Guy Barnett (Tasmania, Liberal Party, Chairman of the Scrutiny of Government Waste Committee) Share this | Link to this | Hansard source

In accordance with the provisions of the Auditor-General Act 1997, I present the following report of the Auditor-General: Report No. 20 of 2009-10: Performance audit—The national broadband network request for proposal process: Department of Broadband, Communications and the Digital Economy.

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

by leave—I move:

That the Senate take note of the report.

This report by the Auditor-General is a response to a request I made to the Auditor-General in my former capacity as the shadow minister for broadband, communications and the digital economy. I asked the Auditor-General to investigate and report on the NBN request for proposals process engaged in by this government to give effect to the policy it took to the last election, a process that ended in dismal failure. At the outset of my remarks, I want to commend the Auditor-General on what is a very detailed, professional and thorough analysis of this whole process. It does, I think, great credit to the Auditor-General and the independence of that body.

But I have to say to this chamber that the Auditor-General has exposed a complete and utter fiasco in the tender process that was engaged in. Frankly, the whole report by the Auditor-General is an indictment of the Minister for Broadband, Communications and the Digital Economy, Senator Conroy. Minister Conroy must take the blame for what occurred. It does expose what was an extraordinary, outrageous and, frankly, incredibly expensive debacle on the part of Minister Conroy. As the report notes, this was at a cost in excess of $30 million to the government, and proponents, to produce absolutely nothing. The costs of the Department of Broadband, Communications and the Digital Economy alone were some $17 million in relation to this failed fiasco of a process. The Auditor-General’s report is full of criticisms of this process from go to whoa, a process for which Minister Conroy was responsible. I will quote one section from page 14 of the summary document. The Auditor-General says:

In reviewing the process employed, and in light of the outcome, there are a number of observations that can be made. Early in the process, most NBN stakeholders considered that a two-stage process to select proponents for the NBN would have improved the prospects of a successful outcome and may have reduced proponents costs, rather than the one-stage process used.

Secondly, the report said that requesting proponents to outline their preferred regulatory outline for the NBN was ‘unusual’—which, of course, in classic Auditor-General’s language, is a gross understatement—for an RFP process and made a complex transaction considerably more complicated. Thirdly, and most significantly, the report said that a non-Telstra proposal was unlikely to build and operate a commercially viable NBN in circumstances where the proponent was responsible for the risk of paying compensation to Telstra. That really is the guts of the Auditor-General’s report. It is why this thing was doomed from the outset and it is why we ended up with the fiasco that we had.

I would also draw the chamber’s attention in particular to the fact that the report notes that as early as August 2008, some eight months before this whole fiasco was terminated, the department started considering NBN options outside the RFP process because the process was failing. This was eight months before the process was finally terminated. This is where the minister is particularly indictable, because he kept saying throughout this process that everything was on track, that they still expected to sign a contract and that everything was sweet in the paddock. On Wednesday, 3 February 2009, some six months after the Auditor-General noted that doubts were being expressed within the department—and clearly the department had been making these doubts known to the minister—I asked Senator Conroy in question time whether his ambition was to sign a contract in March. He replied:

I have already answered that question, Mr President. I said our ambition was to sign by March.

He was still at that stage, six months later, saying that the government was confident of signing a contract in March, the following month, and yet he knew from his own department some six months beforehand that this whole process was completely failing. Frankly, he is guilty of misleading this chamber, misleading the industry and misleading the Australian people about this whole process.

The most significant thing about this report—and it is the thing that we in the opposition kept saying throughout this process—is that it exposes the fundamental flaw in this process that only Telstra could implement Labor’s election promise to build a fibre-to-the-node NBN. The reason we kept saying that and the reason this process was flawed is that Labor stole this policy from Telstra. This was the policy, the proposal, that Telstra brought to our government. We know it very well—I know it very well. I sat opposite the table from Telstra when they put this proposal to us. All that Labor did was take that Telstra policy, put a Labor heading on it and present it to the Australian people as their policy.

Kate Lundy (ACT, Australian Labor Party) Share this | Link to this | Hansard source

Senator Lundy interjecting—

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Conroy knew, Senator Lundy knew, I knew—we all knew—that the only company that could ever implement this policy was in fact Telstra, because it was Telstra’s proposal to upgrade its network to a fibre-to-the-node network. The whole process of this tender—all the millions that all the other tenderers spent on it and all the money that the department spent on it—was always a waste and always a joke. The government should have been quite upfront and quite honest and said, ‘This is about upgrading the Telstra network; we will enter into negotiations with Telstra about how we do that in the best possible way and in the best interests of the taxpayers,’ and just got on with it. Instead, we went through this farce, this fiasco, that ended up with the debacle that we are aware of.

All through this report it is clear that the department and the minister were well aware that there would be literally billions of dollars in compensation payable to Telstra if anyone other than Telstra was selected as the tenderer. That was obvious to us—I as the shadow minister kept saying that—and the minister knew it. Of course, the ultimate farce of this whole process is that the only company that was ever going to be able to implement this policy, Telstra, was then excluded from the process. Why? Because it did not make a small business implementation plan a part of its submission. For goodness sake, this was a multibillion tender that we all knew only Telstra could implement and because of the process they constructed—

Kate Lundy (ACT, Australian Labor Party) Share this | Link to this | Hansard source

Seven pages of arrogance.

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

after spending hundreds of thousands of dollars to get—what was it, Senator Lundy? —seven legal opinions, they had to exclude Telstra from the process. From that point on the whole process was doomed—it was dead in the water. What we see here is an inexperienced, naive minister who was led into naively constructing a process that was so inflexible and rigid, a straitjacket, that despite all he was saying to companies—Telstra itself has reported to me that Minister Conroy kept saying to them, ‘Don’t worry, it’s a very flexible process’—Telstra’s submission, for the sake of a small business plan, was to be excluded from a process which only it could build.

As a result of this complete fiasco, what do we have? The government and the proponents lost over $30 million, half of which at least was taxpayers’ money. The government wasted 18 months on this debacle, and as a result of all this the worst thing is that the government had nowhere to go but to lock the nation into this $43 billion potential disaster that we now have. It is like the old cliche: when you are in a hole dig deeper. That is what this government has done. Having its $4.7 billion proposal sink like a stone because of this fiasco, it has dug us into a $43 billion hole. The sad reality is that the original Labor policy taken from Telstra was in my view, and I have said this before publicly, the way Australia should have gone. The sensible thing for Australia to be doing is to upgrade the existing Telstra network to fibre to the node for an affordable and sensible costing, with government support, of around $4½ billion to $5 billion. We have lost all that because of this fiasco. We are now locked into the creation of a new government business enterprise called NBN Co. which is going to be given and to borrow up to $43 billion to roll out a network that many are increasingly seeing as one of the great white elephants that Australia has ever been involved in. This report, on which I congratulate the Auditor-General, is an indictment of Senator Conroy in particular and he ought to hang his head in shame.

Kate Lundy (ACT, Australian Labor Party) Share this | Link to this | Hansard source

Far from the picture that Senator Minchin tries to paint of the Australian National Audit Office report, the government in fact welcomes the report into a key election commitment to deliver a high-speed broadband network to Australians that will lead to significant national economic benefits. The NBN request for proposals process was designed to maximise flexibility and allow proponents to offer innovative market based solutions. Many aspects of the RFP process in fact mirrored the FTTN competitive process put forward by the previous government in 2007. I note with interest that it was the quote relating to a single-stage or two-stage process that Senator Minchin sought to draw attention to, because we can remember very clearly that the previous government also had a one-stage process that also allowed proponents to put forward the regulatory changes that were necessary to facilitate their bids. So it is quite hypocritical for Senator Minchin to draw attention to that fact as though it was an area that was problematic in the eyes of the ANAO. While the ANAO has commented on it, it was in fact the practice of the previous government as well. Hence, one own goal to Senator Minchin.

The government is also pleased to note that the ANAO considers that the process was conducted well, and it is very important to note that the ANAO has not made any recommendations. I think that is a reasonable indication that, while this is a worthy analysis of the process, there is no subsequent action required of the government in the opinion of the ANAO arising out of this performance audit.

I also agree with the ANAO’s view—as does, as you would presume, the government—that the process was conducted well and in accordance with Commonwealth procurement guidelines. Again, that is in stark contrast to the picture Senator Minchin sought to put in his presentation to the chamber. Notwithstanding that, as we know the RFP process did not result in a successful outcome for several reasons, including that no proposals were sufficiently well developed to present a value-for-money outcome; proposals lacked committed private sector funding; and regulatory changes sought by some proponents could have given rise to significant risks for the Commonwealth. The ANAO also noted in its report the impact of the unforeseen global financial crisis and concluded that this factor significantly reduced the prospect of a successful outcome.

The ANAO also noted in its report that the panel and the ACCC advised that fibre to the premises was preferable technology to fibre to the node. Just to make sure everyone is clear on this, when the original request for proposals was put to the market it was for fibre to the node; as we now know, Labor’s policy is for a fibre-to-the-premises network.

The NBN RFP process was a very valuable one to the government because it allowed the government to test the market and understand exactly what it was capable of delivering. It provided a pathway to fast-track Australia to a world-class fibre-to-the-premises digital future. That will benefit all Australians.

It is a good opportunity to mention that the NBN policy and the broadband rollout is a project underway. It is, of course, a key nation-building project. It will help stimulate the economy and help drive Australia’s productivity. It will assist in transforming service delivery in key areas such as health and education as well as energy efficiency applications. I note Senator Conroy’s very erudite response to a question in question time yesterday about the benefits of high-bandwidth technologies in reducing Australia’s carbon footprint. It is a timely and relevant point to make, given the issues being discussed in this place.

We know that the fibre-to-the-premises NBN policy we are pursing will connect 90 per cent of premises to a high-speed fibre network, providing speeds of 100 megabits per second. This is a substantial improvement on the speeds that were associated with a fibre-to-the-node network. It will be incredibly beneficial to businesses and homes alike.

Of course, we are just getting on with the job. I think the coalition find it quite difficult to deal with the fact that in the meantime NBN Co. and the government are making significant progress. The rollout in Tasmania is already underway. The trenching and laying of conduit and fibre for the transmission between Cambridge and Midway Point has been completed and they are on track for the first services to be connected in Tasmania from July this year. This is fantastic news. Tasmania has been the testbed for many a failed experiment under the previous government. We have seen millions of dollars expended and no real difference made. With the long-term very broad vision of a national broadband network and with Tasmania being the first cab off the rank to experience the benefits of such important economic infrastructure, I think the people of Tasmania understand not only the priority but the importance of making sure that an investment in Australia comes to fruition and makes a meaningful difference to the residents of that beautiful place.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I just want to add a couple of comments to those of Senator Minchin and Senator Lundy, having had a little bit of time to examine the work that the Auditor-General has produced. As always, it is a valuable if carefully worded insight into the process. The public was given very little insight into the original RFP that occurred, starting at the beginning of 2008. It was, as these sorts of processes go, I think, relatively watertight in terms of the amount of information that came out, the kinds of agreements that the proponents were required to sign up to and the fact that the public had very little idea of what kind of work was going on. So it may have been a valuable exercise for the government to test the market and get a sense of what kind of capacity the industry could provide, but as far as the public were concerned I think they were very much in the dark at the time as to what sort of proposal might eventually emerge.

It was really interesting to hear Senator Minchin’s comments on the fact that this document exposes a certain amount of helter-skelter policy making on the run because as the picture became more clear as to what the industry was going to be able to provide in response to the RFP the goalposts began to move. We did not realise this until after the original RFP was terminated and the minister took his press conference with the Prime Minister and the finance minister saying, ‘Actually the goalposts have not just moved, they have multiplied by a factor of 10, and we are going to take this network all the way to the home.’

The Greens support for the broadbrush approach is on the record, partly because it was a model that we have been proposing for quite some time because it is one way of getting the wholesale architecture of the National Broadband Network back into public hands from where it should never have been privatised. Our opposition to the full privatisation of Telstra is also a matter of record. But this gives us a real window into the government’s thinking at the time that the original RFP was being undertaken. I would not use some of the language of Senator Minchin, whose opposition to all things connected to broadband and Minister Conroy is very clearly and firmly on the record, but there are some real irregularities here. I think this is a pretty obvious account of results that surprised the department—and surprised the government on the way through. That was one of the reasons that we saw such an unexpected outcome.

I am interested to know just how keenly Senator Minchin plans on pursuing these issues because, as far as the public and the parliament is concerned, unless I am mistaken this is the end of the matter. This is the last that we will be given on that RFP process; there will be no further records or documentation of the government’s thinking or the advice that it received, or any of the positions that were put to it by the proponents.

This was a matter that I discussed yesterday when we were debating the Finance and Public Administration References Committee’s report into matters of public interest immunity. So it is these very documents that the government was using as the basis for the decision that eventually came out about scaling the National Broadband Network up by a factor of 10 that the parliament is still not able to access. The minister has told us that it is all commercial in confidence: ‘You have to trust us. The Senate cannot have that material.’ So we need to rely on this obviously very thorough and very diligent but very short report from the National Audit Office.

That is where the matter will rest unless of course one or both of the major parties revisits the deadlock that the Senate finds itself in by requesting that those documents be made available for the public. In the event that the Senate does not intend to press its case, there is a proposition now on the table for an independent arbiter to assess public interest immunity claims, including claims like that blocking the production of the documents on a $4½ billion National Broadband Network. Now while that proposal has been suspended we will not know what the thinking was behind that beyond what has been produced in this document unless we see some movement from either of the major parties.

Quite frankly, it is all very well for Senator Minchin to stand up and express outrage at the lack of transparency and at the process that was afoot at the time being full of irregularities and being unconscionable, but unless he is prepared to stand up for those principles, the government will not be handing any documents over anytime soon. I invite Senator Minchin, in the absence of any moves towards transparency by the government, to perhaps revisit the work that his colleagues have done in that finance and public administration inquiry so that we can see this deadlock broken. If it is not appropriate for the Senate to receive the documents upon which these decisions were made, particularly given some of the concerns that have been raised by the Auditor-General in this case, then we should hand that decision to an umpire and then respect the outcomes of those judgements made by an independent arbitrator. A similar system has operated in New South Wales. Although it is a system that we could improve upon here, there is no reason why the Senate could not implement a very similar instrument here with those improved safeguards and improved accountability mechanisms so that these deadlocks do not occur in the future.

Until the opposition swings behind such a common-sense proposal, I am going to be treating the kind of outrage that we saw expressed by Senator Minchin just before with a great degree of scepticism. He has the means at hand to obtain the documents that the Senate has been seeking for nearly a year now. Otherwise, I think it is probably time to just sit down or admit that you are really only in it for political purposes to try and block the rollout of the NBN. That is certainly not the position that the Greens have taken. We are up for full accountability and disclosure. We would like these documents produced in the public interest and, if it is not in the public interest for them to be disclosed, then we would like to see that put to the test. We would like to see that conjecture by Minister Conroy put to the test and get an independent opinion on that. Those mechanisms are available to the Senate if it chooses them.

Guy Barnett (Tasmania, Liberal Party, Chairman of the Scrutiny of Government Waste Committee) Share this | Link to this | Hansard source

I also stand to note the Auditor-General’s report into the National Broadband Network tender service. As a member of the Joint Parliamentary Committee on Public Accounts and Audit, I know the amount of time and effort that the Auditor-General and his office put into such a report. It is very thorough indeed.

Sadly, it is a damning report of the federal Labor government and it highlights the waste, inefficiency and mismanagement of the Rudd Labor government in the running of our economy and, specifically, in the establishment of this National Broadband Network. Senator Minchin has made those views very clear and I stand by them 100 per cent. It is a great shame and the only thing that we can hope is that the Rudd Labor government learns the lessons that are set out in this report for them.

Members of the public will be shocked to know that $30 million of taxpayers’ money has been wasted in this tender process, and that it has achieved absolutely nothing. Departmental costs alone were in the order of $17 million according to the report and there is nothing that describes it better than to say that it is a debacle. It is an absolute debacle and a very costly one to the taxpayer who has got absolutely nothing out of it. The process failed. Indeed, as Senator Minchin noted, the minister knew that the process was failing many, many months before the conclusion of the tender process. Who knows how many lawyers and legal opinions were obtained during the process to try to ascertain exactly whether the whole thing was a debacle and not going to work? Who knows exactly the costs incurred by the Rudd Labor government in obtaining legal opinion to tell it that it was a flawed process? What we do know about the Rudd Labor government is that it is a government of waste, inefficiency and mismanagement.

What we have learned today—this revelation in the Auditor-General’s report confirming and highlighting the $30 million cost—is on the back of what has now been confirmed in answer to a question earlier this week, that the cost of the federal government and its representatives flying to Copenhagen was $1.5 million for the Copenhagen conference. That is on the top of record legal fees paid by the Rudd Labor government when they had promised to reduce legal fees. In fact they promised to reduce legal fees by $15 million and those fees have now gone up now to $555 million for the last financial year. So these revelations are coming out not only month after month; it seems to be week after week and day after day. Surely, they should learn the lesson that the waste and mismanagement have got to stop.

The NBN rollout is occurring in Tasmania, yes, and it is in that regard that I want to speak to those matters. The fact is that in Tasmania, in terms of the NBN rollout there was no business plan. This is set out in the Senate report produced by a committee which was very well chaired by Senator Mary Jo Fisher over many months, a very comprehensive report. The Senate report released just before Christmas confirmed that in terms of the NBN rollout in Tasmania there is still no business plan.

What we do know is what is on the public record in newspapers to say that the estimate of the cost of that rollout is some $700 million. The government will not say if that is true or not. They will not answer the question. I have asked questions of Senator Conroy in this place about the rollout of the NBN in Tasmania, the cost and who is actually paying. Specifically, with respect to the federal government or the state government of Tasmania I have asked who is paying and how much. These are the questions that the government simply will not answer. Why don’t they know? Surely they know exactly how much. We are talking about taxpayers’ money.

There is a lesson in this report that has been tabled today about $30 million having been totally lost to the taxpayer. It has gone down the gurgler into a big black hole somewhere in Canberra. In terms of the rollout in Tasmania, is that waste and mismanagement going to happen again? We do not want it to happen because Tasmania is lagging behind broadband services across the country. We want better broadband and communication services to be delivered, but if they are going to be delivered we want them delivered right and properly without the waste and mismanagement that this government is up to its neck in. In Tasmania there is no business plan—that was set out in the Senate report—and we do not know what proportion of the $700 million investment is allocated and coming from the federal government or the state government. Neither government will say. The users do not know what the costs will be for the use of that broadband service. Surely they should know, whether they be residents or small businesses, so give them a break. What is the take-up rate? These are fundamental issues.

I noticed that Senator Lundy referred to, and complimented the government on, the rollout in Tasmania, but those opposite do not even know what the costs will be to the users and what the cost of the take-up will be. They say that the rollout will be commencing in July this year. Goodness, that is already a delay of a year. Remember the Prime Minister and Senator Conroy, amid much fanfare, getting with Premier Bartlett all those headlines saying it was rolling out from July of last year? Now those opposite are complimenting the government on the rollout to be in July this year. That is a one-year delay. Why don’t you just acknowledge it and say that you are ashamed and disappointed as there have been mistakes and that the rollout will commence from 1 July this year? It would be good if there were some truth in this in terms of getting the facts on the table, so say there has been a one-year delay. We are desperate for broadband services—we want this done and we want it done right. But the waste and mismanagement with respect to the rollout of the NBN, not just across the country but specifically in Tasmania, has been something shocking.

In Tasmania there are a lot of questions as to consultation. It appears that local governments have not been properly consulted. I wrote to them all last year and some of the feedback I got was not complimentary of the government. Certainly towards the end of last year there had been little to no consultation. Business and individuals in Tasmania want to know more and they want to know that fast, because they want to benefit from the rollout of broadband in Tasmania. There have been some seminars recently and I commend the business community for their leadership in trying to get something happening in that regard and working with the governments, federal and state, to get information on the ground so that they can benefit from the broadband service when it is rolled out. But surely with all that money being expended there has got to be a business plan, so, please, could it be revealed and could it be laid out. Please learn the lesson from this Auditor-General’s report that has been released today and is now on the public record confirming the $30 million waste. I hope the government learn from this. I commend the report and I thank the Auditor-General and his office for this work.

Question agreed to.