- Proposed Fit-out of New Leased Premises at 18 Marcus Clarke Street, Canberra
Department of Veterans' Affairs
4.1The Department of Veterans' Affairs (DVA) seeks approval from the Committee to proceed with the Proposed Fit-out of New Leased Premises at 18 Marcus Clarke Street, Canberra.
4.2The aim of the project is to provide modern office accommodation with enhanced technology that meets Commonwealth density targets, supports organisation agility and flexibility, promotes staff wellbeing and services the veteran community.
4.3The estimated cost of delivery of the project is $29.60 million (excluding GST).
4.4The project was referred to the Committee on 27 March 2024.
Conduct of the inquiry
4.5Following referral, the inquiry was published on the Committee’s website and via media release.
4.6The Committee received one submission, one confidential submission and two supplementary submissions. A list of submissions is at Appendix A.
4.7On 23 May 2024, the Committee received a private briefing and conducted a public and in-camera hearing at Australian Parliament House, Canberra. A transcript of the public hearing is available on the Committee’s website.
Need for the works
4.8DVA is responsible for providing support, services and information to veterans and their families. To support these activities, DVA manages a large and diverse national property portfolio of up to forty‐nine sites, comprising leased office accommodation and client shopfronts. This proposal relates to DVA’s national office in the ACT, which has 1,066 employees.
4.9The current lease at 21 Genge St is managed through a Memorandum of Understanding with the Australian Taxation Office (ATO MoU), which expires in May 2025 with no extension options. Notwithstanding the lease expiry, the fit-out at 21 Genge Street was undertaken in 2006 and no longer complies with modern day best practice. In addition, the base building requires a major refurbishment to bring it up to current standards.
4.10DVA summarises the main deficiencies as follows:
- The COVID‐19 pandemic has significantly transformed the office-working environment with a greater emphasis on remote and flexible work arrangements. The existing office was not designed with this in mind, leading to inefficiencies and limitations that hinder productivity, collaboration and employee satisfaction.
- The existing fit‐out lacks the integration of modern technological infrastructure in meeting rooms and collaboration spaces, which limits employees' ability to leverage from evolving enhanced ICT capabilities.
- The current building has outdated amenities, limited breakout areas and collaboration spaces that hinder interactive communication. This impacts on the motivation of staff to access the office, having an enduring effect on employee wellbeing and satisfaction.
Options considered
4.11In December 2022, DVA engaged property consultants TSA Management, to carry out an extensive market test for a new long‐term lease for between 10,000 to 13,000 square metres in A‐Grade office accommodation in Civic or Barton, with a lease commencement of 13 May 2025. Fourteen responses were received, nine of which were for existing buildings requiring refurbishment, with the remaining five for new buildings to be constructed under a pre-commitment lease agreement.
4.12While the options for a new building under a pre‐commitment lease agreement were viable and could be delivered by the required commencement date, all proposed higher rentals and lower lease incentives than available in the existing buildings. They also presented higher risk profiles. Of the nine existing buildings offered, three were selected for due diligence and lease negotiation. The remaining six were rejected for being too small, having inefficient floor plates, unsuitable locations and uncertainty on their ability to meet the May 2025 delivery date.
4.13Accordingly, the following options were considered by cost benefit analysis:
- Option 1 – 21 Genge Street: Status quo option of continuing occupation of the current space in 21 Genge Street under the ATO MoU to May 2025 then on a monthly basis under the ATO head lease. This option was unrealistic but was used to set the baseline cost of the “do nothing” option.
- Option 2 – 21 Genge Street: Negotiate a new long‐term lease direct with the landlord, Charter Hall, in return for a full refurbishment of the building. This option required a staged refit of the DVA floors over a period of 24 months in coordination with the base building refurbishment.
- Option 3 – 18 Marcus Clarke Street: New lease with ISPT Pty Ltd for the whole of Levels 1 to 6 at 18 Marcus Clarke Street. The building is currently undergoing a major refurbishment, which will allow DVA to take access for fit‐out in July 2024.
- Option 4 – 26 Narellan St: New lease with QIC of the whole of Levels 2 to 6, 26 Narellan Street. The timing of the lease commencement for this option was subject to vacation of the space by the ATO and its sub‐tenant, the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA). Due to timing uncertainty, this option was excluded from further consideration.
- DVA found Option 3 presents the lowest risk for the DVA and offers overall best value for money for the Commonwealth.
- The site was also considered to be advantageous because ACT Light Rail Stage 2A will run from the City to Commonwealth Park and will include a stop at Edinburgh Avenue (approximately 300 metres from 18 Marcus Clarke Street). This stage of the light rail will be operational from 2028.
Scope of the works
4.16The proposed fit‐out calculation is based on a usable floorplate of 12,063 square metres with part of Level 1 (1,587m2) being a non‐office floor of five work points for the Veterans’ Review Board (VRB). The VRB is an independent statutory body that provides services to DVA clients.
4.17The proposed fit‐out will include a total of 868 workstations. This will consist of:
- an executive suite for the Secretary and Deputy Secretaries (and their support staff) and allocated offices for Senior Executive Service (SES) only (consisting of 46 SES offices and 3 Deputy Commissioner offices).
- open plan office accommodation for Executive Level (EL)1 and 2 and APS Level officers (21 for Executive, 5 for the Veteran’s Review Board and 793 open plan workstations).
- At the public hearing, representatives from DVA explained the current ratio of staff who work from home verse in the office:
On average, the department has 52 per cent working from the office on any given day. We have a peak of 52 per cent. We find that Tuesdays, Wednesdays and Thursdays are our peak periods, with greater numbers working from home on Mondays and Fridays.
4.19The following dot points describe aspects of the design:
- SES offices designed for alternate uses such as meeting rooms
- all open plan workstations to be rectangular 1,800 millimetre wide with electronic sit/stand height adjustability
- on‐floor breakout/hub areas and kitchens designed to support breaks, and encourage casual meetings
- a range of meeting and focus room types of varied sizes with a variety of collaboration zones (conveniently located adjacent to the open plan areas with separate air‐conditioning or all rooms, with capacity exceeding eight persons)
- a dedicated secure meeting zone for the building to maximise efficiency, reducing on‐floor duplication and the ability to maximise flexibility
- banks of lockers for storage of laptops and personal equipment necessary for an Activity Based Working (ABW) environment
- landlord operated business centre on the ground floor outside of the security perimeter secure rooms
- mail room, equipment, storage and resource areas
- two separately air‐conditioned communications equipment rooms on each floor to ensure the maximum distance for communications cabling is not exceeded
- parent, carers, first aid, and reflection rooms
- secure basement parking spaces
- loose furniture, which includes task and meeting room chairs, meeting room tables, breakout tables, chairs, stools and other casual seating
- minimised use of fixed joinery to provide greater flexibility for rearrangements.
- In order to manage the handling of confidential information, particularly sensitive information relating to veterans, DVA has included the following design aspects:
The fit-out has been designed to allow smaller working areas. Teams will be able to collaborate in smaller spaces, where topics or engagement in particular areas of interest for those particular teams can be kept close within those teams, rather than the broader concept of more widely placed floor plates. We're using sound masking to ensure that communications outside of those around people are not able to be heard from other business areas on the floor plates. That is another way that we're improving our privacy as part of this refit.
4.21On questioning from the Committee at the public hearing, Mr Sweet explained sound masking is akin to white noise:
What happens is that, if there is more noise in one particular area, the sound masking will push more noise to that area so it becomes less audible. It would be more like the sound of air coming out of an air conditioner; that's the sound of it. It becomes less audible.
Staff and stakeholder consultation
4.22The DVA has or will commence consultation with the following internal and external stakeholders:
- DVA Executive
- Repatriation Commission
- VRB
- DVA Employee Relations
- DVA Work Health & Safety
- DVA Workplace Diversity
- DVA Diversity Committees
- CPSU
- Finance
- JLL (Property Services Provider)
- Cox Architecture (Architectural Design)
- LCI Pty Ltd (Services Engineer)
- WT Partnership (Quantity Surveyor)
- ISPT (Landlord).
- The DVA has completed the following engagement activities with staff and the CPSU:
- November 2022 – DVA notified the CPSU of its intention to approach the market to secure a new lease arrangement.
- February 2024 – DVA advised the CPSU of its intention to distribute an email to ACT staff regarding end-of-lease arrangements, held an in person and broadcast briefing with ACT staff, released an intranet page regarding the new fit-out to staff as well providing avenues for feedback and held the inaugural meeting of theProject Board, AWG, and SME Reference Group. Union and non‐union staff representatives are members of the AWG committee and the SME group.
- At the public hearing, DVA explained how their project team has benefitted from consultation with two other Commonwealth departments, the Australian Maritime Safety Authority (AMSA) and the Civil Aviation Safety Authority (CASA), who have recent fit-out experience at 18 Marcus Clarke Street. DVA has not been made aware of any negative feedback regarding the previous Commonwealth department fit-outs of this building and will be using the project manager, tenant advocate, services engineer and quantity surveyor employed for the CASA fit-out, further enhancing learnings as they relate to fit-out and cost.
- At the public hearing, Mr Wilkin, the project manager, explained that he benefits from the experience of working on the recent fit-outs:
I was the project manager and the tenant advocate for CASA's lease of three floors in 18 Marcus Clarke, and I was also the tenant advocate for the lease of AMSA's two floors. I'm not involved in AMSA's fit-out, but I've certainly continued to consult with them. There's been, I think, a reasonably good transfer of information, technically, between myself and JLL in their design and documentation and as to issues with the landlord over the condition of the premises that were handed over. So I believe there has been a good transfer of information between us.
Cost of the works
4.26The cost of the proposed fit-out works are estimated at $29.60 million (excluding GST) which equals $2,168 per square metre (excluding GST) based on the net lettable leased area of 13,650 square metres.
4.27The cost estimate excludes non‐construction related costs such as non‐construction contingencies, relocations and fixtures and fittings including workstations and loose furniture.
4.28Further information about the costing of the project was provided to the Committee in a confidential submission and an in-camera hearing and the Committee was satisfied with the justification of the cost of the project.
4.29The Committee notes that the property service provider, Jones Lang LaSalle (JLL), also represents the landlord, ISPT. When questioned about the potential conflict of interest, DVA advised that it had no concerns about the arrangement, as it was using an independent separately engaged organisation (WSA) to conduct the negotiations. The representative from JLL advised that the conflict of interest was notified to the Department of Finance.
4.30The property costs of VRB, which is an independent statutory tribunal, are met by DVA.
Revenue
4.31There will be no revenue generated by this project.
Public value
4.32The delivery of the proposed fit‐out provides public value by enabling DVA to achieve operational and cost efficiencies while continuing to maintain a workforce in Canberra. Public value associated with the project includes:
- A flexible, agile and contemporary fit‐out with a greater emphasis on open plan collaborative spaces, encouraging staff interaction and improved wellbeing
- Improvement in office operational efficiencies through the adoption of an activity‐based workplace design, which will allow for a flexible and scalable office accommodation capable of meeting future changes to business requirements with minimal costs.
- Value for Money associated with improved leasing costs in the refurbished building.
- Improved ecologically sustainable development (ESD) outcomes associated with modern and efficient building services design, including lower energy costs.
- The modern design of the office fit‐out and its associated amenity is expected to attract staff to return to the office more often, which in turn provides benefits to local small businesses.
- Creating jobs during construction and fit‐out works including through the engagement of local small business and Indigenous providers where possible.
- Making use of existing and proposed public transport facilities.
Committee comment
4.33The Committee did not identify any issues or concerns with the proposal, and it is satisfied that the project has merit in terms of need, scope and cost.
4.34The Committee notes the fit-out will provide greater flexibility to DVA staff and that this may lead to a higher percentage of staff working in the office (currently 52 per cent on any given day) rather than working from home. Current rates of staff office attendance will lead to the under-utilisation of 30 per cent of workstations. The Committee suggests the DVA monitors staff preferences for place of work and incorporate such information for any future fit-outs that may be required.
4.35The Committee notes that the move will result in worsened access to light rail until the proposed Edinburgh Ave stop is built in 2028. The Committee encourages DVA to support staff who use public transport during the transition period.
4.36The Committee commends DVA for conducting a thorough consultation process and absorbing learnings from previous Commonwealth department fit-outs at the same building.
4.37Having 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.
4.38The 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 Veterans’ Affairs — Proposed Fit-out of New Leased Premises at 18 Marcus Clarke Street, Canberra.
4.39Proponent 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.