CHAPTER 5
COMMERCIAL CONFIDENTIALITY
Introduction
In the previous chapter, the committee briefly considered in general terms the issue of
governments' handling of parliaments' requests for information deemed to be confidential,
for whatever reason. In this chapter, the committee considers the issues specifically
relating to information deemed commercially confidential.
Commercial confidentiality has always been a contentious issue between parliaments and
governments. At first, procurement issues were the cause. With the establishment in the
1980s of government business enterprises and units in government departments which
operated on a commercial basis, the problems have accelerated.
It is axiomatic that, in order to know whether a government contract that has been
entered into is sound and represents value for money, parliamentarians or their
representatives must be able to access details of the contract. It has been a general
parliamentary experience in Australia that most such contracts are deemed by governments
to be commercially confidential and therefore unavailable for scrutiny by interested
parties, including parliamentarians. In the federal sphere, the general practice in the
case of significant contracts is for the relevant minister to announce by press release
the awarding of the contract, name the successful tenderer and state the all-inclusive
cost. Brief details of all contracts worth more than $2000 are also listed in the
Government Gazette and similarly, brief details of contracts of any size are
included in the annual report information which must be made available by agencies on
demand, if it is not published in the report itself.
The United States appears to have a more robust attitude to freedom of commercial
information. The committee was told that US state government contracts are generally
available for public scrutiny once the contract is signed. [1]
What is commercial confidentiality?
Commercial confidentiality is a nebulous concept. The Freedom of Information Act
1982 (FOI Act) describes it in general terms in Part IV under documents exempt from
disclosure:
The guidelines for official witnesses before federal parliamentary committees, which
consider the question of public interest immunity and its scope, rely in part on the
exempt provisions of the FOI Act, though the guidelines are at pains to stress that the
provisions of that Act have no actual application to parliamentary inquiries but `are
merely a general guide to the grounds on which a parliamentary inquiry may be asked not to
press for particular information'. [2] Public servants might be
justified in seeking to give evidence to a committee in camera in the case of `evidence
the public disclosure of which would … reveal business affairs, including trade
secrets or other commercially sensitive information'. [3]
The general principles enunciated in the guidelines lean heavily in favour of
disclosure – `it is intended, subject to the application of certain necessary
principles, that there be the freest possible flow of information between the public
service, the Parliament and the public' and `it may be in the public interest to provide
to the committee a document or information for which exemption would normally be claimed
under the [FOI]Act' with exemptions in that Act needing to be `viewed from the perspective
of the proper role and functions of the Parliament'.
Other Commonwealth legislation addresses the question of the publication of `sensitive'
commercial information. The Auditor-General Act 1997, under s.37 (2) (e) prohibits
the Auditor-General from including in a public report any information which `would
unfairly prejudice the commercial interests of any body or person' and under s.37 (3) the
Auditor-General is prohibited from disclosing such information to a House of the
Parliament, a member of a House of the Parliament or a parliamentary committee. Further,
under s.37 (1) (b) the Attorney-General is given the power to issue a certificate to the
Auditor-General, stating that in his opinion the disclosure of certain information would
be contrary to the public interest.
As this legislation has only recently come into operation, there has been insufficient
time to assess its impact. The committee expects that the Auditor-General, as an
independent officer of the parliament, will be robust in his assessment of where the
balance lies between the public interest and commercial interests.
Whether certain commercial information falls within the above confidentiality
definitions is, however, a subjective judgment and one that has been frequently disputed
before the Administrative Appeals Tribunal. “Trade secret” is not defined in the
FOI Act. In a recent review of that Act, it was accepted that an express exemption for
trade secrets was necessary to ensure certainty of protection for third parties'
intellectual property rights. [4] The review also considered the
public interest test implied in the use of the word “unreasonably” and noted
that most state FOI legislation has a public interest test for all elements of the
equivalent exemption. The review, however, concluded by not recommending any change to
s.43 regarding the public interest.
In evidence to the committee, there was no consensus on whether contracts should
necessarily be classified as commercially confidential. Dr Lewis suggested that once an
information technology contract was signed, commercial-in-confidence concepts were
irrelevant:
I have never found a vendor or an agency that has insisted on information being held
commercial-in-confidence after the contract has been signed. There are protections of the
information whilst you are doing the evaluation and so on to make sure the information
does not leak out, and we separate technical evaluation from financial evaluation and
never the twain shall meet until it comes together in the final decision making process,
but the figures that the Commonwealth is paying for, in my experience, have not been
hidden or suppressed. [5]
The New South Wales Auditor-General, Mr Tony Harris, agreed that the confidentiality
status of commercial information depended primarily on the time-frame:
it appears to me that there should be a very clear demarcation between commercial
information which is ex ante, before a decision is made relevant to that information, and
commercial information which is ex post – that is, decisions have been made. Tender
documents provided before the tender decision is made are particularly commercially
sensitive, because a decision has not been made and because the benefits and rights
attaching to that information can be usurped by others should that information be given
out. After the decision is made, I think the information is of very little value in a
commercially confidential sense. [6]
He explained that for large contracts, both the government and the private sector have
hundreds of people involved in examining them, from lawyers to technical experts, and
hence confidentiality could not easily be ensured for long.
Commercial confidentiality and the Senate
Documents which might be deemed to be commercially confidential, however defined, are
frequently sought by parliamentarians, either in debate in a chamber or in the course of
committee proceedings. It is an issue common to most parliaments, which address it in
various ways. The Senate, for example, has evolved the following procedures to handle
claims of commercial confidentiality, depending on the forum in which the claims are made
and whether the claimant is the government or a private citizen.
The Standing Orders which govern proceedings of the Senate recognise that there are
categories of material the disclosure of which is not in the public interest:
168. (1) A document relating to public affairs quoted by a Minister may be ordered to
be laid on the table, unless the Minister states that the document is of a confidential
nature ... [emphasis added]. [7]
This order is of relevance only to proceedings in the Senate chamber and is invoked
infrequently. No guidance is provided in the Standing Orders as to what matters might be
so covered but much clerkly advice has been offered on the subject. Among the issues from
recent Senate debate or responses to questions on notice which have been asserted to be
commercially confidential include:
- annual supplies under contract of uranium concentrate to France; [8]
- names of unsuccessful tenderers for a major aircraft runway; [9]
and,
- cost of chartering a ship (because of confidentiality clauses in contract); [10]
Many of the parliamentary clashes over the confidentiality status of information arise
not from proceedings in the Senate chamber but from committees. Senate committees have the
power to 'send for persons and documents' and to take evidence in public or in private
session, [11] with the exception of legislation committees
considering estimates, whose powers are restricted to taking evidence in public. [12]
Committees, particularly reference committees, normally invite witnesses to give
evidence but have asserted the power, and have been known to exercise that power, to
summon witnesses and documents. Witnesses so summoned have protections as outlined in the
Senate Privilege Resolutions, the first of which states, inter alia:
In their dealings with witnesses, all committees of the Senate shall observe the
following procedures:
(1) A witness shall be invited to attend a committee meeting to give evidence. A
witness shall be summoned to appear (whether or not the witness was previously invited to
appear) only when the committee has made a decision that the circumstances warrant the
issue of a summons.
(2) Where a committee desires that a witness produce documents relevant to the
committee's inquiry, the witness shall be invited to do so, and an order that documents be
produced shall be made (whether or not an invitation to produce documents has previously
been made) only where the committee has made a decision that the circumstances warrant
such an order. [13]
When a committee compels evidence from a reluctant witness, the resolutions provide for
certain protections:
1. (7) A witness shall be offered, before giving evidence, the opportunity to make
application, before or during the hearing of the witness's evidence, for any or all of the
witness's evidence to be heard in private session, and shall be invited to give reasons
for any such application. If the application is not granted, the witness shall be notified
of reasons for that decision.
(8) Before giving any evidence in private session a witness shall be informed whether
it is the intention of the committee to publish or present to the Senate all or part of
that evidence, that it is within the power of the committee to do so, and that the Senate
has the authority to order the production and publication of undisclosed evidence.
Privilege Resolution 1(10) provides that if a witness is required to answer a question,
the witness `shall be required to answer the question only in private session unless the
committee determines that it is essential to the committee's inquiry that the question be
answered in public session'. Should a witness decline to answer a question, resolution
1(10) requires the committee to report the facts to the Senate. This committee is unaware
of any cases following the adoption of the Privilege Resolutions in 1988 in which a
committee has reported to the Senate on non-compliance from a private witness, though it
is aware of instances when committees have determined not to press its requests. A refusal
to provide information could trigger a referral of the matter by the Senate to its
Committee of Privileges to determine whether a contempt of the Senate had been committed
and, if so, whether the penalties outlined should be applied.
Where the witness is a public servant, Privilege Resolution 1(16) affords certain
additional protections: the public servant `shall not be asked to give opinions on matters
of policy, and shall be given reasonable opportunity to refer questions asked of the
officer to superior officers or to a minister'. A refusal by a minister to respond may
lead to an order of the Senate to provide the information and, if the minister failed to
comply, a censure motion as described in the Casselden Place case study below. The Senate
generally prefers to take no action against public servants who have denied information to
the Senate or a Senate committee on the instructions of a minister, preferring instead to
take the matter up with the minister concerned.
To put the issues in context, recent examples of claims of commercial confidentiality
made in the estimates context have included the following:
- exact details of funding of programs under the Development Import Finance Facility
(DIFF) scheme; [14]
- scoping study on the valuation of Artbank; [15]
- copies of Australian Workplace Agreements; [16]
- contingent liability of Jindalee Operational Radar Network for Telstra; [17]
- price breaks in the Department of Veterans' Affairs contract with Integrated Systems
Solution Corporation (ISSC); [18]
- Defence Science and Technology Organisation income from royalties and licence fees; [19]
- projected Defence property disposals; [20]
- aspects of a meatwork's debt history and Australian Quarantine and Inspection Service
recovery activity; [21] and,
- subcontracting of consultancies. [22]
The committee has doubts whether every aspect of all of the above would stand up to
serious scrutiny as being legitimately commercially confidential.
In camera evidence
For committees having the power to take evidence in camera, one response to a
commercial confidentiality claim is for the committee to offer to take such evidence in
that manner. This option is unavailable to committees considering the estimates, whose
powers extend only to receiving evidence in public. A growing practice is for such a
matter raised in estimates to be dealt with by the committee's agreeing to examine the
issue in a separate inquiry under its general powers which allow it to receive evidence in
camera. Recent estimates examples involving contractual information have included the case
of the marketing of the Disability Reform Package, which was referred to the Community
Affairs References Committee; [23] and the case of the
contractual dispute between the CSIRO and Charter Pacific, when the Economics Legislation
Committee agreed to hear matters in camera under its general inquiry powers.
Whether receiving evidence in camera is an adequate means of handling an accountability
issue is questionable. In his submission to the committee, the Clerk of the Senate, Mr
Harry Evans, voiced his support for the practice:
The underlying principle should be that if information can be disclosed to the
government on a confidential basis there is no reason for its not being disclosed to a
parliamentary committee also on a confidential basis. The commercial-in-confidence
principle militates, in appropriate cases of apprehended damage to commercial interests,
against the publication of information, not against the provision as such of the
information. Any claim that information is commercial-in-confidence should therefore be
met by the question: what is the damage to commercial interests that may result from the
publication of the information, and the purpose of this question should be to determine
whether information is treated as in camera evidence rather than as public evidence
[emphasis added]. [24]
The question of extending in camera powers to committees in their examination of
estimates has been discussed almost from the time of inception of the committees. The view
has been frequently expressed that it would be pointless to give those committees the
power to receive confidential information as, if the information revealed something
untoward, the committee would be constrained in what it could properly do with the
information. Even though committees are now empowered to reveal confidential information
in some circumstances, as discussed below, to do so would run the risk of incurring
opprobrium and reducing the likelihood that future confidential information would be
provided.
In considering the provision of information on a confidential basis, the question of
its remaining confidential is often an underlying and generally unspoken concern. There is
a very real risk that in the event that an apparent scandal were disclosed, the
information would be 'leaked' in any event. Penalties for the unauthorised disclosure of
evidence are enshrined in the Parliamentary Privileges Act 1987:
13. A person shall not, without the authority of a House or a committee, publish or
disclose-
(a) a document that has been prepared for the purpose of submission, and submitted, to
a House or a committee and has been directed by a House or a committee to be treated as
evidence taken in camera; or
(b) any oral evidence taken by a House or a committee in camera, or a report of any
such oral evidence,
unless a House or a committee has published, or authorised the publication of, that
document or that oral evidence.
Penalty: (a) in the case of a natural person, $5,000 or imprisonment for 6 months; or
As has been pointed out, there are practical difficulties associated with the use of
this power, including, for example, the unfairness of imposing a penalty on a public
servant who acts on the direction of a minister. [25] These
penalties do not appear to act as a sufficient deterrent, as the history of both federal
Houses' Privileges Committees will attest. The committee suspects that much 'unauthorised
disclosure' goes unreported; none of the five cases that have been referred to the Senate
Privileges Committee has resulted in the imposition of a penalty and in most cases, the
person responsible for the disclosure has not been identified. Understandably, that
committee finds 'leak' inquiries 'frustrating and ineffectual'. [26]
Individuals and public authorities would be wise to be wary about providing information
in confidence to Senate committees, as they cannot receive a guarantee that the confidence
will be respected. Apart from the danger of unauthorised leaking, as mentioned above,
there is a perfectly legitimate means provided by Senate Standing Orders as amended on 13
February 1997 for a senator to disclose confidential information:
37.(2) A Senator who wishes to refer to in camera evidence in a dissenting report shall
advise the committee of the evidence concerned, and all reasonable effort shall be made by
the committee to reach agreement on the disclosure of the evidence for that purpose. If
agreement is not reached, the Senator may refer to the in camera evidence in the dissent
only to the extent necessary to support the reasoning of the dissent. Witnesses who gave
the evidence in question shall, if practicable, be informed in advance of the proposed
disclosure of the evidence and shall be given reasonable opportunity to object to the
disclosure and to ask that particular parts of the evidence not be disclosed. The
committee shall give careful consideration to any objection by a witness before making its
decision. Consideration shall be given to disclosing the evidence in such a way as to
conceal the identity of persons who gave the evidence or who are referred to in the
evidence.
Further, the President of the Senate is empowered to release that information after 30
years. [27]
While to the best of the committee's knowledge, there has been no disclosure of
confidential contractual information in dissenting reports, no cast-iron guarantee
that the information will not be disclosed can be given to persons who might be disposed
to providing such information. Apart from the formal privilege cases referred to above,
the committee is aware of anecdotal evidence to suggest that there has been some informal
leaking of material provided in confidence. While all responsible members of parliament
seek and use information in the public interest and for proper purposes, it must be
acknowledged that others do not. The chief protection against such abuse is through the
disapproval of fellow members. This depends for its efficacy on the maintenance of high
moral standards. Unless parliaments are prepared to exercise more discipline over their
members and staff who transgress in this regard, it is questionable whether they should be
entrusted with confidential information of this kind.
The harsh reality surrounding executive claims of commercial confidentiality is that
they are unlikely to be believed, even when justified, because of their suspected use in
the past to hide sloppiness, extravagance, incompetence - or worse - in the expenditure of
public money. Hence the enthusiasm on the part of non-government senators and members to
pursue such matters. This is a pity because, in an increasingly commercialised
environment, there will be cases when commercial confidentiality, at least in the short
term, may be a perfectly legitimate reason for the non-provision of information. And by
interposing in the equation private sector players who may not previously have had to
contend with public interest questions, determination of public interest claims will be
all the more difficult. In the following case studies, the committee describes cases in
which commercial-in-confidence has been an issue and considers what lessons can be learnt
from them.
Case studies
A few examples will serve to illustrate the problems that will need to be resolved if
contracting is not to become a running sore for both parliament and the executive.
Case 1: Geraldine Doogue's contract
In April 1985, members of Estimates Committee C sought information from the ABC about
the salary paid to television presenter Geraldine Doogue. The minister representing agreed
to convey the request to the Minister for Communications. After consultation between the
ABC and the minister, the former provided the committee with the following reply:
We would be reluctant to make public the amount paid to a particular contract employee
because such a disclosure could adversely affect the interests of the ABC in acquiring and
retaining suitable persons having regard to the competition amongst TV stations for top
'on camera' personalities. However, we would provide such details to the Minister for his
information.
Our view is that by providing the Minister with this information, the ABC is
demonstrating its preparedness to be accountable, while at the same time protecting its
commercial competitiveness. [28]
The committee did not regard this response as adequate and succeeded in having the
matter referred to the then Finance and Government Operations (FGO) Committee, which had
the power to receive evidence in camera if it wished. In the course of its inquiry, that
committee sought an opinion from the Attorney-General's Department which stated, inter
alia:
In deciding whether to press for information about commercial contracts, a House or a
committee would no doubt balance considerations of commercial confidentiality (including
any claims that disclosure would prejudice private or commercial interests) against the
public interest in having access to the information (including, for example, the need for
that information for the purposes of parliamentary scrutiny of expenditure. [29]
Apart from specifics about the particular ABC contract under consideration, the
committee made a number of general observations about parliament's right to know
commercially confidential information relating to budget-dependent agencies. It found that
'authorities must be prepared to account to Estimates Committees for all aspects of their
financial management and administration, even when the information sought may be regarded
as private or commercially confidential' but that parliament should have proper regard for
genuine personal and commercial interests. [30]
The FGO Committee concluded that `information cannot and should not be withheld from
Parliament or its committees by an authority, unless a specific provision to that effect
is contained in an authority's enabling legislation'. The government in its response
accepted this general principle but made the point that `Parliament should assess the
difficulties associated with making the information public and ensure that any such
adverse effect is balanced against the public interest in the Parliament obtaining the
information.' [31]
At least part of the FGO Committee's motivation in this inquiry was to gain a public
acceptance from the ABC that it was accountable to estimates committees for its
expenditure of public monies - and that was achieved. The committee did, however,
recognise parliament's own responsibilities in seeking confidential information:
parliamentary committees should ensure that their powers to gain information are not
used capriciously. Committees should not be used for `fishing expeditions' but, in order
to maintain the integrity of and respect for committees, all committee requests should be
based on a genuine need for information. [32]
Case 2: Casselden Place, Melbourne
In 1987 Cabinet approved the construction of 60 000 m2 of office accommodation in
Melbourne at an estimated construction cost of $143m excluding fitout, at 1987 prices. The
Casselden Place project received the approval of the Public Works Committee.
Justifications advanced for the project included the desire to co-locate Commonwealth
tenancy holdings, low CBD vacancy rates and an expected rise in property rental costs.
Three companies submitted tenders to construct the office building, with the lowest
tenderer, Baulderstone Pty Ltd, being successful with a fixed price contract of $186m
including $22m for fitout subject to rise and fall. The contract was signed in December
1988; occupancy by tenants commenced in July 1992. Final construction costs were $194.2m,
which was regarded by the Audit Office as being within budget, allowing for the rise and
fall contract components. [33]
The tenancy arrangements in 1988 envisaged the Australian Taxation Office being the
principal tenant with the Department of Administrative Services (DAS) taking up
24 500m2 . By the time of occupancy, DAS had been commercialised and its Commonwealth
clients largely untied, resulting in considerable downsizing. The three DAS business units
which ultimately occupied the Casselden Place building – Projects/Australian
Construction Services, Interiors and Asset Services – took up only 8 611m2 . By this
time, the commercial property market had nose-dived, there were significant vacancy rates
in the CBD and rapidly declining face rents and effective rents. New tenants in the market
were being offered significant incentives by the end of 1992, yet the rates to be charged
tenants of Casselden Place were those determined by the Australian Valuation Office (AVO)
in July 1991 and, according to a subsequent Audit Office report:
The actual rents per square metre being charged and paid were the market face rates
applicable for prime buildings including Casselden Place at December 1992. These rents
were at least 40% above effective rents being charged in the market in December 1992 after
allowing for the effect of commonly included and well-known incentive packages. [34]
This matter came to the attention of the federal opposition, with Senator Campbell
asking, on notice, a series of questions relating to leases for office space in the
Casselden Place building. He received a reply from the then Minister of Administrative
Services, Frank Walker, offering the senator the opportunity to view the information on a
confidential basis. An order of the Senate of 5 May 1994 for the tabling of documents
containing information about the rental and outgoings of leases between the agencies
concerned was not complied with. Accordingly Senator Campbell moved a successful censure
motion against the minister and the minister representing him in the Senate, Senator Bob
McMullan. [35] The matter did not rest there, with the
opposition parties joining together in the Senate on 22 June 1994 to pass a resolution
ordering the Auditor-General to report on fourteen specific matters relating to tenancy
arrangements in the Casselden Place building and ordering the Senate Committee of
Privileges to consider the refusal of the minister to produce documents in response to an
order of the Senate. Both orders were complied with, with the Auditor-General presenting
his report in October 1994 and the Senate Committee of Privileges reporting in March 1995.
The latter commended the use of an independent arbiter – in this case the
Auditor-General – to overcome the difficulties presented by executive claims of
executive privilege or public interest immunity. [36]
The salient questions raised by the above case are:
- was the information the government ministers sought to protect really commercially
confidential?
- was the offer of a confidential viewing of the material an appropriate or an adequate
response?
- was the use of an independent arbiter an appropriate way to handle the situation on that
occasion and perhaps more generally?
- were there extenuating circumstances in this case which make the lessons learnt from it
inapplicable more broadly?
The three DAS agencies whose rentals were the subject of the commercial confidentiality
claim had, in the period immediately prior to the move to Casselden Place, become
self-funding commercial business units and in the case of two of them, had had their
Commonwealth customers untied and hence were competing in an open marketplace, albeit with
greater obligations of disclosure and accountability by virtue of their being public
sector enterprises. The government was concerned on the one hand to ensure competitive
neutrality, with DAS businesses being seen to compete without any special advantages
because of their status as government agencies; but on the other hand, it wanted those
businesses to compete successfully. Hence the stated concern to do nothing which might
disclose to their competitors (via disclosure to parliament) their cost structures, such
as rental obligations.
The government sought to justify its non-provision of the lease information on the
grounds that it was protecting the interests of the Commonwealth employees in the DAS
agencies by attempting to ensure that their businesses remained competitive. In the
censure debate, however, it was argued that rent was only a minor cost of between 10 and
15 per cent of the outgoings of a business and precise knowledge by a competitor of the
exact level would only marginally affect tender prices. [37] It
was also suggested that details of the leases would be publicly available from the state
titles office, [38] though this might not be the case in
Victoria where the committee understands that the registering of leases is optional. The
committee notes that the Auditor-General's report provided on the public record all the
details sought bar one, suggesting that the commercial confidentiality claims were perhaps
overstated. Curiously, the one figure blacked out in the report was the amount of cash
settlement provided to one of the agencies to settle restoration obligations. [39] It seems to the committee that this is more likely to have
been the result of sensitivities among the DAS agencies, rather than a matter which might
be genuinely commercially confidential.
The then government repeatedly offered to provide on a confidential basis the lease
information requested. As Senator McMullan stated in the censure debate:
The obligation of the executive, when it is in conflict with the legislature about the
provision of information … is to seek to make as much of the information as possible
available in an alternative way. We are not in the business of covering up. [40]
Senator Campbell replied as follows:
One of the offers we have had in relation to this is for me to go and have a
confidential look at some documents again. The problem with that is that if I take up the
offer, have a confidential look and am not satisfied with what I see, what do I do? If I
come back here and say, `I have just discovered some major fraud,' or `I have just
discovered a major maladministration,' Senator McMullan would put out press releases
saying, `Senator Campbell has rorted the truth again.' I would be putting myself in an
invidious position … having confidential briefings in the minister's office is not
the way to solve it. [41]
As noted above, the way out of the impasse on this occasion was the use of an
independent arbiter in the form of the Auditor-General, an approach suggested by the
Senate Committee of Privileges in its 49th report.
Case 3: Centenary House
Prior to 1989 the Australian National Audit Office (ANAO) was accommodated in the
Silverton Building in Civic, Canberra. That building was evacuated due to structural
faults and temporary office accommodation for the ANAO was found in Medibank House, Woden.
The then Joint Committee of Public Accounts (JCPA) recommended that the ANAO needed to be
accommodated within or near the parliamentary triangle [42] and
discussions began between the ANAO and the Australian Property Group (APG) in March 1990.
In October of that year the ANAO wrote to the Secretary of DAS, formally advising of his
requirement for 7500m2 office accommodation in a separate building in the Parkes-Barton
area or in a large complex with controlled access. The APG advised the ANAO of options,
including one of a building to be constructed in the area by Lend Lease and in December
1990 the ANAO indicated its preference for the Lend Lease proposal. It was not, at this
stage, advised that the proposal was a joint venture with the Australian Labor Party
(ALP). Lease negotiations and discussions with the Department of Finance took place in
1991 and until 8 April 1992, when the formal agreement to the lease was signed by the
Australian Government Solicitor. The terms of the lease, as negotiated by officers of the
APG with the benefit of valuation advice from the Australian Valuation Office, were as
follows:
- area of 6000m2
- 15 years, with an option of a further 5 years;
- rental $280 per square metre per annum;
- escalator adjustment of 10.5% p.a. from 1 January 1991 to date of practical completion;
- escalator adjustment of 9% p.a. from date of practical completion for 15 years;
- market review at the end of the sixth and tenth years and the agreed rate to be
whichever is the greater between the escalated rent rate and the market rate; and,
- total refurbishment after 10 years if option to extend the lease exercised.
Details of the chronology of events and of comparable leases were sought throught much
of 1993 and early 1994 through estimates and in the chambers, and frequently attracted
responses failing to provide the relevant details and citing commercial confidentiality as
the reason. [43] Two inquiries were agreed to: a joint inquiry
by the Auditor-General and the South Australian Auditor-General; and an independent
inquiry by the independent auditor of the Auditor-General, Mr Boymal, with a right to
report directly to parliament. In the event, however, a judicial inquiry into all aspects
of the leasing arrangements was established in May 1994, conducted by the Hon. T.R.
Morling, QC. His report in October of that year concluded that, while the length of the
lease was unusual, the escalator adjustment and the rent review clause were justifiable at
the time and that, overall, `the terms of the lease are reasonable, are not unduly
favourable to the lessor and are not inimical to the interests of the Commonwealth'. [44]
The government consistently argued that to provide lease terms, effective value of
incentives, addresses, lettable areas, building outgoings et cetera would breach the
confidentiality of the APG customers and adversely affect the prospects of the APG as a
commercial service provider in competition with the private sector. [45]
Yet the Morling report, with just such detail, was made public.
Consequences of non-disclosure
If a minister refuses to table a document when requested to do so, either House has the
power to order him or her to do so. In the event that the minister refuses to comply with
the order, the House may censure the minister or the government. The usual result of a
successful censure motion is temporary embarrassment but in a few cases, the exposure has
prompted further action such as a committee or Auditor-General inquiry, or the threat of
one. [46] Were the case sufficiently serious, the Senate might
carry through with a motion allowing penalties to be imposed on a minister, such as
preventing him or her from introducing bills. [47]
Possible ways forward
Codification of what constitutes `commercially confidential' information
In a supplementary submission to the committee, the Australian Law Reform Commission
produced a broad outline of information which could be protected on the grounds of its
commercial character in the contracting out of government services:
- information that has an intellectual property value, or amounts to a trade secret
(noting that this may change over time);
- information that relates directly to the actual conduct and operations of the contractor
(noting also that this may change over time) – in the case of the Victorian
Metropolitan Ambulance Service, this included prospective tenderers' financial position,
operating hours, activity profile, vehicle insurance, communications equipment, employee
shift configurations, cost structures, staff training programs and customer service
initiatives; and the tender evaluation methodology;
- details concerning the contractor's successful tender, where evidence of the market in
that particular industry demonstrates that disclosure of specified information will
adversely impact the business affairs of the contracting firm;
- information obtained in confidence that satisfies the common law test for breach of
confidence; and
- circumstances where there is no overriding public interest in disclosure of the
information or where the public interest is not so great as to result in the person or
business being unreasonably affected by disclosure of the information. [48]
While there is a broad general understanding of the kinds of information which contractors
might regard as commercially confidential and having the potential, if disclosed, to
disadvantage them vis-a-vis their competitors, the committee accepts that precise
codification might not be workable across different industries or services and at
different times. Far less consensus is likely regarding what information concerning
contractual arrangements should be available to parliament to ensure adequate levels of
accountability.
Even in the event that an agreed list of commercially confidential matters were drawn
up, adherence to it would be another question entirely. A refusal by a government to
produce information demanded by a parliament is a political matter and one whose outcome
is determined by the processes of parliament described above.
If it is accepted that information which might disadvantage contractors vis-a-vis their
competitors is not to be openly published, there might be a case, as suggested by the
Department of Health and Family Services, for including in contracts clauses specifying
categories of information which may be disclosed publicly.
Non-disclosure agreements
One compromise approach to handling commercial confidentiality matters has been the
offer of the information on the condition that committee members and committee staff sign
non-disclosure agreements. It is doubtful if such agreements could be deemed to be legally
binding, if an individual chose to disclose information for the purposes of parliamentary
work.
A South Australian parliamentary committee was one which experienced – and
rejected - the offer of information dependent upon the signing of non-disclosure
agreements. The then Select Committee on Contracting Out of State Government Information
Technology obtained the support of the South Australian Legislative Council which endorsed
the committee's call for the provision of the EDS contract on an in camera basis but this
was ignored.
The parliamentary furore over Geraldine Doogue's contract, as described above, was
exacerbated by the inclusion in the contract of a non-disclosure clause, binding on both
parties to the contract. In its submission to the committee, the Attorney-General's
Department raised the use of agreements to settle contract disputes on terms which are not
to be disclosed. [49] Given that parliament should have the
right to know how public monies are being spent, the committee cautions strongly against
the use of non-disclosure agreements.
An independent arbiter
The use of an independent arbiter to break deadlocks between government and parliament
has been shown to be an effective mechanism, as in the Casselden Place matter described
above, when the Auditor-General performed such a role. As an independent officer of the
parliament, the Auditor-General is ideally suited to be a circuit-breaker in such
circumstances and brings to the position a wealth of experience in matters of commercial
confidentiality.
The Auditor-General is limited, however, in his powers to investigate ministerial
actions. His role also requires access to records, as considered in chapter 4. For his
office to be in a position to investigate commercial-in-confidence cases in detail, such
access to records must be provided for.
Production of contract summaries
The South Australian government attempted to resolve the problems associated with the
release of commercially confidential information in 1996. All-party discussions resulted
in an agreement on the establishment of a protocol, which provided that:
- parliamentary committees would have access to summaries of contracts;
- summaries would exclude commercially confidential matters;
- summaries would be prepared without delay; and
- the Auditor-General would certify that the summaries were correct and that the matters
claimed to be commercially sensitive were so.
The relevant audit legislation was amended to enable the Auditor-General to carry out
his new function. Summaries are to be produced by the Crown Solicitor's Office, subject to
instruction from the relevant agency and comment from the contracted party.
Only one summary has been tabled to date, on the contract for the operation of Modbury
Hospital. [50] It was less than two pages in length and
amounted to little more than the contract's table of contents. Unsurprisingly, it was not
well received.
This committee understands, however, that a South Australian select committee on Mount
Gambier prison was furnished with volumes of reports and contracts which, the committee
was assured, contained a plain English version of the contract for the operation of the
prison; the contract itself was not provided, but nor did it become an issue.
Release after a certain time
If it is accepted that elements of contracts need to remain confidential to prevent
competitors from being unfairly advantaged, it then needs to be questioned whether such
confidentiality pertains indefinitely. It has been argued that the need for
confidentiality would expire long before the 30 year-period accorded to cabinet and
national security documents.
Reversal of the onus of proof
In determining whether a claim for commercial confidentiality is justified, both the
ANAO and the Commonwealth Ombudsman suggested the reverse onus of proof test. The former
cited the experience of the New Zealand courts which have enforced the primacy of the
public interest test regarding contract specifications and performance and, `to override
the public interest grounds of disclosure, there has to be a very strong argument of
commercial prejudice'. [51] Mr Greenslade, representing the
ANAO, stated:
In our view, the question of whether or not commercial-in-confidence information should
be disclosed to the parliament should start from the general principle that the
information should be made public unless there is a good reason for it not to be. In other
words, what we are saying is there should be a reversal of the principle of onus of proof
which would require that the party arguing for non-disclosure should substantiate that
disclosure would be harmful to its commercial interests and to the public interest. [52]
The committee agrees. In practice, however, the Commonwealth parliamentary forum in
which the majority of claims of commercial confidentiality is made is estimates hearings,
the partisan nature of which is hardly conducive to a calm, reasoned debate on such an
issue. The committee believes, however, that where information is withheld on commercial
confidentiality grounds, at the very least the reasoning behind the decision should be
provided promptly to the committee. If in turn the committee finds that reasoning
inadequate, it may seek to refer the matter to an independent arbiter.
Conclusions
The committee is firmly of the view that only relatively small parts of contractual
arrangements will be genuinely commercially confidential and the onus should be on the
person claiming confidentiality to argue the case for it. A great deal of heat could be
taken out of the issue if agencies entering into contracts adopted the practice of making
contracts available with any genuinely sensitive parts blacked out. The committee accepts
that some matters are legitimately commercially confidential. If parliament insists on a
`right to know' such legitimately commercially confidential matters, the most appropriate
course to achieve this would be the appointment of an independent arbiter such as the
Auditor-General to look on its behalf and, as a corollary, to ensure that he has the staff
and resources to do it properly.
Senator Shayne Murphy
Chairman
Footnotes
[1] Mr Tony Harris, Evidence, 20 May 1997, p. 378.
[2] Senate Hansard, 30 November 1989.
[3] Senate Hansard, 30 November 1989.
[4] Australian Law Reform Commission & Administrative
Review Council, Open Government: a review of the federal Freedom of Information Act
1982, AGPS, Canberra, 1995, p. 141.
[5] Evidence, 5 September 1997, pp. 693-4.
[6] Evidence, 20 May 1997, p. 378.
[7] Senate Standing Orders, Canberra, 1997.
[8] Senate Hansard, 4 February 1997, p. 55.
[9] Senate Hansard, 27 March 1995, p. 2209.
[10] Senate Hansard, 9 June 1995, p. 1260.
[11] Senate Standing Orders, Canberra, 1997, SO 25 (15).
[12] Senate Standing Orders, Canberra, 1997, SO 26 (2).
[13] Journals of the Senate, 25 February 1988.
[14] Senate Foreign Affairs, Defence and Trade Legislation
Committee, Hansard, 27 February 1997, p. 108.
[15] Senate Environment, Recreation, Communication and the
Arts Legislation Committee, Hansard, 12 June 1997, p. 321.
[16] Senate Economics Legislation Committee, Hansard, 18
August 1997, p. 129.
[17] Senate Environment, Recreation, Communication and the
Arts Legislation Committee, Hansard, 21 August 1997, p. 127.
[18] Senate Finance and Public Administration Legislation
Committee, Hansard, 12 June 1997, p. 363.
[19] Senate Foreign Affairs, Defence and Trade Legislation
Committee, Hansard, 17 June 1997, p. 437.
[20] ibid., p. 440.
[21] Senate Rural and Regional Affairs and Transport
Legislation Committee, Hansard, 26 February 1998, p. 29.
[22] ibid., p. 98.
[23] That committee's report, Inquiry into Matters
pertaining to the Marketing of the Disability Reform Package, was tabled in December
1994.
[24] Submissions, vol. 1, p. 11.
[25] Odgers' Australian Senate Practice, 7th ed.,
Canberra, AGPS, 1995, p. 497.
[26] Senate Privileges Committee, Committee of Privileges
1966-1996, 62nd Report, Canberra, 1996, p. 22.
[27] Senate Standing Orders, February 1997, 37 (3).
[28] Senate Standing Committee on Finance and Government
Operations, ABC Employment Contracts and their Confidentiality, 1996, p. 2.
[29] ibid., p. 28.
[30] ibid., pp. 50-51.
[31] Senate Hansard, 17 November 1987, p. 1840.
[32] Senate Finance and Government Operations Committee, ABC
employment contracts and their confidentiality, 1986, p. 46.
[33] Auditor-General, Special Investigation into Casselden
Place Building, Melbourne, Audit Report no. 4, 1994-95, AGPS, Canberra, 1994, pp. 3-7.
[34] ibid., p. 14.
[35] See Senate Hansard, 10 May 1994, pp. 508-16 for
the debate.
[36] Senate Committee of Privileges, Parliamentary
Privileges Amendment (Enforcement of Lawful Orders) Bill 1994 – Casselden Place
Reference, 52nd Report, 1995, pp. 4-5.
[37] Senate Hansard, 10 May 1994, p. 514.
[38] Senate Hansard, 3 February 1994, p. 310.
[39] Auditor-General, Special Investigation into Casselden
Place Building, Melbourne, Audit Report no. 4, 1994-95, AGPS, Canberra, 1994, p. 26.
[40] Senate Hansard, 10 May 1994, p. 511.
[41] Senate Hansard, 10 May 1994, p. 508.
[42] Joint Committee of Public Accounts, The
Auditor-General: Ally of the People and Parliament, (Report no. 296) 1989.
[43] See, for example, Senate Hansard, 2 February
1998, p. 291.
[44] Royal Commission of Inquiry into the Leasing by the
Commonwealth of Accommodation in Centenary House, Report of the Commissioner, AGPS,
Canberra, 1994, p. 64.
[45] Senate Hansard, 2 February 1998, p. 291.
[46] ibid.
[47] See, for example, Journals of the Senate, 9 June
1994, p. 1791.
[48] Australian Law Reform Commission, in Submissions, vol.
3, pp. 518-20.
[49] Submissions, vol. 2, p. 351.
[50] The Report on Summary of Confidential Government
Contract Under Section 41A of the Public Finance and Audit Act 1987 – Modbury
Hospital was tabled in the Legislative Council on 4 July 1997.
[51] Evidence, 4 July 1997, p. 576.
[52] ibid., p. 588.
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