Chapter1 Annual Report
1.1
Under Section 16 of the Public Works Committee Act 1969 (the
Act), the Parliamentary Standing Committee on Public Works must table in each House
of the Parliament a report of its proceedings during the calendar year just
ended.
1.2
All public works that have an estimated cost exceeding $15 million must
be referred to the Committee and cannot be commenced until the Committee has
made its report to Parliament, and the House of Representatives resolves that
it is expedient to carry out the work.[1]
1.3
The Act states that in considering and reporting on a public work, the
Committee shall have regard to:
- the stated purpose of
the work and its suitability for that purpose;
- the necessity for, or
the advisability of, carrying out the work;
- the most effective
use that can be made, in the carrying out of the work, of the moneys to be
expended on the work;
- where the work
purports to be of a revenue-producing character, the amount of revenue that it
may reasonably be expected to produce; and
- the present and
prospective public value of the work.[2]
1.4
During 2012 the Committee reported on 20 works.[3]
The combined cost of works approved in 2012 was $3.25 billion. A list of
the works and their individual costs is at Appendix A.
1.5
The Committee also approved 31 medium works notifications (those valued
between $2 million and $15 million), with a combined value of $248.5 million. A
list of medium works approved by the Committee can be found at Appendix B.
1.6
The Committee’s reports, submissions to each inquiry and transcripts of
associated public hearings for 2012 are available on the Committee’s website.[4]
A list of all Committee meetings and hearings held during 2012 is at Appendix
C.
1.7
The Committee’s website also provides previously tabled reports, and the
procedure manual which assists agencies to prepare projects for Committee
review.
Inquiries and reports
1.8
The Act requires the Committee to consider and report on each referred
work ‘as expeditiously as is practicable’.[5] Therefore the Committee endeavours
to ensure that all inquiries are completed as quickly as possible, without
compromising the rigour of scrutiny.
1.9
The standard inquiry process allows time for public comment on proposed
works, and for the Committee to inspect the proposed work site(s) prior to
holding public and private hearings to take evidence about the works. When
planning inquiry timetables the Committee and proponent agencies must consider
the parliamentary sitting calendar as generally referrals are initiated only
when the House is sitting and reports need to be tabled in both houses of the
Parliament.[6]
1.10
In 2012 the average time from referral of works to report tabling was
around 17 weeks. However timeframes varied considerably between individual
projects, with the Committee completing an inquiry in as little as 10 weeks for
some, with 30 weeks being the maximum time from referral to tabling. Given this
variation the median timeframe of around 15 weeks is more representative of
typical inquiry duration.
1.11
In addition to the constraints on timing of referrals and reporting
outlined above, the time taken by the Committee to complete an inquiry can also
be affected by the quality of information provided by proponent agencies in
their statements of evidence. Delays in completing inquiries are more likely to
occur if the Committee has to go back to agencies to seek more detailed
information or clarification in order to satisfy its legislative responsibilities.
While generally speaking the Committee was pleased by the quality of
information provided by most agencies in 2012, there was in some cases room for
significant improvement.
1.12
As noted in previous Annual Reports, substantial breaks in the parliamentary
sittings and federal elections can delay projects timeframes. On 30 January
2013 the Prime Minister announced that an election would be held on 14
September 2013, with the writs to be issued and the House dissolved on 12
August 2013. All Committee business would cease at this time, and would resume
following the election when the government has been established and committee
members have been appointed. The Committee takes this opportunity to remind
agencies currently considering projects for referral over the coming months
that it is important to consider implications of the election and to plan
accordingly.
Medium works
1.13
The Committee publishes a list of medium works notifications on its
website. The current list includes works approved since the beginning of the 43rd
Parliament.
1.14
In accordance with previous advice, the Committee reminds Australian
Government departments, agencies and authorities of their obligations under the
medium works process. This Committee emphasises that the medium works process forms
an important part of the parliamentary scrutiny of Commonwealth public works
expenditure.
1.15
The Committee approved 31 medium works in 2012. However, some
notifications did not receive immediate approval.
1.16
A number received approval after providing additional information at the
Committee’s request, either in writing or via a private briefing. Approval for
some medium works projects was conditional subject to the proponent agency submitting
regular progress reports and/or inspection by the Committee.
1.17
Four medium works notifications received in 2012 have not progressed to
approval by the Committee. In one case the Committee sought further information,
and was subsequently advised by the proponent agency that following internal
review of the associated costs and benefits, a decision was made not to
progress with the project.[7]
1.18
In another case, the medium work notification was part of a larger
project to be funded with contributions from a number of Commonwealth
government sources, and with additional financial contributions from state
government sources. As the proposed total cost to Commonwealth exceeded $15
million, the Committee sought referral of the project for full inquiry.[8]
The agency has advised that it will not refer the project.[9]
1.19
In the third case, the medium work was notified to the Committee and
approved. However, subsequent advice from the agency indicated that the project
would exceed $15 million threshold and the work would be referred.[10]
The referral is expected in 2013.
1.20
Approval for the remaining medium work project, which was notified to
the Committee late in 2012, was deferred pending additional information to be
provided by the agency.[11]
Cost estimates
1.21
Accurate cost estimates for public works projects are essential if the
Committee is to effectively exercise its legislative responsibility. The
Committee makes many of its determinations on the basis of information provided
by the proponent agencies. In doing so it relies on the accuracy of the
information provided with regard to cost estimates. If there are significant
changes to project costs during the delivery phase agencies are required to
advise the Committee and seek further approval.
1.22
During 2012 the Committee received a number of notifications detailing
significant increases to project costs (cost overruns). For two projects that
were initially notified to the Committee as medium works in 2010, the increase
was such that the threshold for referral was exceeded. Both projects were referred
to the Committee in 2012 for full inquiry.[12]
1.23
On another occasion in 2012, the Committee was advised of a significant
increase in the cost estimate for a referral only one month after expediency.
In this case, as the project design progressed unanticipated technical
challenges were encountered.[13]
1.24
The Committee recognises that estimating project costs is not an exact
science. The actual cost of a project is not known until the project has been
completed. A level of uncertainty is necessarily attached to cost estimates.
Generally, the level of uncertainty is greater for estimates made earlier in
the project development life cycle, and reduces over time as the project
progresses to completion. This uncertainty should be accounted for by a robust
assessment of risk, and offset by the inclusion of adequate contingency.
1.25
During the year, the Committee was notified of a number of cost overruns
occurring (at least in part) as a result of labour shortages and the increased
costs of labour associated with the mining boom. Additional labour costs were
also a factor associated with some cost overruns for projects located in remote
locations.
1.26
Although optimism bias (i.e. the tendency to underestimate risk and
therefore the level of contingency needed) is a well-recognised phenomenon, the
Committee is concerned about cost overruns, particularly when these relate to
prevailing market conditions which should have been accounted for. Therefore,
the Committee reminds agencies that robust assessment of risks and the provision
of adequate contingencies should be applied to reduce the risk of cost overruns.
Post-implementation reports
1.27
In accordance with a recommendation of the ANAO, all public works projects
that fall within the Committee’s purview must provide a post-implementation report
on completion. The purpose of the report is to inform the Committee whether the
project remained within the advised scope, cost and timeframe. Information on
the following should also be included in the report:
- the extent to which
the expected business benefits, including environmental benefits, have been or
are expected to be achieved;
- user satisfaction
with the delivered works;
- consultations with
neighbouring communities that may be impacted by the works; and
- lessons learned.
1.28
In 2012 post-implementation reports were received for three projects.[14]
Although it is still early days, the Committee acknowledges the potential for post-implementation
reports to provide benefit to agencies and the Committee, by promoting a more
rigorous approach to the quality of information provided to the Committee by
agencies, and highlighting matters which may warrant particular scrutiny in
future referrals.
1.29
The Committee has provided a post-implementation report template which
is available on the Committee’s website to act as a guide.[15]
Review of the Public Works Committee Act 1969
1.30
In its 2011 Annual Report, the Committee reported that it had liaised
with representatives of the Department of Finance and Deregulation (DoFD) to
consider amending the Public Works Committee Act 1969 to enhance the
utility of certain provisions and update others.
1.31
Particular consideration was given to the Section 18(8)(b) of the
Act which allows for the Minister for Finance and Deregulation to move an
expediency motion in the House of Representatives for works that are deemed
urgent without the need to first refer the work to the Committee for inquiry. As
currently framed this provision fails to provide for urgent works that may arise
when the Parliament is not in session. Furthermore, once expediency on the
basis of urgency has been passed by the House the Committee has no role in
scrutinising the works.
1.32
Consideration was given to proposals to amend the Act so as to establish
a mechanism for commencement of urgent works when the Parliament is not in
session and to enhance scrutiny and accountability of works not referred for
inquiry on the basis of urgency by mandating minimum reporting requirements to
the Committee.
1.33
In May 2012 the Special Minister of State, The Hon Gary Gray MP and
representatives of DoFD accepted an invitation to brief the Committee and
explain in more detail the rationale and implications of proposed amendments to
the Act. In September 2012 the Committee received further correspondence on the
matter from the Special Minister of State. However, due to a heavy workload in
the second half of 2012 the Committee has not been able to significantly progress
with its consideration of the proposed amendments.
Enhancing scrutiny and accountability for urgent works
1.34
The Committee has previously stated that urgency provisions in the Act
should only be used in exceptional circumstances. Importantly, the Committee
has emphasised that the urgency provision should not be abused or misused, for
example as a mechanism to avoid scrutiny.
1.35
In November 2012 the Department of Immigration and Citizenship (DIAC)
sought expediency on the basis of urgency to commence works without referral to
the Committee for regional processing facilities on Nauru, and Manus Island,
Papua New Guinea to house irregular maritime arrivals (IMAs). The need for
urgency was on the basis that IMAs and staff were already housed in temporary
facilities with little amenity on sites in Nauru.
1.36
While cognisant of the urgent need to undertake work immediately, the
Committee was nevertheless also keen to investigate options to support to greatest
extent possible the principles of parliamentary scrutiny of proposed government
expenditure on public works and of accountability.
1.37
On 1 November 2012 an urgency motion was passed by the House which
allowed for the commencement of ‘preliminary capital works’ on Nauru,
comprising basic site preparation, waste water treatment plants, septic systems
and power generators. Importantly, in moving the urgency motion the Special
Minister of State indicated:
I am mindful that projects of this magnitude should be put
forward for a full referral. The government very much supports the work of the
Public Works Committee and has not taken this decision lightly. Therefore, as
soon as possible, the Department of Immigration and Citizenship will arrange
for the remainder of the infrastructure and upgrade works for the regional
processing centre on Nauru to be referred to the Public Works Committee for
scrutiny.[16]
1.38
On 29 November 2012 a second urgency motion was passed by the House to
allow for the continuation of works on two sites in Nauru, commencement of work
on a third site and for preliminary works to commence on Manus. In this motion,
The Hon Peter Garrett MP, representing the Special Minister of State,
reiterated the intent that the remainder of the works be referred noting:
The Department of Immigration and Citizenship has consulted
with the Chair of the Public Works Committee, who has supported continuation of
the works, given their urgent nature. During the exemption period, DIAC will
report fortnightly to the Public Works Committee on progress and will arrange
for the remainder of the works to be referred to the Public Works Committee for
scrutiny.[17]
1.39
Since late November 2012 the Committee has received regular progress
reports from DIAC. Furthermore, the Committee expects that that any portion of
the project not granted expediency on the basis of urgency will be referred to
the Committee for full inquiry.
Conclusion
1.40
The Committee thanks everyone who has assisted or participated in the
Committee’s inquiries in 2012. In particular, the Committee appreciates input
from all interested parties, including members of the public.
1.41
The Committee makes particular acknowledgement of the contribution made
by the Special Claims and Land Policy Branch, DoFD. This branch assists
agencies with their preparation of proposals for consideration by the
Committee, and assists the Minister in his management of the Public Works
Committee Act 1969.
1.42
The Committee thanks Ms Janelle Saffin MP for chairing the Committee
from the start of the 43rd Parliament to last sitting week of 2012. As
Committee Chair Ms Saffin has shown her commitment to the work of the Committee
and displayed exemplary integrity at all times.
1.43
The Committee also thanks Mr Steve Georganas MP and Mr Bernie Ripoll MP for
their service on the Committee.
Ms Kirsten Livermore MP
Chair
18 March 2013
