John Williams (NSW, National Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Standing Committee on Public Works, I present report No. 7 of 2008, Update report: the Christmas Island immigration detention centre project, and seek leave to move a motion in relation to the report.

Leave granted.

I move:

That the Senate take note of the report.

I seek leave to have the tabling statement incorporated in Hansard.

Leave granted.

The statement read as follows—

This report presents the Committee’s views on the planning and construction of the Christmas Island Detention Centre by the Department Finance and Deregulation. The Committee of the 40th Parliament reported on the original proposal for the Centre in December 2003. At that time, the total cost of the proposal was estimated at $276.2 million.

In January 2008 Finance advised the Committee of a cost increase for the project of $120 million. This brought the total value of the project to $396 million which is about a 43% 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 to emerge as a result of the cost overruns. The current two stage approval process for public works provides greater cost certainty for project proposals. But overall, the Committee was not satisfied by the Finance’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.

Finance asserted that the project did include adequate planning for risks associated with the 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 concerns 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 Detention Centre project.

I commend the report to the Senate.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Madam Acting President Troeth, and a fine deputy chair of that committee you are. I want to take the opportunity to make a few comments on the Update report: the Christmas Island Immigration Detention Centre project. I would like to draw attention to why it was necessary for the committee to provide an updated report—the committee, of course, being the Public Works Committee.

Briefly, this project was commissioned by the previous government. In 2001 a temporary facility was erected on Christmas Island to detain boat people. It soon proved to be inadequate for that purpose. In 2002 the then government announced its intention to build an immigration reception and processing centre. That centre would accommodate up to 1,200 people. In its 2003 submission to the committee the project was costed at some $276.2 million. However, we now know that the final cost was some $396 million—a blow-out of a massive $120 million. The committee report details a lack of preparation, a lack of planning, a lack of follow-up by the departments of transport and finance and a lack of adequate explanation for the cost blow-outs.

Details have been sketchy because of that hoary old chestnut ‘commercial-in-confidence’. For example, the committee was concerned about the lack of disclosure even on a confidential basis of information relating to settlement of claims with the former contractors. The department of finance have admitted that the original submission did not even have a concept design, and I would like to quote from the evidence. The submission said:

We just had a very broad brush view of what we were seeking to deliver.

What we do know is that, of the additional $120 million required to complete the project, $60 million can be attributed to an issue with a crane—and more on that issue later on; design costs increased from $8.9 million to $15.5 million; project management costs increased from $2.8 million to $6.5 million; and sundry fees and costs increased from half a million dollars to $5 million. Many of the risks contributing to cost increases with this project were of course foreseeable. However, poor planning and non-existent risk assessment resulted in significant project delays and cost overruns.

As we know, Christmas Island is situated some 1,500 kilometres from the west coast of Australia in the Indian Ocean. It is subject to monsoonal weather patterns including regular cyclones. This means that during the swell season shipping is delayed for approximately four months. As a consequence, all materials for the project had to be shipped in. Therefore, delays caused by established weather patterns were predictable.

The geography of the island itself imposes further constraints. Ships cannot pull up directly to the wharf. Goods must be offloaded from a ship and transferred to a barge. In consequence, the port crane was essential infrastructure for this huge project. However, there was no utility assessment of the crane undertaken by either the Commonwealth or the main works contractor before the contract was signed off. The crane developed a series of problems, including significant cracks in its base, and the result was a six-month delay to the project. The crane is owned by the Commonwealth, and responsibility for the crane belongs with the Department of Infrastructure, Transport, Regional Development and Local Government. As a key element in the project—an absolutely critical piece of infrastructure—it should have been thoroughly checked and assessed before the project commenced.

Another risk cited by the department of finance was the competition for resources and materials generated by the current booming mining sector in Western Australia. The department of finance indicated that this played a significant role in the increase in design costs, as in excess of 5,000 drawings had to be produced for the project. The delays resulted in claims from the main works contractor, and these claims were settled to the satisfaction of Finance. The committee, however, is not satisfied, because the compensation settlement between the parties is now well beyond public scrutiny. The finance department told the committee that, as a result of the lessons learned from the Christmas Island project, new processes had been put in place to prevent such project failures in the future. This, of course, does not excuse the lack of foresight on this particular project, nor does it explain why, government approval having been received for the final cost increases in August 2006, there was a six-month delay in reporting such to the Public Works Committee. That occurred on 10 January 2008.

So what do we have? In summary, we have a project demanded by the previous government, motivated by political reasons. We have a set of constraints due to location, remoteness, weather patterns and isolation. We have two major departments responsible either for the construction involved in the project or, in the case of Finance, for the oversighting of the huge cost blow-outs, budget overruns and time delays. We have a Commonwealth department at no stage having sufficient nous to do a risk analysis or inspection of the most critical piece of infrastructure used on the project. As a result of this incompetence, sheer negligence, lack of planning and poor oversight, the Commonwealth—or, really, taxpayers—are stuck with a bill for an extra $120 million.

Then, to add insult to injury, we have a key Commonwealth department, the department of finance, either participating in or approving commercial-in-confidence clauses totalling tens of millions of dollars being paid to the relevant construction companies. There was no care, no oversight, no responsibility and no explanation by a key Commonwealth department, the department of finance, whose primary function is the oversight of Commonwealth spending. In this project, the taxpayer was failed from beginning to end. The department is supposed to catch the sinner, not to be the lead sinner. Finance regularly advises other departments as to the protocols, guidelines and codes of practice for the raising and spending of Commonwealth funds. This project was a financial disgrace from beginning to end, and I know that the new minister will start to insist on some financial discipline within his own department. In that way, going into the future, hundreds of millions of dollars, we hope, will not be wasted on similarly difficult projects. Finally, it would be very useful to have the ANAO report on this project come down in due course so that some relevant practices might be established and imposed on the Department of Finance and Deregulation in its oversighting role on projects into the future.

Question agreed to.