Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Standing Committee on Public Works, I present the fourth report for the year 2017 on referrals made December 2016 and February 2017. I ask leave of the House to make a short statement in connection with the report.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—On behalf of the Parliamentary Standing Committee on Public Works I present the committee's fourth report for 2017 on three proposals referred in December 2016 and February 2017. The first proposal is for the refurbishment of the Australian Embassy in Washington DC. The project will demolish the existing embassy building, which has aged and is quickly deteriorating. It will replace it with a modern iconic building with a project cost estimated around $236 million.

In brief, what will happen in that space in Washington is that our embassy will take up temporary residence in a leased property. That leased property will have to be specced up to security specifications. We currently have tenants, and we will need to service their requirements in Washington. We will do a demolish of the existing embassy. In Washington, under the local town planning act, we are unable to go higher to cater for the extra floor space that we need because the town planning act requires that no building can be higher than the top of the spire of Capitol Hill on top of the Congress. So that must always remain the highest building in Washington DC. So we are going to put another basement in our Washington embassy.

The second proposal is for a fit-out of a new leased premise for the Department of Immigration and Border Protection headquarters in Canberra. The department currently leases about 12 different office spaces around Canberra. We are looking to consolidate that to five buildings and bring resources back in under one roof. The department advises that this will achieve some life savings during the project of some $236 million in reduced rent alone, notwithstanding the efficiencies we will get from reducing from 12 properties to five. In addition to these savings, the work will allow the Australian Border Force to have its operational headquarters in a single location rather than being spread across several properties around Canberra. This consolidation will assist in making Border Force and its operational areas far more effective and efficient. It will help to ensure that Border Force of those tasked with protecting Australia's borders are better equipped to do so.

These works will provide an unified watchfloor with the capability of uninterrupted operations 24 hours a day, seven days a week. The works will also provide Border Force with far more flexibility at their operational headquarters, allowing them to make changes that enhance their capacity to respond to the evolving security environment on our borders with the appropriate speed. The project cost is estimated at $255.3 million, excluding GST.

I would also like to draw to the attention of the House the unauthorised disclosure of committee proceedings in the media last week. Confidential proceedings of the committee appeared in a major newspaper. The matter will be considered by the committee in due course.

The Administrative Appeals Tribunal is also seeking to consolidate its Melbourne presence through this proposal. It currently leases space in four locations. That will reduce to one location in Melbourne CBD. The project cost estimated is $15.68 million, excluding GST.

The committee recommends that these three proposals should be agreed and proceeded with. I commend the report to the House. I move:

That the House take note of the report.

Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Link to this | Hansard source

I want to speak briefly with respect to the report and endorse the comments of the chair of the committee, with the exception of one matter that he alluded to in his remarks—that is, the matter with respect to the Department of Immigration and Border Protection headquarters project. That project seeks approval from the committee to fit out four leased buildings in Belconnen and the Canberra Airport precinct areas of the Australian Capital Territory. The estimated cost of those fit-outs is around $255.3 million, excluding GST.

The Department of Immigration and Border Protection currently leases 100,000 square metres of office space in 12 properties across four Canberra locations. According to the department, the current leases are all approaching the end of their terms, which I understand expire between 2017 and 2020. This project is important in order to meet the evolving requirements of the integrated department. The headquarters project was therefore initiated. The benefits of consolidation will include providing long-term lease savings to the Commonwealth at a reduced office rent rate and a reduction in the number of buildings in the department's ACT lease portfolio from 12 separate tenancies down to five. That is the basis for the project.

The $255 million that is being asked for is comprised of around $212 million in lease incentives offered by the building owners, $25 million of Commonwealth funds provided through the 2014-15 budget and $18 million of internal costs from the Department of Immigration and Border Protection. The department states that consolidation into the four properties will result in a $236 million saving over the life of this project of about 30 years. This was based on a cost-benefit analysis provided to government by Synergy Group Australia in April 2016—that is, about a year ago. The $212 million lease incentive is made up of $136.4 million in building owner contributions and $75.9 million in up-front capital funding, amortised over a 15-year period. That, in essence, is how the $212 million incentive is made up. The cost-benefit analysis was based on a 30-year analysis, which, indeed, differs from the lease arrangements for this project, which provide for a 15-year initial term with two five-year rights of renewal thereafter. The analysis is also based on assumptions which include the department's long-term needs and operations and future market rental rates. Labor members of the Public Works Committee did not support this proposal. Whilst we did not have the opportunity to provide a dissenting report, we nevertheless wanted to make it clear that this was a project that we would not have supported and that we do not support.

The fit-out costs for the 32,924-square-metre airport precinct are $72.55 million or $2,204 per square metre. For the Belconnen precinct, the cost is $109 million or $1,964 per square metre for the 55,518 square metres being leased. Labor members of the Public Works Committee were not convinced that the proposal represents good value for money. Advice provided to the committee about incentive payments was confusing and inconsistent with other interpretations about the term 'lease incentives'. In fact, that point was made clear in subsequent cost-benefit analysis that was provided to the committee only recently, and that could have been made clearer in the first instance by the department.

The lease rate for the airport precinct in particular appears high when all factors are taken into consideration. Our understanding is that that particular building has been vacant for many years. The costs being paid per square metre would appear to be high under the circumstances, and we believe a better deal could have been reached. The projected 30-year savings of $236 million are very speculative and based on matters which are subject to continuous change. Not only do they extend beyond the 25-year possible lease period but they also clearly take into account speculation or assumptions about the needs of the department in 10, 20 or 30 years time. Those needs may well change. As we have seen in recent years, they have changed, and it is very likely there will be changes with respect to the lease rates that are available for properties in the Canberra area. So making assumptions about what might or might not be needed and what might or might not be the costs in 10, 20 or 30 years time was not convincing to Labor members of the committee.

Finally, the evidence to justify the proposal and expenditure was also at times vague and failed to address matters raised by committee members at the hearings. The current buildings that the various departments are located within, in our view, may well have been appropriate for future use as well. Again, we were not convinced that they needed to be relocated. Lastly, on the issue of refurbishment and costs, again, when compared with other floor space leased by the Commonwealth in other buildings, they would appear to be high. Again, Labor members were not convinced by the arguments put to the committee that those costs were reasonable under the circumstances and that the Department of Immigration and Border Protection required additional refurbishments that generally caused costs to be much higher. For those reasons, we opposed that particular proposal, but we supported all the others.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

Your comments are noted. I ask the member for Wright to move a motion in relation to the report.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for a later hour this day.