Chapter 2 Extension of budget and timeline to the proposed fit-out of
Commonwealth Parliamentary offices at 1 Bligh Street, Sydney, NSW
2.1
The proposed fit-out of Commonwealth Parliamentary offices (CPO) at
1 Bligh Street, Sydney, NSW was referred to the Committee in March 2012.
The Department of Finance and Deregulation (DoFD) was the proponent agency.[1]
2.2
The project proposed to design and fit out office space that provides
flexible, fit for purpose accommodation.
2.3
This extension of budget and timeline seeks to increase the project
budget and the project completion date.
Original referral (2012)
2.4
The project was originally referred to the Committee on
22 March 2012, with a cost estimate of $21 million, excluding GST.
2.5
Construction of the project was scheduled to be completed by 30 November 2012,
with occupancy to commence from 14 December 2012.[2]
2.6
The Committee reported on the project in Report 3/2012, tabled on 25 June 2012.
In this report, the Committee accepted the need for the project, the
suitability of the scope, and the adequacy of the costings provided. The
Committee recommended expediency for the project.[3]
Extension of budget and timeline
2.7
In mid-2012, DoFD notified the Committee of an increase to the project cost
estimate. DoFD provided a private briefing to the Committee in August 2012
on this matter.
2.8
In early 2013, DoFD notified the Committee of further changes to the
project. The cost estimate was increased to $25.45 million.[4]
The project timeline was also extended, with practical completion expected by
31 May 2013, and relocation to take place from 2 June 2013.[5]
2.9
The Committee conducted public and in-camera hearings with DoFD on
21 March 2013 in Canberra. The public hearing was advertised on the
Committee’s website and in a media release. The transcript of the public
hearing is available on the Committee’s website.[6]
2.10
The Committee conducted an inspection at 1 Bligh Street, Sydney, on
22 April 2013.
Project issues
2.11
The cost increases were due to three interrelated issues: inadequate
design preparation, insufficient contingency and the timing of the referral.
2.12
At the time of referral, DoFD had no design for the project, and no
advisors.[7] DoFD publicly
acknowledged this:
No, there was no design done. Drawings were available of the
existing building; the issue was the design of the actual fit-out itself. That
is what we are talking about. There was nothing designed; we had no design.[8]
2.13
Although DoFD was able to make some assessments of the modifications
required for the fitout, the agency based the cost estimate on historic data of
other fitouts.[9]
2.14
However, given the lack of a recent comparative project to draw
assumptions from, project uncertainties remained:
Obviously, we made allowances for the sorts of things that we
expected—additional security, additional acoustics et cetera—but without any
input from any consultants because we did not have any consultants on board at
that stage. Effectively, we had to put some factors in to cover that.
Since then we have had consultants engaged and we have had
detailed designs done. … until the architect was appointed and worked out the
way that all the fit-out was going to work, then we could put in the overlays
of security and ICT. [10]
2.15
These acoustic security and data provisions, only specified when the
project design progressed, were significantly more extensive and complex than
initially projected.[11]
2.16
The level of contingency in the project cost estimate proved
insufficient to cover these issues. Although DoFD believed that its contingency
was adequate at the time of referral, it acknowledged that as the design
developed, the contingency was inadequate.[12]
2.17
The contingency in the original project was larger than would be
considered normal, due to the project uncertainties:
… when we did our initial budget we based it on a corporate
fit-out. We factored in additional allowances for the special type of wall
construction for this job and the additional security requirements. But knowing
that there would be other factors—and this was without knowing what they
were—we put more contingency on than we normally do. Normally at that point we
might have a 10 per cent contingency, I think our contingency was more like 15
per cent. Obviously, as it has turned out the contingency should have been
higher.[13]
2.18
Despite agreeing that the project was at an early stage at the time of
referral, DoFD stated that it had no choice but to refer when it did:
Unfortunately, we had no alternative. One of the drivers in
all this is our big client group, which is senators and members of parliament.
We got agreement that we needed to move the CPO and 1 Bligh Street was one of
the places we looked at. It came on the market and some fairly senior people in
the government looked at it and said, ‘This will work.’ We had to move very
quickly to snare a lease in the building. Contrary to some misreporting in the
media, it certainly was not penthouse accommodation. We were very keen to grab
the three lowest floors we could in the building. So we needed to enter into a
leasing arrangement. Then we thought, ‘How long do we have to do this?’ We
thought, ‘2013 is an election year and there is no way you can be moving people
in a CPO during an election.’ So we had to make sure we had people in no later
than the first half of 2013. Working back from that and taking into account all
the things which had to take place and all the procurements which had to be
made, we really had no alternative other than to go to PWC as soon as we could.[14]
2.19
Further, DoFD stated that its desire to sign a lease for 1 Bligh Street and
refer the project at that time impacted on the development of the project:
… it might have been nice if we had more time to prepare, but
we did not, otherwise we would have lost the opportunity [to obtain the lease
on the property][15]
Committee comment
2.20
The Committee accepts that the project design was at an early stage at
the time of referral. However, the Committee trusted that DoFD had incorporated
this risk into the contingency and cost estimate for the project.
2.21
The Committee acknowledges that security and IT are fast-changing areas.
Had the design been progressed further prior to referral, and expert advice
been sought, these issues may have been better addressed. These factors may
have enabled DoFD to have more certainty in the design, contingency and cost
estimate.
2.22
The Committee is concerned that DoFD referred the project at an early
stage because of timing considerations. The Committee notes that delays to the
project mean that it is taking place in an election year, despite DoFD trying
to avoid this with an earlier referral.
2.23
Further, the Committee understands that the unanticipated complexity of
the design has led to the delays in the project delivery timeline.
Final Committee comment
2.24
At the time of the initial inquiry, the Committee was satisfied that the
costings for the project had been adequately assessed by the proponent agency.
The Committee took DoFD at its word regarding the preparation of the project
and its assessment of the project risk and uncertainties.
2.25
The Committee is concerned that proponent agencies may not clearly
enunciate project risks and uncertainties during inquiries. This impedes the
Committee’s ability to assess the project.
2.26
The Committee considers that DoFD referred this project too early. The
Committee acknowledges that the parliamentary sitting calendar affects the
timing of referrals, reports and expediency motions, and thus the duration of inquiries.
However, it is not acceptable to bring projects to the Committee early to meet parliamentary,
leasing or other timeline milestones, if this significantly compromises other
aspects of the project, such as cost and risk assessments.
2.27
The Committee is concerned that projects may be referred too early for
this reason, and that this may increase the risks associated with the project
or compromise other elements of the project.
2.28
The Committee expects that DoFD, and all future proponent agencies,
incorporate expert advice in the development of projects, particularly for
projects with complex technical requirements. The Committee also expects DoFD
to be better prepared for future projects and to bring projects at a stage that
has a greater degree of certainty (or to clearly inform the Committee of
uncertainties).
2.29
The Committee notes that DoFD delivers projects for other agencies (such
as the post-entry quarantine facility in Chapter 3) because of its financial
and project management experience and capabilities. As such, the Committee
places great trust in DoFD’s ability to deliver projects. The Committee is
concerned that DoFD did not seek the appropriate expertise in preparing this
project. In the future, DoFD must clearly demonstrate its project delivery expertise.
2.30
The Committee accepts the extension of budget and timeline to this
project.
2.31
The Committee requires that a post-implementation report be provided on
completion of the project. A template for the report can be found on the
Committee’s website.
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