Government senators' dissenting report

This is very clearly the best thing that has ever happened for primary education in Australia. It will deliver facilities for primary school children that will enable them to learn the skills and knowledge that they will need for their future throughout the 21^st century. For many school communities, this has literally been a dream come true.[1]

Overview

It is disappointing to see the Coalition refuse to acknowledge in any way the evidence showing the success of and support for the Primary Schools for the 21^st Century (P21) program. Coalition senators have used a relatively small number of examples in an attempt to discredit this successful and welcome initiative. Submissions and evidence to the committee show a high level of support for the new facilities being provided under the program. It is transforming schools.

A program of this scale and complexity has not been undertaken previously. The objectives were to provide economic stimulus and to build 21^st century learning environments. With the necessarily tight timetable to provide stimulus to the economy and local communities, the government acknowledged and anticipated that there would be some issues to resolve. For this reason flexibility was built into the program and mechanisms were put in place at the state and Commonwealth levels which have since been used to respond to and resolve issues.

The program guidelines have been revised where necessary to address issues which have arisen during implementation. This is a program which has robust oversight and audit measures in place, and the Minister for Education has acknowledged that, if further steps became necessary to address concerns, they will be taken.[2] Government senators note that action has already been taken in relation to public concerns regarding achieving value for money. To add another level of assurance to the program, on 12 April 2010, the Minister announced that a taskforce would be established[3] to ensure:

...maximum value for money and...that any allegations of waste are investigated fully. The results of investigations to date do not lead the Commonwealth to believe there are widespread practices of over quoting, over charging or fraudulent or corrupt behaviour but with an investment of this scale and as custodians of the public purse the Government believes the establishment of the Taskforce is a prudent step. This will be a further strengthening of what is already a heavily audited program with an ongoing Auditor General’s inquiry under way. Setting up the BER Implementation Taskforce is additional insurance for the Australian taxpayer.[4]

Government senators note that a particular focus of the taskforce will be the way the scheme was implemented by state governments on behalf of public schools, as the concerns regarding value for money were predominantly from this sector. The validity of this focus has been confirmed by a recent survey conducted by the Australian Primary Principals Association (APPA) which found:

...given the breakdown of the results, it was clear that difficulties with the program delivery at the State level lay predominantly with the State education departments, and not with individual schools, or with the federal Government.[5]

Government senators appreciate the concerns expressed over value for money and welcome the work being undertaken by the taskforce to further strengthen the P21 program and improve delivery and outcomes.

The Coalition has focused in its interim report on a small number of issues which have received disproportionate attention. Government senators note that the number of complaints received about implementation of P21 projects amount to a very small proportion of the total number of projects being funded. As at May 2010 there had been 61 complaints to DEEWR and around 30 to state education authorities.[6] For     24,000 projects,[7] this amounts to less than one per cent.

Government senators also note that Coalition senators have ignored the principals, teachers and parents who are delighted with their P21 project. APPA's survey found that the overwhelming majority of schools (97 per cent) reported that their students would benefit from the program. The survey revealed that:

...primary schools are enormously grateful to receive such a significant boost because many have not, to this point, been able to raise sufficient capital from community or governmental sources to substantially extend their facilities for learning. Rural and small schools report significant approval of the funding stream enabling projects formerly beyond their reach. This program has turned that on its head.[8]

Government senators note that 98 per cent of projects have now commenced, 68 per cent have commenced construction, 894 have been completed and over 9, 000 are underway.[9]

While the Senate committee inquiry was taking place, the Australian National Audit Office (ANAO) undertook a performance audit of the P21 element of the government's Building the Education Revolution (BER) program. The audit objective was to examine the effectiveness of the Department of Education, Employment and Workplace Relation's (DEEWR) establishment of the P21 element of BER.[10]

The Minister welcomed the audit, tabled on 5 May 2010,[11] which recognised the suitability of school investments for providing immediate stimulus to the economy. The audit also acknowledged the considerable challenge for DEEWR, the state education authorities and Block Grant Authorities (BGAs)[12] to deliver the projects in the compressed timeframes necessary to ensure timely spending of the stimulus. The ANAO audit has also confirmed the strong support for the program in the school community. The ANAO conducted a survey which found that more than 95 per cent of school principals saw the program as providing 'ongoing value to their school and school community'.[13] Government senators note that the ANAO made no recommendations to DEEWR regarding its administration of the program.

While acknowledging that some implementation issues have arisen, Ms Leonie Trimper, President of APPA, told the committee of the need for greater balance in reporting on the program:

I would like to conclude by saying that we are not being inundated with bad news stories and our members are very good at doing that when they feel cross and grumpy. On the contrary, our three national presidents of government, Catholic and independent schools are also not being inundated so there are some good news stories....[14]

This dissenting report redresses the imbalances in the committee majority report and presents the facts on the success of the P21 program. It outlines the objectives of the program and its effects; steps through the administrative processes; and addresses particular issues raised during the committee's inquiry.

Objectives of the Building the Education Revolution (BER) program

BER is the largest component of the government’s $42 billion Nation Building and Jobs Plan announced on 3 February 2009 which aims to support jobs, stimulate local economies and invest in important infrastructure for the long-term. BER represents an investment of more than one per cent of gross domestic product (GDP) and is the biggest school capital infrastructure program in Australia’s history. The objectives of the program were agreed by first ministers and are expressed in the Council of Australian Government's (COAG) National Partnership Agreement on the Nation Building and Jobs Plan. This contains the program's two main objectives: the first is to provide economic stimulus through the rapid construction and refurbishment of school infrastructure; and the second is to build learning environments to help children, families and communities participate in activities that will support achievement, develop learning potential and bring communities together.[15]

While both objectives of the program will be met, government senators emphasise that the primary objective of the BER was as an economic stimulus package. This was recognised by submitters such as the National Catholic Education Commission (NCEC):

P21 has more than amply fulfilled its purpose. It has been a powerful economic and employment stimulus in local communities at the onset of the global economic crisis.[16]

Positive effect on the economy and employment

The positive effect of the economic stimulus package on the economy is well documented. When releasing the 2009-10 Mid-Year Economic and Fiscal Outlook (MYEFO), the Treasurer advised:

If not for the direct impact of the fiscal stimulus, Australia would have experienced a technical recession and the economy would have gone without growth for two consecutive years, in both 2008-09 and 2009-10.[17]

Treasury reported that the stimulus plan has had a significant effect on the economy. In October 2009, Dr Ken Henry, Secretary, Treasury, advised the Senate Economics References Committee of the following results:

At budget we estimated the stimulus would add a further 1.6 per cent to GDP growth in the present year, 2009-10, and that the stimulus would then unwind and its impact on the economy would unwind as a recovery in private sector activity took hold. Higher gross domestic product associated with the stimulus was estimated at the time of the budget to support around 210,000 jobs and to reduce the peak unemployment rate by 1 ½ percentage points...Without this stimulus, we estimate that the economy would have contracted not only in the December quarter of 2008 but also in the March and June Quarters of this year....[18]

During its inquiry into the government's economic stimulus initiatives, Dr Henry told the Economics References Committee that without the stimulus package the economy would have contracted by 1.3 per cent through the year to the June quarter 2009 and added 'I think a contraction in the economy of 1.3 per cent through the year would be regarded by most people as a fairly significant recession'.[19]

Mr Glenn Stevens, Governor of the Reserve Bank of Australia, told the Economics References Committee of the factors which contributed to Australia's strong performance during the global financial crisis, including the stimulus package, and concluded:

A straightforward reading of the economic outcomes would, I think, suggest that the various policy measures have been effective in supporting demand. In due course both fiscal and monetary support will need to be unwound as private demand increases. In the case of the fiscal measures, this was built into their design...[20]

The positive effect of the stimulus spending was again confirmed at Senate estimates hearings in February 2010, where Treasury officials reported:

...One of the things that has occurred—we drew attention to it in the MYEFO—was that both business and consumer confidence bounced back much more strongly than it did in other OECD countries, and much more strongly than we had anticipated that it would. Our interpretation—and I think it is the interpretation of most commentators—is that the macroeconomic stimulus, both fiscal and monetary policy, was sufficiently quick and sufficiently big that it convinced the community that things were not going to turn out that badly. That was extremely important because it meant that businesses went on with their normal activities. They did not hunker down and cut staff; they found ways to cut hours rather than cutting staff.[21]

Treasury emphasised that it was critical to get the spending into the economy as quickly as possible. Regarding the amount, Treasury stated 'you would have needed to have spent something similar to have had a similar effect'.[22]

The positive effective has continued to be proven over time. ABS data released in June 2010 showed that the economy grew by 0.5 per cent in the March quarter, a result helped substantially by an 11.6 per cent increase in government investment. It is clear that the stimulus measures are responsible for the growth in the economy.[23]

In its audit report the ANAO confirmed that the BER program is supporting the economy and employment:

There are some positive early indicators that the program is making progress toward achieving its intended outcomes. Lead economic indicators, including construction approvals, show that the introduction of BER P21 contributed to a reversal in the decline in non‐residential construction activity that resulted from the global financial crisis. Education industry stakeholders, including peak bodies, Education Authorities and a substantial majority of school principals have also been positive about the improvement in primary school facilities that will result from the program.[24]

Support for the construction industry

BER has materially supported the non-residential construction sector. ABS data showed a 2.2 per cent increase in total construction and 6.9 per cent annually to September 2009, seasonally adjusted.[25] Research from Macromonitor noted the rebound in the non-residential sector and the Director, Mr Nigel Hatcher, emphasised the importance of the stimulus funding for the rebound: '...this rebound has been almost entirely due to the boost to education building coming from the Commonwealth stimulus package.' Importantly, he noted that the 'spending will play an important role in driving the upturn during 2010'. He added that 'This is the first time that a program of Government building work has been of adequate magnitude to offset a major downturn in commercial building in Australia'.[26]

The effects on the non-residential construction sector were reported to the committee by DEEWR:

Over the year to May 2009, before the BER effects started boosting building approvals and while the global recession was adversely affecting the Australian economy, the total value of building approvals fell by almost 40 per cent in seasonally adjusted terms. This could have had a large adverse impact on total employment given that almost a million Australians work in the building and construction industry. Without a pipeline of approved projects, many of these workers would not have a job. BER has triggered a massive increase in the number of non-residential building approvals in the education sector. Over the year to May 2009 the average monthly value of non-residential building approvals in the education sector was around 330,000. Over the next four months, the BER alone added $1.9 billion per month on average to the value of non-residential building approvals and restored the total value of building approvals to around the level it was before the effects of the global recession hit the Australian economy.[27]

On 3 March 2010 the National Accounts for December quarter 2009 were released and showed a 0.9 per cent growth in GDP in the three months to the end of December. Regarding the performance of the construction sector, the Treasurer commented:

Despite the overall improvement in the investment climate, non-residential building investment continued to fall in the quarter, the fifth straight quarterly decline, and is now more than 20 per cent lower through the year. This outcome would have been even worse if it were not for the impact of the Government's Building the Education Revolution program in non-government schools.[28]

In May 2010, Ms Lisa Paul, Secretary, DEEWR, provided an update to the committee:

Based on ABS data DEEWR calculates that the BER now represents 31.3 per cent of the total value of non-residential building approvals in seasonally adjusted terms over the year to March 2010.[29]

The positive effect on the non-residential construction sector was acknowledged by the ANAO and can be seen in the figure below.[30]

Views of state/territory governments

The South Australian government supported the government's initiatives to mitigate the effects of the global financial crisis and reported that P21 has:

...played a crucial role in providing work to the construction sector in South Australia at a time of declining private sector building activity. It has provided positive flow on benefits for associated supply chains, assisted in stabilising employment, and is building community capacity across the State. It will also provide benefits to students and the education system for many years to come through the provision of social infrastructure that supports better learning outcomes.[31]

These views were reinforced by the Queensland government, which stated that the BER program:

...is a significant and welcomed investment by the Australian Government in Queensland state school infrastructure. There is much evidence that the building industry has been revived, jobs have been sustained in the building and construction industries and local economies stimulated by this program.[32]

The Queensland government advised that the construction industry in that state confirmed that the timing and amount of P21 work reduced the effect of the economic downturn and helped avoid potential job losses.[33]

Similarly, the Northern Territory government indicated that:

At this early stage, it would appear that the aims of the program to provide economic stimulus through the rapid construction and refurbishment of school infrastructure and build learning environments to help children, families and communities participate in activities that will support achievement and develop learning potential has been well received and successful.[34]

Employment

DEEWR advised that jobs are being measured at the level of the entire economic stimulus plan.[35] DEEWR spoke to the committee about the effect the program has had at the local level on the retention of jobs and flow-on effects to other sectors:

It is not just about construction jobs that are being supported, however. It is known that there are flow-on effects to other sectors such as suppliers of products, the legal industry and the service industry. History shows that it is indeed our young people, and training opportunities for these people, that are most affected in economic downturns. For this reason the funding agreements with education authorities require that schools use their best endeavours to give priority in contracting and tendering arrangements to businesses that have demonstrated commitment to adding or retaining trainees or apprentices.[36]

The Catholic Education Office of Western Australia also stressed the need to recognise that the employment being generated by the BER initiative does not simply affect builders and labourers:

Other employment sectors such as Planners, Quantity Surveyors, Architects, Electrical Engineers, Hydraulic Consultants and clerical staff have also played important roles in the preparation and planning of these projects and consequently, the need for people in these sectors has created new employment.[37]

The South Australian government estimated that there will be over 5,200 new full-time equivalent positions created from government school projects over one year. When jobs indirectly linked to P21 are included through production and supply chains, this figure rises to 21,000 new full-time equivalent positions.[38] The 142 building contractors and their main sub-contractors in South Australia were asked to report on employment outcomes as a result of the additional BER work. Preliminary results indicated that 883 additional people have been employed as a result of the additional work. Of the 883, 31 per cent are apprentices/trainees and approximately eight per cent are indigenous.[39]

The New South Wales government also welcomed the employment opportunities afforded to local employees and reported:

This is having a real impact on local employment with hundreds of employment opportunities being created, small builders no longer needing to put people off and a renewed focus on apprenticeships and Aboriginal employment.[40]

Similarly, the Victorian Department of Education and Early Childhood Development reported that the P21 projects will generate over 7,000 jobs during the life of the program.[41]

The Australian Capital Territory government agreed with the positive effect on employment. It advised that seven construction contractors were engaged to manage the delivery of 68 projects. Six of these are medium-sized companies operating in the ACT and one is a national building contractor. It estimated that the 68 projects will continuously support an average of 915 on-site workers each day, including 179 apprentices.[42]

Questions were raised about the collection of jobs data at the project level. DEEWR confirmed this information serves a different purpose from that collected by Treasury and is to provide an estimate of the number of jobs supported by each project at the local level. DEEWR explained to the ANAO that it is useful for schools and communities to be able to quantify the effect of each project on the local labour market.[43]

Apprenticeships

The stimulus package had a 10 per cent target of contract labour hours for apprentices.[44] The NSW Government noted a renewed focus on apprenticeships and on Aboriginal apprenticeships as a result of the stimulus.[45] The South Australian government provided the following examples of apprentices being hired after firms receiving additional BER work:

• WCK Pty Ltd in Port Lincoln hired an additional eight staff, six of whom were apprentices;
• Kennett Pty Ltd in Mount Gambier hired an additional seven staff, two of whom were apprentices/trainees;
• Taipan Constructions Pty Ltd in Adelaide employed two additional staff, one of whom is an apprentice.[46]

Comment

Government senators note that the stimulus measures had a real effect on local communities and employment well before any construction commenced. Companies in the construction sector, for example, could anticipate work and were therefore able to retain staff. This was acknowledged by the ANAO in evidence to the committee.[47]

Withdrawal of the stimulus measures

The committee was cautioned against any sudden reduction in P21 funding. The South Australian government advised that any reduction in P21 funding from the announced levels would have a dramatic and far-reaching effect on the building industry in South Australia. It also mentioned fairness as an important consideration and argued that if commitments were reduced that would result in some schools missing out on new facilities and disadvantage some students.[48]

The Independent Education Union of Australia supported the program and expressed concern that the inquiry may have been initiated 'in an attempt to roll back school building programs or retrospectively vary the terms on which schools were able to participate in the program'.[49] The Chair of the New South Wales Catholic Block Grant Authority, Bishop Anthony Fisher, told the committee that 'it is essential that the program now run through to its conclusion and building and cash flow schedules be kept intact'.[50] The Australian Education Union also asked that there be no reduction in funding and noted concern that the Leader of the Opposition was not prepared to give absolute assurance that the funding commitment would continue.[51]

The planned withdrawal of the stimulus is outlined in the 2009-10 MYEFO, which advised:

By design, the fiscal stimulus will be withdrawn in line with the gathering pace of the private sector recovery. Some aspects of the stimulus have been recalibrated to allow flexibility in managing the demand for individual programs and to ensure an appropriate level of support is provided to the economy. The gradual withdrawal remains appropriate, with the economy expected to operate below capacity for some time. A gradual withdrawal avoids sudden changes in the profile of government spending that could threaten growth and confidence.[52]

The MYEFO also noted that the gradual withdrawal of stimulus in 2010-11 is expected to result in around a ¾ percentage point detraction from growth. However, a complete withdrawal in 2010-11 'would result in employment being lower by around 100,000 persons in that year and a much sharper detraction from growth'. It advised that a sudden withdrawal of the stimulus would:

detract 2 ½ percentage points from growth in 2010-11. A sudden withdrawal of public sector activity of this magnitude while the recovery in private sector demand is not yet firmly established would have significant costs in terms of lost output and higher employment.[53]

The government explained the planned withdrawal of the stimulus measures:

The fiscal stimulus measures have been designed to ensure they do not affect the sustainability of the budget and are withdrawn as the economy recovers. As indicated in the 2009-10 Mid-Year Economic and Fiscal Outlook, the stimulus peaked in the June quarter of 2009 and the gradual phasing down is expected to subtract from growth through 2010. This means that Australia is withdrawing stimulus one year ahead of the timetable recommended by the IMF for advanced economies.[54]

Master Builders Australia agreed with this approach and advocated that the BER measures should be allowed to run their course as '[t]he Government's well targeted BER stimulus has underpinned what would have otherwise been a certain collapse in commercial building activity across Australia leading to job losses as high as 35,000'.[55] Mr Wilhelm Harnisch, CEO, stated that the program was appropriately designed to phase down over time but to stop it suddenly would have a negative effect on the commercial building industry. He added: 'Master Builders does not agree with calls for the BER to end early and certainly not when the economic and employment benefits are demonstrably clear and in circumstances when the recovery in the building and construction industry and the broader Australian economy remains tentative'.[56]

Comment

Government senators note the current positive outlook for the economy. The investment by the government supported the economy when it was needed and it is being withdrawn as the economy recovers. The Treasurer has reported that the stimulus had most effect on growth in the June quarter 2009 and the effect began to subtract from growth from the March quarter 2010.[57] Government senators note that the gradual withdrawal of the stimulus package was planned and built into the design. This is a sensible approach and avoids sudden changes in the economy which may threaten growth, confidence and employment.

Elements of BER

Education infrastructure is being delivered through three elements of the BER Program. National School Pride provides $1.29 billion for minor capital works and refurbishment projects in all eligible Australian schools. Science and Language Centres for 21st Century Secondary Schools provides $821.8 million for the construction of new (or the refurbishment of existing sites) for science laboratories and language learning centres in secondary schools. The largest element, Primary Schools for the 21st Century (P21), provides $14.1 billion for eligible Australian primary schools to build major new facilities such as libraries and multipurpose halls and to provide upgraded existing facilities.[58] The committee's inquiry is only into the P21 element of BER, and therefore this dissenting report deals only with the P21 element.

Governance of the program

This report will now turn to detail the roles and responsibilities of the various parties to the program, which are outlined in the National Partnership Agreement on the Nation Building and Jobs Plan (NPA).[59] As noted by the ANAO audit report, the delivery of intergovernmental programs has been the subject of recent COAG reforms aimed to enhance accountability and improve collaboration. The ANAO reported that the NPA for BER 'adopted more elaborate oversight and monitoring arrangements than adopted for other national partnerships due to the need to ensure timely implementation in support of stimulus objectives'.[60]

The Office of the Coordinator General responded that:

Our view is that given the extraordinary circumstances and the Commonwealth funding provided to the P21 program ($14.1 billion), it was imperative that the Commonwealth had appropriate monitoring and oversight arrangements in place. The arrangements that COAG outlined in the NPA were deliberate and agreed with jurisdictions. The [ANAO] Report should acknowledge that the NPA was not a ‘business as usual’ agreement.[61]

The response from the Former Commonwealth Coordinator-General to the ANAO findings follows:

...the overall findings of the draft report do not in my view fully reflect the different nature of the NPA agreed by First Ministers and the objectives and implementation arrangements clearly specified within it. The report suggests that overly prescriptive administration of the P21 was at odds with Australian Government objectives. This is not the case. Nor is it at odds with other jurisdictions objectives for the BER program. In my view the program framework and the reporting requirements are consistent with the COAG discussions in February 2009 and agreements reached by first Ministers on the program. The NPA, as signed by COAG, sets out clear stimulus objectives, detailed implementation arrangements and the need for tight project management of key performance indicators. The [ANAO] Report needs to acknowledge the balance sought in reporting requirements in ensuring that these stimulus objectives were being met without unduly imposing additional burdens on the jurisdictions project and program management arrangements.[62]

Government senators note that consistent with the federal financial relations framework, the roles and responsibilities of the Commonwealth and the jurisdictions were clear from the outset. Delivery of agreed projects to agreed milestones is the responsibility of the states and territories and the federal government is responsible for supporting implementation through coordination at the national level.

Role of the Commonwealth

The Commonwealth is responsible for implementation of the national partnership and providing funding to the states and territories as set out in the agreement.[63]

Role of DEEWR

DEEWR detailed its role to the committee:

The Department of Education, Employment and Workplace Relations has entered into bilateral agreements with eight states and territories, and funding agreements with 14 block grant authorities which represent non-government schools. These agreements specify the policy objectives, the conditions of funding and the reporting requirements...[64]

The committee received many positive comments on DEEWR's work. For example, the Catholic Education Office of Western Australia (CEOWA) reported that:

The DEEWR staff who oversee the non-government sector projects in Western Australia are to be commended for the manner in which they have assisted the CEOWA. Responses and outcomes to submissions have been professional, prompt, competent, courteous and helpful. This assistance has been given in an environment when all concerned have been transacting under prescriptive timeframes for this new program that has had deadlines that are challenging.[65]

Similarly, the Independent Schools Council of Australia (ISCA) reported that 'DEEWR were responsive to the issues that emerged during implementation and attempted to provide immediate responses to queries on matters of policy and administration'.[66]

The National Catholic Education Commission noted that DEEWR's management of the program has been of a high standard with 'frequent, proactive and effective email correspondence, tele/videoconferences and face-to-face meetings with BGAs...'.[67]

In addition, the NSW Catholic Block Grant Authority indicated that 'the responsible officers in DEEWR have consulted with stakeholders on a regular basis and responded to suggestions for change'.[68]

The ACT government indicated that it wished to place on record:

...its appreciation of the high level of commitment and professionalism displayed by Commonwealth officials in seeking to implement this significant program in a very short timeframe.[69]

Role of state education authorities

As part of the division of responsibilities, the states and territories agreed to implement the agreement.[70] DEEWR explained this process:

...In relation to Primary Schools for the 21st Century, both government and non-government education authorities are responsible for working with schools and school communities to develop and submit proposals for projects for managing the construction and refurbishment projects that are funded, for monitoring and reporting progress to DEEWR, and financial management and other accountability requirements.[71]

The state education authority has a role in terms of monitoring and reporting to the Commonwealth. DEEWR advised that, even where a school is self-managing its P21 project, the relevant education authority would have an oversight role and be receiving regular reports which are then provided to DEEWR.[72]

The committee received positive reports regarding working with the state education authorities. The Principal of All Saints Grammar, NSW, reported on his experience with the state education authority:

Due to the approach the department has taken in listening to us regarding timing, concerns, requests and additional information, all I can say is that all those we have dealt with have been very helpful and understanding. They have guided us from the start and for that I thank them...[73]

Catholic Education South Australia (CESA) advised that its working relationship with the Office of the Coordinator General (OCG) had been 'exceptional' and 'where problems have arisen with a planning approval, mainly due to objections raised by local communities, the OCG has facilitated discussion and actively worked with all concerned to resolve issues'.[74]

The Catholic Education Commission for the Archdiocese of Canberra and Goulburn reported that 'the ACT Government has been very supportive of the BER program and moved quickly to streamline the planning approval processes through the relevant government agencies for BER projects'.[75]

The NSW Catholic Block Grant Authority reported that the assistance received from the NSW State Government has:

been of particular assistance in fast tracking building approvals through its national building Taskforce. The Taskforce has scheduled regular meetings with the schools sector and assisted in whatever way possible to approve projects, assist with finding builders in remote areas in conjunction with government schools, and the monitoring and scheduling of building supplies. The role of the State Coordinator-General and Taskforce is much appreciated.[76]

Differences in the government and non-government approaches

Government senators note that the funding agreements made it clear that DEEWR's relationship would be with the state and territory education authorities, and with BGAs, rather than with individual schools. This was due both to the timeframes involved and to DEEWR's established relationships with the education authorities responsible for managing these schools.[77]

In response to questions raised about implementation of the program, Government senators emphasise that government and non-government education authorities have long-established processes for planning, assessing and implementing school infrastructure projects. In order to meet the tight timelines, the P21 program made use of these existing delivery systems.[78] There are obvious efficiencies in using existing processes. As noted by DEEWR:

Each education authority typically used the system that they already had in place for the management of capital infrastructure programs, and they differed from state to state and from block grant authority to block grant authority in the case of non-government schools.[79]

Non-government schools

Mr Bill Daniels, Executive Director, Independent Schools Council of Australia, told the committee that the Commonwealth provided a separate allocation for independent schools to work through their BGAs, which he believes was instrumental in the effective and successful rollout of the program for his sector.[80] He explained to the committee that Catholic and independent schools are familiar with managing their own projects and have established relationships with local architects and builders. Mr Daniels pointed out that the associations of independent schools and their BGAs have been administering Commonwealth capital programs for more than 20 years. Therefore, notwithstanding the unprecedented scale and complexity of the program, independent schools are very experienced in this work:

In effect, the Commonwealth outsourced the administration of those programs to the independent sector and indeed to the Catholic sector at least 20 years ago, so there was already infrastructure in place in those block grant authorities and the mechanisms in place to roll out a capital program, albeit this was a very substantial capital program that was much bigger than any of the sectors had ever seen before. So, first of all, the infrastructure is in place.[81]

Government schools

The government system of schools, managed centrally, recognised the magnitude and complexity of the program and the need for quick implementation. The ANAO acknowledged that the government system faced the additional challenges of ensuring the investment would cater for the immediate and long-term needs of the system, including taking account of demographic changes; trends in school enrolments; the age and quality of existing infrastructure; evidence about the optimal size of schools; the ability of the infrastructure to cater for special needs; and the fact that some schools were under consideration for closure or amalgamation.[82]

This centralised management decreased the visibility of some elements, such as costings, to the schools and Parents and Citizens (P&C) associations. This has perhaps fuelled the perception, further encouraged by the media, that the program is not achieving value for money. Government senators understand that a lack of access to costing details may have created feelings of frustration and lack of empowerment for school communities and led to assumptions being made about lack of value for money. However, it should be acknowledged that organising and overseeing construction activity would not be possible for some schools that lack the necessary experience, skills or time.[83] In these circumstances it was decided that the support of a centralised management system was required.

The government has acknowledged the concerns about transparency and value for money which appear to focus on the government sector. It wishes to ensure value for money has been achieved and to this end it has set up the BER Implementation Taskforce, headed by Mr Brad Orgill, to investigate claims regarding value for money.

Comment

Government senators note the differences between the government system and the non-government sectors. Independent schools are very experienced in organising capital works. They have existing processes and established relationships with architects and builders. It is clear that, despite the increased scale and complexity of the P21 program, these mechanisms worked well for the independent sector and the Catholic system.

However, government senators note the extra challenges facing the government sector, where schools are managed in a system. In many cases the knowledge and skills to run large projects and the established relationships with builders and architects did not exist. Central management was therefore seen to offer the best solution to achieving the challenging timeframes for projects.

Administration of the program

The report will now turn to describing the administration of the program. Government senators note that the National Coordinator's Implementation Report, which was provided to the committee, presented a more detailed account.[84]

Timelines

As noted in the National Partnership Agreement, the primary objective of the P21 program was as an economic stimulus measure, which therefore required a rapid roll-out of the program. DEEWR told the committee about a small number of complaints received regarding timelines:

The compressed time frames have attracted the criticism from a small number of schools that there was insufficient time for consultation or consideration of the design options. These concerns must however be considered in the context of the policy intent, which is to provide economic stimulus through the rapid construction and refurbishment of school infrastructure. The national partnership requires states and territories to fast-track the design application and assessment process with minimal red tape. Furthermore, the BER guidelines state that projects which are unable to demonstrate their ability to be completed within the specified time frame will not be funded. Although it is understandable that some schools may have liked more time to consider project designs, it is important to recognise that the vast majority have appreciated the need for timely decision making in the context of economic stimulus and have acted accordingly.[85]

While noting the challenging timeframes, evidence to the committee indicated that they were achievable. For example, Giant Steps School in Sydney, which caters for students with a diagnosis of Autism Spectrum Disorder, reported that:

The timeframe has meant there has been a very dynamic response which has focused our attention intensively and drawn us together as a school community.[86]

The Queensland government noted that the timelines for delivery of projects are considered tight by industry standards but implementation of the program continues, with 1,664 projects in various stages of delivery. It added that it remains optimistic the projects will be completed on time or in advance of the timelines outlined in the BER program guidelines.[87]

Catholic Capital Grants (Victoria) also noted the short timeframes but reported that:

The meeting of these timelines has been made possible as a result of the hard work and dedication of our school principals, staff, teachers, parents and their architects. They have worked energetically to meet the timelines imposed by the program.[88]

The Northern Territory government pointed out the 'uniqueness of the NT's portfolio of schools' which required a high level of consultation and a considered design response to achieve value for money while meeting the requirements of the Building Code of Australia. Despite these requirements the NT 'fully expects to deliver the P21 within the overall timeframe and completion date...'. The NT Chief Minister, the Hon Paul Henderson MLA, advised the committee on how the timelines were being achieved:

Overall, the benefit to the NT is substantial and I am advised the level of innovation and cooperation between governments, industry, schools and their communities will ensure projects are completed by March 2010.[89]

The ACT government summarised its plans to meet the timelines:

When combined with the ACT's own ambitious capital works program for its public schools, the increased funding and tight timelines required under the BER program have posed a significant challenge. The ACT Government has placed the highest priority on meeting this challenge, and as a result of streamlined processes and high level[s] of cooperation between school communities, government agencies and employers, is confident of meeting its commitments under the BER.[90]

Comment

In order to meet the primary objective of stimulating the economy, government senators note that rapid implementation of P21 was required. This was recognised by submitters and the committee was told that, although the timelines were challenging, they were achievable.

BER Guidelines

Guidelines were developed by DEEWR to assist states, territories, BGAs and schools submit project proposals. The guidelines set out the arrangements for the administration and delivery of the program. Given the scale and complexity of the program, it was anticipated that the guidelines would need to be amended as issues arose which required to be addressed.[91]

The committee heard that the guidelines were easy to deal with and sufficiently flexible, and that when issues arose they were dealt with sensibly and quickly.[92] Mr David Robertson, Executive Director, Independent Schools Queensland advised that they have been able to work very successfully within the guidelines and reported that for their 214 projects in Queensland, as of May 2010, 87 per cent have commenced construction, some 22 per cent are completed and 51 per cent are over 50 per cent completed.[93]

The NSW Catholic Block Grant Authority reported that the management of the program has been efficient, consistent and courteous. While noting a few 'teething' problems, which were not unexpected in a program of such magnitude, adjustments were made which were not disruptive, and the basic structure and guidelines published in February 2009 remain intact and operational.[94]

Eligibility

I have seen magnificent facilities being built, and they are facilities that school principals have said to me, ‘Well, we may have had this on our master plan’—because most independent schools would have a master plan—‘but it was somewhere there in the distance.’ In Queensland in particular the growth is so strong that the demand for capital in our schools is for classrooms and basic facilities. They have certainly had a tremendous boost. The feedback I get from our schools is that there will be very significant, long-term, positive benefits from the facilities that have been built under BER.[95]

P21 funding was available to every eligible government or non-government primary school according to school enrolment numbers.[96] Catholic Education South Australia advised that basing the conditions for funding on student enrolments was generally seen as being fair and equitable.[97] The NSW Catholic Block Grant Authority commented that project allocations by school enrolment were '...reasonable and allowed for facilities appropriate to school size. The use of February 2009 enrolments as the base gave every school opportunity to be considered at its current enrolments'.[98]

Mr Bill Daniels, Executive Director, Independent Schools Council of Australia welcomed the inclusive nature of the program which meant that all independent primary schools were able to access funding and explained:

...This is particularly welcome for our sector where 80 per cent of the capital funding investment is sourced from parents, not from governments...[99]

In addition, Mr Daniels summarised the effect of the program on the independent sector:

If you go back to the objective of the program—which was economic stimulus at the local level—that is exactly what it has done in our sector. All 900 independent primary schools have benefited from a project. Many of those would not have had projects in their communities of any sort in the near future. This is roughly the equivalent of 15 to 20 years worth of Commonwealth capital programs for the independent sector being put into the sector in the space of two years, so it is something that our communities have very much welcomed.[100]

Providing for flexibility

Infrastructure

Contrary to some reporting, the P21 program had flexibility built in at many levels. First, the provision of infrastructure was flexible. The P21 program provides funding in priority order for: the construction of new libraries; the construction of new multipurpose halls, or, in the case of smaller schools, covered outdoor learning areas; the construction of classrooms; the replacement of demountables or other buildings as approved by the Commonwealth; or the refurbishment of existing facilities.[101]In addition, where a school and its community determined that a school had no need for any of the above but had determined the need for an early learning centre, it could apply for this funding under P21.[102]

Mr Terrence Leavy, Manager, Government Programs, Queensland Catholic Education Commission reported that the priority list was easy to work with and DEEWR were very accommodating in relation to it.[103] This view was supported by Mr John Barker, Head, Finance and Planning, Catholic Education Office, Catholic Education Commission (Canberra and Goulburn).[104]

Many submissions expressed the view that the guidelines and implementation allowed sufficient flexibility. The Catholic Education Office of Western Australia told the committee that there was sufficient flexibility in the guidelines to serve the needs of almost all schools eligible for the funding.[105] Specifically commenting on the potential for duplication, it said:

...careful planning and co-operation between the schools and the CEOWA has enabled the WA Catholic System to avoid the replication of existing facilities.[106]

Similarly, the Catholic Education Commission of Western Australia told the committee that the criteria for projects provided ample scope for the provision of facilities that would improve the educational environments in schools.[107]

Catholic Education South Australia (CESA) advised that it found sufficient flexibility within the criteria for school communities to have constructive input into designs and achieve projects which met broad community needs while still meeting the requirements of the program.[108]

The Catholic Education Commission for the Archdiocese of Canberra and Goulburn commented on the 'misnomer in some quarters that schools must build libraries or halls'. It stated that 'there is sufficient flexibility within the program to allow schools to build or refurbish to their immediate needs where they can demonstrate they already have a hall or contemporary library'.[109]

The NSW Catholic Block Grant Authority advised that there was sufficient flexibility for every school to propose a project to meet its requirements and the variations process allowed by DEEWR enhanced the flexibility in facility options. It added:

Contrary to some media reporting, schools were not forced to accept or duplicate facilities they did not want or need. In our sector, schools were pleased to accept the Government's priorities and those with modern hall and library facilities (such as newly built schools or schools in receipt of recent major upgrades) were able to nominate for other facilities they needed.[110]

Cringila Public School, NSW, provided a specific example of the ability to take into consideration specific school requirements. The principal Mr David Lamb reported that additional dialogue and communication was required but that the result will be a feature that 'will compliment the work already occurring in the school academically and the social context for the community'.[111]

The National Catholic Education Commission (NCEC) also advised that:

Contrary to some media reports, there is no evidence of Catholic schools using P21 to unnecessarily duplicate existing facilities or accept unwanted facilities or building templates.[112]

Funding

Flexibility was also built into the funding. The guidelines allow for variations to funding amounts with the agreement of the school involved.[113] The National Coordinator's Implementation Report showed that 77 per cent of schools received their full notional funding allocation, 14 per cent received more and nine per cent received less.[114] These figures show the flexibility built into the P21 element of the BER to ensure the program's effective and efficient delivery.

This flexibility has been used in some circumstances to direct funding to schools with greater need.[115] DEEWR explained the considerations:

There were funding allocations based on a school’s enrolments with more funding for more students, and that was considered an indicative cap. But we did not want to be prescriptive around that because if a school did not need funding it would not have been sensible to stick with that. For example, if a school was brand new it would not need that level of funding, or if it had recently had major refurbishment or something. At the same time, there are also schools with much higher needs that have not had any capital improvements for a while. So there was always the flexibility for the education system to be able to give a school a project less than their cap and use that additional or leftover funding for schools that had a greater need, and we have seen that happen. But as you can see, with 77 per cent getting their cap—and the majority have—then the education authorities have used that flexibility to direct funding that was not needed to schools that did need it.[116]

The flexibility in the program was able to cover not only the diversity of student needs but also the diversity of sites where the same building would attract different costs due to extra architectural work required.[117] The NSW government provided examples of increased costs for some schools:

...schools in remote locations may find that their projects are more expensive simply because of the cost of transporting building supplies and tradespeople to the site. In other cases the school may be located on a very difficult site, leaving little room available for construction of new buildings. Other schools might be subject to multiple easements, flooding, or even be home to koala colonies which cannot be disturbed. All these factors can add to the expense, as the new building may need to be on a sloping part of the site, or the school may need to have existing buildings removed before new construction can commence.[118]

Comment

Government senators believe the evidence shows that the P21 program has sufficient flexibility built in to recognise the diversity of school and student needs and sites. The evidence received by the committee is contrary to impressions created by the media that schools were forced to accept or duplicate facilities.[119] The flexibility to move funding is discussed in more detail later in this dissenting report.

Applications for P21 projects

Applications were made through the state education departments and BGAs to DEEWR. The education authorities collected the information from their schools and submitted applications on behalf of schools. DEEWR explained the process:

...Each education authority was responsible for seeking applications from their schools. Typically, the process would work such that most education authorities put in place some kind of form that the schools filled in to put down their desire against each of the building priorities for P21. Then the education authority, on behalf of a school, filled in the application form that we had—we had an online application form. That, typically, gave us all the information about the program, including the name of the school, the name of the school principal and the name of the contact officer within the relevant education authority.[120]

Catholic Education South Australia commented that the application process, while rushed, was well coordinated by DEEWR and proceeded with minimal disruption.[121]

Sign off from school principals

Government senators note that the approval process included project sign off from the principal of the relevant school. DEEWR officers advised the committee that this occurred prior to the application being submitted:

...My understanding is that most educational authorities received sign-off from their school principals prior to the application being submitted to us—that is, as part of the form they filled in. Many of those forms required not only the school principal’s signature but also that of the president of the school council or P&C. That would have been done before the application was submitted to us.[122]

In addition, any changes as a result of discussions between DEEWR and the education departments were also signed off by school principals.[123]

Assessment process

DEEWR assessed each application against eligibility and quality assurance criteria in accordance with the guidelines. Extensive eligibility and quality assurance tests are listed in the National Coordinator's Implementation Report and the DEEWR submission.[124] Each application was assessed by a team within the BER Taskforce. DEEWR explained the assessment process:

...Because it was an online system, each application had to go through a series of eligibility ticks to move through the system, where it ultimately came out at the other end as a project that met the guidelines and was one that we could recommend to the minister for approval. As part of that process we would negotiate back and forth with education authorities when we had questions—for example, about projects where an application was unclear. So there were opportunities for education authorities to clarify and refine applications to make sure that they did meet the guidelines.[125]

Funding

Program funding

Funding was calculated based on the school's full time equivalent primary level student enrolments. Notional funding per school is set out in the following table.[126]

Size of primary school (enrolments)	Notional cap $
1 to 50	250,000
51 to 150	850,000
151 to 300	2,000,000
301 to 400	2,500,000
401+	3,000,000

Additional funding

Government senators note that the additional funding required for the program[127] has been dealt with comprehensively through parliament by the minister[128] and the senate estimates process by relevant departments.[129] There was greater demand for funding than originally anticipated. It was unknown at the time of developing the program whether schools would be able to take advantage of the program to the maximum amounts available within the limited time to develop and submit applications. The ANAO acknowledged it was evident and transparent to the Strategic Priorities and Budget Committee ministers that, depending on the response from schools, an estimates variation might be required. The further funding was provided with offsets made from within the $42 billion Nation Building and Jobs Plan.[130]

Funding rounds

The P21 program was divided into three funding rounds. It was intended for 20 per cent of schools to be included in the first round, 40 per cent in the second round and 40 per cent in the last round. DEEWR explained that the first round was smaller as the timeframe for applications was much shorter.[131] The NSW Catholic Block Grant Authority supported the use of three funding rounds, saying that it allowed more time to develop proposals for the more difficult projects.[132] DEEWR explained to the committee that if substantial changes were required an application could be held over:

...Because we had three funding rounds, where an application might have required substantial changes or a lot of negotiation it may have been held over to allow time for the negotiation with the education authority and the relevant school. For example, an application that came in in round 1 may have been held over to round 2 or round 3.[133]

Funding approval

Once the eligibility and quality assurance tests were completed, funding approval of successful projects was recommended to the Minister for Education.[134] DEEWR advised the state education authorities of the successful schools in each round. The Deputy Prime Minister then wrote to the school principals congratulating them on their successful applications. Funding agreements were put in place with the education authorities, and the schedule to those agreements reflected the approved project.[135]

An identical process was undertaken for government, Catholic or independent schools. The distribution of funding was $9.5 billion for the government sector, $2.7 billion for the Catholic system and $1.6 billion for the independent sector.[136] Related to percentages of children, these figures translate into 68.6 per cent for the government sector, 19.9 per cent for the Catholic sector and 11.5 per cent for the independent sector.[137] The table below provides the breakdown of P21 funding by education authority.[138]

Education authorities or schools can add a co-contribution to the project funding in order to address specific requirements:

If they have applied for a hall and we have given X amount of funding for that, if they wish to add a further amount of money to add extra rooms or extra features, they can. That needs to be clearly identified to us, and they do that in their monthly reporting. That is happening in some instances.[139]

DEEWR advised that as at 18 January 2010, 1038 schools had added a co-contribution to a total value of $574,732,300.[140]

The BER Guidelines make it clear that the funding allocations are indicative and a state education authority or BGA may decide to fund some schools at slightly lower amounts and some at higher amounts than indicated.[141] Mr John Barker, Head, Finance and Planning, Catholic Education Office, Catholic Education Commission (Canberra and Goulburn), told the committee that the guidelines gave the Commission the capacity to reallocate funding and they took up this opportunity. In order to be transparent about this:

We made it very clear from the start of the program to our principals and communities that the allocations are indicative and as a system authority we have the capacity to distribute that funding on the basis of need.[142]

This was also the case for the government system, and this is discussed in more detail later in this dissenting report.

Funding for program administration

The National Partnership Agreement (NPA) recognised the additional cost of BER administration to the education authorities and that they had not budgeted for BER. COAG agreed to allocate education authorities 1.5 per cent of the BER funding approved for their schools to administer the BER program on behalf of their schools. This amounted to $207.8 million.[143] DEEWR explained:

Built into the program is a 1.5 per cent administration funding amount for each education authority; that is 1.5 per cent of the total dollar value of the projects that they were funded for. Education authorities have used that funding to bring in additional staff where they have needed it to help with the volume.[144]

Catholic Education South Australia advised that the provision of a fair administrative allowance enabled it to employ experienced staff to administer the program.[145] The Queensland government recorded appreciation for this funding which is being fully utilised to support the BER program at central and regional levels.[146]

Dr Geoff Newcombe, Executive Director, Association of Independent Schools of NSW told the committee that having the administration funding separate was a 'very sound position for the government to take' as it was clear that the administration funding would not affect the amount of money to be spent on schools.[147]

The table below details the administration funding for education authorities for BER.[148]

 

Maintenance of funding by states and territories

The NPA also made it clear that the P21 funding was to be additional effort and that the states and territories and non-government authorities are required to maintain funding efforts. Mr David Robertson, Executive Director, Independent Schools Queensland told the committee that the guidelines were very clear that new money could not be put into any existing contracts and that capital expenditure must be maintained.[149]

Maintenance of state funding will be monitored through reporting to Heads of Treasuries and the Ministerial Council, and sanctions for any state's failure to meet spending benchmarks may include making this failure public.[150]

DEEWR advised the committee that the maintenance of effort was being monitored through the Department of the Treasury.[151] The committee wrote to the Secretary of the Department of Treasury and requested the quarterly reports on the maintenance of funding effort. The Secretary to the Treasury, Dr Ken Henry, responded:

Given that the Agreement between the Commonwealth and the States provides for making the assessment public as a sanction, I consider that providing these reports to the Committee would be against the public interest as doing so would damage relations between the Commonwealth and the States. The information in the reports was provided by the States in confidence and on the understanding that they would only be made public, in respect of a particular state, if the Commonwealth decided to impose a sanction on that state for failure to meet its benchmark. Provision of the reports to the Committee outside this context could have an impact on the Commonwealth's future dealings with the States.[152]

The chair of the committee then wrote to the Treasurer, The Hon Wayne Swan MP, who responded:

I consider that the release of the quarterly reports on progress under the National partnership Agreement on the National Building and Jobs Plan would harm the national interest on the grounds that their release could reasonably be expected to cause damage to relations with the States. Further, I consider that the damage could result equally from the disclosure of the information or document to the Committee as in camera evidence.

The States are important partners in implementing the Nation Building and Jobs Plan and collaboration between the Commonwealth and the States continues to be critical in ensuring Australia can respond to economic challenges with immediate and concerted action. The information in the reports was provided by the States in confidence and on the understanding that they would only be made public, in respect of a particular state, if the Commonwealth decided to impose a sanction on that state for failure to meets its benchmark.

I have noted the Committee's arguments in support of the release of these reports. Contrary to the Committee's assertions, I consider the fact that making the assessment public is an explicit sanction in the agreement supports my conclusion that releasing the reports would not be in the public interest.[153]

The chair of the committee has also called for the production of the documents in the Senate chamber.[154] The following statement responding to the resolution was tabled on 13 May 2010 by Senator the Hon. Nick Sherry, Assistant Treasurer:

I have noted the Committee's arguments in support of the release of these reports. However, contrary to the Committee's assertions, I consider the fact that making the assessment public is an explicit sanction in the agreement ...supports the Treasurer's conclusion that releasing the reports would not be in the public interest.

I consider that the release of the quarterly reports on progress under the National Partnership Agreement on the Nation Building and Jobs Plan would harm the national interest on the grounds that their release could reasonably be expected to cause damage to relations with the States. Further, I consider that the damage could result equally from the disclosure of the information or document to the Committee as in camera evidence.[155]

Comment

Government senators consider this an appropriate response to avoid damaging relations with the states, as releasing the information was specifically listed in the National Partnership Agreement as a sanction.

Rephasing

In the context of the 2009-10 MYEFO, the government announced on 2 November 2009 that $500 million of the P21 funding will be moved from 2010-11 to 2011-12 to provide flexibility for a small number of projects requiring additional time to either obtain value for money by delaying the project or deal with unexpected environmental or site challenges. DEEWR is working with the education authorities on how the rephasing will be managed, and the authorities have been asked to provide a proposed strategy.[156] DEEWR provided some examples where rephasing was necessary to achieve the best outcomes:

...The other need for flexibility is around where there are unexpected site or environmental issues. For example, we know that, in northern Australia, if the wet season is excessively long it can have an impact on building because there is a particular window for building. We know already that, when construction has started on some schools, there have been some unexpected site challenges. So the rephasing is allowing education authorities to address those particular issues.[157]

DEEWR also provided other reasons for rephasing:

It might be the case in a primary school where there is not sufficient ground space to relocate classes in the school, so the majority of work may have to be done during school holiday periods. They have to carefully plan, scope and sequence that to ensure that the learning of the children is not interrupted and that there is space for the children to go. So, where there are high enrolments at some primary schools, they are nearly at capacity and they are doing building work, they will plan and sequence so that particular building works are done only in school holiday periods so that they do not have to relocate some of the classes. It is right down to that level of detail.[158]

Use of local contractors

Having recently completed our new Junior School facility at [the] end of 2008, the School was permitted to choose the existing builder/contractors and architect. All these individuals were local companies, and were selected initially based on correct tender procedures. Although they have tendered for this current project, they were familiar with our various requirements, environment etc and quoted realistically on the intended project.[159]

It is a requirement of the BER Guidelines that states, territories and BGAs endeavour to identify and communicate opportunities in local areas for tradespeople and other small businesses. The Guidelines and funding agreements with BGAs specify that they must give priority in contracting and tendering to local businesses and must report to the Commonwealth on this matter.[160] DEEWR advised that, while tender processes vary between jurisdictions, all have measures in place that will facilitate the use of local contractors or sub-contractors and provide information to local businesses on how to take up work opportunities.[161]

The NSW government reported that the BER Program Office and Managing Contractors have 'proactively engaged local businesses to get them involved in the delivery of the program'. This included:

• advertising information on how local businesses can become involved;
• providing information sessions for local businesses interested in obtaining work; and
• providing the ability for suppliers to register their interest in participating on-line.[162]

The NSW government further reported that evidence to date indicates that the managing contractors are overwhelmingly using local contractors to deliver the P21 program.[163]

The Victorian Department of Education and Early Childhood Development similarly reported that it held industry information sessions across Victoria to encourage builders to register with the Victorian Government's Construction Supplier Register. Local tradespeople were encouraged to contact the Industry Capability Networks to link them with contractors. It reported that all contractors engaged through the BER program have been encouraged to use local tradespeople and sub-contractors as a first preference and where available.[164]

Government senators note that the first P21 project to be completed was located at Yandina State School in the hinterland of Queensland's Sunshine Coast. The Queensland government informed the committee that it aimed to utilise local contractors where possible on P21 projects. Accordingly, the Government reported that 90 per cent of the contractors who worked on the Yandina State School project were based on the Sunshine Coast.[165]

Other examples of the use of local contractors include the ACT Catholic Education Commission, which reported that:

All successful building contractors for P21 projects in ACT Catholic System schools are local contractors and are engaging local sub-contractors.[166]

The NSW Catholic Block Grant Authority also advised:

...our experience is that in most cases local builders have been engaged where they could demonstrate sufficient experience and ability in projects of P21 scale.[167]

Mr Daniels, ISCA, advised that in NSW 84 per cent of independent schools are using local builders and about 93 per cent are using local tradespeople.[168] Giant Steps in Gladesville NSW reported that all local contractors were used during the project and a number of apprentices have been working on the site.[169] The National Catholic Education Commission reported that the widespread use of local contractors was crucial and most beneficial.[170] The NT government advised that it encouraged the use of local contractors by following existing procurement guidelines which provide a weighting for local development.[171]

In addition, DEEWR advised that the Catholic schools sector reported maximum use of local project management and local building contractors, subject to industry experience and being able to offer value for money. In the independent schools sector, the schools have the freedom to choose local contractors. Evidence of the use of local contractors and sub-contractors was also reported in the media, with Mr Terry Schuster, Head of College at St Stephen's College in Gladstone reporting that 'the use of a local builder and project manager was very important to us to ensure the success and quality of the project'.[172]

Comment

Government senators note that wherever possible and practical local contractors were encouraged and engaged to work on P21 projects.

Monitoring and reporting

There is a comprehensive monitoring and reporting regime in place to support the implementation of the P21 program. DEEWR took the committee through the process:

...Each month education authorities submit a detailed report at project level, which enables DEEWR to monitor project progress and expenditure. Any anomalies in this reporting are immediately investigated. In addition, DEEWR officers visit education authorities regularly to discuss local implementation issues. Recent visits have included school sites and discussions with principals.

As part of routine program assurance, DEEWR has recently engaged Walter Turnbull to assess the implementation of BER across six education authorities against the program’s policy objectives and business rules. In addition, education authorities are required to submit a detailed annual statement of income expenditure, which details the use of project funding, administration funding and interest earned on funds. This multilayered program assurance approach has been designed to support the rapid implementation timeframes and to provide robust monitoring of public funds.[173]

The committee received some evidence suggesting the level and frequency of the reporting requirements could have been more tailored. For example, Catholic Education South Australia (CESA) suggested that formal accountability and acquittal processes that have been in place for over ten years could have acted as the basis for the BER process, and then frequency and detail could have been customised.[174] However, the Victorian Department of Education and Early Childhood Development supported the reporting arrangements and noted that all project expenditure is subject to rigorous monitoring and accountability processes and audit scrutiny at both the state and federal levels.[175]

While some customisation of reporting requirements was suggested, it was recognised that:

...at the end of the day this was taxpayer money and it is perfectly legitimate to have detailed reporting arrangements.[176]

Comment

Government senators note that the P21 reporting requirements appear to have attracted little comment in submissions and been accepted by the vast majority of schools.[177] It should also be noted that it is important to have appropriate monitoring mechanisms in place and the arrangements that COAG outlined in the NPA were agreed with jurisdictions.[178]

Signs and plaques

The Coalition tried to make much of the requirement for signs and plaques to be placed on P21 projects by including this in the terms of reference. However, the committee heard that the approach taken to signs and plaques is consistent with previous infrastructure programs. DEEWR submitted:

Reflecting recognition protocol arrangements that have applied to previous school programs, there is a requirement to acknowledge the Commonwealth's contribution to public funding programs. Signs that contain information about building and infrastructure projects are part of the Government's obligation to the Australian public to provide information about how their tax dollars are being spent.[179]

The committee was advised that the total cost of the signs and plaques is estimated to be $3.6 million—that is, $3.37 million for signs and $226,000 for plaques. The average cost of a sign is $295[180] and the average cost of a plaque is $27.[181] Regarding arrangements for the recognition ceremony:

...The guidelines say that a school is to have a recognition ceremony within three months, I think, of the completion of their project. They come to us about two months in advance seeking to settle their date and start the arrangements....[182]

Evidence showed nothing unusual or of concern in the requirement to acknowledge that the funding has come from the Commonwealth government. The Catholic Education Office of Western Australia commented on the requirement for signs and plaques:

For many years there has been a requirement for signs and plaques to be erected in order to recognise the contribution made by Governments toward school building projects. There is no objection to this occurring in the case of BER projects and this has always been welcomed by the CEOWA and school communities.[183]

Similarly, the Principal of All Saints Grammar, NSW, stated:

I have absolutely no issue with these requirements [for signs and plaques] and agree that we have an obligation to indicate where public money has been spent.[184]

Evidence showed that the requirement for school signs was not viewed as anything departing from normal practice and requirements were not onerous.[185] In fact, it was noted by the Catholic Education Commission for the Archdiocese of Canberra and Goulburn that an advantage of the BER program over other capital programs 'is that the Commonwealth is providing the plaques and signs rather than them having to be purchased from project funds'.[186] Giant Steps in Sydney commented on the issue of signs and plaques that:

This is such a minor matter. It is difficult to understand why this should be the concern of a Senate Inquiry.[187]

Comment

Government senators note that BER recognition costs for a P21 project equate to 0.014 per cent of the total project funding—half as much as for the Investing in Our Schools Program, where recognition costs equated to 0.39 per cent of the total project funding.[188] Government senators also note that DEEWR has received no direct complaints regarding signage.[189]

Issues raised during the inquiry

Government senators acknowledge that a small number of issues have been raised in relation to aspects of the program. This was anticipated and procedures were put in place between DEEWR and the education authorities for issues to be addressed. Evidence showed that in the vast majority of cases issues were addressed as they arose with solutions being found quickly. In a small number of cases the issues raised required more consultation and took longer to resolve. This in no way detracts from the overall success of the program. Below are summaries of the main issues raised with the committee in relation to the program, which focus on communication with the school community and projects achieving value for money.

Consultation and communication

The committee heard from some witnesses about what was perceived as a lack of consultation and communication with the school community about some projects.[190] This appears to be an issue for some government schools but was not raised in relation to the Catholic or independent sectors.

In NSW, Mr Michael Coutts-Trotter, Director-General, New South Wales Department of Education and Training (NSW DET), acknowledged that in order to meet project deadlines the timeframe for consultation with the school community was necessarily compressed. However, he also noted that it was a requirement that projects were signed off by the principal and the principal had to confirm that the school community had been consulted.[191]

The committee also heard that some principals felt pressured into not taking on management of their projects.[192] Mr Coutts-Trotter explained that NSW has the most stringent occupational health and safety (OH&S) environment and that the project manager would be subject to the prevailing OH&S, legal and procurement environments as well as taking on reporting requirements. In responding to concerns about pressure being applied to principals to not manage the projects, he stated:

[T]hat was a pretty confronting exercise for a number of people. I do understand that but I think I would have been deficient and failed my colleagues if we had not ensured that they really know what they would be taking on.[193]

The committee heard that it was an objective of NSW DET to provide more opportunities for principals to take control of projects. As an example of facilitating local management, Mr Coutts-Trotter told the committee that initially advice from the Coordinator-General in NSW was that, given the financial risks, a school electing to self-manage a project should lodge a 10 per cent security deposit with NSW DET. However, after receiving strong negative feedback on this from school principals, NSW DET changed the requirement that a deposit be lodged but continued to advise that project managers should maintain a 10 per cent contingency fund from within the project budget.[194]

Mr Coutts-Trotter reported that his department endeavours to communicate well, be open to feedback and respond to concerns. He added that specific measures were taken to assist principals with school community communication. This included recruiting public schools principals with considerable experience to act as a liaison point with their colleagues within the delivery unit.[195] Responding specifically to allegations of pressure or bullying, Mr Coutts-Trotter said that he takes such allegations seriously and they would be investigated. However, he noted that people have to respect their responsibilities as employees of an organisation.[196] In summary Mr Coutts-Trotter stated:

...We take every concern of every school community seriously. They are the people we serve. They are the people we get out of bed for in the morning and how they have experienced the way we work for them is of vital importance to us. It is of vital importance to public education. In a huge program under extraordinary time pressures, sometimes that is not going to be done as well as a school community would expect of us. But taken as a whole, this program is being done extraordinarily well in New South Wales public schools.[197]

Process for issues to be raised

The government recognised that, given the size and necessary speed of the program, issues would arise, so it ensured that there was an appropriate process in place to address and resolve issues as they arose. The BER Guidelines outline this process:

If a school considers that a proposed allocation of funding under the BER program is not in accordance with the BER Guidelines or a school has complaints about the administration of the BER, the school may put its concerns in writing to the national BER Coordinator who may, where appropriate, after considering the objectives of the BER program and the BER Guidelines, discuss the school's concerns with the relevant state, territory or BGA for the purposes of ensuring that funding is allocated in accordance with the BER guidelines or to investigate a complaint.[198]

The National Coordinator's Implementation Report to 30 September 2009 advised that there had been 55 complaints out of 25,489 applications received and 24,382 projects funded, which amounts to 0.22 per cent of applications received and 0.23 per cent of applications funded.[199]

On 30 November 2009 the National BER Coordinator provided the committee with an update and went on to describe the three main areas of concern raised:

...One is about value for money and project management fees. The second is around the implementation time frame and the third relates to negotiations between government schools and the state and territory education authorities regarding the nature of the projects. I will just briefly go through each of those areas of concern.

Due to the unprecedented scale of the program and the compressed time frames, achieving value for money remains a key priority for all the education authorities—government and non-government—that are involved in the delivery of the program. DEEWR has investigated any concerns about value for money as they have been raised. To date we have been satisfied that education authorities have actively sought to achieve value for money.

Similarly, 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.[200]

Regarding complaints between schools and the state education authorities, DEEWR advised:

A total of 7,962 schools are receiving funding for P21 projects. A small number of these schools have publicly expressed dissatisfaction with the projects submitted by their education authorities. DEEWR has examined each of these cases. We are satisfied that the schools concerned have been adequately considered by the relevant education authorities. In the vast majority of cases, a mutually acceptable solution has been negotiated. There are some cases however where the school’s preference simply cannot be accommodated because of the longer term impact on the education system as the preferred project will generate unreasonable maintenance costs or population projection statistics show a declining school enrolment, which means that the desired facility may not be utilised in future years. The funding agreements with education authorities require them to be fully responsible for all ongoing current costs and maintenance of any new or refurbished infrastructure that is built or refurbished under the program.[201]

DEEWR also addressed criticisms by school principals or P&Cs:

Generally we have found that in those instances where a principal might have agreed to the initial phases of a project—time lines have been quite short, so all of this was done quite quickly—as time has passed sometimes they have reconsidered that. Many times a principal has changed or the P&C composition has changed or they have heard about other projects that have been funded and had second thoughts. That has happened over the months after the application going in.

...We have found that as they have raised complaints the relevant state department has entered into discussions with them and that the vast majority of those have been resolved. Sometimes it has meant that the project has been slightly rescoped to compromise. At other times the school has ultimately agreed with the education authority’s call. It has been a matter of working those things through.

...There had been a couple of cases where, despite negotiations, the schools at this stage still had some concerns. But, as I indicated, they seem to be around quite legitimate issues. For example, a school wants to build something which will have a quite excessive, long-term maintenance cost for the education authority to bear, or in another instance, a school might want additional facilities but the state authority’s view is that long-term population projections show that numbers will actually be declining over future years and so it is judged that it is not reasonable to invest in new facilities that will not be used. It is about system-wide approaches, I guess, versus the individual schools.[202]

DEEWR told the committee that each state and territory had its own complaints process:

I think you can be reassured that most jurisdictions—in fact, all that I am aware of—and educational authorities do have a complaints process...and many of those report through their annual report. They have places where they have time taken to resolve complaints. I think, as Ms Wall has pointed out, the escalation point of coming to her as the national coordinator would be exercised by those who have not been satisfied with what is happening in a jurisdiction. I think that is widely known through the website and I think principals are very attuned, in my meetings with both primary principals and secondary principals, to the mechanisms that they can go through with their education authority. If it is not suitably resolved at that level, then they have the option of complaining by coming forward to the national coordinator.[203]

The Deputy Prime Minister's office indicated that, if individual schools had any issues with BER funding, they could contact the BER Coordinator anonymously if that was their preference.[204]

Through DEEWR, state education authorities advised of the numbers of complaints they had received which shows the numbers are few and most are resolved.[205] DEEWR explained the process if a complaint is escalated to them:

When they are sent to me, I look at them and I discuss with the officers in my team what we will do to investigate those. The officers in my team will do that and then they will provide advice to me. At such time as I am satisfied, I will write to the person who has written. In most instances, that means discussing first with the relevant education authority, getting the information. Sometimes we will phone the school or the person directly if we need further information. Then, at such time, I will write back to them. As I said, in most cases the situation has been resolved by that time. There are a couple—and I am afraid I do not have the numbers with me at the moment—where the education authority is still in negotiations with the school or the school community and we are waiting to see the outcome of that.[206]

The Independent Education Union of Australia reported that, where concerns were raised in relation to operational issues and function, there is evidence that:

...the parties, including the Australian Government, are working cooperatively and with flexibility, sensitive to the needs of school communities, to ensure that the best possible outcomes are achieved.[207]

Value for money

There have been questions raised in evidence and by the media regarding whether some P21 projects in the government sector are achieving value for money. Under the partnership model, the responsibility for ensuring value for money on a project basis rests with the relevant education authority and this was recognised by the ANAO.[208] DEEWR advised the committee that it asked the 22 education authorities how they were determining value for money as well as their audit arrangements and undertook to provide this information to the committee.[209] At the 30 November 2009 hearing DEEWR advised:

...Certainly the state departments have a responsibility around value for money under the program. But, in accordance with their state requirements, they would have certain standards around procurement which all the schools would need to adhere to regardless of whether they were self managing or not. In the non-government sector, again, that might vary. An independent school would not need to comply with those state system requirements, but obviously under our contracts we were requiring value for money as well. So again it would vary.[210]

Education authorities sought to achieve value for money through a number of procurement and contracting methods. Evidence on this aspect from the centralised government systems and decentralised Catholic and independent schools is outlined below.

Government systems - QLD

The Queensland Department of Education and Training spoke to the committee about the central management of the program and the processes in place to ensure value for money. The decision to manage the projects centrally was taken to allow school principals to focus on their job as they are not qualified or paid to manage projects. Ms Julie Grantham, Director-General, Queensland Department of Education and Training informed the committee that the procurement methods used had been selected as they provided the capacity to ensure conformity with the BER guidelines. For all projects, audit quantity surveyors review the prices submitted at a preliminary stage and this is repeated when tenders are received. The committee heard that the department engaged PricewaterhouseCoopers to independently examine the implementation of BER and investigate any questions regarding costings. Ms Grantham told the committee that the department had registered 12 formal issues, with five of them relating to value for money. These have been referred to Pricewaterhouse Coopers (PwC) for further investigation.[211]

Ms Grantham also reported to the committee that the Queensland Department of Education and Training has engaged regional advisers and project coordinators who work with the school principals and school P&Cs. Each major project has a project definition plan, which includes a design for the building and a detailed cost breakdown. These are provided to the school and P&C, which sign off on the documentation.[212]

Ms Grantham then provided an update on two schools which were specifically raised with the committee, Holland Park State School and Hendra State School. Both  projects are currently out to tender. The committee was told that the principal of Holland Park State School is pleased with the project and the current P&C have supported that position. However, the department was aware of a complaint raised by Mr Craig Mayne, the former president of the P&C. Ms Grantham informed the committee that they have not found any basis for Mr Mayne's complaint but they have referred it to PwC for their independent audit of these complaints.[213]

The complaint about Hendra Primary School centred around some early documentation that a domestic construction would give greater value for money. Ms Grantham reported that the department has spent time with the school community and explained that school infrastructure is not undertaken along the lines of domestic construction. She added that, once the tender closes, the department will of course examine the tender very closely to ensure it satisfies the requirements of the school.[214]

Mr Graham Atkins, Acting Deputy Director-General, Queensland Department of Education and Training advised that each project has a contingency allowance of between five and ten percent depending on the assessed project risk. This is not given to the contractor unless there is a valid claim which is independently assessed by a project quantity surveyor. If there is contingency money remaining at the end of the project it is used to supplement the project and add things that may have been a wish of the school but not achievable in the original budget.[215]

When Queensland departmental officials were asked about the appointment of construction managers, the committee was told that the intention was to distribute the work as widely as possible. The construction managers provided a mechanism to engage smaller contractors who would partner with larger companies to deliver the projects. Expressions of interest from 12 of the larger contractors were called for and, after assessing their submissions, eight construction managers were appointed to deliver work all over Queensland.[216]

NSW

In NSW, Mr Michael Coutts-Trotter, Director-General, NSW Department of Education and Training told the committee of the magnitude of the program:

For us in New South Wales public schools, just under the P21 program, that meant undertaking twice the size of the Olympics on 100 times the sites in half the time. It meant spending $3 billion on around 2½ thousand projects in 1,800 schools. A third of our schools are heritage listed and more than a third are in bushfire zones. Under our usual program it takes about four years from go to whoa from the point at which we engage with the school to talk about a school hall to the point at which it is delivered, including about 52 to 78 weeks of planning with the school community. Under the stimulus, in order to create jobs quickly, we had six, 12 or 20 weeks to plan and 18 months to deliver the program. The construction program under P21 is 10 times as large as our existing school building program, which we had to maintain as well in order to get the benefit of the economic stimulus.[217]

He explained that, because of the P21 timelines, the NSW department needed a different process to business as usual and decided to use experienced construction companies with a proven track record for safety and delivery of high-quality buildings to budget and on time.[218]

On selecting the managing contractors, Mr Coutts-Trotter told the committee that it was a fully competitive process where the department went to 13 major construction firms with a track record of delivery.[219] He advised the committee '[w]e have designed a program that in its contractual form, in its oversight and in its review aims to secure value for money'.[220] Responding to questions about allegations of rorting and secret fees[221] Mr Coutts-Trotter stated:

...any substantial allegations specifically made should be put and would be investigated. I am not aware of any substantial allegation of secret fees or any of the other things you have outlined. There are questions about value for money but they are quite separate to questions of propriety and the application of government procurement policies and so-called secret fees. Managing contractors are paid to do a job. They go on site. They take an architect. They take a surveyor. They take an engineer. They work out what is to be built, where it is to be built. They check the prevailing breezes for naturally ventilation. They do a lot of work. It appears as a fee.[222]

He added:

We have been absolutely open about these fees. If those fees were not paid, the work would not get done. The only element of this that does not directly generate a service—an architect coming; a check being made—is a profit margin. These firms bid an average profit margin of 2.85 per cent. They are at risk for $3,000 million worth of delivery and they are getting a profit margin of 2.85 per cent. We struck arrangements with them that are sound but represent good value for money and we did it at a time when they were willing to be very competitive in the prices they offered the Australian community.[223]

Clarifying the fees in NSW, Mr Coutts-Trotter told the committee that the project management component of four per cent is split, with 2.7 per cent going to the managing contractors and 1.3 per cent to the regional delivery teams, who manage the contract with the managing contractors at a regional level.[224] In response to allegations of rorting by managing contractors, Mr Coutts-Trotter emphasised:

The notion that, somehow, someone is just scooping up money and doing nothing for it is absolutely wrong. Taken as a whole, for the work they do—including the work they do as builders—the seven firms will receive $345 million of $3,000 million, and they have the potential of earning a further $50 million if they deliver on time and below budget. They are wearing the whole risk of doing that—the financial risk, the operational risk. They are absolutely guaranteeing the quality of what they produce for us. If there is a problem they have to fix it. There is no risk to the taxpayer in that. It is a good arrangement.[225]

Compared with business processes outside P21 work, Coutts-Trotter told the committee his current assessment is that using managing contractors has cost a premium of two or three per cent.[226] He told the committee that the next step with the program is to look at where a project has been delivered below cost and move any excess funds to schools which have had the scope of their project reduced.[227]

In conclusion, Mr Coutts-Trotter told the committee:

...it is a minority of projects that are attracting attention in a huge program. I think, taken as a whole, the program is running extremely well. I think it represents excellent value for taxpayers' money. I think that will be proven over time. I think we need to do our best to resolve–as we try and do, day by day–the issues that school communities confront us with.[228]

Government senators note the response provided to the NSW parliament inquiry from the NSW Infrastructure Coordinator General which noted:

There has been ongoing public debate centred around value for money issues that affect a very small number of projects out of more than 2, 300 projects in the P21 Program. In NSW, cost estimates for whole projects including all development, planning, design, construction and handover activities were published early on in the program to ensure transparency and accountability. Unfortunately, the cost estimates have been used in some cases to draw invalid comparisons, which on individual projects themselves are not supported by the actual scope of final costs, and are certainly not indicative of systemic problems...[229]

Catholic and independent schools

The Catholic school sector reported maximum use of local project management and building contractors subject to industry experience and their ability to offer value for money.[230] Mr Victor Lorenz, Assistant Director, Finance and Resourcing, Queensland Catholic Education Commission told the committee that generally the tenders for their projects are coming in under estimate. He added that they relied on their existing processes and procedures to achieve value for money:

...the project gets approved by the block grant authority, then goes through the normal process to get government approval and, after that, all projects go out to the tender market. So it is the tender market that really dictates good value for money. I will give you an example. I went to a social function recently where there was a primary school principal from a Catholic school and I just asked her how it was going. She said: ‘We got 32 expressions of interest to tender. We use a selective tendering process, which means we require a minimum of six.’ She said they took seven, in case one pulled out, and they were expecting good value for money. That is more than anecdotal evidence, because all the authorities provide us with the tender outcomes. We are getting good value for money.[231]

Mr John Barker, Head, Finance and Planning, Catholic Education Office, Catholic Education Commission (Canberra and Goulburn), told the committee of their processes around achieving value for money:

...our tenders remain strong and competitive. They are always around or within the quantity surveyor estimates before we go to tender. The management fees or the professional fees of our architects have been capped within 10 per cent. I have seen no evidence of any price g[o]uging in any of our programs.[232]

Other monitoring mechanisms

Government senators note that the P21 program has a number of checks and balances included to ensure value for money, including independent audits and reporting requirements.[233] For example, the Minister described the protection mechanisms in the system working when she reported that Hastings Public School is being audited by the New South Wales audit squad. The audit was commenced before the name of this school appeared in the media. She added that the New South Wales audit squad has audited around 102 schools.[234]

In responding to specific examples, Mr Coutts-Trotter informed the committee that Eungai Public School is the subject of a value for money audit which is currently underway. He also told the committee that an audit had been undertaken on the cost estimates for a covered outdoor learning area (COLA) for Hastings Public School.[235] Mr Coutts-Trotter then responded to questions about Tottenham Central School[236] where concerns about value for money had been raised:

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.[237]

Issues raised about Gordon East Public School and the cost of the buildings built there in 2005 were also fully addressed by the Minister after she took the time to personally consult with the school principal, who told her:

The school is so excited. The four new classrooms are just beautiful. The plans are on the Web. The classrooms are state-of-the-art with a sink, a withdrawal room, an environmentally friendly natural cooling system with a special roof cavity and water tanks. The classroom should be finished towards the end of the next term and will be home to the kindergarten class, two year 1 classes and a year 2 class. The kids can't wait.

The workers are working hard to deliver the new classrooms, even working on Saturday. Some concrete was poured yesterday and the kids were just so excited. From whoa to go the school community has been involved. The plans went to the P&C. To compare there classrooms to the 2005 classrooms is just not right because the 2005 classrooms are modular. The new classrooms are brick. The 2005 classrooms do not have any of the facilities like the withdrawal room, the sink, the cooling system and the water tanks, The BER money extended so far it went to refurbishing the administration building – which she described as stunning. It was a once-in-a-lifetime chance.[238]

APPA told the committee that they had no hard data regarding allegations of rorting in the state systems. What they did have were comments received from principals on the perception that they were getting buildings that were somehow less than what they would have organised themselves. This was compounded by concerns about 'descoping'. APPA explained to the committee that these comments were based on the principal's level of experience in their school but they had no evidence of rorting.[239]

Comment

Government senators understand that the achievement of value for money in the government sector cannot be assessed by simply dividing the notional amount of money a school could receive by the size of a building to come up with the cost per square metre. This important point does not appear to have been well understood and perhaps not well communicated.[240]

Effectively, the decision was taken that as government schools operate in a system, the total money available was pooled across the system. Common contractual arrangements were entered into for buildings of a certain size. However, it is important to remember that there will be variation in construction costs depending on location and specific site requirements—a fact that was acknowledged by some witnesses.[241] For example, the committee heard about a number of sites where unexpected issues arose to explain increased costs such as white ants, contaminated soil,[242] hidden stormwater[243] or asbestos removal.[244] In addition, there can be extra costs associated with some sites such as those with a steep slope.[245] In these cases the buildings will cost a particular base amount plus additional amounts to deal with site-specific factors. In the government system, therefore, not every school was given the full notional amount in dollar terms. Where a project comes in under cost, it will subsidise those projects where additional factors mean that they are more expensive.

Government senators note that many reports relating to value for money issues have proved unfounded upon investigation. Apart from perceptions voiced to the committee, and fuelled by the media, no evidence of any criminal or illegal behaviour was presented. Government senators understand and accept that these perceptions and feelings of disempowerment have been intensified for some by what appears in some cases to be poor communication with government schools by the education authorities.

Government senators also note the concern expressed by some schools over lack of access to costings. In response to this the committee heard that tender processes are still underway in some states and would be compromised by the release of this information. Government senators note that NSW has made estimates available publicly and expects that in time costings of finished projects will be made available in NSW and by other jurisdictions. For example during May/June 2010-11 estimates DEEWR advised the committee about some completed projects in NSW:

I thought it might be helpful just to share an example or two of the variance that we see between the New South Wales published estimated costs. For a couple of projects that have completed, where they have got their final invoices and so on, I can tell you what the final cost of the projects were, just to give you a sense of the deviation. If I can quote first a school called St Peters Public School. It is a school in St Peters in Sydney, some six kilometres south of the GPO in Sydney. The figure that you will find on the New South Wales Department of Education and Training website will show that the estimated cost for that school is $795.692. There is a Covered Outdoor Learning Area being delivered, so that is $800,000 round about. When all the tallying up was done and the project was finished, that project came in at $628, 248. A second example is Carinya School which had an estimate of $246, 895 for refurbishment of classrooms. The final cost for this project was $180, 880. I have got a calculator, but I have not done the maths, but you can see that there is a fair bit of margin.[246]

Government senators emphasise that the National Partnership Agreement on the Nation Building and Jobs Plan makes explicit reference to adopting a best value approach in contracting and tendering.[247] In addition DEEWR told the committee that the bilateral agreements with each state and territory include the requirement that each education authority require compliance with relevant procurement rules:

It is important to note in that context that each state and territory does have its own procurement laws...all of which encompass the concept of value for money as a central principle.[248]

Government senators also note that accountability mechanisms have been established for the P21 program, as well as processes to report issues. With a program of this size and complexity, issues were expected and from the start the program had complaints mechanisms built in to deal with issues that arose. This included a process to escalate any complaints that could not be resolved at the local level. The complaints processes have been shown to work most effectively. Government senators note that the vast majority of issues have either been resolved through the mechanisms set up or negotiations to resolve them are well underway.

DEEWR told the committee that of the around 61 complaints only around four remain outstanding[249] and that when claims regarding value for money were investigated it was found that costs were not being compared correctly. Ms Lisa Paul, Secretary DEEWR explained they had found errors in comparisons:

...Interestingly, I suppose I would comment that in some of the cases we have looked at in the past—we have had some of this discussion at estimates—what we have tended to find even on the value-for money question—I am not saying this is the case here at all—is that there has been a kind of comparison of apples and bananas, if you like, or something like that. In some of the cases we have looked at we have said, ‘Why did this cost this amount?’ or ‘Why were the project management fees outrageously high?’ et cetera. Then, when we have peeled it back, we have found that actually this was an entirely different basis for comparison from that or that things were being counted in fees which are not actually, in the industry standards, counted as project management fees and so on. So you really have to look at each case.[250]

DEEWR cautioned that it is important to look at each case on its merits and noted that these issues are exactly what the BER taskforce will be investigating.[251]

Coalition senators and the media claim that people with complaints did not feel able or were too scared to come forward.[252] This is clearly false as evidenced by media reports and by APPA.[253] Government senators note that the government is nonetheless concerned to receive assurance that projects are achieving value for money and that any genuine issues are addressed. To this end the government has established the BER Implementation Taskforce headed by Mr Brad Orgill to respond to allegations regarding value for money. Government senators note that Mr Orgill detailed for the committee what the taskforce will focus on:

We are looking at the complaints and they tend to fall into four categories. The first category is how many students did we have and how much funding did we get? The second category is what product was delivered and what was the consultation process for product? The third category relates to policy type issues and the fourth category, which is really our focus, is value for money. Often cases where a walkway has been forgotten or it is too hot... are the result of de-scoping. So it is a value-for-money issue and, therefore, clearly falls within our purview.[254]

Mr Orgill added that he has received excellent cooperation from the states in providing cost data for his investigations.[255] Government senators note that Mr Orgill is due to report during August 2010 and again in November 2010.[256]

There have been calls made by the Coalition to delay the release of BER funding pending the report from the BER Implementation Taskforce.[257] The Minister clarified that the next $2 billion payment would be made on 1 July 2010 and then further payments totalling $3.5 billion would not be released until November 2010 and March 2011. The money will not be fully expended on 1 July but will be held by education authorities. If there are any problems sanctions are available. Money can be withheld, payments can be suspended or money recovered.[258] The Minister has stated that there will be time to respond to any recommendations made by Mr Orgill.[259] Mr Orgill confirmed this with the committee.[260] Government senators note the disruption and confusion that would be caused by delaying BER funding when appropriate investigation of schools with value for money concerns is underway by the BER Implementation Taskforce.

Support for the program

Evidence to the committee demonstrated a very high degree of support for the program. It is important to record this support here, to introduce more balance into the reporting on the P21 program. The program has been enthusiastically supported by state governments and the construction industry for providing and supporting jobs during a period of decline in residential building activity. It has also been supported by the education sector and parents who noted the educational benefits provided by the new facilities:

It [the P21 program] has enabled us to build eight new state of the art learning areas, thus replacing old, small and unproductive portables. The excitement of parents, staff and kids is intoxicating. Children and teachers will thrive in these new learning areas, big, bold and beautiful.[261]

The Federal Government's Primary Schools for the Twenty First Century program for our school has been fundamentally positive in a range of areas. The new spaces created and re-furbished have meant an increase in the quality of the programs we can now deliver, it has also minimised the risks to both staff and students given that spaces are now designed to assist students with significant behavioural challenges. We have been able to pay attention to good design in a special school environment that was previously unavailable to us due to the costs.[262]

The Independent Education Union of Australia conducted a survey and reported on the usefulness of the program:

P21 will ensure that more Primary Schools teachers than at any other time are teaching in buildings designed in and for contemporary learning. It is axiomatic that students need a healthy and stimulating environment in which to learn. Members commented variously that:

- new planning and design principles have incorporated educational considerations for the first time;

- students were consulted in respect of decisions significant to them such as the replacement of school sporting facilities;

- until this project linking behavioural objectives to spatial needs has been an impossibility and at the margin of capital investment considerations owning to the necessarily piecemeal nature of building improvement and replacement;

- healthy and comfortable buildings increase student participation, enquiry and achievement;

- the need to comprehensively examine projections for student spatial learning needs in itself drove a new program of analysis of learning space design principles which for the first time involved students and the community; the new building processes in maximising energy savings, light and ventilation has provided a core learning opportunity in social responsibility for students.[263]

The Minister has personally visited a number of schools which indicated their support for building school infrastructure.[264]

Support from government

The Queensland government welcomed the investment in state schools and noted:

Prior to the BER program, Queensland's state primary schools were not generally provided with multipurpose halls. Investment in these facilities, particularly the multipurpose halls, along with libraries and other facilities, has received overwhelming support from principals and local communities.[265]

The Queensland government also indicated that 'school communities have overwhelmingly welcomed the program and are indicating their satisfaction with its implementation'.[266]

The NT government advised that:

...all schools have indicated they are satisfied with the level of consultation undertaken and the types of projects being funded under the initiative. Naturally some of the smaller schools would like more funding and some could argue a higher need compared to the large urban schools that received the highest level of funding. However, overall every school will benefit from the program by way of additional and/or upgraded infrastructure.[267]

Support from business

Supporting employment, particularly in the construction industry, is discussed in detail at the beginning of this report. Employment property and construction consultants Davis Langdon, involved in a number of BER projects, told the media:

Without the BER program, which is projected to be complete first quarter of 2011 there is no doubt there would be wholesale job losses in the construction industry.[268]

Support from school principals

...builders are also coming in to start on a teaching block that means the temporary transportable classrooms...that have been on the site for 21 years...can be removed and Year Sevens will finally have proper classrooms. The covered assembly area will be commenced too...replacing a large, flat, grey metal roof with no sides for 800 students to gather during winter. Huntingdale would never have been lifted to this new standard without the BER funds...[269]

A survey conducted in September 2009 of 300 principals at the Australian Primary Principals Association (APPA) conference found that 85 per cent of principals highly strongly supported the P21 program.[270] Participants were asked to rate the program from 1(lowest) to 5 (highest) and to provide comments:

The data showed that 85% of respondents strongly supported the program, giving it a rating on 4 or 5. Only 9% gave it a low rating, giving it 1 or 2. Only 4% of respondents (13 out of 305) rated the program as a 1, while 64% (almost two-thirds) rated it as a 5. This data clearly indicates that the program has been successful in the vast majority of primary schools across Australia.[271]

APPA emphasised that, of the small number of negative comments, almost none of them were about the program itself but were about the implementation of the program at the local and/or jurisdictional level.[272]

A more recent survey[273] conducted by APPA of 2,438 principals found that 97 per cent said their students would benefit from the program. Ms Leonie Trimper, President, APPA, told the committee that:

...from our dealings with principals and our research there are lots of good news stories for primary schools in this scenario.[274]

In fact, Ms Trimper told the committee that while at a function with about 60 principals she was asked numerous times when she was going to say something positive about BER. She had to explain that she had said a lot of positive things but they were not being reported. She told the committee that it is important to get more balance into the debate.[275]

The Minister for Education said that the APPA survey reflected the 'overwhelming feedback the government has received from principals and school communities around the nation'.[276]DEEWR also told the committee of professional support for the program:

Putting the economic impact of the program to one side, it is important to also note that there is strong professional support for the program and its positive impact on school communities. Results from a survey conducted by the Australian Primary Principals Association showed that 85 per cent of primary school principals strongly support the Primary Schools for the 21st Century program and the BER, with one principal stating that the funding from the program ‘has brought forward our plans, hopes and dreams for our school by at least 20 years!’ The project profiles demonstrate that schools are taking this unique opportunity to enhance their learning environments, to install energy efficient features, to improve disability access for students and the community and to address occupational health and safety standards.[277]

The NSW government reported that principals and communities have publicly supported the program. For example Mr Ron Brown, Principal of Maitland Public School, stated in a letter to the Sydney Morning Herald:

Soon my students will have a real library rather than two empty classrooms. Two teachers will be able to develop their innovative class structure with a soundproof moveable wall. The dance and gymnastics groups will no longer have to practice on pebblecrete. The concert band will not have to dismantle equipment after each rehearsal. The cost of hiring a hall for our annual performance will disappear. The success of speech day will not depend on the weather. In more than 30 years of teaching I am experiencing a most exciting and rewarding time. My school and its community will be forever grateful.[278]

Giant Steps, which caters for students with a diagnosis of Autism Spectrum Disorder, emphasised their positive experience and outlined particular areas:

The new spaces created and re-furbished have meant an increase in the quality of the programs we can now deliver, it has also minimised the risks to both staff and students given that spaces are now designed to assist students with significant behavioural challenges We have been able to pay attention to good design in a special school environment that was previously unavailable to us due to the costs.[279]

The committee was also informed that the project undertaken for the infants' areas is now short-listed for an architectural award as a project of great value.[280] Also speaking about his positive experience with the program was Mr Anthony Tsoutsa, Principal All Saints Grammar.[281] Government senators also note the examples of support for the program by a number of schools on the Queensland government website.[282]

The Minister for Education, the Hon Julia Gillard MP, provided the following example:

At Bellaire Primary School in Geelong, Victoria, $3 million is funding a new learning facility that allows flexible, state of the art teaching and learning strategies. The school has won a national award for this new way of teaching and learning in the senior primary years.  The new building will allow it to expand to the middle years students. When I visited the school the principal, Jane Warren, explained how BER is helping them to integrate teaching, curriculum, new technology and social relationships to support children’s achievement.[283]

Conclusion

Government senators note that the P21 element of the BER program is a central part of the government's economic stimulus strategy. The evidence shows that it has been successful in its primary aim of supporting the economy and jobs in local communities through the global financial crisis. It has supported employment not only in the building and construction sector but in other employment sectors as well, including planners, quantity surveyors, architects, electrical engineers, hydraulic consultants and clerical staff. It is pleasing to note that not only jobs but skills and apprenticeships are being created. This has left Australia much better off than other countries which are now facing almost double digit unemployment figures.

Supporting the economy and jobs meant tight timeframes were required. Evidence to the committee showed that this was well understood. School communities worked hard to achieve the challenging but achievable timeframes. Government senators note advice from Treasury that it was critical to get the spending into the economy as quickly as possible. Regarding the amount, Treasury emphasised that a similar amount would have to have been spent to achieve a similar effect.

Due to the necessarily tight program implementation timeframes, the government recognised that issues would arise and put in place mechanisms to address them quickly. The success of this is evidenced by the relatively small number of complaints relative to the number of projects, most of which have either been resolved or are being resolved.[284]

Government senators note that evidence received by the committee shows the P21 program has sufficient flexibility built in to recognise the diversity of school and student needs and sites. The evidence addresses false impressions that schools were forced to accept or duplicate facilities.

BER is the biggest ever capital injection into our school system, representing an approximate doubling of recent levels of capital investment in educational infrastructure,[285] and it is also the biggest school modernisation program ever seen. But the Coalition voted against it and they are not committed to its continuation.

The new facilities in Australia's primary schools turn around a decade of underinvestment. Importantly, the program was inclusive in nature with funding being provided to government and non-government schools. In addition to its primary aim of supporting the economy and jobs, the P21 program is also about creating the infrastructure required to provide quality teaching and learning which will contribute to boosting innovation capacity and performance through a better educated workforce. And, just as important, these new facilities will be accessible to the wider community as well as the current school students and staff. This will help build social capital in local communities and encourage school-community partnership.

Government senators note the importance of documenting support for the P21 program in this dissenting report to redress the imbalances in the committee majority report and place the facts on the record. The issues reported in the media and by the Coalition are not across the whole program but reflect some frustration around particular issues. Government senators note that the government is concerned to receive assurance that projects are achieving value for money and that any genuine issues are addressed. To this end the government has established the BER Implementation Taskforce, headed by Mr Brad Orgill, to respond to allegations and concerns regarding value for money.

The personal accounts provided to the committee and quoted in this report show that the P21 investment is transformational for schools. This program will leave a legacy of improved school infrastructure and facilities which will contribute to the quality of education provided in schools and lead to improved educational outcomes.

 

Senator Gavin Marshall                                                   Senator Catryna Bilyk
Deputy Chair

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