Senate Finance and Public Administration Legislation Committee, , 7:31:30 to 8:27:28
Examination of SME participation in government procurement and the complex process of divesting surplus defense estate properties.
Topics: Procurement, Firearms, Infrastructure
Speakers: Hon Katy Gallagher, Hon Jane Hume, James Paterson, Andrew Danks, Libor Pelecky, Anna Harmer, David Pocock, Gareth Sebar, Hon Bridget McKenzie, Karen Grogan, Matt Yannopoulos PSM, Natasha Cole, Speaker 28
Okay. Uh we will go to Senator PCO. Um
>> thank you for your time this afternoon. I've got some questions about procurement um if that's all right. Um and as we've discussed at previous estimates um been trying to track contracts awarded tomemes um as against uh primes often multinational um primes and last estimates uh you told me that the statistics were to be published on procurement value wouldmemes and quote in in the coming weeks. It's interest that data has been published.
>> Uh it hasn't yet senator. It is imminent. There were some delays. Uh there was some method methodological changes that had to be made as a result of some changes to O tender. Mr. SAR might be able to go through it, but there's been a lot of back and forth between finance and the ABS to to finalize the numbers.
>> Could you maybe just talk me through what what are the changes to the methodology?
>> Uh we updated Oender last year to allow uh contract notice reporting to show negative values. uh until that point in
time. >> Can you explain that?
>> Yeah. When you report a contract on OS tender, you report what the value of that contract is. >> When you vary that contract, up until last year, you could only vary the value of that contract upwards. If you were whilst you could reduce the value of that contract within the contract itself, odds tender couldn't reflect that the value had gone down.
>> How often does it happen though? Uh
>> it happens quite regularly. The reports are showing that um that entities uh regularly oh not regularly but on a large number of occasions do amend their contracts to show a reduction in value. Um what that meant was that the methodology for calculating statistics needed to account for these reductions in value. um some of the reductions are quite large and it was leading to results which suggested that some entities had uh negative values for their engagement withmemes. So we needed to go back to the ABS to try and uh extract that data from the calculations remove it so that we weren't suggesting that uh particularly some larger departments had made negative investments in SMAS
>> and is this this was being done inhouse by finance or you paying contractor to
do it? Uh so no we uh so the ABS uh we pay the ABS to uh analyze that data for us and then the information that they give us is considered by public servants.
>> Okay. And and last time you said that this data will be much more readily available as a result of the move to supply portal and gov panels. Is this
still the case? So the supplier portal uh went live in uh October of last year. Uh we now have uh over a thousand businesses that are registered on the supply portal. Many of those are identifying whether they are um anme a womenowned business and indigenous business etc. Um on one July of this year the supplier portal will be open to all businesses to identify. So we expect that uh by the end of this year we should have a very good picture of which businesses the Australian government engages with and their characteristics meaning that next year's statistics uh should be more uh should be able to use the supply portal uh to be provided more rapidly.
>> Okay. And you you've you've had a look at the most recent year's
>> uh of for this this yes theme statistics. Yes, we have. Um I was
taking a look at the data that's available um which is only up to the 20 23 24 um financial year and the percentage of procurement contractedmemes has been steadily falling from more than 30% in the 202122 financial year to just 19% in the 23 24 Has the data from the last financial year improved on that on that 19% and can you maybe give me an explanation as to why we've seen this this fall in procurement tomemes?
>> I think it's that the 2425 data is not public yet senator. We probably prefer not to comment on it. We we don't have an estimates pack because it's not a public information at this point in time. I think the reduction that you have seen over extended period of time is as a result of significant amounts of larger value contracts that have come into OS tender. Um so the value of contracts in O tender have gone from something 70 billion to 110 billion in the last three or four years and of that there's a significant amount over a billion dollars. Ummemes don't play in the billion dollar market. So when you have a proliferation of those billion dollar plus contracts into the data set, it does necessarily reduce in a reduction in the percentage of thememes getting work.
>> But Mr. Dangsters comes comes to the heart of the the biggest one of the biggest beefs thatmemesmemes have with government procurement is that you don't necessarily need to do those billion dollar procurements because what's happening in a lot of the situ you know um times is that the prime gets the billion dollar contract and then divvies it up skims the cream off the top and you're essentially paying them to manage it. Um, so they're saying break break it down into into manageable um, chunks. And as to your um, saying it's not publicly available data, but that seems to be what estimates is about is trying data that isn't public into the public and and so why you won't just tell tell me the the number if you know it.
>> We we don't have it with us, Senator. That's that's the kind of truth. Like it's not on our estimates pack. It's sitting in the Department of Finance ready to be uploaded on a website. So we don't have the information. It's ready
to be uploaded on the website. It's obviously gone through all the checks and why wouldn't you have brought it? Like it's
>> Apologies to Mr. Danks. I wouldn't characterize it as being ready to load up onto the website. Uh we are still doing final checks to ensure that there isn't going to be anything misleading that's released uh once we release the data. Um but we do expect that to be resolved within the next 2 to 3 weeks. We expect um unless we identify additional issues with the data that it will be available by the end of this
>> I [clears throat] would also note senator that um in the 2324 figures 40.3% of all contracts up to 20 million were awarded tomemes. So that was there's been an increase year on year for that.
>> Mhm. Maybe minister if you could maybe just comment on this this decline in um I guess the the overall percentage of contracts going tomemes and and what what the government is doing there.
>> So we've made a number of changes and as um Mr. Danks just said all contracts we're actually exceeding the target or increasing from the year before um for a proportion of all contracts up to 20 million frommemes to 40.3%. So yes, there are some areas we need to continue to focus on. I think it is uh you know we've had discussions across um I have with a lot ofmemes about procurement. We've made a number of changes to the CPRs which I thinkme sector have really welcomed like defining an Australian business for for instance. Um also from the 17th of November, new requirements in the CPR include all all procurements with an expected value below 125. um uh on that go through the panels um only be invited to make a submission and all non-panel procurements valued between 10 and the relevant for goods and services it's 125 and 7.5 million for construction only Australian businesses be advided to make submissions um and we've also we've got the targets where we did strengthen the targets to um a target of 25% of contracts by value frommemes. As you say, we've got some more work to do there and our target of 40% which we're just slightly above. >> Got a new definition formemes. >> So I think that's been a bug bear of the theme sector as well. uh and also reducing the threshold at which economic benefit to the Australian comm economy must be considered as part of the value for money assessment to $1 million from $4 million. Again, that's something that I was lobbied for. Um and increasing the threshold at which entities could directly approach anme to 500,000 for all Commonwalth entities. Before that, it was between 200 or 500,000 for defense. So, we've standardized that. Um, so yeah, we I mean I I've been meeting probably very similar to people to the one that you ones you've been meeting. Um, and you know, more to do, but I think they've been pretty positive about the changes we've made today.
>> Thank you, Minister.
>> I think there is an issue and I know about kind of breaking down packages. there is an issue as we're doing some of these big defense pieces in particular uh you know how we measure SM involvement in that um because often it's those big multi-year massive contracts that can have an impact on how we report and I don't know if there's a better way maybe there's a better way of trying to break that down so we get a better you know it doesn't look like we're just missing the target but explaining or having a look at how defense reports.
>> Yeah.
>> Because often they do break it down themselves.
>> Yeah. Thank you, Minister. I really acknowledge all your all your work on um on this. Um one of the other things that I was asking about during the last estimates um was concerns that in more than half of the contracts procured through a panel last financial year, Commonwalth agencies only approached one supplier. and you you took a notice a question uh on up-to-date figures on the percentage of contracts in which agencies only approach one supplier uh but didn't respond to that quan and so just interested why you didn't respond to the quan and if you've got that information to provide it today
>> I think we we have done some analysis on this senator and I think there there are 249 panels that only have one supplier on them so when there's only one supplier on a panel it will necessarily mean that those panels will be soul sourced. Um when you pull those single panel single supply panels out I think numbers around 60% wasn't it Mr. Z bar of contracts have more than one supplier. It's still not good enough.
>> Still 40%.
>> Completely agree Senator um we have made changes to O tender where it provides that visibility now where you have to put in how many um suppliers you go to. So it will be bringing greater transparency into that um behavior. We have also released a using panels e-learning module as part of our training suite. So that was released on the 1st of December and that's to designed to support officials use of appropriate panel use.
>> Okay. Do you have a I mean do you have a target in mind? You said 40% still not not not cutting it but
>> we we we haven't yet senator but we're still looking into it. There are some panels for example uh DVA has panel for for taxis in rural rural and regional areas. Um they may have 40 or 50 suppliers on that panel. Um only one of those suppliers are in a certain geographic region. So that person's going to get all the work in that area. So there are some nuances in it that we have kind of worked through before we
>> and we'll rotate.
>> Okay. Sure.
>> If you if you've got a last question you want to ask
>> just to maybe Yeah. Um could you maybe um last last estimates we were talking about the implementation of supply portal um and also the roll out of gov panels and just interesting if you if you can provide us with um a bit of an update on on what feedback you're receiving from suppliers about that that process and what changes are being made in um in response.
I think with the supply portal, it's been a a good roll out so far, Senator. So, we've been focusing on the people panel and the management advisory services panel suppliers, we have received some feedback around uh what business name gets shown on the supplier portal because some businesses have a trading name versus legal name. So, we've been able to make some changes supplier portal to accommodate that. Might just check with Mr. Sibo if he's got any extra information on that. Uh I
think we would what we're seeing from suppliers that they is that they are engaging with the process. They want to provide their data. Um they want to be able to explain uh who their contacts are, what their key characteristics are. Um so we're seeing a lot of engagement from businesses to provide that data to us. Um we are um expanding uh and reaching out to other panel suppliers over uh since January of this year. We're getting a lot of uptake. Uh I I think it's certainly from our perspective uh it's been very the the feedback uh and the reaction from suppliers has been very positive.
>> Thank you chair. Thank you very much.
>> Thank you. Um, Minister, earlier we were discussing the impact of the health and hospitals agreement on uh the budget. Um, I want to also discuss the thriving kids program. So, the government has announced it's a joint package of 4 billion over 5 years. >> Um, what portion of that funding will the Commonwealth contribute?
>> Two. >> Yeah, it's half two.
>> Two billion. >> Two, right? And so that's two is spread over the five years. Is it evenly over the five years? Does it scale up over
>> It was included in the announcement, wasn't it, about the allocation to stay?
>> Yeah. With the senator
>> uh senator, sorry, it's Natasha Cole, first assistant secretary, social policy division. The funding, the 2 billion provided by the Commonwealth is actually split into two components. There's 1.4 four billion going to the states and territories on a population basis to assist them in terms of services which they can provide for this you know younger cohort of people who need assistance and then there's 600 million which the comwalth will provide uh for stuff which is better done on a national basis
>> okay so direct to the relevant organizations that 600 million
>> sorry
>> sorry
>> direct to the relevant relevant organ organizations, excuse me.
>> It could be
>> could be. Yeah. >> Some of those um decisions will be made through the budget process. >> About the Commonwealth allocation of our share. >> Yeah. >> And then 1.4 of our funding will go to the states who will build the services and co-und them uh to to essentially rebuild services that have been lost
will contribute two billion on a population basis presumably as well.
>> Yes, that's correct.
>> Um the $2 billion comworth commitment does that come from savings to the NDIS from the new target lower growth rate?
we've made provision for thriving kids. So no, it's unrelated to that. Um >> we because this if you remember I think um we've been trying for some time to work with the states on thriving kids.
>> Yes, understand.
>> And so we've made a provision to get those services going. We haven't like it's going to be progressed better now that we've got agreement from national cabinet. uh but it's not linked to any decisions that haven't or that might be taken in the future about what else what how we moderate the growth in the NDIS.
>> Sure. But the minister for health and the NDIS has publicly announced a growth target for the NDIS which is lower than it was previously. That will save much more than $2 billion over the Ford estimates if it's successful I assume.
Um yes, but I my my you you asked me whether thriving kids was part of that.
>> Yeah,
>> it's not. We've we've made a provision for that. We haven't taken um reflected in any of the budget numbers. Further moderate moderation behind the initial one to get it to 8%. Um there's you know and we needed the states and territories on board for some of that as well which is why national cabinet has will allow that where they they have agreed to to trying to work towards that target. What
is the expected save from the lower target NDS growth over the forwards?
>> I think it it's hard. It depends um it depends on where when those decisions are taken
>> which sorry when which decisions are
>> and reflected in a budget like we haven't done that. Mark um M minister Butler has said this is what I think essentially think needs to happen. >> Yeah. States and territories have agreed that that's the desirable outcome, but in terms of translating that into a budget decision and costing that, that has not been done.
>> So, you haven't costed the lower growth rate in the NDIS yet that he's committed
>> it was the original work that was done was around moderating growth to 8%.
>> Y
>> and that's been reflected in the budget.
>> Right. So that's what I'm asking a question about. What is the save from getting NDIS growth down to 8% over the forwards?
>> I haven't got a final number on that. >> I just don't I don't have a a number that I can give you.
>> Surely the officials someone will know that. I mean
>> we can have a look and otherwise take it on notice Senator and find out. >> I mean can give you as the
>> this is a pretty important um budget item very expensive program.
>> but it's also subject to discussion further discussion um you know through the budget process and so um
>> I'm not asking you to give me unannounced things I'm just asking what you've announced already. I mean
>> we haven't announced a costing minister Butler has said eight growing at 8% is not sustainable and he said that a more realist I can't remember the words in the speech at the press club but it was working towards a 5 to 6%
>> yeah I'm not I'm not holding you to
that. Yeah. So that and you know it would depend on how you know it would depend there would be a number of things that that would depend upon. Um and so we're not in a position to give you a number on that today.
>> But I understood from Mr. Unopoulos's answer that the government's policy of bringing the growth rate from well above 8% down to 8% has already happened and is already reflected in the budget. Is that right?
>> Yes, that's right.
>> It's not the additional save of bringing it down to five or 6%. Right. That's right. So just just tell me what the save is >> to get it down to 8%.
>> Um that would be
>> I'd have to take it on notice. It wasn't it it was published it wasn't published in myo earlier and we'd have to take it on notice to work out what that number
looks like. >> Yeah. 23 24 budget I think.
>> Often there are people in the room who have this within their own knowledge and come forward and let you know. I notice there's not actually a lot of finance officials in the room.
>> There's more in the room behind.
>> Yeah. Parliament House.
>> We've got I'm I'm sorry. We've got the official here that um uh is best placed to possibly be able to answer and we just don't have that number in front of us and I don't want to sort of do a
calculation on the fly. >> What is the point of having a room full of people sitting there? They could be back at the department jobs.
>> I mean, these these decisions were taken a couple of years ago. you're asking for what what was the budget impact essentially of uh I think a decision taken in the 2324 budget uh and and how that fed in across the Ford estimates. We don't have that number with us. We are happy to provide it to you.
>> Okay. Um if you could that would be great. Um and obviously the decision to reduce the spend even further down to five or 6% that will be reflected in the upcoming
Well, if if we are in a position to make those decisions, yes.
>> Yeah. Okay. Like if decisions haven't been taken, I accept that.
>> A a decision is taken about the to continue to trend down on the growth costs in the NDIS. >> But in order to deliver that, you need to make a series of decisions. Like you just don't say, "Okay, let's go to 5%." You need to understand what that looks like, the time frame for that, what year that might come in, how you would get there. Like does it go like at the moment I think we're 7.6 growth. We came we've come down from 22% or was growing on average at about 13 over 13%. We're down to 7.6. Um, you know, there's still pressure in the scheme and so that needs to be managed and so to get it down even You know, the government needs to take some decisions and states and territories need to take some about what that looks like and how how long that might take to get there.
>> Sure. But did you say that to Minister Butler before he publicly announced that was the government's target?
>> Well, yes. I mean, he and he went through some of that in his speech. You know, he did. I mean, you know,
>> it's the government that's put this number out there and you're saying you haven't done the work to work out how to get down.
>> No, that's not right. I think it's that's not right. I mean, I think anyone would say a program the size of the NDIS growing at the rate it's growing is difficult from a budget sustainability point of view. I think everyone would acknowledge that.
>> Everyone would say that now. Few years
>> We've reached agreement with the states and territories who are important partners here. There's a lot of reform work going on in the NDIS and we will work through all of those issues. There is a lot of work going on around the NDIS uh both in the Commonwealth government and around the country.
>> But as it stands today, you don't have a plan to get it to five or six%.
>> Well, that there is a lot of work underway, Senator Paterson. I'm sure >> and if and if and when uh decisions are made that that are going to be, you know, have a budget impact, they would be reflected in the next in the next economic update.
>> Okay. Um I'm about to move on to another topic. I wonder Senator McKenzie, did you want to share the call with the chair's permission?
>> Certainly. >> Sure. >> We can go to you.
>> Very friendly. Now back together.
>> always respectful.
>> Yes.
>> As I am with you, Minister. So, I just had um a couple of quick questions um for the Minister for Finance or um her officials. On the 19th of December, [clears throat] the Prime Minister announced National Gun Buyback Scheme. >> I wanted to understand uh what provision the Department of Finance has made in the budget for that scheme. >> We're looking over our shoulders. Someone knows that
>> the provision will be reflected in the
>> so it was post the decision was taken post myo cut off. In fact yes because myo was >> published yeah on the 17th. >> Um and so it will be the decision will be reflected in the next budget update.
So in terms of costing because there has been figures ranging from$1 to $15 billion but the $1 billion is the one that has been in most of the media >> um speculations. Um I want to understand what methodology was used to arrive at
Uh Senator Anahama acting deputy secretary governance and resource management. Sorry, could you refer me to that figure that you had and where
>> it was a a media report of a $1 billion buyback cost figure for obviously that is um 50/50 with the state and territories that are participating.
>> Y so that's not a costing that the department of finance has worked on with the department of home affairs. So the department of home affairs has responsibility for the development of the gun buyback scheme. We would of course work with them in agreeing the cost of that scheme. Um but that is something that remains under development and as has been said would once agreed be reflected in the next economic update.
>> So in the previous two Commonwealth um gun buybacks 96 and I think 2003 um fair market value uh was the the method of determining compensation. that hasn't been the methodology used by uh the Labor party, the Labor government in WA in in their most recent gun buyback. And so I just I don't need to go to the figures, but I want to understand that given this will also be a Commonwealth um buyback that you will be um following those principles of fair market value compensation as a Commonwealth. I think
Senator as I said that the scheme is being designed by the Department of Home Affairs. Those questions might be better directed to the Department of Home.
>> I have directed to them.
>> Yep. >> so the costs will reflect the scheme as it is designed and we would work with them on ensuring that the costs reflect the parameters that that are developed and agreed by government but I'm not in a position to say how it will
>> No, that's fine. So I don't need to know the details but the ERC has had a submission based on the work that Home Affairs and the Department of Finance have undertaken.
I think by convention the deliberations
>> If we've announced it, I'm assuming someone's put an ERC submission in. I don't I don't need the details. You don't need to give me the greens. You just need to tell me have you done the maths and it will be reflected in the budget. >> Thank you, Minister. Um just finally, one of the concerns raised by stakeholders was the abolishing of the B79D8 permit system um which importers use to um minimize uh individual permits. They're now getting advice that there will be hundreds of thousands of individual permits now for uh the types of um firearms and parts as a result of um the hate laws gun legislation that was rushed through a few weeks ago. Has there been any consideration by the department of finance not just on the impact on businesses that but on the actual resources of government agencies that are going to have to assess this increase in paperwork as a result because as I understand from my questioning of home affairs this morning there wasn't um a RZ done there wasn't um an economic impact statement done with this piece of legislation. industry has said significant business impact. But my question to government is have you thought about hundreds of thousands of permits as a result of abolishing B79D? And are you resourcing the appropriate agency or home affairs or whoever is going to be actually looking after that pile that's coming your way? Um, and if
so, what's the figure? So Senator I I I don't know I don't know that all these matters are actually settled in a policy design sense. Um >> uh so
>> well the ex the abolish of this permit
>> that permit is the ABF permit is it not
or is it a state and territory >> that permit's been abolished under the legislation. It was um industry in discussions with home affairs right now about do you really understand the impact to you and us and I wanted to understand if that had been something finance had considered.
>> So senator not from a strict costing sense. So uh the details of design are really ones that home affairs is better placed to advise on. From a strict costing sense we look at those questions um that have a um an expense impact. That's not an element of the design that I'm that I'm intimately familiar with.
>> Thank you.
>> Thank you. Just to come back to Senator Paterson >> um in being as helpful as we can. So gone back to the 2324 budget. It um published in that budget which was when the decision is taken. It said reduce growth by um heading 8% reaching 8% growth by the 1st of July 2026 would reduce um uh growth by 622.8 million in 2627 and 59 billion over 7 years from 2728 to 3334.
>> Senator Paterson, Senator Hume, Senator Hume, do you have questions as well? >> Just a few. Yeah, I'
>> I've got a couple and then I'm happy to share the calls. Senator Hume will probably get it done in this block or certainly my questions done in this block. >> Um, I understand that tax is a matter for Treasury, but has had has finance had an involvement in modeling changes or considering changes to capital gains
>> No, we've had no involvement. No. So
there's no inter interdep departmental committees. There's no requests for data. Finance holds no relevant expertise information on CGT.
>> No s.
>> No. Okay. And minister, will the government break its commitment to make no changes to CJT?
>> Um well, our policies have not changed.
>> Are they going to?
>> Well, that's that's the answer to your question. Our policies remain the same. our focus on tax reform has been in those areas that we committed to at the election. So the instant uh the um deductions um and uh the income tax changes that will come in and the better targeted superanuation changes. They the they are the measures that we're focused on.
>> That's what everyone says before they change their policy. So you won't rule
out >> my answer hasn't changed to you. our tax policies, um, in relation to the question you asked have not changed.
>> That's what you said before the stage
three tax. >> They have not changed.
>> Yep. That and they have not yet.
>> You're the one that supported an inquiry into CGT
>> and you voted against it. So, has your position changed?
>> Well, you're the ones that supported a Greens inquiry teaming up with the Greens on capital gains tax.
>> Yeah. Our position on CGT things. Yeah. >> Um, but yours is not. You know, prior to the stage three tax cuts, you said our policy hasn't changed. Prior to the superanuation backflip, you said our policy hasn't changed. Is this just the same kind of talking points before you make another change?
>> Well, it's answering your question honestly, Senator Paterson is what it is.
>> It's not very illuminating, I've got to say. I mean, there's lots of speculation that you are going to change policy on
>> Senator Paterson, the minister's
>> I've answered your question.
>> Okay. Uh and we'll move on to final matter. Um I think Mr. banks. Uh you might be best placed to help with this in relation to the CTM issue. Sorry, I called you banks. I meant banks. I apologize. Um we've discussed the CTM issue in previous rounds of estimates. Uh the CTM CEO has now set stepped down since we last had that discussion. Can you let me know um whether finances investigations into whether Australian taxpayers have been ripped off by the company have progressed and what you've learned?
>> Uh Senator, we've commenced the audit. U so we've appointed Axiom Associates who is the department's internal auditor to undertake the audit. They commenced work on the 22nd of January. Um their work will be done on a couple of different phases. Um, we'll have a a progressive report done in April by 2026 and a final report in June of 2026. Uh, the audit will examine CTM's handling of service fees, airfare costs, refunds, and the accommodation program. >> So, it's in train,
>> but in the meantime, we're still using CTM. Um, what level of confidence can we have that, you know, taxpayers are not take being taken advantage of in the meantime?
>> Um, we haven't seen any degradation to service over the period, Senator. Um the program that we run is quite different to the UK government. Um our program uh doesn't have CTM holding the money in relation to airlines. We have our payment card system that CTM uses our agent. >> Um accommodation is done on a chargeback process for public servants. So public servant has to have stayed in accommodation in order for them to be charged. So there are some fundamental differences to the UK arrangement. Um, we have commenced discussions with the UK government to make sure that we're fully aware of where their auditing considerations are going. Um, but also their early days in their considerations about how the refunds will work.
>> So, are you reasonably confident given the differences in the arrangements that we have not been victim of the same overcharging practices the UK has.
>> Look, I think that's what the audits for, Senator, to give us that confidence. Um we think there are significant differences between the two arrangements that give us greater protections but we want to be absolutely sure which is why we've commissioned the audit.
>> But I mean hopefully the audit finds that we haven't been defrauded in the way the UK government appears to have been. But if we find out in June that we have been defrauded then we have had an extra given CTM an extra 6 months of opportunity to defraud the taxpayer further. So can't there be any interim findings um prior to then? It seems like a long time to satisfy ourselves for going contract.
>> Well, I think that's why the report will progressively report from April. So, the highest pressure issues will be looked at in by April. Um, if there are significant issues in that interim report, then we will take a different course of action. Senator, yes,
>> this came to light in I think November or December last year. Correct me if I'm wrong. It's now February. April's still a few months away. In that meantime, we just continue to use CTM. So what assurance do taxpayers have that uh they haven't been ripped off for an extra 5 or 6 months?
>> Again, we haven't seen anything in the Australian operations that would give us cause for concern to that level of extent, Senator. Um but again, we we want to do the audit to be absolutely sure. We haven't seen a degradation of service. They're still delivering services consistent with their KPIs.
>> Yeah. I don't think the issue was ever about the quality of the service. It was whether they've been, you know, where we've been charged for more than what
We've got no there's no evidence or information to us that there's any grounds on which you could change the arrangements that we have with them now. >> And it is it is different in terms of the way the transactions occur.
>> Sure. Sure. Except that the the same company whose CEO has stepped down has clearly defrauded UK the UK government. So I mean that alone should be of immense concern to the
>> which is why we're doing the audit.
>> Yeah. But I mean, even if let's say hopefully we get to this process and we find Australian taxpayers have not been defrauded, should we still be having a multi-million dollar contract with the business that defrauds others?
>> I think that's a matter to consider once the order findings
>> like we've got the supplier code of conduct now which gives us, you know, which we bought in post PWC. >> Um, but again, you need to, you know, we need to work through and see what see if there are any issues here.
Okay. All right. Uh, sorry chair that you're I might just handle the call. >> Sorry, chair. I picked a bad time to conclude my questions, but I have finished.
please go. Thank you.
>> I want to ask some questions about the Port of Darwin and finance's role in that comm election commitment. Can anyone tell me exactly what finance's role in that election
the the infrastructure department is the lead for government on the port of Darwin. Uh we are involved through our commercial group in assisting that department to enable us to brief our minister. >> you know it's it's a it's a >> negotiation or uh piece of work underway.
>> Right. So is there uh so Minister King obviously then is the lead minister >> but Minister Gallagher obviously will be intricately involved with the logistics if you like the administration of the sale I'm assuming is that correct?
>> Uh I would definitely be involved and I have obviously I I have been I have discussions with Minister King and a brief to a certain point.
>> Right. So do is it regular briefings? Is it sort of updates? Is it ad hoc? How many have there been?
>> I think we're providing an update when we when there's some movement.
>> Right. >> so it was an election commitment. Uh is that something then that finance realizes in the budget somewhere and if
Uh well we don't I don't I mean only when costs are associated you know and known >> um like there's not I don't I mean I
>> there must be a fiscal impact somewhere.
>> I think the budget wouldn't recognize it until time as we know what they are. >> Right. And then at that time when it's recognized it may be acknowledged that it's a it's an election commitment but we don't start by >> including you know we don't sort of anticipate the cost of an election commitment until we've actually done the work and know what the cost might be.
>> Yeah. So even if you don't know what the cost might be is it on budget is it off budget? Where does it where
what it is yet. >> Well yeah I think as clearer >> as those discussions progress.
>> So what are the choices of where it
>> I just I I don't know. I mean these are best questions for infrastructure that are handling the negotiations and I'm not sure it's very useful me speculating while we are discussing the way forward on this.
>> Okay. So so a mechanism for sale has not been decided
>> there. Well, infrastructure are leading the discussions. Um, and they really should should be the ones who answer or ask the questions of and I'm not sure, you know, maybe uh request to to Minister King for a a briefing, a private briefing on it. Like it is obviously >> sensitive. Sensitive. Yeah. So,
>> so, so if so what are you being briefed on if it hasn't been sold and you haven't decided on a mechanism
>> update on discussions
>> on discussions with potential
>> on the on the work that infrastructure is leading essentially. Yeah.
is would you meet with potential buyers or a consortium of buyers minister? Is that something that would fall under your purview?
>> Uh, well, I haven't.
>> No.
>> Um, no.
>> Okay. Um, all right. I mean, this was a significant election commitment. The prime minister was very keen to make the announcement. He dialed into a radio to announce it by surprise. And because it was an election commitment, I'm surprised that there hasn't been more interest in following it up.
>> Well, there has been a lot of interest, but it's not necessarily, you know, it's complex. >> Yeah. Um so
>> and the fiscal impact of that decision was that something that was contemplated prior to the announcement or is it something that um because
>> well I understood there would be costs but to quantify those costs you need to get to the end of you know you need to reach agreement on the way forward. Um that's work underway. I mean the prime minister has for a number of years I've heard him not not just in the election context but in years beforehand uh expressing concern that the port of Darwin was ever sold in a fire sale that was supported by your government in under asset recycling arrangements because I remember that getting into we got out of gambling but they sold government sold the port of Darwin so you said it was surprise announcement. The PM has been on the record for a long time that that porch should never have been sold.
>> So, but there has clearly been very little progress.
>> Well, I don't think you can um you can take that view. No.
>> And what progress has been made?
>> Well, there is a lot of work underway. It's being led by infrastructure
>> and you've been briefed, but you're not entirely sure what you've been briefed on.
>> Well, no, I am sure what I've been briefed on. And yes, I have been appropriately briefed as you would expect the Minister for Finance to be.
Uh I want to ask about some of the uh defense estate sales and again finance role in that. So, Minister Miles uh said on Sunday agenda uh that of the 67 sites, three had already been sold and so three were sold in the four days between the announcement of the policy and the interview on Sunday agenda which was
think
>> since the date of the audit, >> and the announcement, those three sites had been sold or devested by defense.
>> Yeah. So which ones are they?
>> Uh the Habfield training depot, uh a what's called Garbett, G A R B U T. Uh, I think it's adjoining RAF base Townsville and the Amaru Apartments on Magnetic Island.
>> Okay. And do you know who they was? I mean, obviously you would know who they were sold to.
>> Uh, I do not because [snorts] that was transacted by the Department of Defense,
>> right? Okay. Were those sites transferred to finance before they were sold? >> No. >> Right. So it was so
>> finances getting 58 of the 68 propert surplus properties. So of the 68 my recollection is one is being retained.
>> Yes.
>> Uh three have been sold. I think six are currently under divestment by defense. So that process is underway. And so the decision taken is that finance will be responsible for the devestment of 58 of the 68 identified in that audit.
>> 58. Okay. And how is that uh what logistically what's being done there? Are there is there a tender process? How's that going to work? Are they all going at the same time? Are they being >> in some sort of sort of plan?
>> Just to outline the process that we will go through. >> Liberki, first assistant secretary commercial group. So senator, so we are uh property and legal advisers. We are currently in the process of appointing strategic industry partner who will be charged with uh undertaking due diligence. So that would be undertaking uh site valuations uh looking at the level of of contamination remediation activities and so on. So once we appoint the industry partner, we will commence the due diligence on individual sites which will then inform our next steps. So the intention is to identify sites that will will be ready for early divestment which will be sites that have no or low defense personnel, no or low uh contamination. So, so we will focus on those, but in the meantime, uh the strategic industry partner will uh continue doing due diligence on all 58 sites.
>> And the the $1.8 billion in revenue that Minister Miles keeps referring to in the media. Is that I know you just said that some will be done by defense and some will be done by finances. Is that the whole lot together? Is that just finances component? Is it just defenses component?
>> So those figures were provided by uh by the defense estate audit committee. So they were uh estimated what two or three years ago. So those estimates are quite old. >> So they estimated that the potential revenue $3 billion. They also estimated that the cost of the diverments about 1.2 billion leaving 1.8 billion as a net figure.
is that expected to be realized over what time frame? Four years, 10 years, 25 years, what are we talking about?
that some properties will be quite complex in terms of contamination take some years. Uh but I also expect there'll be some properties that we will be able to divest pretty quickly.
>> Okay. So there's a couple of properties there. Um ASP estimated that the sales of Victoria Barracks in Sydney and HMS Penguin alone would cost would gross around 1.55 billion. That's a huge amount of money. If the total gross sale estimate is three billion, how does that how does the economics of that work if one or two of those sites are just mind-blowing? Does that mean this the
>> again we'll have to do the valuations uh as part of the due diligence. I think the the expected revenue will depend on uh what are the disposal options uh because as you mentioned some of those sites have heritage buildings and uh uh so we will have to determine this
>> Right. So the remediation again that's part of the due diligence. You can't estimate what the remediation might be.
>> Not not at this stage.
>> Okay. Um defense has been in negotiations to devest some of these sites already. Is that right?
>> So there are defense are in charge of disposing disposal of six sides. >> Mhm. >> Uh we don't have visibility on on on progress on those. So uh very best to ask defense about current status.
>> There's one in my home state of Victoria that is uh 310 at Kilda Road and that was proposed for sale to the Melbourne City Council a number of years ago. There was a remediation estimate at the time. Do you know what that was?
>> No. Again, that site's being disposed of by defense.
>> Apparently, the Melbourne City Council decided not to proceed with a discounted sale at that time because of the extent of the remediation costs. So, that's not something that's appeared on your radar
>> Not yet.
>> That will be one that we do diligence on. It's in it is in the list of the uh I'll just get the number wrong. 58 that we're going to going to lead on devestment,
>> right? That at the time I can remember being approached by a couple of veterans in um in a restaurant, believe it or not, who told me that uh that building was going to be repurposed as a veterans well-being hub. And I wonder whether there was um and it was was going to support like a number of ex-service organizations. Uh, and I wonder whether there was any consideration given to repurposing any of the sites for anything other than a sale.
>> I think there are questions directed at the Department of Defense, Senator.
>> Okay. Um, the auditors admitted in their report that they didn't visit every site that had been listed. So, are is finance comfortable then that every one of these sites are in fact salailable?
I don't think we know yet. We'll do the they they appear all salailable from from what we have seen in information provided to us, but we need to have our strategic property advisor assess them, understand market conditions, who are the potential purchases. There's a there's a bit to go before we uh are able to be clear on how we will tanch or what we will do in and indeed what the the the strategies are to move defense personnel if they're already if they're currently located in one of these sites like where are they actually going that's a that that needs to be deal dealt with by the department of
defense. So, uh, one of the sites identified, Swan Island, for instance, uh, my understanding is that that site was sold that, uh, a developer wouldn't be able to access the road to get there without military approval. Those are sorts of things that will be considered
>> that would be considered a constraint on the site, I would imagine, if that's the case.
do you know how many of the sites can currently only be accessed through through like via defense or via government controlled roads or roads or
easements? Would know that
>> we don't know how many. No,
>> no, defense may be able to assist you. I think they're on tomorrow center.
>> Yeah. So I mean part of the decision here is that we take this off defense's hands so they can concentrate on the things that they need to do and then finance will take a whole lot of information that accompanies you know what defense knows about these sites and then we will conduct the department of finance and its commercial group will will start the process of um I imagine in the entrrenching what what's more ready for sale than not you know so that we can prioritize within that as they piece, you know, the whole program together, but that work hasn't started yet.
>> Okay. I mean, I realize this is going to be complex. Obviously, you've got to put a value on this site so you can essentially budget for what it is that to to, you know, to make from this from from this sale. Um at the same time though and and you we should expect some sort of transparency of if you're going to do a um an internal assessment of of how salable these properties are. How are you going to manage that process? Balancing um the budget process combined with assessing the salailability, putting things out to tender, making sure it's competitive tender. How's it
going to work? So, so once we finalize the due diligence that will give us a good sense of for individual sites what are the complexities there being contamination, heritage uh heritage uh uh buildings and so on. Then we will undertake uh together with defense consultation with key stakeholders to develop disposal options. Uh so so the the key stakeholders will would be uh consulted through that process.
>> Okay. So what's the timing of the due diligence did you say?
>> Well again it would depend on the complexities of the sides because uh doing uh assessing for example uh the level of contamination requires expert analysis. So that could take some time. So we will be focusing on sites that can be I guess tranch as a trench one that can be disposed >> of quite quickly. uh but as I said uh the more complex sites will probably take more time in terms of the analysis and so on.
>> So the 1.8 billion in revenue that Minister Miles keeps referring to. What you're really saying is well that is from an auditor's report that is out of date. Uh we have no idea how much remediation might be required on these sites. We have no idea whether they're salailable or whether they're accessible. Uh, and we have no idea who we're selling them to or when we're selling them. So 1.8 billion is kind of pulled out of nowhere, isn't it?
>> Well, I don't I don't know. They would have made assumptions that we haven't seen uh on the remediation costs and that would have been included in that 1.2 billion figure. So So I'm not I don't know what methodology they use to estimate those costs.
>> Those costs were estimated in the independent audit uh
>> which is now out of date. got those.
>> Well, it it it's it's a year and a half or two years old. Yes.
>> Mhm. Okay. But the independent or so the independent audit did do analysis of what remediation was needed, but you have to do that again.
>> Well, I think it could be more.
>> They did desktop analysis. They haven't they didn't do >> soil sampling or any of the sorts of things we would do to sell something.
>> All right. I'll leave it there. Thank you. Thank you, Chair. Senator
Paterson, do you have more? No,
>> not for now. Thank you, Chair.
>> Okay. Thank you very much. We appreciate your time. Um, we've all had a lovely Um, you may now go about your business, but thank you so much. Um, I would ask Services Australia to make their way to the table, but we will suspend for a moment while we um while we get them to