Senate Rural and Regional Affairs and Transport Legislation Committee, , 2:00:00 to 2:09:34
Senators discuss the reporting obligations for contractors in Victoria under the Federation Funding Agreements (FFA) and the state's zero-tolerance policy for criminal behavior on infrastructure projects.
Topics: Infrastructure, Integrity
Speakers: Hon Bridget McKenzie, Lachlan Wood, Mr. Jim Betts, Toby Robinson, Jessica Hall, Senator Glenn Sterle
continuation in corporate matters, Senator McKenzie.
>> Ah, thank you so much, Chair. I'll just um continuing on the um federation funding agreements the safeguards against unlawful behavior and and Mr. Betts you continually go to 11D and F of the FFA where those obligations to report are >> [snorts] >> um laid out. I just want to understand whether between July 2024 and January 2026, were contractors in Victoria legally or contractually required to report allegations of corruption, fraud, bullying, and criminal conduct in that gap
>> legally and contractually. [clears throat]
so the requirement for the under the FFA did apply during that period of time. Um, Victoria head contractors about their obligations um and wrote to them um expressing their zero tolerance for criminal and unlawful behaviors um and their expectations that their contractors are taking all appropriate steps to prevent criminal unlawful and inappropriate conduct. So
that was a letter to T1
>> uh from sort of the Victorian Delivery Agency out to their contractors. Yeah. >> Um and that was in March of 2025.
>> March. Yep.
so also taking expecting that their contractor will take all appropriate steps to prevent presence of persons with known criminal associations. uh ensuring engagement and management of some contractors is under can taken with consist is undertaken consistent with the highest standards of integrity including appropriate vetting of suppliers and compliance with the state suppliers code of conduct uh and also the requirement to have robust controls in place to mitigate risk of fraud and corruption by suppliers and subcontractors on reporting. Um, they outlined that they expected the contractors to immediately report to Victoria Police any known or suspected instances of criminal or unlawful conduct. Uh, and also that it be reported to um, in this case VA, the Victorian Infrastructure Delivery Agency, any known or suspected in instances of conduct which is inconsistent with the standards of integrity referenced in this letter.
Right. Nothing about conflicts of interest though.
I just say while Mr. Wood looks that up, conflicts of interest and pursuant to your questions earlier on, conflicts of interest can arise not just in a government context. A conflict of interest for the purposes of the terminology in the document we provided to you could for instance be the award of a subcontract to a relatively small player from a contractor where the person taking the procurement decision within that contractor had say a family relationship or some other inappropriate relationship. >> So just wanted to clarify that while we got the chance.
>> Uh it doesn't appear to be called out specifically but would be covered under the broad corruption and fraud and other integrity measures. Yes.
>> Got it. Um so Victoria rights to their contractors uh zero tolerance and yet here we are um new new contracts still aren't required to comply with the FFA until January this year. >> I think do you know how many contracts were signed in that 18 months by Victoria?
>> I don't have that detail. Senator,
>> do we have that detail though?
>> I have it. We could I think we'd have to
ask. >> Do you know how many contracts Victorian government signed for infrastructure projects that they partnering with the Commonwealth on funding in the 18 months between your minister >> we're going to fix this?
>> We'd have to collect that information
for you, Senator, and take that on
notice.
Um All right. In Senate estimates in May this year, you confirmed that Minister King had received a briefing on the 19th of March concerning options available to the Commonwealth in relation to funding projects affected by allegations of unlawful conduct. What options were presented to the minister?
Um, Senator, I don't have that particular briefing in front of me, but u in terms of options to recover funding, I mean, obviously if um any allegations were proven uh that Commonwealth funding had been misappropriated, um the Commonwealth would be um would have obligations under the the PGPA act to recover um funding. Um and so we would look to do that with the the relevant state or territory
>> because isn't it the case that um the Commonwealth to Mr. Betts' point earlier that uh halting payments or suspending payments uh on Commonwealth funded infrastructure projects actually doesn't result in subcontractors not getting paid because the state government is responsible for paying uh the contractual work aren't they? We pay in a rears sorry we commonwealth pays after the work has already been done and paid for somebody's pay slip isn't affected because the state government is responsible the contractual arrangement is between the tier one and the state isn't that correct
>> if the commonwealth withdrew funding support whether it's in a rears or
>> no paused
>> if if it withdrew funding support then the ability of the contracting chain then to make sure everybody was paid would be compromised to the extent that that payment had been withdrawn.
>> Well, it actually falls onto the state government. It's a risk for them, isn't >> Some state governments care more about uh crewing debt than others.
>> If you're delivering a mega project and several billion dollars worth of uh support is withdrawn from that project, your ability um then to honor payments is significantly compromised. That was a point that Jeffrey Watson was making that I was quoting.
did the options presented to the minister, Minister King include suspending, withholding, conditioning, or recovering? You've said recovering. Yes. Uh suspending, withholding, or conditioning uh Commonwealth payments.
>> Uh I would need to take that on notice, Senator. I don't have the briefing in
front of me. I want to understand whether Minister King was given options, a range of options of how she could actually enact her desire to protect the Commonwealth taxpayers in Victoria.
Oh, we don't we'll have to take that on notice in uh since we don't have that briefing in front of us, but I clearly recall conversations with the minister where she was keen to make sure that we explored all options for uh tackling inappropriate and criminal behavior on work sites and all options for making sure that value for money and the integrity of Commonwealth payments was
>> Um well, I will be reursuing this in the appropriate outcome. So having that brief uh available would be helpful at that time. Um since first allegations concerning Victoria Big Build projects were raised in July, uh um it's your evidence that the Commonwealth has not withheld, suspended, deferred, or recovered a single dollar of infrastructure funding in Victoria because of the alleged corruption, fraud, criminal behavior.
>> No, Senator, I think we mentioned last time that we have um uh withheld um a payment um previously until we've got further information.
>> And which project was that on, Miss
>> That was Northeast Link.
>> Northeast Link.
>> While we confirmed with Victoria that they had um referred the allegations to the appropriate regulators.
>> Yeah. Um but there's been no further action about withholding, suspending, deferring, recovering
>> once they had confirmed that they had followed the FFA.
>> What about all these new allegations?
>> So part of our new protocol is that when states submit milestone claims, they also confirm that they have referred the allegation to the relevant regulator in compliance with the
>> When did that come into place?
>> Uh that came in from one July. 1 July
2026.
>> That's correct.
>> Um given the premier him in South Australia himself has referred a project to their integrity body is that grounds for pausing payments to