Review of Auditor-General’s Report No. 6 of 2009: …...REVIEW OF AUDITOR-GENERAL’S REPORT NO. 6 OF 2009: GOVERNMENT OFFICE ACCOMMODATION – INTERIM REPORT RECOMMENDATIONS RECOMMENDATION

S T A N D I N G C O M M I T T E E O N P U B L I C A C C O U N T S

Review of Auditor-General’s Report No. 6 of 2009:

Government Office Accommodation

I N T E R I M R E P O R T - F E B R U A R Y 2 0 1 1

Report 14

Committee Membership

Ms Caroline Le Couteur MLA Chair

Mr Brendan Smyth MLA Deputy Chair

Ms Joy Burch MLA Member to 19 November 2009

Mr John Hargreaves MLA Member from 20 November 2009

[As a former Minister for Emergency Services, Mr Hargreaves did not participate in any discussions or deliberations relating to the ESA’s office accommodation needs and outcomes.]

Secretariat

Secretary: Andréa Cullen

A/g Senior Research Officer Lesley Irvine

Administration: Lydia Chung

Contact Information

Telephone: (02) 6205 0142 Facsimile: (02) 6205 0432 Email: [email protected] Post: GPO Box 1020 Canberra ACT 2601 Website: www.parliament.act.gov.au

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mailto:[email protected]

http://www.parliament.act.gov.au/


Resolution of Appointment1

The ACT Legislative Assembly appointed the Standing Committee on Public Accounts on 9 December 2008 to:

(1) examine:

a) the accounts of the receipts and expenditure of the Australian Capital Territory and its authorities; and

b) all reports of the Auditor-General which have been presented to the Assembly;

(2) report to the Assembly any items or matters in those accounts, statements and reports, or any circumstances connected with them, to which the Committee is of the opinion that the attention of the Assembly should be directed;

(3) inquire into any question in connection with the public accounts which is referred to it by the Assembly and to report to the Assembly on that question; and

(4) examine matters relating to economic and business development, small business, tourism, market and regulatory reform, public sector management, taxation and revenue.

1 ACT Legislative Assembly, Minutes of Proceedings No. 2, Tuesday 9 December 2008, pp. 12–13.

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R E V I E W O F A U D I T O R - G E N E R A L ’ S R E P O R T N O . 6 O F 2 0 0 9 : G O V E R N M E N T O F F I C E A C C O M M O D A T I O N – I N T E R I M R E P O R T

TABLE OF CONTENTS

Committee Membership .......................................................................................... i Resolution of Appointment...................................................................................... ii

R E C O M M E N D A T I O N S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V

1 I N T R O D U C T I O N A N D C O N D U C T O F I N Q U I R Y . . . . . . . . . . . . . 1 Inquiry context .......................................................................................................1 Conduct of inquiry ...................................................................................................1 Terms of reference..................................................................................................2 Submissions ............................................................................................................2 Public hearing ..........................................................................................................3 Structure of interim report ....................................................................................3 Acknowledgements ...............................................................................................3

2 A U D I T B A C K G R O U N D A N D F I N D I N G S . . . . . . . . . . . . . . . . . . . . . . . 5 Audit background and objective(s) ......................................................................5 Audit conclusion(s) ................................................................................................6 Audit recommendations........................................................................................7

3 C O M M I T T E E C O M M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 New ACT Government Office Accommodation Proposal ..................................9 The decision making process in the context of the Canberra property market .....14 Re-use of existing office accommodation buildings versus new construction......15 Whole-of-government office accommodation strategy .........................................17

4 C O N C L U S I O N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1

A P P E N D I X A : A C T G O V E R N M E N T S U B M I S S I O N . . . . . . . . . . 2 3

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RECOMMENDATIONS

R E C O M M E N D A T I O N 1

3.30 The Committee recommends that the ACT Government make no final

decision with regard to the whole-of-government office building project until

the Standing Committee on Public Accounts has received a copy of the

business case, and the economic and environmental analysis, together with

any other relevant considerations, and had time to consider this information

and report to the ACT Legislative Assembly.


3.32 The Committee recommends that the ACT Government provide the

Standing Committee on Public Accounts with an assessment of the

opportunity cost of a whole-of-government office building project against

other significant infrastructure projects, such as the Majura Parkway, a light

rail network, a new convention centre, or a third major hospital.


3.42 The Committee recommends that the ACT Government whole-of-

government office accommodation strategy should be finalised, and

considered by the ACT Legislative Assembly, prior to any final decision, or

awarding of any contract, with regard to the whole-of-government office

building project.

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1 INTRODUCTION AND CONDUCT OF

INQUIRY

1.1 Auditor-General’s Report No. 6 of 2009: Government Office Accommodation (the Audit report) was presented to the ACT Legislative Assembly (the Assembly) on 28 August 2009.

1.2 In accordance with the Standing Committee on Public Accounts’ (the Committee) resolution of appointment2 the Audit report was referred to the Committee for examination.

1.3 The Audit report presented the results of a performance audit that reviewed whether ACT Government office accommodation had been strategically managed in an efficient and effective manner. The Audit specifically focussed on the strategic planning and the management processes, and the compliance with requirements specified in the whole-of-government accommodation strategy.3

Inquiry context

Conduct of inquiry

1.4 Under its resolution of appointment, the Committee examines all reports of the Auditor-General which have been presented to the Assembly. The Committee has established procedures for its examination of these reports.4

1.5 In accordance with these procedures, the Committee resolved on 3 August 2010 to inquire further into the Audit report.

1.6 The Committee met on 8 and 10 February 2011 to discuss the Chair’s draft interim report, which was adopted on 10 February 2011.

2 ACT Legislative Assembly, Minutes of Proceedings No. 2, Tuesday 9 December 2008, pp. 12–13. 3 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation. 4 Available at: http://www.parliament.act.gov.au/committees/AGReports.asp

http://www.parliament.act.gov.au/committees/AGReports.asp

S T A N D I N G C O M M I T T E E O N P U B L I C A C C O U N T S 2

Terms of reference

1.7 Whilst the Committee’s terms of reference are to examine the Audit report and report to the Legislative Assembly, the Committee’s inquiry is specifically focused on best practice planning, acquisition, management, delivery and utilisation of government office accommodation.

1.8 The Committee’s inquiry frame is forward looking and is concerned with drawing lessons arising from the Audit which can be applied to future activity at a whole-of-government level as well as at an agency level. Further, in resolving to adopt the Audit report as a formal reference, the Committee was of the view that any lessons arising from its inquiry may provide useful input for consideration by the Government as part of its recently announced proposal to consider a whole-of-government office accommodation building project.

1.9 Since the Audit, responsibility for the management of property and related issues has shifted from the Department of Territory and Municipal Services to the Department of Land and Property Services. In evidence, the Chief Minister stated:

… at the time that the audit was undertaken, responsibility for issues in relation to property and the management of property and our asset base were [sic] vested in the Department of Territory and Municipal Services. Through administrative arrangement amendments, that responsibility now vests in the Department of Land and Property Services.5

Submissions

1.10 The Committee received a submission from the Government6 in relation to the findings of the Audit report. The Committee also received a briefing from the Auditor-General on the Audit report.7 A copy of the Government’s submission to the Committee in response to the Audit report is at Appendix A. A copy of the submission can also be downloaded from the Committee’s website.8

5 Mr Jon Stanhope MLA, Transcript of evidence, 12 November 2010, p. 1. 6 Dated 13 May 2010. 7 7 October 2009. 8 <http://www.parliament.act.gov.au/committees/index1.asp?committee=116&inquiry=833>

http://www.parliament.act.gov.au/committees/index1.asp?committee=116&inquiry=833


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1.11 The Committee invited submissions to its inquiry by written correspondence to key stakeholders. The Committee did not receive any submissions.

Public hearing

1.12 The Committee held a public hearing on 12 November 2010 with the Chief Minister, in his capacity as the Minister for Land and Property Services, and officials from the Department of Land and Property Services appearing. The public hearing transcript can be accessed from the Committee’s website.9

Structure of interim report

1.13 The Committee’s interim report is divided into four sections:

Chapter 1 – Introduction and conduct of inquiry

Chapter 2 – Audit background and findings

Chapter 3 – Committee comment

Chapter 4—Conclusion

Acknowledgements

1.14 The Committee thanks all those who have contributed to its inquiry to date, by making a submission, providing additional information or appearing before it to give evidence.

9 <http://www.parliament.act.gov.au/committees/index1.asp?committee=116&inquiry=833>

http://www.parliament.act.gov.au/committees/index1.asp?committee=116&inquiry=833



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2 AUDIT BACKGROUND AND F INDINGS

2.1 This chapter presents an overview of the background to, and key findings of, the Audit.

Audit background and objective(s)

2.2 The objective of the Audit was to assess agency performance relating to the strategic planning, management, and delivery of government office accommodation. The Audit assessed in particular, whether office accommodation projects meet governance, quality, value for money and environmental sustainability requirements.10

2.3 The Audit also examined actions taken to assist agency compliance with the ACT Government Energy and Water Policy for Leased Accommodation and National Australian Built Environment Rating System (NABERS Energy) scheme. NABERS Energy is formerly known as the Australian Building Greenhouse Rating (ABGR) scheme.11

2.4 Using three case studies of individual office accommodation projects, the Audit considered administration at the whole-of-government level as well as at an agency level. The three case studies12 were:

(i) case study one—the relocation of the Department of Education and Training (DET) from Manning Clark Offices in Tuggeranong to 220 Northbourne Avenue, Braddon

(ii) case study two—the refurbishment of Eclipse House, London Circuit,

City for occupancy by the Shared Services Centre, and

(iii) case study three—the acquisition of leased premises and the construction of some new buildings for the Emergency Services Agency (ESA) Headquarters.

10 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, p. 4. 11 Ibid. 12 Ibid.


2.5 The Audit report noted that:

The focus of the first two case studies was on implementation of the office accommodation projects as part of the whole-of-government accommodation strategy. The third case study, while not part of the whole-of-government accommodation strategy, focuses on the outcomes of, and the processes for, decisions to relocate the Emergency Services Agency Headquarters to Fairbairn.13

Audit conclusion(s)

2.6 The Audit report contained the following audit conclusions14 drawn against the Audit objectives:

The ACT Property Group within the Department of Territory and Municipal Services delivered within a short timeframe a range of office accommodation projects that generally met the requirements of the ACT Government 2006-07 budget initiatives. There were improvements in utilisation rates per employee and also overall occupancy rates in both owned and leased buildings. There were, however, shortcomings in the strategic planning, management and administration of the whole-of-government office accommodation portfolio. The approach by agencies to business continuity planning in relation to accommodation needs was inadequate. There was also scope to improve monitoring and management of performance and benchmarking information across the property portfolio and in Annual Reports.

In the two case studies delivered under the whole-of-government accommodation strategy, decisions were based on limited strategic planning and the office accommodation policies and procedures were not always effectively implemented.

Another case study, the ESA Headquarters relocation project experienced significant delay, and substantial cost increases, and was not completed at the time of reporting. This case study highlighted serious deficiencies in the early decision-making process in entering into long-term leases and financial commitments without proper advice, planning, and analysis of suitable

13 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, p. 4. 14 Ibid., p. 5.


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options. Despite actions taken subsequently to address problems arising from past decisions, the ESA relocation project at the time of reporting had not achieved value for money nor delivered the ACT Government’s intended outcomes.

Audit recommendations

2.7 The Auditor-General made fifteen15 recommendations:

Audit area

Recommendation coverage

Whole-of-government accommodation strategy Governance and

accountability framework

Delivery of property services

Achieving value for money

Environmental sustainability

R1—Risk management framework R2—Business continuity planning R3 and R4—Strategic planning for office accommodation R15—Governance arrangements and controls for leasing accommodation

R5—Administrative practices and processes R6—Systems used to maintain the property portfolio R7 and R8—Training and awareness R9—Records management

R10—Project reconciliations for whole-of-government accommodation strategy funding

R11—Sustainability considerations in office accommodation R12—Annual reporting on environmental performance of

ACT government owned and occupied buildings Case study one— Department of Education and Training

R13—Compliance with statutory requirements

Case study three— Emergency Services Agency Headquarters Relocation

R14—Governance in decision making and planning

15 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, pp. 6-17.


2.8 In its submission, the Government indicated that it agreed with fourteen16 recommendations and agreed-in-part with one17 recommendation.

2.9 In evidence, the responsible Minister told the Committee:

Significant progress has been made by the Property Group in implementing each of the 15 recommendations. They were all accepted by the government and the Property Group has been, since that report was tabled, working quite vigorously and in a focused way to address the issues that were raised. Indeed, it continues to seek to improve our strategic planning, management and administration of our property.18

2.10 The Committee notes that it received the Government’s submission19, approximately eight months after presentation of the Audit report20.

16 Recommendations 1-8, 10-15. 17 Recommendation 9. 18 Mr Jon Stanhope MLA, Transcript of evidence, 12 November 2009, pp. 1–2. 19 Dated 13 May 2010. 20 Presented 28 August 2009.


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3 COMMITTEE COMMENT

3.1 After considering evidence received to date, the Committee resolved on 1 February 2011 to table an interim report making specific comment and recommendations in relation to the proposal to construct a purpose-built government office building as the Government’s preferred accommodation option. Based on evidence received, that the Government’s decision on the new government office building was imminent, the Committee was of the view that it was important to table an interim report.

New ACT Government Office Accommodation Proposal

3.2 The option of the development of a whole-of-government office building was being considered at the time of the Audit. The Audit report, together with the Government’s submission, made reference to the option.

3.3 In response to the Auditor-General’s recommendation21 that the ACT Property Group should develop and implement an office accommodation strategy that considers short, medium and long term planning strategies and objectives for the whole-of-government, the Government agreed with the recommendation, noting that:

The long term strategy will be influenced by the Government’s consideration of the possible whole-of-government office block.22

3.4 Further, in agreeing with recommendation three, the Department of Territory and Municipal Services stated:

The Chief Minister’s Department is currently responsible for the development and delivery of proposals for the new major office block. The proposed ACT Government Real Estate Policy will require the development of a long term accommodation strategy that covers all ACT Government employees. Work will commence on the strategy once the ACT Government announces a final decision on the development of the new major office block.23

21 Recommendation 3. 22 ACT Government submission, May 2010, p. 4. 23 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, p. 13.

S T A N D I N G C O M M I T T E E O N P U B L I C A C C O U N T S 1 0

The proposal

3.5 The Government made a public announcement in May 2010 which outlined key features of the proposal to build a single office building to co-locate ‘a very significant proportion’ of the ACT Government’s administrative staff.24 The Government had been examining options over the past few years to replace its ageing building stock and to deliver more cost effective services to the community.25

3.6 The Government stated that an office building centralising ACT Government services in one location would result in improved workforce efficiencies, increased productivity and major improvements in the delivery of services to the Canberra community. The building would be built to a high level of environmental sustainability which could result in a reduction of up to 60 per cent in greenhouse gas emissions, when compared with the current situation. The proposal is for a 53,000 square metre building adjacent to the Legislative Assembly on Section 19 City. The Government is exploring partnership options for financing, constructing and operating the building.26

3.7 Subject to Government approval the Government office building is expected to be completed in early 2014.27

Rationale

3.8 The Department of Land and Property Services has undertaken a detailed economic analysis of the proposal which indicated, when compared to alternative options, that:

…the ACT Government Office would deliver the best environmental, economic and workforce benefits to the ACT Government, and broader ACT [c]Community, over the effective life of the building.28

24 Mr Jon Stanhope MLA, Transcript of evidence, 12 November 2010, p. 5. 25 Chief Minister, Media release: ‘Private sector input sought for office building, 14 May 2010. 26 Chief Minister, Media release: ‘Private sector input sought for office building, 14 May 2010; Refer:

Department of Land and Property Services website: http://www.laps.act.gov.au/projects_and_initiatives/government_office - accessed 28/10/10.

27 Refer: Department of Land and Property Services website: http://www.laps.act.gov.au/projects_and_initiatives/government_office - accessed 28/10/10.

http://www.laps.act.gov.au/projects_and_initiatives/government_office



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3.9 The Government anticipates that an ACT whole-of-government office building will respond to a range of issues related to current accommodation arrangements, including: the lowering of space utilisation to 15 square metres per person due to a more efficient building design; lower energy costs due to the passive design; security costs savings due to co-location; and lower fleet costs due to a consolidated fleet and less requirement to travel to attend meetings.29

3.10 Additionally, the Chief Minister highlighted further factors influencing the whole-of-government office building proposal, in terms of the buildings that currently house ACT Government administrative staff and the ACT Government’s responsibilities as an employer. Administrative staff are currently accommodated in 37 buildings across 14 locations.30 A significant number of these buildings are B minus or C grade buildings with very low energy efficiency rates.31

3.11 In evidence to the Select Committee on Estimates 2010–11, the Chief Minister stated:

It is an issue for us as an employer. The commonwealth, as you know, most particularly and very strongly over the last five to six years, has taken a decision in relation to energy ratings and the environmental standard of its buildings. It has also taken a decision in relation to its obligations as an employer to its staff. We now have a situation in the ACT where the majority of commonwealth officers are housed in A grade accommodation that has an acceptable, at least, green rating. The majority of the ACT public service are housed in B and C grade accommodation. The statistics on it are very challenging for us as an employer. Significant numbers, if not the majority of our staff are in C Grade; almost all commonwealth public servants are in A grade.32

28 Refer: Department of Land and Property Services website:

http://www.laps.act.gov.au/projects_and_initiatives/government_office - accessed 28/10/10. 29 Select Committee on Estimates 2010–11, 2010–11, Inquiry into Appropriation Bill 2010–2011, Transcript of

evidence, 27 May 2010, pp. 1371-1372. 30 Business and Industry Development – ACT Chief Minister’s Department website:

http://www.business.act.gov.au/canberra_construction_snapshot/newsletters_-_2010/september_newsletter/september_2010/act_government_office_building - accessed 28/10/2010.

31 Select Committee on Estimates 2010–11, 2010–11, Inquiry into Appropriation Bill 2010–2011, Transcript of evidence, 19 May 2010, p. 598.

32 Mr Jon Stanhope MLA, Select Committee on Estimates 2010–11, 2010–11, Inquiry into Appropriation Bill 2010–2011, Transcript of evidence, 19 May 2010, p. 598.


http://www.business.act.gov.au/canberra_construction_snapshot/newsletters_-_2010/september_newsletter/september_2010/act_government_office_building



3.12 Further, again in evidence to the Select Committee on Estimates 2010–11, the Chief Minister, in his capacity as the Minister for Land and Property Services, stated:

There is a social obligation and, in addition, just the need to constantly upgrade B and C Grade buildings and the cost going forward that we have to meet in relation to upgrades and fitting out buildings.33

3.13 The Committee notes that the responsible Minister has indicated that the Government decision about whether the new government office building project will proceed was imminent. In evidence, the Chief Minister stated:

The final decision most certainly has not been made. But certainly the government has, the cabinet has, successively given approval for the project to continue to advance to the next stage along a continuum of decision points. I do not want to commit to a particular cabinet point, but the point is imminent.34

3.14 In response to a supplementary question from the Committee as to how imminent the Cabinet decision on the new government office building was, the Minister for Land and Property Services stated:

It is anticipated that a final decision on the project will be made in early 2011.35

3.15 The Committee understands that the Department of Land and Property Services has undertaken a detailed economic analysis of the proposal for a whole-of-government office building including comparing it with alternative options.36 The Committee has been promised a copy of the analysis and it looks forward to examining it in detail.37

33 Mr Jon Stanhope MLA, Select Committee on Estimates 2010–11, 2010–11, Inquiry into Appropriation Bill

2010–2011, Transcript of evidence, 27 May 2010, p. 1372. 34 Mr Jon Stanhope MLA, Transcript of evidence, 12 November 2010, p. 9. 35 Mr Jon Stanhope MLA, Response to supplementary questions—Inquiry into Auditor-General’s Report

No. 6 of 2009: Government Office Accommodation, 20 January 2011, p. 3. 36 Refer: Department of Land and Property Services website

http://www.laps.act.gov.au/projects_and_initiatives/government_office - accessed 28/10/10. 37 Mr Jon Stanhope MLA, Response to supplementary questions—Inquiry into Auditor-General’s Report

No. 6 of 2009: Government Office Accommodation, 20 January 2011, p. 2.



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3.16 The Department of Land and Property Services website states:

After a detailed economic analysis, it was concluded that the construction of a purpose built office building was the ACT Government’s preferred office accommodation option. It involves the co-location of the administrative functions of the ACT Government within a 53,000 m2 purpose built office building on a government owned site adjacent to the Legislative Assembly Building on London Circuit in Civic. When compared to alternative options, the economic analysis indicated that the ACT Government Office would deliver the best environmental, economic and workforce benefits to the ACT Government, and broader ACT [c]Community, over the effective life of the building.38

3.17 In response to a request from the Committee that it be provided with a copy of the economic analysis, the Minister for Land and Property Services advised that:

The ACT Government is currently considering the issue of the new whole of government office building and the economic analysis of the project is an intrinsic element of this consideration. The ACT Government will be pleased to provide the information to the Committee regarding its analysis – including the economic analysis – of the proposal once the process has been completed.39

3.18 The Committee acknowledges that action is required to respond to the accommodation needs of ACT Government employees and the condition of the buildings in which they are housed. Further, improved accommodation options will assist with meeting targets as specified in the Climate Change and Greenhouse Gas Reduction Act 2010 together with improving the Government’s sustainability outcomes as they relate to office accommodation.40

38 Refer: Department of Land and Property Services website

http://www.laps.act.gov.au/projects_and_initiatives/government_office - accessed 28/10/10. 39 Mr Jon Stanhope MLA, Response to supplementary questions—Inquiry into Auditor-General’s Report

No. 6 of 2009: Government Office Accommodation, 20 January 2011, p. 2. 40 Business and Industry Development – ACT Chief Minister’s Department website:

http://www.business.act.gov.au/canberra_construction_snapshot/newsletters_-_2010/september_newsletter/september_2010/act_government_office_building - accessed 28/10/2010.





The decision making process in the context of the Canberra

property market

3.19 The Committee notes that the recent report from the Property Council of Australia highlights that there is a 13.4 per cent office vacancy rate in Canberra.41 As a consequence, there are important environmental, social and economic considerations attached to this vacancy rate. The Committee acknowledges that since the Government commenced its work on a proposal for a whole-of-government office building, the property market in Canberra has changed significantly. The current office vacancy rate is not likely to improve in the short term.

3.20 In evidence, the Committee sought to ascertain whether the decision making process for a whole-of-government office building proposal would take account of its impact on the Canberra property market.

THE CHAIR: When you are deciding about the government office building, how much emphasis are you putting on the impact on the rest of the property market? Presumably, along Northbourne Avenue there will be quite a number of empty buildings and this will be the case in other places in Canberra. We already have a fairly high office vacancy rate. Where does that sit in your decision making?42 Mr Dawes: Once the decision is made we will be working with the property sector as well. I think there are a number of things that are occurring with property owners at the present time. We are looking at how some of those buildings may be able to be re-used for conversions. There are a couple of strategies in place. Once that decision is made, we can actually work with them a little closer.43

3.21 The Committee has a concern about whether the Government has fully considered the impact a new government office building may have on the Canberra property market. The Committee also has concerns about whether the process advancing the construction of a purpose built office building as the ACT

Government’s preferred office accommodation option has adequately considered alternative options.

41 Property Council of Australia, Media release: ‘Double-digit vacancy rates continue for Canberra’,

2 February 2011 - http://www.propertyoz.com.au/act/Article/NewsDetail.aspx?p=16&id=4031, accessed 4 February 2011.

42 Ms Caroline Le Couteur MLA, Transcript of evidence, 12 November 2010, p. 13. 43 Mr David Dawes, Transcript of evidence, 12 November 2010, p. 13.

http://www.propertyoz.com.au/act/Article/NewsDetail.aspx?p=16&id=4031


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Re-use of existing office accommodation buildings versus new

construction

3.22 The Committee is not aware whether alternative options with regard to the construction of a purpose built office building have been evaluated, in particular with regard to the re-use of existing buildings (government occupied and leased together with new leasing opportunities) versus new construction. The Committee is aware of a number of office buildings in Civic close to the Assembly precinct that are currently being refurbished to 4.5 Star NABERS.

3.23 The Committee notes that whilst the Government’s analytical work indicates that the construction of the proposed new building will assist in meeting targets as specified in the ACT Government’s Climate Change Strategy—Weathering the Change, together with improving sustainability outcomes as they relate to office accommodation44, it is uncertain whether the Government has considered achieving the same outcomes by using existing office accommodation stock.

3.24 The Committee would welcome a detailed analysis of the whole-of-life environmental impact involved in refurbishing the existing office buildings to bring them up to 4.5 Star NABERS versus new construction of a purpose-built government office building.

3.25 However, in the absence of being able to assess the business case and the economic and environmental analysis for the proposal, the Committee has reservations that the proposal for a whole-of-government office building is being presented as an all encompassing solution for a range of issues without adequate consideration of alternative options or scenarios.

3.26 Further, the Committee notes that there is an opportunity cost of using resources for this purpose, as measured against other projects that may be deferred, by not using the allocated resources in their best alternative use, for example, because of funding constraints.45

44 Business and Industry Development – ACT Chief Minister’s Department website:

http://www.business.act.gov.au/canberra_construction_snapshot/newsletters_-_2010/september_newsletter/september_2010/act_government_office_building – accessed 28/10/2010.

45 Chrystal, K.A. & Lipsey, R.G. (1997) Economics for Business and Management, Oxford University Press, New York.




3.27 The Committee is concerned about the opportunity cost of funds that may be tied up in the project, if it were to proceed, against the lost opportunity of investing these funds in alternative infrastructure ventures or capital projects that may also yield positive benefits.46

3.28 As noted earlier, the Government has undertaken a detailed economic analysis of the proposal for a whole-of-government office building compared to alternative options47 and the Committee’s request that a copy of the analysis be made available to it for examination has been unsuccessful.

3.29 The Committee is of the view that the Government has more work to do to make the public case for a whole-of-government office accommodation building. To assist with this, the Committee is also of the view that it should be provided with an opportunity to assess the business case, and the economic and environmental analysis, for the whole-of-government office building proposal compared to alternative options or scenarios, together with any other relevant considerations.


3.30 The Committee recommends that the ACT Government make no final

decision with regard to the whole-of-government office building project

until the Standing Committee on Public Accounts has received a copy

of the business case, and the economic and environmental analysis,

together with any other relevant considerations, and had time to

consider this information and report to the ACT Legislative Assembly.

3.31 The Committee is also of the view that the Government should identify the opportunity cost of using the funds constructing a whole-of-government office building in respect to other infrastructure ventures or capital projects.

46 Drummond, M.F., Sculpher, M.J., Torrance, G.W., O’Brien, B.J. & Stoddart, G.L. (2005) Methods for the

Economic Evaluation of Health Care Programmes (3rd edn.), Oxford University Press, New York. 47 ACT Department of Land and Property Services website:

http://www.laps.act.gov.au/projects_and_initiatives/government_office – accessed 28/10/2010.



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3.32 The Committee recommends that the ACT Government provide the

Standing Committee on Public Accounts with an assessment of the

opportunity cost of a whole-of-government office building project

against other significant infrastructure projects, such as the Majura

Parkway, a light rail network, a new convention centre, or a third major

hospital.

Whole-of-government office accommodation strategy

3.33 The Auditor-General recommended that the ACT Property Group should develop and implement an office accommodation strategy that considers, short, medium and long-term planning strategies and objectives for whole-of-government.48

3.34 The Audit report stated:

The ACT Government, however, did not have a whole-of-government office accommodation strategic plan to assess its future needs and inform its current accommodation strategy. Accordingly, office accommodation planning did not address medium and longer-term requirements, both at an agency and whole-of-government level.49 … Audit was advised that work was expected to commence shortly on the development and implementation of these documents. The accommodation strategy would focus on short, medium, and long-term office accommodation requirements for both owned and leased premises and will also need to take into account the whole-of-government office building option that is currently being considered by the ACT Government.50

3.35 In its submission, the Government agreed with the Auditor-General’s recommendation stating:

The development of accommodation strategies are identified within the ACT Government Real Estate Policy.

48 Recommendation 3—ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation,

p. 31. 49 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, p. 19. 50 Ibid., p. 29.


The long term strategy will be influenced by the Government’s consideration of the possible whole-of-government office block.51

3.36 The Committee has reservations that the proposal to construct a whole-of-government office building may proceed before the Government has completed its whole-of-government accommodation strategy. The Committee is of the view that the construction of a single office building to co-locate a significant number of the Government’s administrative staff will define the whole-of-government strategy for the ACT Public Service (ACTPS) for the next twenty years or more.

3.37 A strategy of this kind is a high level document that should set the framework for planning and decision making in relation to the accommodation needs and outcomes for the ACTPS over the short, medium and long term horizons. The purpose of a strategic planning document for office accommodation:

…is to provide government with an overview of the status of office accommodation for both leased and owned premises and a summary of key factors and risks that influence the supply of and demand for government office accommodation in the medium and longer terms.52

3.38 Initially, the Government advised that work on the whole-of-government office accommodation strategy would commence after a final decision had been made on the development of a new major office block.53 However, during the course of its inquiry to date, the Committee was told that work had commenced on the development of the Strategy to respond to short and medium term accommodation needs.54

3.39 In response to a question from the Committee55 concerning the development of the whole-of-government accommodation strategy, the Committee was told:

Mr Ryan: At the time the report came down, there was work already underway on the whole-of-government office building. We were faced with the situation of trying to—you have decisions already made. So you are trying to work out how you will handle the strategic work. So what we did was focus more on the government real estate policy, to actually try for the first time to put in place in writing what was the

51 ACT Government submission, May 2010, p. 4. 52 ACT Auditor-General’s Report No. 6 of 2009: Government Office Accommodation, p. 28. 53 Ibid., p. 13. 54 Transcript of evidence, 12 November 2010, pp. 4–7. 55 Mr Brendan Smyth MLA, Transcript of evidence, 12 November 2010, p. 4.


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existing situation, I suppose, and then over a period of time try to take that forward and improve it. We have done some strategic work. We went to the government late last year and got agreement on a subleasing strategy. The subleasing strategy again took into account that until there is a final decision made on the whole-of-government office building, we had to look after what was the existing accommodation. What we have been focusing on from our perspective while that is occurring is the short-term accommodation arrangements. Equally, we started about six months ago putting together a document which will take into account whichever decision is made on the whole-of-government office building, a strategy to take us forward for the next 20 years, which we will bring back to the government. That will look at the accommodation across the board. But from our perspective, we were faced with what was already in the pipeline.56

Mr Stanhope: Actually, I understand your question very well, Mr Smyth—the logic of it. But I think that what Mr Ryan has just said is that through the work that we have done through the government accommodation subleasing strategy we have in fact accepted that we could not just do nothing. In the shorthand that is included within that response that you referred to, it perhaps does not address the fact that we would continue to work on policies. The government accommodation subleasing strategy, which is post the Auditor-General’s report, does deal with and address the short and medium-term strategic accommodation needs. Indeed, I think it is fair to say it is not a hiatus. It is not as if nothing is happening. On a daily or monthly basis as our office accommodation needs change, we deal with this and meet it. At this point—I think I speak for the Property Group—it is not as if in relation to our immediate accommodation needs or our medium-term accommodation needs they are not being met and they are not being met in a strategic way. I am sure that Mr Ryan could go through each of our agencies, each of their current accommodation and their accommodation needs over the medium term, and say: “Yes, we know exactly where our officers are. We know where they are accommodated. We believe that the accommodation is currently satisfactory.” In the context of strategy, you need to know what the landscape looks like—where you are going to need to be when the next set of leases expires and what you are going to do. Are you going to renew them? Are you going to consolidate? Are you going to sell a building? Are you going to buy another building?

56 Mr Stephen Ryan, Transcript of evidence, 12 November 2010, pp. 4–5.


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Hanging over all of this, of course, as everybody knows, is a major decision that would potentially see the co-location of a very significant proportion of our administrative staff. I think that in the shorthand that is in the government’s response, your question is very well put. But perhaps if we were to expand that answer, we would say, “We will be doing all this other work and we will be doing it in the short and medium term.” But we are doing this with the prospect—the decision has not yet been made—of a major government office project proceeding. Of course, you would understand that while it has been a long time in the development, it has made it hard for officers to deal definitively with our long-term strategy. In response to your question, we do put in place and have put in place strategies that meet the Auditor-General’s recommendations in relation to the short and medium terms.57

3.40 A whole-of-government office accommodation strategy is a significant high level document which should be used to inform the decision making process for the construction of a new government office building. On the basis of the evidence, the Committee has reservations that the development of the Strategy, rather than informing what the decision should be, will, in the main, accommodate the decision.

3.41 The Committee believes that this would be contrary to the purpose and intent of strategic planning. The whole-of-government accommodation strategy should therefore be finalised prior to any decision concerning the construction of a whole-of-government office building project or the awarding of any contract.

3.42 The Committee recommends that the ACT Government whole-of-

government office accommodation strategy should be finalised, and

considered by the ACT Legislative Assembly, prior to any final decision,

or awarding of any contract, with regard to the whole-of-government

office building project.

57 Mr Jon Stanhope MLA, Transcript of evidence, 12 November 2010, p. 5.


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4 CONCLUSION

4.1 The Committee resolved to table an interim report as it believed that its position with regard to the new government office building proposal, as outlined in this report, should be brought to the attention of the ACT Legislative Assembly.

4.2 The Committee has made three recommendations in relation to its interim report inquiring into Auditor-General’s Report No. 6 of 2009: Government Office Accommodation.

Caroline Le Couteur MLA

Chair

10 February 2011



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APPENDIX A: ACT Government submission

Attached is a copy of the Government submission to the Standing Committee on Public Accounts in response to the Audit report.


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Documents

Review of Auditor-General’s Report No. 6 of 2009: …...REVIEW OF AUDITOR-GENERAL’S REPORT NO. 6 OF 2009: GOVERNMENT OFFICE ACCOMMODATION – INTERIM REPORT RECOMMENDATIONS RECOMMENDATION