Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The Public Works Committee Amendment Bill 2006 was originally to be debated under the non-controversial section of the Senate’s Notice Paper on Thursdays, but I took it out of there because I think there are some important principles to be addressed. In fact, I will be moving a number of amendments. On the face of it, the bill would not have seemed at all controversial, but I think there is an important principle which needs to be tested before the Senate and exposed in debate.

The major purposes of this bill are to amend the definition of a ‘public work’ to include works funded through public-private partnerships and other similar arrangements, to increase from $6 million to $15 million the threshold value of projects that require referral to the Joint Standing Committee on Public Works to provide for the threshold value to be varied by regulation and to insert gender neutral language into the act. On the last point, it is good to see the government addressing areas where the old-fashioned view was that everything had to be in the masculine gender.

The background is that this act—and the Public Works Committee Act goes back four decades—governs the work of the Joint Standing Committee on Public Works. The committee was originally established by the Commonwealth Public Works Committee Act 1913 and first met in 1915, which means it goes back eight decades, not four. It is one of the old investigative committees of the parliament. The act requires that all public works of the Commonwealth which exceed $6 million in value be referred to the committee via the houses of parliament or by the Governor-General and, with some exceptions, that all public works sponsored by Commonwealth departments and major statutory authorities with large building programs come within the ambit of the committee’s investigative powers.

It is unexceptional that either house of parliament is able to set up any committee with any term of reference or guideline it wishes under the broad aegis of the rules and orders of that house. Of course, it is the parliament itself which has accepted that a committee should be set up by a legislative act rather than by a rule of either house. But the question, of course, is whether the executive is entitled to restrain or prohibit the workings of a parliamentary committee in any way. Like a number of joint parliamentary committees, the Public Works Committee is affected by statute. The statute does not attempt to limit the primary power of referral that the parliament has. Section 18(1) of the act states:

(1)      A motion may be moved in either House of the Parliament that a public work be referred to the Committee for consideration and report.

The act does not differentiate between referral moved by a minister or member of either house, including a member of the committee. It also does not restrict a referral of works based on costs. A work costing well below the threshold amount is able to be referred to the committee, subject to approval by either house. All of this is unexceptional so far. Section 18(8) of the Public Works Committee Act provides that works, the estimated cost of which exceed a threshold amount, currently $6 million—to be raised to $15 million by the bill—cannot commence unless they are referred to the committee or are declared exempt for certain reasons.

My problem is this: there is currently no provision for the committee to self-refer a work for inquiry and report by a motion passed at a private meeting of the committee. Nevertheless, despite that provision, that is effectively what the committee has been doing. My view is that the committee is operating properly and as it should in terms of determining its own work schedule, but it is contrary to the statute and will continue to be contrary to the statute. In an apparent conflict with the statute, the committee’s Manual of procedures for departments and agencies provides for an informal arrangement whereby agencies are to notify the committee of medium works of a value between $2 million and $6 million. The manual states that the committee may inquire into a proposed medium work if it so chooses.

Frankly, the manual is not entitled to do that: the statute prohibits it. There is—perhaps to pervert the meaning of the word—a lacuna between what the statute says and what the committee is doing. This apparent conflict between committee process and statute needs to be regularised. I must stress that the Democrats have no quarrel, none whatsoever, with the way in which the committee has been operating. We have no quarrel with the way in which it is chaired and managed and the way in which it operates. Neither do we take any issue with the Public Works Committee having a statutory underpinning. That is a feature of other statutory committees. We have no objection at all to a threshold being established above which the committee must conduct an inquiry and we do not oppose the proposed $15 million threshold. We do not take issue with the parliament deciding to give the government of the day the majority on the committee. In short, we support current policy and practice. However, we are concerned to ensure that any possible conflict between statute and parliamentary rights and privileges and entitlements and committee practice is fixed.

In our amendments before the Senate and in our proposals we are naturally biased to preserving the primacy of parliamentary discretion and we are seeking two things to be made clear in the amending bill. The committee is to be automatically advised by agencies of all proposed public works above a threshold—and we have suggested, based on precedent, $2 million—and, as at present, the committee on its own cognisance may examine any project below the upper threshold. We are accepting that it must examine above the threshold but we believe, as parliamentarians, the committee should be entitled to examine any project that it wishes below the upper threshold. Based on advice and precedent, we accept that it is unlikely that this discretion will be exercised very often by the committee.

Why do I feel strongly enough about this to take it out of the non-controversial Senate business section and to agitate for change and to lobby—probably unsuccessfully—for this change? There are two important principles. Firstly, you should not have a statute which is contrary to the actual practice of the committee because, effectively, you are defying the law and it is the job of all of us to obey the law. Secondly—and it is a bigger point in my view—I do not think the parliament in any of its guises should ever give up its powers, its rights, its freedom or its independence to the executive. That is effectively what this legislation does. Effectively, the parliament is saying that with respect to this committee it cannot carry out an accountability role below a $15 million threshold.

In passing I should say, incidentally, there is a danger with any threshold. Public sector employees and management are as able and as capable as anyone else in the for-profit or not-for-profit world of trying to manipulate matters to make sure that they get an easier ride. There is nothing to suggest it unlikely that someone might break up a contract into several parcels so that they all fall below $15 million and therefore are not subject to the rigours of the Public Works Committee’s view. I am sorry, because I am pretty certain from the reaction I have received, that I have not been able to persuade the parliamentarians concerned on this committee and in government to my argument, but nevertheless, I did want to take the opportunity to put that argument before the Senate.

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I appreciate Senator Murray’s input into this debate and understand to a degree some of his concerns. It is important to have the debate outside the non-controversial legislation time that Senator Murray removed this Public Works Committee Amendment Bill 2006 from. However, I certainly disagree, and the government would disagree, with the amendments that Senator Murray has proposed.

The major features of the bill which Senator Murray has articulated go towards the raising of the threshold—and that is one of the prime concerns—and then placing that threshold change into regulation rather than having an amendment to the act each time we need to raise that threshold. As Senator Murray would acknowledge, I am sure, that is a very common thing to do. When there are consumer price index issues and when amounts are set in legislative form, in the form of an act, it is much more difficult to change. When we can rightly expect that there will be inflationary pressures and other issues as time proceeds requiring us to raise that limit, the best place for that is within the regulation framework.

I would like to comment on some other issues that have been raised. The definition of a public work has now been broadened quite dramatically to prevent scrutiny of matters of major public works being avoided by the parliamentary committee. The widening of the definition is very important and I think it goes some way towards allaying the concerns that have been raised by Senator Murray.

There is another issue, and it is one I think we should always fall back to as one of the basic tenets of the Public Works Act. Any member of parliament, be it a minister, an opposition member or a minor party member of either house, at any stage can refer the matter to the parliament. I think that is where under the proposed legislation any works would be flagged for scrutiny, for whatever reason, and I do not think any reason would occur where it would escape the scrutiny of the committee or the department. I suggest that if any member of parliament is aware of any works at any time they can at least raise that and then it is a matter of public record. That would then give us an indication if the system is not working.

My understanding also is that there is a list of current works undertaken by each government department that is readily available for any member of the public or parliament to scrutinise. That list would also flag the size of works and the dollar value of works, if indeed we thought that those were being missed out from the proper scrutiny of the Public Works Committee.

I think it is also important to mention that matters under the value of $15 million, whilst significant in their own right, have scrutiny within the ambit of the ministerial process and certainly within the senior departmental process. I think that it is right and proper that anything over the value of $15 million in this day and age should be automatically referred to the Public Works Committee and matters below that threshold—and the suggestion is between $6 million and $15 million—would have a discretionary approach from the committee and, I stress again, any public work could be referred by any member of parliament. I think the saving grace in every aspect of this is that those smaller works can be referred to at any stage.

It is also important to place on the record that, since September 2005, 17 projects costing less than $15 million have been reported on. As a member of the Public Works Committee, I think that has been a significant load. Some of those works have been below, or just bearing on, the $6 million threshold. In some instances, if they had been $100,000 or $200,000 less, they may not even have come before the committee. That should allay Senator Murray’s concern about departments or agencies manipulating figures to avoid scrutiny. That would be extremely difficult to do, because some of the figures have been extremely borderline.

I am very much in support of the bill, which goes a long way towards widening the net. We are now having public-private partnership arrangements, which have not been captured completely by the act in the past. The definition of ‘public work’ will also incorporate matters irrespective of the source of revenue or funding, so the value of a project, rather than whether the source of income or revenue is from the government sector, will be the best way of defining it. I commend the bill to the Senate and I hope Senator Murray’s concerns have been allayed somewhat.

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise as a member of the Joint Standing Committee on Public Works to make a few comments on the Public Works Committee Amendment Bill 2006. At the outset, I support Senator Parry’s comments on the specific provisions of the bill. Senator Parry is a member of the Public Works Committee. I take this opportunity—it is early in the week—to compliment him and other members of the government parties on their work on the committee. It is a committee that functions exceptionally well. Our task, as the statute requires, is to assess the value for money of public works projects that are undertaken by government departments and agencies. We do that in a very bipartisan and, I believe, professional manner. I also note the comments of Senator Murray, who has a very keen interest in this area. He is a member of the Joint Committee of Public Accounts and Audit, which has an affinity with the Public Works Committee.

The specific provisions of this legislation are supported by the opposition. They arise, dare I say it, out of suggestions coming from the committee itself. I note that the Parliamentary Secretary to the Minister for Finance and Administration, who is in the chamber today and is a former member of the committee, is aware of this. I compliment him on taking up these propositions and bringing forward this legislation. Firstly, there is the issue of the threshold, which has been at $6 million for some time now. All members of the committee realise that was an unrealistically low figure given the cost of major projects in this day and age. The increase reflects a suitable adjustment so that the committee is not overburdened by dealing with projects of a monetary value which would have classed them as major projects many years ago but would not do so today.

Six million dollars does not buy you a lot. However, it is not an insignificant amount, particularly when it comes to fit-outs. As Senator Parry and the government have acknowledged, the committee still has the discretion to look at medium-value projects below that amount where it is advised of those projects and feels it would be worth while to do so. So we support the increase from $6 million to $15 million as a sensible adjustment. In case anyone should think that increasing the amount means fewer public works will be scrutinised by the committee, let me assure them that will not be the case. In fact, the workload of this committee has increased substantially in the last couple of years, as all members can attest.

The second aspect is a change in the definition of ‘public work’ to pick up changes in construction techniques and funding techniques, particularly the use of private-public partnerships. The committee has recently been considering projects which are private-public partnerships in the defence area. I think it is fair to say that, even for those on the committee who have some expertise or long experience in dealing with the building and construction industry—and that does not include me—this is a pretty complex area. The committee has been applying itself diligently in examining private-public partnership projects which are costed over, say, a 30- or 40-year period. Where the committee is required to approve an up-front appropriation, it has been at pains to ensure that all the relevant information is before it so it can ensure that the Commonwealth and taxpayers get value for money.

There are a couple of other things that I also want to add. The committee has from time to time expressed an interest in or views about other issues. One of those is the fact that the committee does not have the statutory power to look at leases—and I am sure, Mr Acting Deputy President Brandis, your interest will be tweaked here. For some time major leasehold arrangements have been entered into by government departments and agencies which are often far in excess of the cost of a public works project. Also, sell and lease-back arrangements have been entered into by various departments and agencies.

There have been times when committee members have been, for instance, examining a construction project or a fit-out project of, say, $5 million or $10 million, but we were aware that a leasehold arrangement was being entered into which amounted to $20 million or $30 million. We can look at the former but we cannot look at the latter because of the statutory limitations. I am not arguing or proposing that we change the legislation at this point in time, but this is one of those interesting issues that arises before the committee. There are other mechanisms of the parliament, such as the estimates process, that are available to senators and the parliament to look at those leasehold arrangements, and they have been used on many occasions in hearings of the Senate Standing Committee on Finance and Public Administration, as you no doubt would be aware, Mr Acting Deputy President.

One other issue that is of relevance, particularly with some of the more recent projects that have been brought before the committee involving construction and fit-out or major fit-outs of buildings that are being leased, is the practice within the industry of the reversionary payment. That is where the developer has a price for the project, which the Commonwealth department has to pay, but at the completion of the project, as part of the overall project costs, there is a discount for the department or the agency entering into a long-term lease. This may take the form of reduced leasehold payments or of rent-free accommodation for a period of time or, indeed, of a lump sum payment back to the department. Without going into specific details, this has attracted the interest of the committee because it goes to the question of, ultimately, how much the actual cost of the project is to the Commonwealth. At the end of the day, that is what the committee is required to approve—that is, we are required to assess and approve or not approve the expenditure of a dollar amount on a public works project.

Other issues, of course, have been identified such as what happened in the case of the proposed Christmas Island detention centre, where there was a huge cost blow-out. It certainly would have come to the point where that project would have been referred to the committee by the parliament, if the government had not taken other action at the time. Another recent example of a blow-out was where the committee gave approval to a project of about $18 million or $19 million for ANSTO to build a new radiopharmaceuticals facility at Lucas Heights. The committee assessed and approved it, and then it came to light sometime later that the board of ANSTO had in fact decided not to go ahead with the project because, after it did some further homework and assessment, it realised that the cost of the project was going to blow out to about double the original amount requested—that is, $40 million. I particularly was concerned about that because, certainly to my understanding, the committee only became aware of that sometime after the actual decision of the board.

Our committee does not have direct power to go back and reconsider projects because our job finishes once we have dealt with the reference. I am concerned about this issue, but we do often enter into arrangements with departments and agencies whereby they will continue to report to us on the progress of the development of a project after its approval so that we do not have situations where there are substantial cost overruns or blow-outs after the original decision has been made.

With those comments, I indicate that we support the legislation. I thank particularly the parliamentary secretary, other members of the committee and members of the government who have worked to get these changes introduced. As I said, members of the committee have been advocating these changes for some time.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

On behalf of the Labor opposition, as the shadow minister who has been given responsibility for this matter, I wish to make a few remarks in support of the Public Works Committee Amendment Bill 2006, which is before the Senate today. Before commenting on the specific purposes of the bill, it is worth drawing to the attention of the Senate that the Commonwealth Public Works Committee Act 1913 and the first meeting of the Parliamentary Standing Committee on Public Works in 1915 make the committee one of the oldest investigative committees of the parliament. We should note that fact, particularly at a time when a government—and an out-of-touch government—that now has a majority in the Senate and the House of Representatives is intent, in an arrogant and disrespectful way, on winding back and restricting, particularly in the Senate context, the investigative powers that are so important in a democracy.

We did not see any mention of reducing the investigative powers of Senate committees prior to the last election. We have seen a lot of activity reducing the power of Senate committees since the last election, but not one word about it was mentioned prior to the last election, when the government obtained a majority in this chamber. In that context, it is important to note that this is an important committee. It is overseeing, over the term of a government, hundreds of millions of dollars in public expenditures with respect to capital works.

The bill itself amends the definition of a public work to include works funded through public-private partnerships, commonly known as PPPs. PPPs are a contentious public policy area. There is no doubt about that, whatever one’s views on PPPs. They involve the government of the day—not just Commonwealth, of course—entering into a partnership relationship with the private sector, which actually provides the capital and generally owns and, in some cases, operates the public work that is undertaken. PPPs are controversial in some areas. Therefore, it is important that, in the examination of these projects, effectively, the public worth of a public work that is subcontracted in this way through a PPP should be included within the oversight of the standing committee and within the values set for examination by the committee.

That brings me to the second change: the proposal to increase the threshold value of the projects under consideration from $6 million to $15 million. I did not go back to 1915 but, in looking back over the last 30-odd years, found that the threshold in 1969 was $750,000, which was raised to $2 million in 1973 and $6 million in 1985. A little over 20 years later, the $6 million is being increased to $15 million. That is reasonable in the context of inflation over that period. There has to be a limit. We can argue about the size of the limit, but the committee simply could not function if it were required to examine every public work undertaken—it is major projects. In that context, the $15 million seems to Labor to be a reasonable figure, given the price increases of public works over the time we have considered. Finally, it provides for the threshold figure, to which I have just referred, to be varied by regulation. That is a sensible approach. To have amendments to bills to vary quantum figures and monetary amounts is generally not the best use of the parliament’s time. To vary those figures via regulation is a more efficient way of dealing with matters.

I want to also draw the attention of the Senate to a related matter. The issue of the Commonwealth’s property asset sales has been a matter that has been investigated by the Auditor-General in respect of sale and lease-back arrangements. I note that the Liberal government sold 59 properties for some $980 million in the three years to 2001. A hurdle rate—the nominal rate of return that was required to be reached or the property would be sold—was set at between 14 and 15 per cent; otherwise divestment, the sale of the asset, occurred.

The Auditor-General is a statutory, independent office which gives very effective scrutiny of the government of the day. In the time of this Liberal government with its untrammelled and total power in the Senate, cutting back the oversight of Senate committees, it is very useful and important to have a statutory, independent Auditor-General. The Auditor-General’s report noted:

The use of a hurdle rate of return that is too high would result in a sub-optimal investment outcome and financial loss to the Commonwealth when combined with long-term leaseback arrangements.

That is the comment it made with respect to examination of at least some of the property sales by the Commonwealth in that three-year period. It is an important conclusion because it indicates that, at least in some areas, the sale by the Commonwealth of property actually resulted in a loss to the Commonwealth because of the rental that the Commonwealth had to pay and there being no net gain in debt disposal by the Commonwealth against that higher net rental rate of expenditure long term by the Commonwealth.

I will finish on a bipartisan note. I acknowledge the contributions of Senator Forshaw and Senator Parry, who are both hardworking members of this committee. It is a committee that does a good job. It is one of the less publicly acknowledged committees, with minimal publicity, but it is an important aspect of parliamentary duty and responsibility that is little recognised. I thank the members of the committee. The bill we have before us and its component parts are sensible arrangements that have come from the committee itself after considerable examination by the committee in a bipartisan way. The Labor opposition supports the bill before the Senate.

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

Firstly, I thank honourable senators for their contribution to the debate this afternoon. The Public Works Committee Amendment Bill 2006 makes some important amendments to the Public Works Committee Act. The amendments reflect changes in the Commonwealth public works environment since the act was last amended in 1989. They take into account new methods of procurement and the increase in construction prices since the threshold was last amended.

The bill updates the threshold value, for which projects must be referred to the committee, from $6 million to $15 million. It reflects an increase in construction costs since the last amendment in 1985 that Senator Sherry mentioned. The proposed legislation also allows for the value of the threshold to be set by regulation. Again, I see this as being a sensible way to manage this into the future rather than a legislative change being required. This obviously provides for greater flexibility for future updates of the threshold value to accommodate future changes in construction prices.

In reacting to new methods of procurement, the bill amends the definition of a ‘public work’ to make it clear that works funded by way of public-private partnerships, or PPPs, must be referred to the committee—and, as Senator Forshaw has said, a couple of those have been considered or are being considered by the committee at the moment. The amended definition of a ‘public work’ specifically includes public works funded through leasing or similar arrangements, even though the Commonwealth may not necessarily become the owner of the work. Again, this reflects the changing nature of Commonwealth construction procurement, and Senator Forshaw touched on that in his contribution to the debate. Works under precommitment leasing arrangements are not considered to be for the Commonwealth and continue to be excluded in line with existing practice. Together, these changes update and modernise the Public Works Committee Act, which governs one of the longest standing committees of the parliament, as indicated by Senator Sherry. I thank the committee for their consultation during the process of preparing this legislation. We have received full support for the bill from the committee and we commend the bill to the Senate.

Question agreed to.

Bill read a second time