3.1
Services Australia (the Agency) seeks approval from the Committee to proceed with the proposed fitout of New Leased Premises at 52–62 King William Street, Adelaide. The aim of the project is to provide office accommodation to support the consolidation of the Agency’s five Adelaide sites (six leases) in 2023 in accordance with the Whole of Government Leasing Strategy.
3.2
The estimated cost of the project is $53 million (excluding GST).
3.3
The project was referred to the Committee on 7 October 2020.
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 one submission and one confidential submission. A list of submissions can be found at Appendix A.
3.6
On 23 November 2020, the Committee conducted a project briefing, public and in-camera hearing via teleconference. A transcript of the public hearing is available on the Committee’s website.
Need for the works
3.7
Services Australia is ‘responsible for the provision of essential government services including delivering Centrelink, Medicare and Child Support programs for the Australian Government.’
3.8
The Agency currently leases 30,307.5 m² of office accommodation providing 2,482 work points across five sites (six leases) in Adelaide. All of the current sites are within five kilometres of one another, with four of the five sites located within the Adelaide Central Business District. The locations of the five current Services Australia locations in Adelaide are listed below:
209 Greenhill Road, Eastwood.
3.9
The Agency has assessed that maintaining five separate sites ‘is inefficient, costly and would require significant investment to ensure existing amenity meet policy and operational standards.’
3.10
In addition, the existing five sites are approaching the end of their useful life and Agency's told the Committee that in order to ‘ensure efficient and cost effective performance for the next 15 to 20 years’, significant base building and fit-out refurbishments would be required.
3.11
In their submission to the inquiry, the Agency stated that the key objectives of the proposed works will be the realisation of operational and financial benefits including:
a fit for purpose property solution for the consolidation of Agency sites in Adelaide to support the continuation of Agency operations over the longer term
a cost effective, value for money outcome for the Commonwealth through a reduction in the number of leases and outgoings
the delivery of an A‐grade building amenity which meets Commonwealth energy and waste management targets
achieving efficiencies through an average work point density of 11.8 m2—with consideration for physical distancing—which is below the Commonwealth occupation density requirement of 14 m2 per occupied work point
provide an environment to support staff wellbeing, productivity, connectivity and collaboration.
3.12
At the public hearing, Services Australia confirm that there would be no impact on face-to-face services as a result of the proposal, as none of the five current sites provide face-to-face services direct to the public.
Options considered
3.13
In their submission, Services Australia stated that:
Consultation with the Department of Finance and the subsequent approach to market identified that there are no existing buildings available in Adelaide within the timeframe to provide the required 28,500 m² of office accommodation. The open market approach and supporting Cost Benefit Analysis indicated the most beneficial option is to enter a lease associated with the construction of a new building at 52–62 King William Street.
3.14
Services Australia stated in their submission that they considered the following five options for the project:
Option 2: Existing Commonwealth Leases or owned properties
Option 3: Alternative funding arrangements
Option 4: Build own operate buy
Option 5: New construction or existing vacant premises (preferred option)
3.15
In comparing the cost of renewing the current leases against the proposed consolidated lease at King William Street, maintaining the status quo was more costly and would not enable the Agency to bring its occupational density in line with the government targets.
3.16
Additionally the Agency would also be required to refurbish its five existing sites (six leases) in 2023 as the ‘average timeframe for refurbishment of the agency’s non‐face‐to‐face premises is 12–15 years’.
3.17
Services Australia state that:
The option to relocate to surplus leased government space in the Adelaide CBD was explored and was not possible as the Department of Finance confirmed there is no existing Commonwealth leased or owned accommodation in Adelaide that could accommodate the operational requirements of the Agency.
3.18
The option for an alternative funding arrangement was marked as not applicable by Services Australia, as the ‘funding for the lease and fitout of the proposed new building will be from the agency’s approved property operating expenses, capital budgets and incentive contributions.’
3.19
Services Australia stated that the capital funding to support Option 4: build own operate buy, was ‘not readily available within the Agency’s existing annual allocations’, and would be uncertain through the Budget process risking the delivery of the project within the required timeframes.
3.20
The Agency further notes that:
Additionally, a new development would require the Commonwealth to identify and acquire an appropriate site which would add significant risk to achieving a new development prior to the expiry of current leases.
3.21
In their submission Services Australia stated that the preferred option, Option 5: new construction or existing vacant premises, offered the best ‘value for money for the Commonwealth’, ‘maximises efficiencies and provides close access to a wide range of surrounding amenities for staff.’
3.22
Services Australia stated in their submission that a ‘Request for Tender process was undertaken, which resulted in four viable proposals for consolidation into a single building’, and the ‘financial and qualitative analysis indicated the 52–62 King William Street proposal provided the best value for money’ option.
Scope of the works
3.23
The proposed building is a new commercial office development comprising of 15 floors (42,902 m²) located within Adelaide’s central business district.
3.24
Services Australia proposes to occupy 28,500 m² office accommodation (70 per cent) across floors 1- 10 of the building, which includes the following:
ground floor lobby with provisions for a guarding desk, security turnstiles and waiting area
30 secure parking spaces, including one accessible space
first aid and multi‐function carers/prayer rooms
2,420 workpoints, at 11.8 m² per workpoint
3.25
In their submission, Services Australia stated that typical materials and finishes used in the fitout will include ‘glass for office and meeting room partitions, plasterboard walls, fabric panels on workstation screens, timber veneer or laminate finishes to workstations and meeting tables’. In addition, the fitout will be delivered using the Agency’s existing panel arrangements for furniture.
3.26
The Agency noted that:
Acoustic performance criteria has been incorporated into the fitout brief to ensure adequate noise insulation between offices, meeting rooms, training rooms and other work spaces. Attention will also be given to air‐conditioning detailing to reduce noise from moving air and mechanical plant.
3.27
The fitout works also includes a range of hydraulic and electrical services in compliance with statute and regulations.
Staff consultation
3.28
In its submission, Services Australia stated that ‘in developing the design plans, it has undertaken extensive consultation and interactive design sessions with business areas to understand priorities and requirements and ensure the design plans and the overall project meet business needs.’
3.29
Services Australia noted that ‘Senior Executives were consulted on the preferred outcome, including the preferred accommodation solution and its alignment with workforce requirement.’ In addition, the Agency noted that that ’consultation with staff has also informed the fitout design’ and staff would continue to be engaged up until relocation.
3.30
In response to questions from the Committee about the availability of parking and public transport, the Agency stated that currently staff had access to 154 free parking spaces. Of these spaces, 36 were located within the Adelaide central business district and 118 were located at the Eastwood site. Comparatively, the new proposal at King William Street only includes 30 dedicated parking spaces.
3.31
Services Australia told the Committee that while staff had acknowledged that there would not be free parking available at King William Street, the new building was only 200-600 metres from four of the current sites, and 3.4 kilometres from the Eastwood site.
3.32
With regards to the availability of public transport at the new site, Services Australia told the Committee that:
The proposed new building is well situated near public parking and transport options for staff, with public parking facilities within 200 metres, the Adelaide Railway Station within 400 metres, numerous bus stops along King William Street, and the Glenelg tram line operating along the middle of King William Street through the city centre.
3.33
Services Australia stated that it had been actively engaging with the Community and Public Sector Union (CPSU) regarding staff relocations since 27 November 2018, and would continue to engage with the CPSU throughout the relocation process.
3.34
When questioned by the Committee if the CPSU had raised any issues or concerns in response to the proposal, Services Australia stated that it was ‘not aware of any concerns’.
3.35
With regards to the ongoing impacts of COVID-19 on workplaces, Services Australia stated that ‘The Agency has ensured physical distancing, accessibility and sustainability measures have been integrated into the fit-out's design’. When asked by the Committee if staff would be required to hot-desk under the new proposal, Services Australia responded that ‘Hot-desking is not part of our current thinking, because of COVID-19.’
3.36
Due to the delivery of essential services, Services Australia told the Committee that while some staff had successfully worked from home during the COVID-19 pandemic (approximately 25 per cent), the Agency had ‘determined that staff are required to attend the workplace in order to meet functional and operational requirements, and deliver customer services and ensure system security’. However, the Agency stated that its ‘experience with working from home during COVID-19 has been a good one and leads to optimism about what is possible in the future.’
Cost of the works
3.37
Services Australia’s proposed fitout of new leased premises at 52–62 King William Street, Adelaide, has an estimated total cost of $52,997,340, exclusive of GST.
3.38
Services Australia told the Committee that funding for the fitout costs will be met from their capital budget.
3.39
The Agency provided further details on project costings in its confidential submission and during an in-camera hearing.
3.40
Services Australia told the Committee that:
The proposal will deliver considerable operational efficiencies for the Agency through the co‐location of staff, and the consolidation and rationalisation of leases. Operational savings will also be achieved through the implementation of high energy efficient technologies in the new building.
3.41
The Committee is satisfied that the costings for the project provided to it have been adequately assessed by the proponent entity.
Revenue
3.42
There will be no direct revenue generated by the project.
Committee comment
3.43
The Committee was pleased to see that staff had been consulted as part of the design process, and staff feedback had influenced the design of the fitout. The Committee encourages Services Australia to continue engaging with staff and the CPSU throughout the process.
3.44
All entities relocating staff to new sites should consider the availability of parking and transport options, and the potential increased cost this may place on staff.
3.45
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.
3.46
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.
3.47
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: Services Australia’s Proposed Fitout of New Leased Premises at 52–62 King William Street, Adelaide.
3.48
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.