Chapter 3

Problems with P21 program implementation

3.1        This chapter sets out the committee's concerns regarding the implementation of the P21 program. It focuses on the marked differences in processes and outcomes for government and non-government schools, including different approaches to tendering for projects. Key issues for schools in the government system are discussed, including a lack of communication with school communities about their projects and a lack of transparency regarding costings. Case studies as well as systemic analysis included in this chapter illustrate that value for money has not been achieved under the P21 program in the government sector, because of a number of factors including problems with the states' tendering processes, overcharging and inflated fees paid to managing contractors.

Differences in outcomes between government and non-government schools

3.2        Since the inception of the P21 program a number of complaints have been received from government schools in relation to overcharging, and waste and mismanagement of funds. A small number of complaints have been received from the non-government school sector.

3.3        Evidence presented to the committee demonstrates that Catholic and independent schools have been able to achieve superior outcomes compared with schools in the government systems. This would seem to be counterintuitive, as given the scale and the centralised management of projects in the government sector, it would be reasonable to expect economies of scale. The evidence suggests that better outcomes have been achieved in the non-government schools as a result of direct funding and local management of projects.

Figure 2         Relationship between the Commonwealth, education authorities and schools

Source: Australian Government, Nation Building, Economic Stimulus Plan, Building the Education Revolution – National Co-ordinator's Implementation Report, February – September 2009, October 2009, p. 5.

3.4        Figure 2 shows that DEEWR had different arrangements in place with government and non-government schools. For non-government schools the Block Grant Authorities (BGAs) dealt directly with DEEWR and were responsible for administering the P21 funding in their relevant jurisdictions.

3.5        In direct contrast the government schools dealt with state education authorities.

3.6        The Independent Schools Council of Australia (ISCA) in their submission to the committee advised that the arrangements in place for the independent schools were one of the main reasons for the success of the BER program for their schools:

There was no requirement under the BER National Partnership for the independent sector to engage in negotiations with their state and territory education authorities for access to funding. The decision by the Commonwealth to provide a separate allocation for independent schools and utilise sector BGAs for administration has been instrumental in the successful implementation of the program for the sector...This implementation model is an example of the effectiveness of providing the independent sector with a specific share of program funding and the autonomy to implement the Program within the sector.[1]

3.7        Mr Bill Daniels, Executive Director ISCA, gave evidence to the committee that the Commonwealth outsourced the administration of Commonwealth capital programs to the non-government schools approximately 20 years ago. In practice this has meant they are very familiar with the requirements for successfully completing capital works projects and already have well-established processes and established relationships with local architects and builders to draw upon, as well as master plans for their schools ready to use.[2] When the committee asked about the reason for the effectiveness and success of the program in the Catholic and independent sectors, it was told that the direct funding relationship was fundamental to this success.[3]

Experience of the national partnership model

3.8        ISCA gave evidence to the committee that for the non-government school sector, BER was administered in the traditional way, with the Commonwealth providing funding directly to the sector. Mr Daniels gave evidence of his experience with the national partnership model, the instrument between the Commonwealth and state governments, under which the non-government sectors deal with the state education authorities to access funding other than capital funding.

3.9        Mr Daniels explained that independent schools find the national partnership model difficult to deal with as it introduces a range of bureaucratic processes which slow down the distribution of funds and cause uncertainty.[4] He stated:

I can tell you from personal experience, having sat on a number of national partnership implementation working groups during the year, that it to me was probably as bad an experience of dealing with the federal structure in Australia as I have ever experienced. There was lots and lots of bureaucracy and very little outcome...over the space of 12 months without money being rolled out to where it actually makes a difference on the ground.^[5]

3.10      This view was confirmed by Dr Geoff Newcombe, Executive Director, Association of Independent Schools of News South Wales, who told the committee:

In New South Wales we would have spent, as Bill [Daniels] said, a good 12 months preparing to implement national partnerships because of the nature of the model. It did not recognise the differences between systems and a group of independent schools. I had my staff attending meeting after meeting after meeting and we estimated that if we had been given our own funds and our own framework within which to operate we would have had people in the schools actually achieving something within two months at the outside, whereas this took 12 months before we even struck a blow.[6]

3.11      ISCA concluded that the national partnership model:

...is not considered by the independent sector to have been an efficient or effective approach to delivering funding to independent schools for a range of reasons primarily involving bureaucratic processes and lack of autonomy and flexibility in decision making for the sector.[7]

3.12      When asked whether the independent sector would have been able to achieve the same success and value under the P21 program if they had not been provided with funding directly, Mr Daniels said this would not be the case:

I would have no hesitation in saying there would be no prospect that we would have achieved the same outcomes and value for money—no prospect at all.[8]

3.13      The Queensland government noted the policy shift between other recent Commonwealth education infrastructure programs and BER. Previously, there was a direct funding relationship between schools and the Commonwealth government. BER introduced a greater role for state and territory governments in the implementation of the program, which was welcomed by the Queensland government. However, certain aspects of the P21 program, such as signage and recognition ceremonies, retained the direct relationship. The Queensland government indicated that its role was confused and made more difficult, particularly in relation to management responsibilities such as ensuring stakeholders' access to accurate information.[9]

3.14      The committee heard that under the Howard government's Investing in Our Schools Program, all schools self-managed funding and as a consequence there were no allegations of rorting under that program.[10] Mr Daniel Forrest, Principal of Donald Primary School, told the committee of the success of funding schools directly:

...Under the Investing in Our Schools Program some years ago and the National School Pride Program last year, the federal government trusted the schools to manage those funds. We completed some amazing projects at our school, and I know every school did. We were able to build our own multipurpose centre—an over-700-square area, a kitchen and a sports stadium. We raised over $100,000 in local funds to put towards that project. It proves that we can manage money.[11]

3.15      Mr Michael Doolan, School Council President, Swan Hill North Primary School, also praised the management of projects under the Investing in Our Schools Program.[12]

3.16      Despite assertions to the contrary by state government departments, Mr Forrest told the committee that many principals have experience with large-scale building projects:

...With a project on this scale—so large—I can understand that some principals might not have had any experience with building projects before, so I can understand the government coming in with project managers and architects and doing all those things as it might make it easier for all those principals. But a lot of us have had the experience of doing school makeovers and larger scale building projects. We do have experts in our field. On the big shed project I had a fellow who is a town planner and who has done a lot there. A volunteer, he who worked with me on that one. I am not too sure. We would have liked the opportunity to have a bit more input.[13]

3.17      The Australian Primary Principals Association (APPA) noted the successful outcomes in the Catholic and independent school systems and suggested that increased local management would also lead to better outcomes in the government system. Recognising that some principals may not have the necessary experience, the APPA suggested that it would be helpful to have some facility for less experienced principals to opt in to a centralised management system with necessary support in place.[14]

3.18      The committee majority notes that Mr Brad Orgill, Chairman of the BER Implementation Taskforce, has acknowledged that the centralised delivery model used by states such as New South Wales and Victoria, with more distance between the decision makers and the educational outcomes, appears to have resulted in more problems being experienced in those schools.[15]

Pressure applied to principals not to manage projects

3.19      Of concern to the committee was evidence given to it that principals in government schools were actively discouraged from self-managing projects at their schools, despite their strong belief that they would be able to obtain better value for money and achieve outcomes more relevant to their individual school's needs.

3.20      The committee heard evidence that the principals received letters from the NSW Department of Education and Training designed to dissuade them from self-managing projects. Reading from a letter to principals about managing their own project, Mr Gary Zadkovich, Acting President, NSW Teachers Federation, informed the committee:

There are fines attached to any injuries that happen on building sites. The school principal as project manager can be separately and personally liable for up to $55,000 for any accidental injuries that happen on their site.[16]

3.21      Mr Zadkovich further advised that at the end of the document, where people were clearly being persuaded to go with the state managing contractors and not to look at self-management as an option, there was this comment:

The managing contractor will manage the risks associated with a building project of this scale and scope so that you can concentrate on being a school principal. It means they also bear the cost of any delays or contingencies, as well as looking after OH&S, job protection and the onerous but important reporting that is naturally part of any project that uses taxpayers’ dollars.

3.22      Mr Zadkovich further stated that this is the kind of active dissuasion that principals experienced when they were considering what was best for their school communities.[17]

3.23      The letter tabled by the NSW Teachers Federation also included the following information:

If a principal discovers part way through planning their project that a power upgrade, a sewer upgrade or any other extra work is needed to make the project operational, this must be done from within the school’s Building the Education Revolution funding allocation. ... the school could be liable for hundreds of thousands of dollars worth of extra building work.

Schools are responsible for making sure that all workers on site are properly supervised at all times ...[18]

3.24      Mr Zadkovich told the committee that private schools were given an option to engage a project manager who would manage the project in accordance with the school community's wishes and would ensure value for money. He emphasised that this option was not provided to public schools. Quoting from a principal who communicated with them:

Probably what irks our community [more] than anything else is that a private school only 30 kilometres away with the same grant was able to build a permanent architect designed library three times the size of ours using all local contractors. Public education once again misses out.[19]

3.25      The committee was advised that out of 20 principals who volunteered to locally manage their P21 projects, only three followed through. Dr Mary Fogarty, Research Officer, NSW Teachers Federation, spoke with some of the principals who decided not to self manage. Her evidence to the committee was:

In talking to some of these principals, it was documents like this. They thought they could take that risk and undertake the project themselves, but they capitulated, if you like, and decided to run with the contractors and let the DET organise it for them.[20]

3.26      The committee also heard evidence that the three principals who chose to self-manage their projects have highly successful projects and in the respective principal’s opinions have achieved twice the amount of value in terms of the buildings constructed.[21]

3.27      Mr Grant Heaton, Principal, Hastings Public School told the committee of his experience when considering whether to self-manage the project for his school. He indicated the letter provided to school principals outlining the obligations played a significant part in dissuading him and other colleagues:

...you saw the calamitous consequences that were set out for us if we decided to put up our hand. As I said, I like my school, but my home is worth a little more to me and I was not prepared to risk personal liability by putting up my hand to do it. In hindsight, I wish that I had.[22]

3.28      Mr Heaton concluded that in his view:

...I have no doubt the highlighted inequalities in this whole program would not have been as marked if public school principals had self-managed their projects, but we were actively discouraged from doing so. We were told we would be personally liable if anything went wrong. I love my school but I love my home even more.[23]

3.29      On the issue of self-managing projects, Mr Michael Coutts-Trotter, Director-General, NSW Department of Education and Training advised that NSW has a stringent occupational health and safety environment and he had a duty to ensure that principals understood what they were taking on and the potential consequences.[24] Mr Coutts-Trotter told the committee that it was an objective of the department to provide opportunities for principals to take control of projects.[25]

3.30      The committee heard from principals who had relevant experience and wanted the opportunity to manage their projects. Mr Danny Forrest Principal, Donald Primary School stated:

...a lot of us have had the experience of doing school makeovers and larger scale building projects. We do have experts in our field. On the big shed project I had a fellow who is a town planner and who has done a lot there. A volunteer, he who worked with me on that one...We would have liked the opportunity to have a bit more input.[26]

3.31      Mr Forrest added

...Under the Investing in Our Schools Program some years ago and the National School Pride Program last year, the federal government trusted the schools to manage those funds. We completed some amazing projects at our school, and I know every school did. We were able to build our own multipurpose centre—an over-700-square area, a kitchen and a sports stadium. We raised over $100,000 in local funds to put towards that project. It proves that we can manage money.[27]

Committee view

3.32      The committee majority was not persuaded by the evidence of Mr Michael Coutts-Trotter, Director-General, NSW Department of Education and Training that the NSW government system encourages or facilitates self-management of projects.   The committee majority considers that the letter provided to principals was designed to have the opposite effect to that stated by Mr Coutts-Trotter and in fact dissuaded many principals from exercising the self-management option.

3.33      The committee received evidence which indicated significant success in the implementation of the P21 program for non-government schools. 

3.34      The committee majority notes that the P21 program was run for non-government schools in the same way as the Howard government's Investing in Our Schools Program, that is, by enabling and empowering schools to manage their own projects and expend their own funds.

3.35      Evidence provided to the committee illustrated that local management and direct funding of projects is the most effective way to deliver projects which take account of individual school and student needs. The committee majority notes that the evidence from the non-government sector highlighted the successful outcomes that the absence of bureaucratic imposts and the ability to self-manage projects had.

3.36      The committee majority considers that remaining P21 funds should be managed and administered locally by schools if they so choose.

Recommendation 2

3.37      The committee majority recommends that when the next round of P21 funding is made available the remaining P21 program funds be provided directly to those government schools choosing to manage their own projects to completion.

Lack of effective consultation and communication

3.38      DEEWR gave evidence that state education authorities and BGAs are responsible for 'consulting with schools and school communities' to develop P21 project proposals.[28]  Despite this requirement, the committee received evidence from a number of government schools complaining about a lack of effective consultation with, and inclusion of, the school community in the development of their P21 projects. A number of these cases are highlighted below.

Case study – Eungai Public School - NSW

3.39      The Eungai Public School Parents and Citizens (Eungai P&C) Association told the committee that the school community wanted to use the P21 funds to build a multi-purpose hall as:

At present, there is no enclosed space at the school which will hold all the students, staff and the many interested and supportive parents who attended prize-giving day, school assemblies, concerts, recitals and other special events. We hold our annual prize-giving day outside, under a COLA [covered outdoor learning area] as this is the only space that will contain everyone. In summer it becomes very hot under the COLA and when it rains, some people get wet and it can be very difficult to hear people due to the noise of the rain on the COLA.[29]

3.40      Mrs Lisa Hall, Member, Eungai P&C, told the committee that the school was advised by the NSW Department of Education and Training that it was not eligible for a hall as the school was too small. However, Mrs Hall stated that 'when students, staff and parents congregate, there have been times when over 130 people have been present'. She expressed her dismay that in receiving two classrooms to replace two demountables, the school would receive a 'net gain of nothing'.[30] She summarised her concerns:

...From our perspective, the Department of Education and Training seems to have full control over the funding for our government schools and, in our experience, have not listened to parents and school communities. So we believe that the non-government sector has got a much better return for their money...[31]

3.41      Mrs Hall emphasised that right from the consultation stage the department seemed unwilling to listen to the school community:

I think the first problem that we would identify with communication happened at the consultation stage. To us it seemed the Department of Education and Training in New South Wales were unwilling to listen to us. We ourselves made it very clear that we would like a hall but they were adamant that we did not meet their requirements to get a hall. We believe—but we do not know—that a departmental official said, ‘It doesn’t matter what those parents say. We are not going to change our minds.’ I cannot confirm or deny that because I never heard anybody say that.[32]

3.42      The lack of communication continued when the Eungai P&C sought information about cost overruns:

At this other stage, when we were trying to find out about cost overruns and where the money had gone, we had spoken with members of the Department of Education and Training from their implementation program office, as I think it is called. There was Mr Angus Dawson. We had spoken with him and some of his staff. We had tried to get answers through our state and federal MPs to get adequate costings to us, and they just had not arrived. So we have been quite persistent without being rude, we hope, because it is not our intention to be rude. Those responses have not been forthcoming.[33]

3.43      Mrs Hall explained that the Eungai P&C had sought costing information from the NSW Department of Education and Training:

Because this project is for spending at a school and we are a P&C association of that school, we have been dealing with the Department of Education and Training. We had not spoken directly to Reed Constructions because we felt that it was far more appropriate for us to go through the state government, because it is a government school and we felt that they really should have the answers. I certainly would not be suggesting that there has been misappropriation by anybody. We have had some weeks to try to consider where our money has gone, so a large number of theories have gone through our minds. We would have thought that, given that the Department of Education and Training had been overseeing our project, they should know where the money has gone. That is why we have asked them to be forthcoming with the figures. This here is the best we have got. We have asked for further details and they have not been forthcoming.[34]

3.44      When asked about the situation at Eungai Public School, Mr Michael Coutts-Trotter, Director-General, NSW Department of Education and Training, responded:

To take Eungai Public School, we are auditing the delivery of that school’s project—the double classroom. We are auditing it from a value for money perspective. We have a team of internal auditors that do that at our request. That is one school among, I think, about 20, where we have directed the team to go and have a look and test it for value for money. We will do that and then we will publish the results.[35]

3.45      The committee's concerns about oversight and audit mechanisms are discussed in chapter 4 of the report.

Case study – Stuarts Point Public School - NSW

3.46      Stuarts Point Public School P&C Association also told the committee about a lack of effective consultation with the school community. Miss Karina Daniels, President of the P&C Association, told the committee what had occurred:

...we were advised one week before submissions were due that the money was available and that we were going to be given something. We were asked to put together a wish list, so with that one week we consulted with the school community. The principal and the P&C worked on getting some costings for what we thought would be an appropriate acquisition for our school. As I said earlier, we wanted a hall, and if we could not get a hall, our second priority was a multifunctional teaching area. That submission was lodged on time, and we were told that we would be getting a library despite our not needing a library.

In about February, we started to hear about other schools that were having budget problems with their buildings, and we thought that we would just try to find out whether our building was having similar problems. We tried to find out costings for our building, which is what other schools were trying to do is well. They had been getting told that their buildings were running over cost, and they were trying to find out their costings.

On 11 February we started making investigations. By 16 February we had been given the estimated project costs. That indicated that our building was actually $31,000 in excess of its budget. We became alarmed, because we thought that there were going to be items omitted from our building, and asked that we be consulted on any omissions. We had no response to that, and so began our own investigations into the line items that had been on that estimated costing.[36]

3.47      Miss Daniels advised that the Stuarts Point Public School P&C Association discovered the project had been descoped from one of the workman employed on the project, even though they had repeatedly asked the BER project manager about the alleged descoping. After pursuing this issue, at a meeting with the BER project manager, the project manager from Reed Construction and representatives from the school, the Stuarts Point P&C was finally advised:

...that we had been descoped in December, which was three months earlier, and we asked them why we had not been informed. They said that the scoping had occurred on 23 December and that they did not want to upset schools. I did say that surely our repeated email requests for information on any descoping should have alerted to them to the fact that we did not know officially. They had no answer to that.[37]

3.48      Miss Daniels explained to the committee the effect of the descoping on the school:

...We are on the mid North Coast and we get a lot of rain. I have had a look at the Bureau of Meteorology data and we have on average 135 rainy days per year. Our new building is some 25 metres from the rest of the school. Without the covered walkway, which was de-scoped in December, on 135 days we will have children walking from the library back to the school in the rain. We do have a lot of torrential rain and that effectively means that the library will not be used on rainy days.[38]

Case study – Courtney Gardens Primary School - Victoria

3.49      Mr Nathan Prowd of Courtenay Gardens Primary School Council advised the committee that there had been little effective consultation with the school or the community by the Victorian government during their P21 project.  Furthermore, the school and the community received minimal information from the government regarding design details, construction stages, relocation plans and subsequent effects upon school activities, budget details and available monies to cover contingencies (including costs associated with relocation and re-establishment of existing buildings and infrastructure to accommodate construction).  Prior to the P21 program, the school council had been working towards the construction of a gymnasium for some years.

3.50      As a result of the P21 program funding, the Victorian government took over the project and is now building a multipurpose hall at the school.  P21 program funding could have represented a valuable opportunity to work towards construction of the gymnasium. Yet, project plans were not made available to the school council until a late stage of the planning process, leaving insufficient time for consultation and alterations. The school council representative noted that the application process:

...was difficult to understand with conflicting information received federally to what was coming from the State of Victoria Education Department. From the outset we have had difficulty having any local involvement... From my perspective the consultation with the school community has been non existent and the dealings with school staff directive and authoritarian. Taking into account the needs of the actual community that will utilise the building has been negligible... Attempts to contact [the Victorian Department of Education] and discuss local concerns and get information have been met with silence. The contempt shown for the local community and staff has been staggering... The ability of the Education Department to effectively communicate with schools has been demonstrated to be poor, resulting in confusion and frustration... [There has been no] provision of information to the school on funding allocation (how much is remaining?)[39]

Case study - Donald Primary School - Victoria

3.51      The Principal of Donald Primary School, Mr Daniel Forrest, told the committee about the disappointment felt in his school community regarding the lack of communication with them about their project:

We really feel disappointed that there has been a lack of communication. We have had three different project managers, but every time we have had a replacement project manager it is only because we have been on the telephone and found that out; we have never been told that we have lost project managers. Throughout the papers, you will see that certain ministers do not want us to supervise concrete pours. The principals are always on the front line of building projects and have a great deal to do, because they want to make sure they get good value for money for their school. It is disappointing that for every building project for which I have been a principal for nearly 10 years we cannot get the best value for the money in our local area.[40]

Case study – Mount Martha Primary School - Victoria

3.52      Mrs Iona Eichstadt, President, Mount Martha Primary School Council, told the committee that although she has two folders filled with correspondence the school council still has not received an adequate response to its initial query about the allocation of funds:

...Sadly, we have still not been furnished with an answer to our initial query. We did consider our query to be simplistic in nature and are still dumbfounded as to why no-one could even be courteous enough to respond.

We finally began receiving responses around the end of October 2009. I was alerted by Catherine Wall that a response from the Hon. Julia Gillard was imminent. I instantly shared this news with our school council community, but I was gutted when the long-awaited response arrived, because it was, devastatingly, a word-for-word cut and paste of the letter I had already received from Catherine Wall. It was a very sombre school council meeting that night when I shared the communication, because neither the correspondence from Catherine Wall nor the repeating of it by Julia Gillard answered our simple original question.[41]

3.53      Mrs Eichstadt told the committee that the school council has never been given the courtesy of a direct response to its original question of why their school missed out on funding.[42] She told the committee of her communication with Minister Gillard's office, which she summarised as 'extremely poor':

...I have stopped corresponding on behalf of the school to her because it took her or her office from August through to late October to respond and, as I said, the responses were basically cut and paste, one to the other. We just cannot keep up the hopes of the school community that we are going to get this response when we are not...

...It just came back with a couple of passages from the act in there. I read it to the school council. None of us can understand what is being said. In all the correspondence that went through that we saw, there was always that little glimmer of hope that we might get something. It was always skating around the obvious, that the money has been expended and you are now beating your head against a brick wall trying to find out why you missed out...[43]

Case study – Hallam Valley Primary School - Victoria

3.54      The President of the Hallam Valley Primary School Council reported that the school's P21 project, a gymnasium, was being constructed on school grounds with 'minimal input' from the school.  In addition, the school was advised that the funds left over after construction of the gymnasium was completed would be re-allocated to other schools to 'fund projects where costs exceeded expectations'. From the School Council's evidence, it is apparent that this was not a consultative process where the school was given the opportunity to negotiate; the school was simply told it would not be able to access the remaining funds and that 'there would not be the possibility of companion projects'.[44]

Other examples of poor communication with government schools

3.55      To streamline the application process and accommodate extremely short time frames, the NSW Department of Education and Training 'pre-identified....for possible inclusion in the program' larger schools that did not have the types of facilities which were to be provided under the P21 program.[45] While this method may have expedited the initial application process, in practical terms it was not inclusive of schools or communities.[46] This was highlighted by the Coogee Public School Parents' and Citizens' Association, which stated that:

[t]he timeframe has been inadequate to allow for whole school community consultation on the projected outcomes of the BER funding for [Coogee Public School].[47]

3.56      The Western Australian Council of State School Organisations (WACSSO) reported that in its experience consultation had been very limited.[48] It added:

In some cases, at a local level, where questions were raised, feedback has been 'you will get what you are given' and no consultation or consideration is given to the individual schools (sic) wishes.[49]

3.57      WACSSO emphasised to the committee that school communities have knowledge of what is most needed to benefit their school but this was not recognised.[50]

Non-government sector

3.58      Consultation and communication with school communities was not identified as an issue for the non-government sector.

3.59      In direct contrast, close involvement of school communities in local Catholic schools was identified as one of the strengths of the P21 program by the National Catholic Education Commission.[51]

Committee view

3.60      The committee heard evidence from many government school communities regarding what they considered to be a lack of consultation and communication. This lack of consultation and communication has resulted in valuable local knowledge regarding the needs of individual schools not being effectively utilised, leading to projects which do not have the full support of the school community.

3.61      The committee also heard examples of dismissive and superficial treatment by state bureaucracies in response to some school communities providing input or requesting information about the P21 program for their school.

3.62      A number of submissions to the committee indicated poor communication between state governments, schools and local communities in relation to P21 projects and also referred to inadequate information flow. The case studies indicate that in a number of cases, a paucity of information was made available to schools and communities. In other cases information was not made available in a timely manner or when provided was found to be not accurate. There were also cases where schools received no follow-up information and there was minimal responsiveness to legitimate questions being asked.

3.63      A lack of effective communication between school communities, builders and education authorities has led to delays in planning and construction and has caused some school communities to feel alienated and dissatisfied with their P21 projects.

3.64      In NSW, for example, it would appear that once control was given to the department, the problems multiplied as school communities had their capacity for involvement and decision making removed. It is clear there needs to be a better balance struck between the responsibilities of the state education authorities and school-based decision making to address many of these issues and effect better outcomes.

3.65      The committee majority considers that self-management of projects by local communities, in accordance with its recommendation at paragraph 3.37, will assist in addressing communication issues.

Failure to achieve value for money

3.66      The committee notes extensive evidence presented to the committee as well as available in the public domain that inescapably points to a conclusion that the problems with achieving value for money are not restricted just to a number of specific cases but are instead systemic in nature, with the entire state school system in particular achieving outcomes substantially inferior in terms of value for money than the independent and Catholic school systems in the same states.

3.67      The NSW Teachers Federation faxed 2240 public schools across NSW asking about their experience of the P21 program. After receiving hundreds of responses it pursued 27 value for money case studies.[52] Dr Mary Fogarty, Research Officer,  relayed the essence of the conversations she has had with principals:

...Might I say though that many, many principals spoke to me who were not prepared to speak out but privately said, ‘We are so grateful for what we have, because we had so little in the past. I do not think we got value for money. There is no way we got value for money, but I am not prepared to speak out. I’m just letting you know, but I am not prepared for you to take up the cause and mention my school or myself as principal.’ But they said, ‘Value for money is not my concern. I am the principal, I have a wonderful facility, I’m going to let someone else deal with it.’[53]

3.68      Dr Fogarty added:

The principals who have pursued this and are prepared to speak out have made statements to me where they have used words such as ‘rorting’ and ‘what is happening to the money?’ When they see that the value they are getting—sometimes it is only 50 per cent of what they would have expected in terms of the money made available to the school—they are so disappointed that they are not getting what they thought. They have promised their school communities COLAs, they have promised them paved walkways—as principals they feel compromised.[54]

3.69      Mr Gary Zadkovich, Acting President, NSW Teachers Federation provided the following example:

The department has standard design halls and libraries. With any particular standard design, that might get built in 20, 30 or 50 schools—one standard, core 14 hall or whatever it might be. It is built there, there and there. And yet the department’s costings duplicate the design costs for every building and every project, even though they are working off the one central template. If that is not a rort, what is it?[55]

3.70      Mr Zadkovich stressed to the committee:

...We have cited reports from schools where there is clear conjecture and speculation about the wasteful use of department and government funds. If you find words like ‘rort’ and ‘rip-off’ personally inappropriate, I respect that interpretation. But that is the language of school communities when they see a clear lack of value for money.[56]

3.71      The NSW Teachers Federation gave evidence to the committee that there will be less than $10 billion in actual value from the $16 billion allocated under the BER.[57] Dr Fogarty explained this statement:

If you look at the 27 case studies you will see management fees in some cases of 20 per cent and up to 30 per cent. In most projects that are cited there we are looking at management fees upwards of 13 to 15 per cent. On top of that, principals are expressing the fact that the building they have received is really only half the structure that they would have expected in terms of value. When we put that all together we arrived at that figure. You will note, of course, that in other media sources, even as recently as this morning, other people have come to the same conclusions.[58]

3.72      Individual case studies questioning whether value for money has been achieved are presented below. The committee majority notes that this is not an exhaustive list. Many more examples of schools questioning value for money were described to the committee in submissions[59] and many additional examples have been raised in the media.

Case Study – Eungai Public School- NSW

3.73      The committee was told that the Eungai Public School was to receive infrastructure valued at $850,000. The school community initially wished to build a school hall but was told it did not meet departmental guidelines to receive a hall. Instead the school was allocated a double, prefabricated classroom of approximately 200 square metres to replace two air-conditioned demountable classrooms and a covered walkway. The principal was told by representatives of the managing contractor, Reed Construction, that the new classrooms would be air-conditioned and have a covered walkway. This has not occurred. In addition the principal was promised a water tank, solar panels and interactive whiteboards but these items have now been 'descoped' from the project. The total cost of the project is now $892,860. Mrs Lisa Hall, member of the Eungai Public School P&C Association told the committee that:

So not only did we fail to secure the one project we knew would set our school up for the next decade but, at project end, our school and our children ended up, in our opinion, with a net loss, with two classrooms with no covered access, no air-conditioning and no electronic whiteboards.[60]

3.74      Mrs Hall said the Eungai P&C wanted to find out exactly how the $892,000 had been spent and why the project had been descoped, and expressed concern with the results. She added that the Eungai P&C have not received a satisfactory answer or detailed costings from the NSW Department of Education and Training.[61]

3.75      Questions over value for money were intensified when a parent from the school, who is a qualified civil engineer, provided an estimate for the building of just under $390,000, including a $100,000 contingency fund. Mrs Hall pointed to the Rawlinsons Construction Handbook[62] which suggests a building of this nature should cost approximately $1400 per square metre, compared with the apparent government costings of approximately $4500 per square metre which is more than three times the cost set out in the construction handbook.[63] The committee heard that Mrs Hall believes the school had the expertise to manage the project themselves.[64] She stressed that there are no special site requirements to be taken into consideration:

In our opinion, we did not receive value for money. Every time I walk past and look at the double classroom, which is one building with two classrooms, I cannot for the life of me see how that could possibly come in at $900,000. There is no way I can stretch the figures, massage the figures or do anything with them to make them come in anywhere close to that. There are no special circumstances at our school. There was no asbestos to be removed. It is not a difficult site to build on. The only things removed for that building to be put there were our vegetable garden and our chicken coop.[65]

3.76      The school has now been told that the demountables being replaced will be taken to another school.[66] While acknowledging that the teachers and children are enjoying the new double classrooms, Mrs Hall noted her disappointment with the process[67] and summarised her concerns and wishes for the committee:

As a P&C association from a small school on the mid-North Coast of New South Wales, we are unsure why the costings allocated to our building are so high. Despite many requests, we have been unable to find out exactly where the money has gone.

So what does Eungai Public School P&C seek? We seek recognition that our school has received a negative benefit under this scheme. We further seek to have the balance of funds between those allocated and the true value of the project, an amount in the order of $460,000, returned to our school for the self-managed construction of our school hall.[68]

Case study – Tottenham Central School - NSW

3.77      Perhaps the most blatant case of waste and mismanagement under the P21 program was the construction of the $600,000 'cubby house canteen'[69] constructed at Tottenham Central School.  The committee heard evidence that the new canteen is half the size of the one it replaced and is too small to be used as there is insufficient room to store or prepare food.[70] Mr Richard Bennett, President, Tottenham Central School P&C Association, told the committee that the costings for the 3m by 8m building would equate to about $25,000 per square metre. He stated:

In regard to the canteen that was built at Tottenham Central School, this project has certainly not given the Tottenham Central School community or the taxpayers anything like value for money. It is a deplorable and inexcusable waste of money and the canteen cannot be utilised for its intended purpose.[71]

3.78      Mr Bennett told the committee of his efforts to get answers for the school community:

Mr Dawson is head of the BER program. I tried for three days to ring him. I rang him on the Monday at 10.30 am. His secretary said he would ring me back in an hour’s time. I sat around the phone all day—no phone call. The next morning I rang at 10.00 again and explained what I was ringing about; our canteen had in fact no air-conditioner, it was not vermin proof and it was almost at the sign-off stage. I was also concerned about the size of the canteen because there was no way in the world fridges and freezers et cetera were going to fit in. Mr Dawson never returned my phone calls, so I rang again on the third day. I was told, ‘Mr Dawson is in a meeting; he’ll ring you when he gets back from that meeting.’

In the meantime I rang a couple of newspaper reporters, and said ‘I seem to be coming up against a brick wall. No-one wants to talk to me about this. What’s the go?’ They put the questions to Mr Dawson and then I received a phone call asking, ‘What’s your problem?’ I said, ‘There is no air-conditioning here.’ He asked, ‘Are you in a heat area?’ I said, ‘We get an extra week of holidays where we start school a week later. Of course we’re in a heat area. Every other building in the school has an air-conditioner in it. You have put a canteen up with no air-conditioner and the thing is miles too small and it is not dustproof.’ With that, Angus turned around and said to me, ‘I think we can sort something out there,’ or ‘We should be able to sort something out.’

In the mean time, I have got on to parliamentarians as well—Kevin Humphries and Mark Coulton have both looked at the building. I was contacted through the school to meet at the school on Tuesday, 27 April to speak with Stuart McCreery from the BER program—he is meant to be third under Angus Dawson—and Jim Smith, who is from the department of commerce and go over the actual costing for our canteen. Stuart McCreery actually spoke for about three quarters of an hour on how they justified the fact that they spent $600,000 on our canteen. The whole time I restrained myself to stay in my seat, because steam was coming out my ears and I just could not believe that $600,000 could be spent on a building that was three metres by eight metres. I spoke to Stuart at one stage and said, ‘When would the alarm bells have rung that this was too much money for this project? Would it had to be $800,000 or a million dollars and you would have said this project cannot go ahead?’ Stuart said to me, ‘What do you mean?’ I said, ‘Mate, $600,000 is miles too much money for a project like this in a small school—and this is taxpayers’ money, and I am a taxpayer.’ Stuart’s reply to that was, ‘Well, this is what it has cost’—and he passed me this paper.[72]

3.79      The NSW Department of Education and Training (NSW DET) eventually responded to the media comment on the apparent exorbitant construction cost that the canteen had actually cost $275,000 and that another $272,000 had been spent on items not directly associated with the canteen. The committee notes that this does not align with the budget published on the NSW BER website[73] or with the costings breakdown provided to the school by NSW DET and tabled at the committee’s Sydney hearing, which appeared to committee members to be a generic spreadsheet rather than specific to Tottenham's canteen.[74]

3.80      When asked about the P21 projects at Tottenham Central School, Mr Coutts-Trotter, Director-General, NSW DET, told the committee:

It is about $450,000, I think, for the canteen, $50,000 to solve ponding on the school playground and a further $100,000 to upgrade the main switch and to run electrical cables 150 metres underground. The process to get that work done was competitively tendered. What we have within our arrangements is a lump sum price with the possibility of savings. So in the process we are able to go back to our managing contractors once we have amassed a fair pool of BER projects delivered around the state—both in their region and elsewhere—and we can draw some cost comparisons between similar projects undertaken in different parts of the state to fully test the value for money.[75]

3.81      Responding to Mr Coutts-Trotter's explanation, Mr Bennett said:

This morning, when Michael Coutts-Trotter spoke he said a few things that I did not realise about Tottenham Central School and how they spent $150,000 on a pooling problem. If you look in our submission you can see on the back page where the water is still laying in front of the canteen. There was meant to be a box gutter go across the front but it never happened. There are two shower gutters about so round and three parts the way up the cement on the slope. You can still see the water mark in front of the new canteen. At the bottom of the picture you can see a water mark straight in front of the canteen. If there was $150,000 spent on that, it did not alleviate the problem. It was a waste of money.[76]

Case study – Hastings Public School - NSW

3.82      Mr Grant Heaton, Principal, Hastings Public School Council, told the committee that his school was allocated $3 million and they only received a four-classroom block for that money. He added:

A parent of my school who is a builder and the son of a retired high school principal has examined the plans and estimates, using building industry standards, that the building should not cost any more—and he has very much erred on the side of caution—than between $1.5 million and $2 million. We know we have been left behind when we see local private schools rejoicing in the many changes the BER money has brought while we are left with a restrictive program that does not meet need or allow for flexibility.[77]

3.83      Mr Heaton contrasted what his school could have built for $3 million with the construction achieved by schools in the non-government sector:

I have stated that the principal of St Columba Anglican School in Port Macquarie spoke about: spectacular value for money, two international standard basketball courts, some office areas, a small kitchenette, a mezzanine viewing area, a wait room in the future and possibly one classroom. That is what he got with his $3 million.[78]

3.84      He also gave the following example:

There is a local school two kilometres from us—Tacking Point Public School—and they are getting a six-classroom block for their $3 million. I have requested six classrooms as well and I have been told that, because of my sloping site, I can only look at four classrooms.[79]

3.85      Mr Heaton told the committee of his concerns regarding the funding:

Underneath the feeling of disadvantage lies the notion that a large part of our funding will finish up with contractors and not with the school. In relation to my school’s building costs, no final figure has been quoted but in preparation for my appearance here today I asked the contractors and the IPO for an anticipated quote. The reply I received was to use the estimated construction sum from the initial, smaller two-room project I had been allocated. A school council member of mine, Kylie Sherwood, did her maths and came up with a figure of $6,903.80 per square metre. Twice I have asked why there should be such a difference between this figure and industry standards but have received no answer. State and federal governments in their defence have claimed that the audit performed at my school was an example of the process working. If that is the case, why has the New South Wales education minister consistently refused requests to make that audit public? The aforementioned Mrs Sherwood has also repeatedly asked the minister whether any money was given to Reed Construction for the cancellation of our proposed COLA. But again there has been no satisfactory answer to this question. I have no doubt the highlighted inequalities in this whole program would not have been as marked if public school principals had self-managed their projects, but we were actively discouraged from doing so...[80]

3.86      After some discussion about the guidelines allowing for schools to receive less than their notional allocation, Mr Heaton advised the committee that he has never been told that the school would get less than the notional allocation and he expects $3 million in funding will be spent at his school.[81]

3.87      Based on the evidence that it has received, the committee majority questions how an audit undertaken by NSW DET concluded that it was 'not convinced' about the issue of value for money and found nothing untoward about this contract for Hastings Public School. This project was only changed due to the campaigning undertaken by the school community; otherwise $954,000 would have been spent on a COLA which experts say should not have cost any more than about $200,000.[82]

Case study – Stuarts Point Public School

3.88      Miss Karina Daniels, President, Stuarts Point Public School P&C Association, expressed concern over lack of value for money for the school's P21 project. The school was advised it would receive funding of $850,000 and initially applied for a hall; the second priority was a multifunction teaching area. Both of these applications were dismissed and the school was told it was getting a library. Miss Daniels told the committee that the school already had a library which was over 100 years old but perfectly functional. The school community was 'up in arms' at this and managed to save the library building.  Had they not saved the library 'our school would have been worse off through this project. We would have lost a whole room'.[83]

3.89      Miss Daniels told the committee that the P&C asked for a cost breakdown and attempted to ascertain what projects of this type would cost to construct outside the BER/P21 program. She reported that the modular building cost $340,000 but an additional $141,000 was needed for items you would expect to be included in the cost of a building, such as painting, guttering and door frames.[84] Miss Daniels told the committee that parents are outraged as the cost of the building would purchase three homes in the local community.[85]

3.90      The committee heard that the community felt helpless and frustrated by their failure to get answers to their questions:

The way the BER has been set up, it is very difficult to get complete answers. We queried particular line items in the costing that I referred to that we got in February, particularly some that were not even applicable to our building. There was an item for $50,000 for a network substation allowance. We checked that with our local electricity supplier, and they said that was never used and prepared us a report at a cost of $120.

When we took that to the BER project manager, we were told that the costings that had been put up on the BER website as an individual school’s costings are not actually individual to that school. In our case, our school had been lumped together with somewhere between 20 and 30 other schools—we have not been able to find out how many—and then the costs averaged out. To this point, we have been trying for four months to find out exactly what our building cost and where the money has gone, but it has been impossible.[86]

Committee view

3.91      The committee majority notes with significant concern that the risk that a school would pay too much for projects was an identified risk of the P21 program. This is illustrated in an extract from the Queensland government procurement plan provided to the committee by Mr Craig Mayne which states:

Failure to deliver value for money

In the drive to meet the tight timeframes for delivery and expenditure there is a heightened risk that the State may pay too much for what are relatively simple buildings.

In particular, there is a concern that excessive fees and charges will significantly reduce the amount of building delivered for the fixed budget.

Likelihood – high

Consequence – medium.[87]

3.92      The committee majority's view is that t complaints from school principals in relation to their satisfaction that their school has achieved value for money under the P21 program is not an accurate measure of the success of the program.

3.93      The evidence indicates that not only were principals dissuaded from publicly complaining about the BER process, but even where there is a failure to receive value for money, the school community does not complain as 'something is better than nothing'.

Project costings

Lack of transparency

3.94      The committee heard evidence of a lack of transparency with costings, including difficulty for schools in accessing costings and the questionable accuracy of these costings.

3.95      Evidence was received that access to costings for government school projects was significantly more difficult than for the non-government sector. The committee was disturbed by evidence given by Mr Michael Doolan, School Council President, Swan Hill North Primary School, of the treatment he received when he sought access to costings from the project manager. He was told:

That we do not need to see the costings. He said that it is, basically, none of our business. He said there is too much information going out there for us to know what the costings of the buildings were. We did not need to know what the costings of the buildings were—we were getting a building, so that should be good enough for us.[88]

3.96      When asked how he responded to this, Mr Doolan told the committee:

Well, we did not know where to go. Our response to that was the letter we sent to Julia Gillard. We still have not had any satisfying response since then. I have asked him, personally, what the costs were going to be and all the rest of it. I said to him that it was just a rort, where all the money was going. His response was just: ‘This is what happens’.[89]

3.97      The evidence provided to the committee illustrates that lack of information involving costings has led to school communities feeling disempowered and frustrated. This was confirmed by APPA, which told the committee of the results of a survey of school principals where access to costings was identified as a key issue:

Where there were negative responses, there were particular issues. One was that the access to costings for the government sector was quite significantly lower than the other two sectors. That may have been—and I conjecture on these—from one of two things. Either there was a value for money issue in reality or there was a perception of that because they did not have access to the costings. One is not to judge whether they were just feeling disempowered in terms of those costings and making assumptions about whether they were getting value for money or not.[90]

3.98      The committee heard evidence from numerous schools which had been trying to access detailed costings to enable them to check their concerns about value for money.[91]

3.99      The committee notes that some information regarding P21 projects in each state and territory is available from the BER websites provided by the state education authorities.[92] Generally, however, these sites offer little detailed information regarding project costs. The committee also notes that in September 2009 the NSW Minister for Education and Training announced that NSW had established a dedicated website to provide project costs.[93]

3.100         Whilst the NSW government has made efforts to publish the costings of its projects the committee notes that the information that has been published refers only to cost estimates rather than a detailed cost breakdown of each project.

3.101         It is uncertain whether other states will follow the NSW government in publishing a breakdown of costs on all BER projects.

3.102         The Victorian government has been criticised for not revealing costs on BER projects. The Victorian government has however stated that it will release financial details of BER projects once the tender process is complete.[94]

3.103         Western Australia's Executive Director of infrastructure in the state's education department was quoted in media reports as 'not seeing the public interest in' that course of action but he noted that details of tenders were available from the Tenders WA website.[95]

3.104         Queensland's Education Minister recommended that the state education department have an 'open mind' regarding the issue of publishing breakdowns of all costs on BER projects.[96]

3.105         Ms Leonie Trimper, President, APPA and a member of the expert advisory panel of the BER taskforce, called for the states to provide a breakdown on individual project costs to schools and the community in order to be able to follow the money.[97]

3.106         In relation to committee requests for costings a response was received from the NSW Department of Education and Training. The committee was advised that:

At an early stage in the program a sheet of indicative costs was distributed by the department. These costs were rough cost estimates for the superstructures of buildings only. They did not include appropriate allowances for design, site investigation, planning, heritage, ecology, bushfire protection, engineering, connection to utilities, foundations, footings, furnishings, commissioning, and other items required to provide schools with buildings that are safe, durable and ready for occupation. Further, they did not include estimates of program or project management expenses...

Costs for structures delivered under BER, as well as under other major capital works schemes, can vary greatly depending on the nature of the scope of works, specific site considerations, location, and a variety of other factors, and it is not possible to identify a particular 'cost' for such structures.[98]

3.107         DEEWR told the committee that project costings are held by the 22 education authorities. However, it admitted to the committee that it holds the original application and the month by month data on how the project is progressing, including updated expenditure. The committee heard that DEEWR does not have the detailed project plans that contain cost per square metre but it receives information on the actual project costs as projects come to completion.[99] At the committee hearing in Canberra, Coalition senators requested DEEWR to release this data.[100]

Questionable costings

3.108         Questions over accuracy of costings were also demonstrated by Mr Craig Mayne, a former civil engineering draftsman, who in his evidence to the committee presented an analysis of the BER program in NSW.  Mr Mayne explained that costings are required to use what the government deems to be the 'benchmark price'. However, he has found that in NSW and also in Queensland the benchmark price is 'greatly inflated above what you would expect in a normal commercial environment'.[101]

3.109         Mr Mayne also called into question some of the reasons provided by the NSW government for the extra costs incurred in P21 projects, for example termite proofing. Mr Mayne explained to the committee that 'the cost of putting Termimesh under a concrete slab in any building is roughly between $23 and $34 per square metre. If you add those figures across the per square metre rates currently being paid by the New South Wales government, it adds 0.64 of a per cent to the overall cost'.[102]

3.110         Another example of questionable costings and lack of transparency was provided by Mr Richard Bennett, President, Tottenham Central School P&C Association. He had asked for and received the construction costs of the canteen project and provided this to the committee. On closer inspection, however, it appears to be a generic spreadsheet and not specifically for the canteen.[103]

Rawlinsons - rejection of BER costs

3.111         In the absence of detailed costings for individual projects, witnesses with knowledge of and experience in the construction industry pointed the committee to Rawlinsons Australian Construction Handbook (Rawlinsons). This was referred to as 'the bible in Australia of construction costs' and is 'accepted in the courts of the land as being the authoritative text'.[104]

3.112         The committee heard that Rawlinsons was used in the non-government sector to estimate costs.[105] Rawlinsons sets out that a school building should cost approximately $1300 per square metre.[106] However, evidence given to the committee indicates that P21 buildings for government schools are apparently costing as much as $4500 per square metre and more.[107]

3.113         The committee majority notes with concern that Rawlinsons has stated that it will exclude the 'insane' cost of school buildings under the BER program from its cost calculations 'because they would distort its data'.[108]

Committee view

3.114         The committee majority notes that BGAs were happy to provide costings to the committee.[109] Catholic Capital Grants (Victoria) provided the committee with indicative or expected costs per square metre which range from $2221 for a multi-purpose hall to $3060 for a library. These are all-up costs which include building costs, all professional fees, charges, loose furniture and equipment, and external works. Importantly, the pre-P21 costs were also provided and do not differ significantly from the P21 costings.[110] 

3.115         The committee majority notes the contrast between the costs in the Catholic and independent school sectors and the substantially higher costs reported in the media for similar P21 buildings across the government school sector.

3.116         The committee majority is concerned that the lack of ability to accurately identify costs in the government system is likely to be indicative of systemic problems that go beyond, and predate, the P21 program.

Recommendation 3

3.117         The committee majority recommends that the government immediately require all state and territory education authorities and Block Grant Authorities to publish breakdowns of all individual P21 project costs.

Recommendation 4

3.118         The committee majority recommends that DEEWR release original applications and project costs as P21 projects are completed, together with an explanation regarding any contract cost variations.

Project fees

3.119         In addition to a lack of transparency relating to costings, the visibility of P21 project fees was questioned, including the amounts being paid.[111] Mr Craig Mayne told the committee of the fundamentally flawed process in Queensland which he believes is open to massive rorting.[112] He asserted that in Queensland a fee of six per cent was negotiated by the Master Builders Association (MBA) for the managing contractors, when the industry standard for their role would be around two per cent. However, he acknowledged that DEEWR deemed that a four per cent ceiling would be appropriate. He advised the committee that the CEO of the MBA is 'on the record as saying, 'if they were willing to accept six, why would we go for four?'[113]

3.120         When asked about the engagement of managing contractors in Queensland, Mr Paul Krautz, Department of Public Works, Queensland, responded:

Mr Krautz—When we went out to the construction managers as part of that package we, through the Department of Public Works, had nominated a fee of six per cent for the construction managers to perform the role of the project manager to do the cost planning, to do the program management and to actually manage the tendering et cetera of the projects through these smaller contractors. We nominated that fee based on our industry knowledge and also on the historical knowledge we had of competitive tendering in the past.

Senator BACK—How would that six per cent stack up in the commercial-industrial world in Australia?

Mr Krautz—That fee would stand up quite well in any construction field.[114]

3.121         Mr Craig Mayne also alleged that in Queensland money was allocated to builders without a tender process.[115] When asked about this, the Department of Public Works responded:

Mr Krautz—We went out with an expression of interest to the PQC level 1 contractors, who were those larger contractors. There were 12 PQC level 1 contractors that we went to with expressions of interest, and we had some non-price criteria in there upon which to assess their submissions to us. After that process of assessing those submissions, eight construction managers were appointed, generally all over Queensland, to deliver the distributed work over Queensland.[116]

3.122         The committee majority notes that it has now written to P21 managing contractors and builders seeking submissions on matters such as tendering processes and project management costs. These matters will be addressed further in the committee’s final report.

3.123         Mr Mayne gave evidence to the committee that, based on his research, for states using the managing contractor model he would expect that buildings could be built 'for close to 50 per cent of the allocated funding'.[117] He told the committee of his experience where he attended a 'pre-meeting' with a managing contractor. He asserted that at this ‘pre-meeting’ point the money had been allocated and the conversation was as follows:

At the pre-meeting stage the money had been allocated, yes. In essence, the conversation is: ‘School A has been allocated $3 million. The school by default has to build a library—go do it.’ My experience of many, many years in the construction industry is that that is a recipe for rorting and price gouging. I assure you that in the majority of cases the cost of that building will be the allocated funds.[118]

3.124         Mr Mayne also drew the committee's attention to a 1.3 per cent Integrated Planning Office (IPO) fee in NSW which is a fee levied on each project to cover the costs of the IPO.[119] Mr Mayne recommended greater autonomy for principals and P&Cs to achieve better value for money from the projects.[120]

3.125         Mr Mayne also gave evidence that he forwarded a list of potential problems to the government soon after the BER program was announced, following his experiences as project-manager of construction work at his school which was not funded under the BER program.[121] Mr Mayne told the committee that he had first raised his concerns in February 2009 with the Prime Minister's office, as the Hon Kevin Rudd MP is Mr Mayne's local member. Since February 2009, he has met and written to numerous federal and state politicians as well as federal and state bureaucrats.[122]

3.126         The Queensland Department of Education and Training told the committee that the 1.5 per cent administration fee provided to all education authorities to administer the program had been split between the Queensland Department of Education and Training and the Queensland Department of Public Works.[123] However, it is not clear to the committee majority what work was undertaken by the Queensland Department of Public Works for that fee.

3.127         In its written submission to the committee, the Queensland government acknowledged the confusion regarding project management costs, noting that this had led to 'some adverse media coverage'. The Queensland government cited a range of methods that it had used to convey accurate information regarding limits for project management fees. These methods included drafting fact sheets and producing web pages 'to ensure that stakeholders understand this issue'.[124]

3.128         The Queensland government also stated that the confusion had arisen partly because project management costs were being confused with other professional costs such as architect fees.[125]

3.129         DEEWR agreed with this argument and informed the committee that:

...claims that education authorities have applied project management fees in excess of four per cent, which is the cap, have not been substantiated. Our analysis has shown that reported cases of high project management fees have generally resulted from the inclusion of items which are not regarded as project management, such as architects' fees or site fees, which should actually be classified as project costs and not project management fees.[126]

3.130         Questions were also raised with the committee over NSW managing contractors being paid performance incentives ranging from one to three and a quarter per cent of each school's funding allocation.[127] Mr Coutts-Trotter, Director-General, NSW Department of Education and Training, told the committee about the process in NSW where projects are delivered by:

...the top end of the Australian construction industry precisely because if we tried to do it the way we ordinarily do it, it takes us four years from go to whoa. It is a different process. It is a good process, designed against different objectives, but the point I was making at the outset is that we decided not to do it ourselves for precisely that reason. We knew that the money had to be put out, the jobs had to be created, the apprentices had to be engaged, the quality had to be assured, the safety had to be provided, and we formed the view that we needed to take a different option other than the way we ordinarily do things.[128]

3.131         Mr Coutts-Trotter advised that the premium for using managing contractors will be in the region of two or three per cent on ordinary costs.[129] When speaking about the project management component of four per cent, Mr Coutts-Trotter informed the committee that it has been split 2.7 per cent with the managing contractor and 1.3 per cent with the regional delivery units which manage the contract with the managing contractor at the regional level.[130]

3.132         The committee was informed of efforts undertaken by the NSW BER Program Office to check the project costs compiled by the managing contractors in NSW. The office compared state-wide costs of similar projects with as costs across various regions to ensure that costs were not inflated. During construction, the office set benchmark costs based upon market rates and compared these with the final construction costs for projects. On the basis of these calculations, the state government pays the lesser of either the final actual cost or no more than 105 per cent of benchmark costs on any project. The NSW government noted that this process 'acts as a real incentive for Managing Contractors to keep costs down'.[131]

3.133         The committee notes that the NSW government was aware as early as April 2009 of concerns from some principals regarding the high estimated costs used by the NSW BER program office.[132] Similarly, the Commonwealth government and Queensland government were informed at a very early stage of the P21 program of the potential for mismanagement, inflated quotes and lack of value for money.

3.134         The committee received a number of other complaints regarding high project management fees. The Jindera Public School Parents and Citizens Association gave evidence that its budget of $2 million was 'quickly exhausted' by project management fees and the choice of a template design.[133]

3.135         Coogee Public School Parents' and Citizens' Association complained that management costs on P21 projects were too high and did not reflect current industry standards:

The proposed proportion of the funding allocated to management fees is excessive...the proportion of the P21 budget allocated to management fees suggests that budget allocations direct to school communities could have been a more cost effective way of maximizing the funding outcomes. Local communities have a vested interest in gaining the most for each dollar spent. Management fees (projected 25% of budget) are in excess of current industry practice.[134]

3.136         The Western Australian Council of State School Organisations indicated there was significant confusion regarding project management fees and administration costs. The council complained that substantial variation was found across projects in the limits cited for these costs.

[We] have been constantly confused by different expectations of project management/administration costs. Figures given have ranged from 1.5% to 15 %. For future projects a clear statement by the project commissioners is required so as to provide school communities with a transparent and accountable process.[135]

3.137         The BER Guidelines clearly set out that administrative funding is set at 1.5 per cent for the additional funding to cover administrative costs related to the states responsibilities of implementing the program.[136]

3.138         The BER guidelines however, are not clear on the limits for project management fees. The cap for project management fees is not included in the guidelines.

3.139         DEEWR informed the various education authorities via email of the 'industry standard' of four per cent for project management costs in March 2009. As set out in the National Co-ordinator's Implementation Report, a cap of four per cent on project management fees was included in the criteria used by DEEWR to assess funding applications from individual schools. The following information was also included in the National Co-ordinator's Implementation Report (released in October 2009):

The question of an appropriate budget for management of school projects by on-site project managers was discussed by the BER Coordinators Group on 17 March 2009. Following a detailed discussion, DEEWR provided email advice that the industry standard for project management fees was four percent, although it could be expected to vary according to the size of a project.

This advice was obtained by DEEWR from the Commonwealth Department of Infrastructure, Transport, Regional Development and Local Government on 11 March 2009 and was promptly conveyed to education authorities. DEEWR advised that four percent was the maximum percentage of BER funding that could be allocated for on-site project management in funding proposals. Many proposals bid for less than this, and other proposals did not include a project management funding bid at all.[137]  

Conclusion

3.140         The litany of complaints concerning waste and mismanagement and lack of access to costings confirms to the committee majority that further investigation of the P21 program and its consequent outcomes is required.

3.141         The numerous examples provided to the committee demonstrate for the committee majority that value for money is not being achieved for P21 projects in the government system where managing contractors are being used.

3.142         The committee majority considers that these are not isolated examples and represent systemic failure in the management of P21 projects in the government system. The Tottenham Central School's unusable canteen is a prime example of this systemic failure.

3.143         The issues raised with the committee regarding fees paid to managing contractors require further investigation by the committee. The committee has been unable to fully investigate the fees paid to managing contractors due to a lack of relevant evidence to date. The committee has not received submissions from any managing contractors and will pursue this area in its next report.

3.144         The committee majority's concerns about the current oversight and accountability mechanisms relating to value for money are discussed in the final chapter of this interim report.

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