5.1
The Department of Defence (Defence) seeks approval from the Committee to proceed with the Explosive Ordnance Logistics Reform Program (EOLRP) Project.
5.2
The estimated cost of the project is $230.9 million (excluding GST).
5.3
The project was referred to the Committee on 22 June 2017.
Conduct of the inquiry
5.4
Following referral, the inquiry was publicised on the Committee’s website and via media release.
5.5
The Committee received five submissions and two confidential submissions. A list of submissions can be found at Appendix A.
5.6
On 29 September 2017, the Committee conducted a public and in-camera hearing. A transcript of the public hearing is available on the Committee’s website.
Need for the works
5.7
According to Defence, the explosive ordnance (EO) network is a critical enabler to Australian Defence Force (ADF) training and operations:
This network provides direct support to our troops, combat vehicles, aircraft and naval vessels, amongst others, through the acquisition, transportation, storage, distribution, handling, maintenance, return and disposal of explosive ordnance products.
5.8
Defence submitted that it had recently made changes to the way that it operated the explosive ordnance (EO) supply chain:
The EO network historically comprised a collection of depots developed and operated by the individual Services in isolation to meet specific storage and handling requirements. In the late 1990s, these EO depots were amalgamated into a national network under the stewardship of Joint Logistics Command.
5.9
Defence told the Committee that:
Since that amalgamation, there has been limited investment in EO logistic infrastructure and the facilities have not evolved to meet changing storage and processing requirements of new weapons platforms. These legacy issues have culminated in a shortfall in national EO storage and handling capacity, and logistics support being delivered from ageing facilities. Both factors are contributing to inefficiencies in service delivery and increased operating costs.
5.10
Defence stated that ‘rectifying current network inefficiencies’ will help to ‘support and ensure the ongoing effectiveness of Australia’s broader Defence capability’ by delivering ‘increased storage and handling capacity to the national EO network.’
5.11
The Committee is satisfied that the need for the works exists.
Scope of the works
5.12
In its submission, Defence outlined the range of facilities it proposes to build at the various locations.
Administration building. A standard office facility to provide modern and fit-for-purpose working accommodation for EO Depot personnel. The administration building will be sized to house the working population of the relevant depot. The administration building will be a fully climate controlled environment and includes:
car parking for depot personnel and visitors;
a visitor entry for depot security control and dedicated area for visitor inductions;
ablutions, kitchenette and lockers for staff amenity;
working accommodation for depot personnel (ranging from five to 30 people, depending on the depot), including meeting rooms, and a mix of standard offices and open-plan workstations; and
communications rooms to the relevant standards to accommodate Defence and contractor information and communications technology networks.
Ammunition process building. A specialist workshop to provide for the safe inspection, testing and maintenance of various EO holdings. The ammunition process building will be a fully climate controlled environment and includes:
covered areas for the all-weather receipt and dispatch of goods;
workrooms and paint booth for the safe and efficient conduct of explosive ordnance processing activities;
plant and storage areas; and
administration and staff amenity facilities.
EO storage facilities. These facilities provide for the safe storage of all classes of ordnance in the Defence inventory to the relevant policy and safety standards. The EO storage facility types to be provided are:
earth covered buildings. A reinforced concrete warehouse-type structure for storage of pallets and containers, with an external earth covering, and a hardstand to assist with receipt and dispatch activities;
light frangible buildings (small arms ammunition and flares). A logistics warehouse for storage of pallets, with an external hardstand to assist with receipt and dispatch activities; and
light frangible buildings (white phosphorous). A reinforced concrete logistics warehouse for storage of pallets, with an external hardstand to assist with receipt and dispatch activities.
Non-EO storage building. A basic warehouse structure for the palletised storage of non-EO goods, with an external canopy and hardstand to facilitate all-weather activities.
Hardstands. Rigid pavement hardstands for temporary containerised EO storage and handling.
Quarantine inspection facility. A facility suitable for the Department of Agriculture and Water Resources’ ‘point of entry’ inspection, quarantine and treatment of imported goods.
Materials handling equipment (MHE) store. A basic weatherproof structure for the storage of MHE and facilities for centralised depot receipt and dispatch.
Civil infrastructure. Vehicle and pedestrian pavements will be provided to achieve access to new facilities. Pavement types are designed to the relevant traffic and operations, with main roads and hardstands rated for B-double heavy vehicles and MHE; flexible pavement is provided to areas of light vehicular traffic.
5.13
Defence proposes to construct EO storage and logistics facilities at 12 locations around Australia:
Explosive Ordnance Depot Amberley, Ipswich, Queensland includes an administration building, ammunition process building, two earth covered buildings, two light frangible buildings (one small arms and one flares), one non-EO storage building, and civil and engineering services;
Explosive Ordnance Depot Mt Stuart, Townsville, Queensland includes an administration building, one earth covered building, one light frangible building (white phosphorous), and civil and engineering services;
Explosive Ordnance Depot Darwin, Northern Territory includes one administration building, one ammunition process building, two light frangible buildings (one small arms and one white phosphorous), one non-EO storage building, and civil and engineering services;
Explosive Ordnance Depot Myambat, Denman, New South Wales includes seven earth covered buildings, three light frangible buildings (small arms), one MHE store, one depot gatehouse, and civil and engineering services;
Explosive Ordnance Depot Williamtown, New South Wales includes one earth covered building and civil and engineering services;
Explosive Ordnance Depot Twofold Bay, Eden, New South Wales includes two earth covered buildings and civil and engineering services;
Explosive Ordnance Depot Mangalore, Seymour, Victoria includes one administration building, two earth covered buildings, one light frangible building (small arms), one hardstand, and civil and engineering services;
Explosive Ordnance Depot Cerberus, Hastings, Victoria includes one administration building, one ammunition process building, one earth covered building, one non-EO storage building, and civil and engineering services;
Point Wilson Explosives Area, Avalon, Victoria includes one administration building, one container storage hardstand, one handling hardstand, one quarantine inspection facility, and civil and engineering services;
Explosive Ordnance Depot Fort Direction, South Arm, Tasmania includes one administration building, and civil and engineering services;
Explosive Ordnance Depot Edinburgh, South Australia includes one administration building, one ammunition process building, one non-EO storage building, and civil and engineering services; and
Explosive Ordnance Depot Stirling, Rockingham, Western Australia includes one administration building, one ammunition process building, one earth covered building, one non-EO storage building and civil and engineering services.
5.14
The Committee finds that the proposed scope of works is suitable for the works to meet its purpose.
Local impact
5.15
During the course of this inquiry, two matters relating to local impact were raised in submissions: increased traffic at Myambat and opportunities for local industry.
Traffic issues
5.16
In its submission, Upper Hunter Investments (UHI) stated its belief that ‘the increased storage capacity at Myambat will add to existing road safety issues’. As a result, UHI argued that Defence ‘should consider a contribution to works to improve the safety’ of a key intersection near Myambat.
5.17
Defence recognised that following the completion of the works at Myambat, ‘the occasional delivery vehicle may utilise the intersection when transporting loads to and from the depot’, but that:
Defence forecasts little to no net increase in daily traffic. This is due to the Depot not materially increasing the number of additional employees operating at the site.
Opportunities for local industry
5.18
The Committee received two submissions focused on opportunities for local industry that flow from proposed construction works. The Hon Greg Hunt MP, Member for Flinders, told the Committee:
The EOLRP project is anticipated to create prospective employment opportunities within the construction sector and related support sectors around the depot, which would be particularly beneficial to Hastings and the surrounding region.
5.19
Similarly, Mr Rob Mitchell MP, Member for McEwen, stated that the project ‘is expected to generate employment opportunities within the construction sector and related support sectors’, and would ‘be of great benefit’ to his electorate.
5.20
In its submission, Defence stated:
The proposal will stimulate business in regional Australia given the remote location of project sites. The potential to utilise local suppliers of construction materials and labour presents an opportunity to boost activity in regional economies.
5.21
Further, at the public hearing, Defence told the Committee that the EOLRP would be a pilot project for local and regional engagement:
In late August in Darwin, the Minister for Defence announced that the EOLRP project would be one of three pilot projects under which we’ll be trialling what’s referred to as a local industry capacity plan, which under these contracts we’re looking at, which are head contracts, will require that potential tenderers have to provide a standalone tender schedule response to show how they have engaged with local industry, how they have identified capacity and capability for local industry to become involved as either subcontractors or in the supply chain.
Cost of the works
5.22
The total estimated cost of the project is $230.9 million (excluding GST). It includes construction costs, management and design fees, furniture, fittings and equipment, contingencies and an escalation allowance.
5.23
The Committee received a confidential supplementary submission detailing the project costs and held an in-camera hearing with Defence on the project costs.
5.24
The Committee is satisfied that the costings for the project provided to it have been adequately assessed by the proponent entity.
Committee comment
5.25
In regard to increased traffic at Myambat, the Committee is confident that Defence is cognisant of the potential impact on the local community of increased traffic resulting from the proposed works. The Committee encourages Defence to monitor the impact of this traffic, consult with the local community, and take any reasonable steps that are required to ensure the safety of road users in the vicinity of Myambat.
5.26
The Committee also commends Defence for its commitment to engaging with local industry, and looks forward to receiving a post-implementation report which details the level of local engagement achieved during the construction phase of this project.
5.27
The Committee did not identify any issues of concern with the proposal and is satisfied that the project has merit in terms of need, scope and cost.
5.28
Having regard to its role and responsibilities contained in the Public Works Committee Act 1969, the Committee is of the view that this project signifies value for money for the Commonwealth and constitutes a project which is fit for purpose, having regard to the established need.
5.29
The Committee recommends that the House of Representatives resolve, pursuant to Section 18(7) of the Public Works Committee Act 1969, that it is expedient to carry out the following proposed works: Explosive Ordnance Logistics Reform Program Project.
5.30
Proponent entities must notify the Committee of any changes to the project scope, time, cost, function or design. The Committee also requires that a post-implementation report be provided within three months of the project completion. A report template can be found on the Committee website.