3.1
The Department of Immigration and Border Protection (DIBP) seeks approval from the Committee to fit-out four leased buildings in Belconnen and the Canberra Airport in the Australian Capital Territory (ACT).
3.2
The estimated cost of the project is $255.3 million (excluding GST).
3.3
The project was referred to the Committee on 1 December 2016.
Conduct of the inquiry
3.4
Following referral, the inquiry was publicised on the Committee’s website and via media release.
3.5
The Committee received two submissions and eight confidential submissions from DIBP. It also received a submission from a member of the public who requested their name be withheld, and a confidential submission from the member of the public. A list of submissions can be found at Appendix A.
3.6
On 10 February 2017, the Committee conducted a public and in-camera hearing with DIBP. The Committee conducted a second public and in-camera hearing with DIBP on 20 March 2017. Transcripts of the public hearings are available on the Committee’s website.
Need for the works
3.7
DIBP currently leases 100,317 square metres of office space in twelve properties across four Canberra suburbs. According to DIBP:
These leases are all approaching the end of their terms – between 2017 and 2020. In order to meet the evolving requirements of the integrated department, the headquarters project was initiated. As well as meeting operational needs, the new headquarters will secure the Department’s long-term office accommodation while consolidating the Department’s leased office portfolio. The benefits of consolidation 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.
3.8
In its submission, DIBP stated that the current leased premises have the following deficiencies:
Security. The current facilities have multiple access points and security limitations that need to be continually risk managed. The security provisions necessary to ensure the current facilities comply with the Australian Government Protective Security Policy Framework are inefficient, costly and difficult to manage and maintain. There are also current operational areas and secure facilities in DIBP that are under accredited or operating on ‘waivers’ that will be rectified under the project.
Staff connectivity. Building layouts that physically separate work areas and are not conducive to staff interaction and cohesion in the workplace. The current accommodation inhibits DIBP’s ability to create collaborative relationships, ultimately leading to siloed and isolated work spaces.
Occupational density. The current underutilisation of work points does not align with the occupational density target of 14 square metres per work point… set by the Department of Finance.
Inefficient internal design. The fit-out (internal design, furniture types and layout/configuration) does not provide flexibility to adapt to the ever changing nature of the department as dictated by Government, without incurring significant cost.
3.9
At a public hearing, DIBP elaborated on the identified deficiencies with its current leased premises:
Many of the current existing leased buildings are characterised by outdated and inefficient fit-outs. There is little or no flexibility to change or to align functional areas to meet DIBP’s evolving and modern business needs. The inefficient fit-outs have a high cost of change and require continual relocation of business functions across the 12 separate buildings. The headquarters project will provide DIBP with an opportunity to develop a new workplace that is innovative, fit for purpose and allows for this transformation. The proposed office accommodation will also provide a high level of overall amenity for staff.
3.10
DIBP stated that the inefficient fit-out have led operational areas to be split between buildings. For example, in the current fit-out the ‘intelligence area is split between buildings’, which makes the formation of linkages between staff working on similar issues difficult. Overall, DIBP told the Committee that ‘while it is running quite well, it could run a whole lot better.’
Options considered
3.11
In order to address the identified need, DIBP considered several options, including:
Status quo (i.e. remain in all current leased buildings as is);
Design, build and operate (i.e. asset ownership);
Whole of government (i.e. existing Commonwealth leasing space available as shown on GovDex);
Private lease (new and/or existing buildings); and
Alternate funding models (i.e. private-public partnership).
3.12
In its submission, DIBP states that a cost-benefit analysis assessed these options in February 2015, which ‘showed that the private lease (new and/or existing buildings) option was recommended on the determination that this option was to be both viable and affordable’.
3.13
Following this assessment, DIBP released a request for tender to consolidate its presence in the ACT in a single location in the centre of Canberra. However, following the Department of Finance’s release of a revised framework for Commonwealth property leases which included a provision for local impact assessments, the original request for tender was withdrawn in October 2015.
3.14
According to DIBP, when the headquarters project resumed in November 2015, the cost-benefit analysis from February 2015:
…was reviewed and the Department determined that the assumptions and conclusions were still valid and applicable for the new process. It was agreed that the private lease option remained the only viable and affordable solution to address the issues identified with the current accommodation.
3.15
At a public hearing, DIBP outlined its second approach to market seeking new leased premises for the headquarters project:
In 2016 a whole-of-government lease procurement approach to the market was initiated by the Department of Finance, which sought accommodation for the Australian Bureau of Statistics, the Department of Defence and DIBP, with DIBP acting as the lead agency. The evaluation of the responses identified the option that represented the best value for money for the Commonwealth. This saw the outcome of DIBP occupying three buildings in Belconnen and one in the Brindabella Business Park at the Canberra Airport.
3.16
According to DIBP, the evaluation of this option found that it would result in considerable lease cost savings for the Commonwealth:
The cost-benefit analysis identified whole-of-Australian-Government lease savings of $324 million, of which DIBP’s portion was an estimated $236 million. These savings were primarily driven by a reduction in leased office area, and the competitive procurement process.
Scope of the works
3.17
In its submission, DIBP stated that the proposed works will consolidate DIBP’s presence into four buildings in two Canberra suburbs:
The Belconnen precinct will consist of:
5 Chan Street (currently occupied by DIBP);
6 Chan Street (currently occupied by DIBP); and
Part of 45 Benjamin Way (currently occupied by the Australian Bureau of Statistics).
The Canberra Airport precinct will consist of:
3 Molonglo Drive (not previously occupied).
3.18
The full scope of works proposed by DIBP comprises a wide range of factors, summarised by DIBP at a public hearing:
The scope of the fit-out includes the construction of DIBP’s 24/7 operation facilities, including DIBP’s unified watch floor; situation rooms; briefing rooms; instant rooms; operation planning facilities; associated intelligence support rooms; and combined training and surge facilities, all of which will meet the Commonwealth’s protected security policy framework (PSPF), at the secret and top secret level. The unified watch floor will be a purpose-built area for DIBP to consolidate key operational related functions currently located in multiple sites in Canberra.
3.19
DIBP’s submission provided further detail on the proposed scope of works:
The scope of the proposed fit-out works will include:
Base building integration of services. Design and construction of services to be integrated with the base building works including electrical, mechanical, communications, security, fire, acoustics and hydraulic services.
Office fit-out. Design of the fit-out will conform to DIBP’s operational requirements including construction of general office fit-out and specialist capability work areas to standards that are appropriate to a contemporary and functional Commonwealth office. Elements that are included in the fit-out are listed below:
General office areas that have modular executive offices, meeting rooms and sit-to-stand workstations throughout;
Operational areas including a unified watch floor, situation rooms, briefing rooms, incident rooms, operations planning rooms, associated intelligence support rooms, combined training and surge rooms all of which meet the Commonwealth PSPF requirements (at the secret and top secret level) which are operated 25/7;
Executive areas including the Secretary, Commissioner and Deputy Secretaries’ offices and executive support facilities;
Australian Border Force (ABF) college and training including use of force and ballistics preparation facilities;
An armoury for ABF staff with holding of public weapons subject to control measures;
Video conferencing and recording facilities in the base building theatrette;
Kitchen and breakout spaces, quiet rooms, collaboration hubs and casual meeting spaces;
Communications, server rooms, Immigration Records Information System server rooms;
Conference and training facilities;
Gymnasium facilities and bike storage;
Change rooms, showers and lockers;
Records management, microfiche storage and chart/map rooms;
CCTV store and CCTV build lab;
Border entry/exit (Smart gate lab and passport, et cetera) control testing and evaluation rooms;
IT build and test rooms, store rooms and user acceptance evaluation room;
Video conferencing rooms and secure communication rooms;
DIBP shop front, interview rooms and holding cells to support operational requirements;
Visa and citizenship certificates and records management rooms;
Utilities and library areas;
Multi-purpose health and diversity rooms including first aid, multi-faith, carers rooms;
A display area for examples of seized items, objects of historical significance and other memorabilia;
Mail room designed to follow security requirements for mail screening;
Tender evaluation rooms (variable capacity and concurrent activities); and
Secure store/loading dock facility.
Security. Design and installation of security controls in accordance with PSPF and supporting documentation including physical security, type one alarm systems, door hardware, identity verification and electronic access control system at the main entrances, other entrances, exits, vehicle access points and all internal areas.
Lighting control system. A lighting control system to reduce energy consumption in tenant areas including the ability to automatically turn off lights in unoccupied rooms and to provide reduced lighting levels when appropriate, such as reduced light levels for access after-hours and potential task lighting solutions. Some additional lighting will be provided as required in partitioned rooms.
Data cabling. Data cabling throughout the tenant areas including fibre and copper with outlets at each work point which meet DIBP’s cabling specifications and the Australian Government Information Security Manual. The cabling infrastructure will provide saturation cabling to in-ceiling and in-floor consolidation points and be designed to cater for future capabilities in order to provide future flexibility and efficiency related to change.
Flexibility for change. The building design and fit-out will enable DIBP considerable flexibility to meet its ever-changing accommodation requirements. Speed of change is also a key consideration. This will be achieved through:
Work points that can easily and quickly be reconfigured without disturbing productivity;
Ensuring that the utilisation of modular office and meeting room design is used so that any built rooms can also satisfy an alternative purpose (for example, being easily interchangeable between offices, meeting rooms and workstations). Noting that areas with higher security requirements require construction that is inherently inflexible;
Building services that are located to allow for repositioning of walls; and
Work point layouts and accommodation changes in technology.
3.20
According to DIBP, the proposed works will assist in achieving a number of its long-term accommodation objectives. DIBP noted that the proposed works will:
Provide an open, collaborative and rewarding workplace in two precincts that enable responsive, innovative, efficient service delivery to government;
Accommodate and support the integrated requirements of the ABF including specialist facilities such as the current Maritime Border Command, Strategic Border Command, Intelligence, ABF Capability and ABF College related facilities;
Enable evolution of the workplace and promote cultural transformation;
Provide flexibility and adaptability to support emerging functional requirements and a capability to surge if needed;
Support provision of a Shared Operational Environment that can accommodate external partners in a secure environment;
Support concurrent and uninterrupted operations;
Reduce DIBP’s leased office net lettable area by approximately 14,600 square metres. It is estimated that DIBP will be able to relocate and consolidate its current twelve lease holdings into four with a total office net lettable area of 85,700 square metres (existing holdings are 100,317 square metres);
Secure lease tenure beyond 2017 (until at least 2032);
Stronger economic basis by minimising fixed, semi-variable and variable property operating costs through a reduction in total leased space and utilisation of a more efficient and purpose-built fit-out;
An ability to plan for and meet the longer term organisational needs consistent with the Australian Government Property Data Collection density target of 14 square metres per occupied workpoint;
Improved floor area efficiencies across DIBP through increased work space density in buildings with large floor plates and designed to facilitate open plan environments;
Flexibility, adaptability and responsiveness to support organisational growth, and any restructure, reconfigurations and task forces;
More opportunities to work cooperatively, efficiently and more effectively if staff were consolidated in an open plan environment with the potential for increased productivity;
More efficient provision of ICT support services which is expensive to establish and maintain in the current dispersed accommodation and is subject to protracted installation timeframes;
Lower cost of churn and support of organisation change with the use of common office fit-out and furniture; and
Support for sustainability and environmental objectives. The new fit-outs would satisfy Ecologically Sustainable Development… which would be difficult and disproportionately expensive to accomplish in DIBP’s current leased accommodation.
Location of the works
3.21
The Committee received a submission regarding the location of the proposed works at 3 Molonglo Drive.
3.22
This submission stated that:
Given the site’s proximity to the main runway, a number of important considerations may have been overlooked, understated or not investigated in the detail required to satisfy the Commonwealth Government’s duty of care, or in order to develop accurate project costings.
3.23
Specifically, the submission notes the potential for the proximity of 3 Molonglo Drive to Runway 35 at Canberra Airport to cause operational issues at the airport. According to the submission:
It is very likely that the proponent’s wind analysis supporting the design was significantly flawed, and the wind environment characteristic to Canberra Airport inaccurately defined. The result has been an increase to the level of operational risk at Canberra Airport, due to a combination of the existing building’s dimensions, the proximity to the threshold of Runway 35, and the common strong and gusty westerly winds characteristic to the local environment.
3.24
The submission further states that:
As a consequence, the Airport Leasing Company must now apply risk mitigation strategies to address the risks to flight operations. These strategies include automated warnings for pilots on approach to Canberra Airport during adverse wind events, which may have very limited effectiveness. Ultimately, if the risks are to be adequately treated the building size should be reduced.
3.25
At the public hearing, DIBP told the Committee that the building owners had offered assurances that this had been investigated and ruled out as a potential issue:
The building at 3 Molonglo Drive was constructed and completed in 2008. At that point it was reviewed to the Airports Act and all the requirements of it. It was approved by the airport building controller and a certificate of occupancy was issued to Canberra Airport Group. The 3 Molonglo building is part of the master plan that the airport maintains and it was approved by government. All that due diligence and all the investigations and all the certifications have been achieved and have been provided to us from Canberra Airport Group, and that is what we rely on.
3.26
The submission raised other issues related to the proximity of the building to Runway 35. In particular, the Committee was concerned by the fact that the potential for larger planes to land and take-off from Canberra Airport posed a potential acoustic risk, particularly to building occupants using the carpark during the take-off and landing of planes.
3.27
The submission states:
Compliance with the Work Health and Safety Act 2011 is likely to be problematic if these issues are not resolved prior to occupation. Furthermore, the Commonwealth may be exposing itself to significant contingency expenditure and/or future legal penalties if the acoustic requirements are not clarified prior to Agreement for Lease negotiation and endorsement.
3.28
In response, DIBP told the Committee that the acoustics ‘will be assessed formally as the building is fitted out to ensure that noise levels within the building’ are acceptable. Furthermore, in regard to the carpark, DIBP stated that ‘the elements of the whole precinct have been reviewed by the building controller and approved within the noise levels set.’
Committee comment
3.29
The Committee notes that the proposed works constitute a very large and complex project, intended to be undertaken at more than one location. It appreciates that a wide range of issues have no doubt been encountered in the development of a project of such complexity and scale.
3.30
While the issues raised regarding the location of 3 Molonglo Drive are concerning, the Committee accepts the assertion that these have either been adequately addressed during the construction of the building, or will be assessed and dealt with during the conduct of the proposed fit-out works.
3.31
The Committee finds that the proposed scope of works is suitable for the works to meet its purpose.
Cost of the works
3.32
The project has a budget of $255.3 million, excluding GST. The cost estimate includes provision for the office fit-out, cost escalation, contingencies, relocations, associated professional fees and DIBP internal costs.
3.33
This funding is comprised of $214.32 million in lease incentives offered by building owners, $25.04 million of Commonwealth funds provided through the 2014-15 Budget, and $18.03 million of internal costs from DIBP.
3.34
DIBP provided further detail on project costings in its confidential submissions and during two in-camera hearings.
Committee comment
3.35
During the course of this inquiry, the Committee identified some issues with the proposed project funding.
3.36
Specifically, during the public hearing it emerged that a portion of the lease incentives offered by building owners actually take the form of interest-bearing loans, which are to be repaid over the life of some of the proposed leases.
3.37
While the Committee commends the use of lease incentives by proponent entities, as they often act to reduce the overall cost of proposed works borne by the taxpayer, in this case the Committee does not necessarily accept that the repayable portions can be considered true incentives, nor can they be considered to reduce the cost borne by the taxpayer.
3.38
DIBP told the Committee that the loans constitute incentives because they assist DIBP in solving a ‘cash flow’ problem. That is, DIBP would be unable to fund the proposed works using existing departmental funds or budget allocations. DIBP argues that the loans essentially make the project possible, and thus constitute an incentive to sign the leases under which the loans are offered.
3.39
The Committee does not share this view. In the Committee’s view, a true incentive is one that is offered without the expectation of repayment. This project has led the Committee to reconsider the definition of ‘lease incentive’ contained in its Procedure Manual, which provides advice to proponent entities on the practices of the Committee, to reflect the fact that the Committee will not accept interest-bearing loans as lease incentives for future projects.
3.40
The Committee believes that, as these loans form part of the project funding, the interest payable on these loans also forms part of the project funding. Given that the interest paid on these loans is a cost borne by government, and thus the taxpayer, the interest should be considered part of the cost of the project, and not part of the longer-term whole of life costs of the leases to which they are attached.
3.41
By failing to list the interest payable on these loans in the project funding, the Committee believes that the headline figure of $255 million understates the true cost of the project. As such, it is the Committee’s view that the interest payable on these loans should have been included in the project costs from the start, so as to ensure that the total amount of taxpayer funds that will go towards the project are accurately captured by the information the Committee uses to consider the project.
Final committee comment
3.42
The Committee has been unimpressed by the way that DIBP has provided it with information in relation to this project. DIBP has found it necessary to provide the Committee with nine separate submissions for this inquiry, and in some cases, these submissions simply provided information that could have been provided much earlier to assist the Committee in its considerations.
3.43
Furthermore, DIBP has made some changes to the scope and cost of the proposed works during the course of the inquiry. In some cases these changes were not communicated to the Committee in a timely fashion, and in one case a change to the proposed design of the works was not communicated to the Committee at all, until it asked a direct question about the proposed design. The Committee finds this unacceptable, as it can only make decisions about projects based on the information provided to it.
3.44
Pursuant to Section 14 of the Public Works Committee Act 1969, the Committee divided on the inclusion of this Chapter in this report. It was resolved in the affirmative with five ayes and four noes. Pursuant to Section 14(3) of the Public Works Committee Act 1969, the results of this vote are included in Appendix C.
3.45
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.
3.46
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: Department of Immigration and Border Protection Headquarters project.
3.47
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 project completion. A report template can be found on the Committee’s website.