Mark Bishop (WA, Australian Labor Party, Shadow Minister for Defence Industry, Procurement and Personnel) Share this | Link to this | Hansard source

I want to rise this afternoon in this debate and pass a few remarks about the proposed new joint headquarters for the Australian military in Bungendore, just outside of Canberra. I think it is most appropriate to have this discussion today because the foundation and construction of new joint headquarters is a matter of significant public interest and will be of significant interest well into the future. We know that our military forces are stretched at the moment. They are located in several parts of the world—some in the immediate region of Australia; some in the Middle East. I think it is fair to comment that there is going to be an increasing role for the military in a range of overseas engagements in the next two or three decades.

That being the case, it is entirely appropriate that the command structure be up to date and modernised. To that extent, one should not quibble with the government’s proposal for the construction of a new joint headquarters just outside Canberra. Indeed, in one respect, I think it is fair to comment that it is simply a continuation of longstanding developments and organisational review within the Australian defence forces that have been in train since at least the mid-seventies when we shifted away from separate portfolio representation of the armed services to the current system of joint military and civilian oversight of senior officers. To the extent we will now have a joint headquarters housing the Army, the Navy and the Air Force, it is probably unremarkable in that context.

What is remarkable, and what I want to discuss about the project for the joint headquarters at Bungendore, are the time lines involved in the project, the financing of the private-public partnership and the costing and financing issues associated with that PPP method of raising finance. In that context, what matters have been disclosed by government as to costing and financing issues and what matters do government continue to resist to disclose in any meaningful way? That leads us then to a bit of a summary: what we know about this particular project, putting that in context and then outlining some thoughts on likely future action that the opposition is interested in pursuing with regard to this project for the joint headquarters of the armed services out at Bungendore.

The time lines of the project are on the public record. The project was announced twice, immediately prior to the 2001 election and immediately prior to the 2004 election, the site being located—then and now—in the reasonably marginal seat of Eden-Monaro, held by Mr Nairn in the other house. As it involves a significant amount of federal funding, a significant amount of construction work and a significant amount of local labour to be employed, that of course drew the attention of local electors there who saw the immediate advantages and gains within their own electorate. It having been announced in 2001 and 2004—and we are now towards the end of the current year, some seven years later and not a sod having been turned—one questions the veracity of government undertakings in this area. One raises squarely that the issue is one of pork-barrelling in that particular electorate—pork-barrelling to keep the seat in government hands, as evidenced by the fact that no work has commenced and the time lines for conclusion of the work, as I understand it, have now blown out to 2008 or 2009.

The fact it is a public-private partnership is a matter of interest, I suggest, at three levels: firstly, its present value; secondly, its significance; and, thirdly, general interest around the issue. In terms of precedent value, it is my understanding that this project is the first private-public partnership to be entered into by the Department of Defence. Accordingly, one would have thought government would be keen to ensure that a proper template of conditions was established for this type of project into the future. Whilst it will be the headquarters of the armed forces and it will have a significant command and control, communications and intelligence role, nonetheless, we are talking about land acquisition, site clearance, building construction, road clearance, housing of 750 staff and operational matters consequent upon that. It is hardly a matter of high risk, one would have thought, in the greater scheme of things. Hence, why the need to go into a PPP arrangement for finance when, firstly, there is not a great deal of risk attached to the project; and, secondly, there not being such a great amount of risk, why the need to transfer that risk off the budget books to the private sector? That is a matter of interest in terms of precedent value for the future. But, in terms of significance, it is more important to have the templates correct, to have the norms established out there, subject to public discussion and public review so that we can have a decent set of standards that apply. It is important when government is going to be involved and when it has had multibillion dollar surpluses for many years and is likely to have them into the future but chooses not to use those surpluses to fund capital construction, but instead chooses to allow the finance to be provided by a private consortia, with a repayment term over a 30- or 40-year period.

One would have thought that government would be keen to have the templates established, the norms agreed to in a relatively public fashion so that the government, the opposition, private financiers, state agencies and the capital markets could all be satisfied that there is a proper process involved in the raising of significant funds. That, I am afraid to say, has not occurred. In that context, what we know is this: disclosed matters are these—budget papers and questions on notice reveal that the project will cost $339 million. That is for land acquisition, site clearance, building construction, operational funding matters and the C4 system and intel capacity that needs to be embedded in the project. The cost of the entire project is $339 million. What we are latterly advised, publicly, by the Special Minister of State and federal member, Mr Nairn, is that the repayment of that $339 million by government will be in excess of $1.2 billion over a 30-year period. So the cost of the project is $339 million, as disclosed in questions on notice, but the repayments over a 30-year period by government for capital cost and operational costs will be in excess of $1.2 billion.

That is a remarkable built-in inflator in terms of repayment deals. In fact, the original costing announced by the Prime Minister in the year 2001 was something of the order of $200 million. As I say, that has blown out to $339 million now, notwithstanding the fact that the project has been downsized significantly. So the repayments, over that 30-year period, are going to be in the order of three times the cost of the project, notwithstanding the fact that the government has huge multibillion-dollar surpluses. So it is choosing to spend $1.2 billion when it could have essentially just allocated $170 million this year and $170 million next year for the entire capital cost of the project.

Repeated questioning by the opposition has failed to obtain any hard information as to the terms of the contract, the length of the contract, the repayment period or the repayment amounts—with one exception. The government has disclosed that $39.9 million will be repaid in the 2008-09 financial year. But, in the other 28 years of the contracted repayment period, the government refuses to disclose what the annual repayments to the consortia are going to be.

In addition, in terms of such a major contract, the government has failed to disclose whether there are any gain-sharing agreements or technology savings clauses in the contract, and it has failed to disclose when and how the repayments are going to be made. So all we know is that we have a project out there in Bungendore not requested or sought by the chiefs of staff or the defence department and imposed upon them by government twice in election periods as a pork-barrelling exercise. We have public costs of $339 million and repayments over 30 years of over $1.2 billion, and the government refuses to disclose, in the first and most important public-private partnership that it has entered into, the details of that particular arrangement, the details of that contract.

We are not silly. We understand that some matters necessarily have to remain private. Some matters necessarily should remain confidential. That is entirely appropriate, particularly in detailed negotiations or in negotiations affecting security matters, intelligence matters and those sorts of things. I do not quarrel with that. But when you shift a project off the budget books priced at $339 million, and when the minister and the local member indicate publicly that the repayments are going to be $1.2 billion, the opposition has a duty to inquire as to the terms of the contract—to satisfy itself, on behalf of taxpayers, on behalf of the public, that the consortia involved in the project are not taking inordinate and gross profits from the community, and that the government has not got some side-deals elsewhere.

That is particularly the case here, when this project was not sought by the defence forces. We are going to have a joint headquarters out at Bungendore—we are told, to house the senior echelons of Army, Navy and Air Force. But we are also told, after we pry at estimates, that each of the three services is going to retain its current headquarters in Sydney. So we are going to have two sets of headquarters. Each of the services is going to retain its headquarters and go about its business, and we are going to have a beautiful, new, highly expensive white elephant out there at Bungendore, which might be staffed permanently—but they are going to keep their old headquarters on the North Shore and other parts of Sydney.

So I say that there is something rotten about this project. Why has the government continuously refused to disclose necessary details of the price and the contract?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

They’ve blown out.

Mark Bishop (WA, Australian Labor Party, Shadow Minister for Defence Industry, Procurement and Personnel) Share this | Link to this | Hansard source

They have blown out. Have they ever blown out, Senator Conroy! They have blown out from $200 million in 2001, to $339 million this year, to over $1.2 billion over 30 years.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

How much?

Mark Bishop (WA, Australian Labor Party, Shadow Minister for Defence Industry, Procurement and Personnel) Share this | Link to this | Hansard source

$1.2 billion over the next 30 years are going to be the repayment costs paid by this government to the consortia erecting the project out there at Bungendore—a project not requested by the chiefs of the defence forces, a project not required by the defence forces, a project imposed upon them. And they, in their wisdom, are going to keep their old headquarters in various parts of Sydney.

The opposition has been diligent in pursuing this matter in the various forums that are available to it to get some reasonable answers to reasonable questions. Unfortunately, the government has been equally diligent in refusing—in public forums, in accountable forums—to provide any reasoned or reasonable response to those issues. So I think the appropriate thing to do is to refer this issue of the funding, the costing, the repayments and some of the contract details off to the Joint Committee of Public Accounts and Audit. Let there be proper questioning down in that committee, in that chamber—as to the intention of government with this particular project, as to why it has not used its own surplus to fund the project and as to why it is intent upon spending in excess of $1.2 billion over the next 30 years to fund a project which its own budget papers disclose is going to cost only $339 million. Why in God’s own name would you seek to repay $1.2 billion for a project which is only slated to cost something in the order of $339 million? (Time expired)