of this project and the whole-of-life project costs. The successful consortium that has won this contract was selected as the preferred tenderer after a very detailed, rigorous, value-for-money evaluation process conducted by the defence department. The Minister for Defence announced on 18 August that financial closure has been reached for this $300 million project—and that figure is in 2003-04 dollars. That 2003-04 figure, which was the one used, translates to $339 million in 2006-07 dollars, allowing for inflation. That is the capital cost of the project. The figure of more than $1 billion that you properly said Mr Gary Nairn, the member for Eden-Monaro, had mentioned—and I think the Sun Herald also had a figure in excess of $1 billion—refers to the nominal whole-of-life service payments over the 30-year term of the contract that has been signed. The whole-of-life cost includes the forecast impact of inflation and covers a much broader range of costs than simply the capital cost. It includes the services, maintenance and mid-life refurbishment costs for the 30-year period of this contract.

The winning consortium will be paid an annual service payment, which will commence after the facility is commissioned in late 2008. I am sorry that I do not have the exact commencement date but I am advised that we expect the facility to be commissioned in late 2008. The first full-year payment will be $39.9 million commencing in 2009-10. That is consistent with the nature of what is a public-private partnership contract. We think we can do these things a little bit better than perhaps the New South Wales Labor government can in its experience. We think we can at least do better than that.

Under such arrangements the private sector partner does not receive service payments until the completion due date when the facility must be complete and operational. The annual service payment represents the cost to the defence department of the buildings and infrastructure and the cost of the range of services provided such as access control, cleaning, administrative and clerical support, waste removal and maintenance services. So I think that there are two different concepts. Both the $300-odd million is right when it refers to the capital cost, but so is the figure in excess of $1 billion, because it refers to be 30-year life of contracts.