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House of Assembly - Fifty-Fourth Parliament, Second Session (54-2)
2020-09-22 Daily Xml
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State Procurement Repeal Bill

Second Reading

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (12:26): I move:

That this bill be now read a second time.

The South Australian government spends over $11 billion a year on purchasing goods, services and construction projects. This spending underpins the provision of critical public services and has a significant impact on employment, business activity and investment in the state. The government is committed to enhancing the efficiency and effectiveness of our policies and practices for procurement, maximising value for money and improving local industry and social outcomes.

To this end, in late 2018, the government tasked the South Australian Productivity Commission with undertaking an inquiry into public sector procurement. One of the key recommendations made by the commission was to repeal the State Procurement Act 2004, abolish the State Procurement Board and replace the board's policies and guidelines.

In parallel, the Statutory Authorities Review Committee (SARC) conducted an inquiry into the State Procurement Board and made similar recommendations. We thank both for the work that they had undertaken. The government has accepted a majority of the recommendations made by the commission and SARC, including those related to the State Procurement Act 2004.

The State Procurement Repeal Bill has been introduced to act on the government's commitment to implement these recommendations. To give effect to the government's decision, the bill will repeal the State Procurement Act 2004 and the State Procurement Regulations 2005 and dissolve the State Procurement Board and its relevant policies and guidelines.

The passage of the bill through parliament is a key enabler to progress implementation of a range of other important recommendations made by the commission and SARC. Pursuing this program of work will represent the most substantive form of the state's procurement system in more than a decade. I commend the bill to members. I have a short explanation of clauses, as follows:

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

Part 2—Repeal of State Procurement Act 2004

3—Repeal of Act

This clause repeals the State Procurement Act 2004.

4—Transitional provisions

This clause sets out transitional provisions for the purposes of the repeal of the State Procurement Act 2004.

The DEPUTY SPEAKER: Thank you, Attorney. Does the opposition have a speaker?

The Hon. S.C. MULLIGHAN (Lee) (12:29): Are we proceeding now? Okay. What a collegial parliament we are today.

The DEPUTY SPEAKER: Are we adjourning, are we?

The Hon. V.A. Chapman interjecting:

The Hon. S.C. MULLIGHAN: I am happy to speak, I am informed by the Deputy Premier.

The DEPUTY SPEAKER: If you are happy to speak, member for Lee, you have the call.

The Hon. S.C. MULLIGHAN: Once I can resecure my own will, let me see how I can proceed with making some comments.

The DEPUTY SPEAKER: And you will be the lead speaker?

The Hon. S.C. MULLIGHAN: I will be the lead speaker on the State Procurement Repeal Bill. This is a reform by the government, which does no more than abolish the State Procurement Act and also, in doing so, the State Procurement Board. We are told by the government that this is an important reform because we have had a voluminous review undertaken by the Productivity Commission within the Department of Treasury and Finance into state procurement operations. That review commenced in 2018 and proceeded over the course of more than 12 months, and here we are 18 months before the next election and, other than the abolition of Brand SA, this is the government's main contribution to reforming procurement efforts across the public sector.

These are important efforts, and the Deputy Premier is correct in quoting the figure of $11 billion being procured annually each year. Of course, that figure will change and will in particular change given the current government's predilection for privatising essential services under this government, but it also seems to indicate a discomfort with separate independent oversight of procurement operations across government.

The rationale that has been put forward by the Treasurer in the other place, the Hon. Rob Lucas, is that the State Procurement Board rarely if ever provided advice to a minister on procurement operations, which is of course, and characteristically of the Treasurer, a deliberate misrepresentation of the role of the State Procurement Board. The State Procurement Board was to oversee and provide guidance to public authorities in the course of procurement, not to the responsible minister of the day. The bulk of their work was for the benefit of the agencies.

What will happen if the State Procurement Board is to be abolished? Well, apparently, we will be entering this new nirvana of a separate unit established in the Department of Treasury and Finance to oversee procurement operations. That is all we know. We do not have any further detail about who might be on that, what they might be doing with what resources they may be doing it and what benefits they may be seeking to deliver.

So, once the Treasurer and the government have successfully eradicated any separate oversight of the $11 billion of procurement activity a year, the Treasurer assures us he will be an appropriate person to take on sole oversight and responsibility of those operations across government by virtue of a yet to be established division within the Department of Treasury and Finance. Should that give South Australians comfort? No, it should not give any comfort whatsoever; in fact, it should provide the opposite to South Australians—an ongoing sense of trepidation if not fear about how taxpayers' dollars may be expended in the future.

We have already seen an appalling record quickly be established under this government of dreadful procurement activities. Take the most recently announced: the outsourcing of train operations to Keolis Downer. This was a company that as soon as the election was over, if not beforehand, made a beeline directly to government ministers to thump on their door about outsourcing rail operations here in South Australia.

Their infamous agent, Sasha Grebe, formerly of Keolis Downer—maybe they moved him on, maybe he left of his own volition, because he is no longer at Keolis Downer—you might remember, Mr Deputy Speaker, from such hits as disseminating defamatory information about me and the member for West Torrens, falsely claiming that we had made comments about the so-called benefits of privatisation of rail operations in South Australia.

It was not hard to point out that Keolis Downer and their agent, Sasha Grebe, had fabricated those claims. They had been taken from an obscure weblog, a post being made on no day other than April Fools' Day, I understand. I was going to say that the fool is no longer Sasha Grebe, but it may well be and, given that behaviour, it perhaps is likely to be. Unfortunately, the fool now, of course, is users of the rail system here in South Australia.

We have been told by a very, very reliable source very close to the procurement operations that Keolis Downer won that contract because their offer was substantially below those of other tenderers for the operation of that rail service. One of the reasons why they were able to offer that is because of the substantial reduction in the number of workers who will be providing those rail services into the future.

Of course, it is not the first rail operations that were outsourced under this government. The tram operations have been outsourced under this government as well. We have had the remarkable appointment of corporate liquidators KordaMentha, interstate corporate liquidators not from South Australia on a fly-in fly-out basis at extraordinary expense to the taxpayer—a contract at full value of more than $40 million without any market process.

The Auditor-General no less has commented extensively on this procurement in one of his reports recently. It is extraordinary that SA Health would take it upon themselves to directly approach KordaMentha and offer them to do this work without any process. They clearly do not believe, and this government clearly does not believe, that there is anyone in South Australia that is capable of assisting the health department try to achieve the efficiencies which the government tells us are so important to achieve.

We still do not know who put the idea in the mind of those health bureaucrats to go out and approach KordaMentha and KordaMentha only. Of course, there are an enormous number of theories circulating throughout corporate South Australia as to why KordaMentha was specifically approached. Nonetheless, we saw the extraordinary situation where KordaMentha was awarded a three-stage contract, culminating in a full value of over $40 million, uncontested without a market process. If that is the sort of behaviour that the removal of independent procurement oversight is going to provide South Australians, then we should be very worried. Of course, it does not stop there.

Speaking of reaching over the border to ask people without a market process to come and provide services to the state government, we only have to think of the schools capital works program, where the company Sensum, hitherto unheard of in South Australia, was asked to bid to project manage work for several of the school upgrades. The reason, we are told, that Sensum was asked to do this without an open process, without a tender process, was that, apparently, allegedly, they are the only ones who do prefabricated building services, which would enable the swift construction of some of these school upgrades.

You can imagine how those South Australian building companies felt when they found out that Sensum had been awarded this work, when they themselves had been providing very similar prefabricated construction modules that would have enabled them to complete this work. That is a project worth in the vicinity of $50 million, to oversee something in the order of $500 million to $600 million worth of capital works.

Of course, we had the attempted privatisation of SA Pathology. If any good thing could come out of the coronavirus pandemic—not that there are many or any—it is the recognition of the importance of SA Pathology's work and the public appreciation for that work, to the point where the Premier was badgered into ruling out on radio the privatisation of SA Pathology. Less than two hours after, when Treasurer Rob Lucas was asked on radio whether SA Pathology would not be privatised, he was at a loss for words, eventually responding, 'If that's what the Premier has said earlier today, he is the Premier. He is the one who makes these decisions.' This is a government making it up as it goes along when it comes to these decisions.

So we have had KordaMentha, we have had Sensum for the schools' capital works upgrades and we have had the treatment of SA Pathology. Of course, we have had the privatisation of the Adelaide Remand Centre, we have had the privatisation of facilities management services in Department of Planning, Transport and Infrastructure, and the privatisation of field services and its operations in DPTI, which does not tend to get as much public recognition as other issues, such as road maintenance and facilities management, but is just as important. Those people who are responsible for maintaining, upgrading and installing, for example, traffic lights, road signage and so on—those staff and their operations at the Walkley Heights facility—devolved down into privatisation.

It makes you think: what is it about transport ministers and the not so newly appointed now chief executive of the transport department that they do not trust themselves to provide transport services here in South Australia? They do not want to provide rail operations, they do not want to provide road maintenance operations, they do not want to provide facilities management operations and they do not want to provide field services operations. You might ask yourself why Mr Braxton-Smith would have taken on the job if he did not want to provide these services from the government.

In contrast, we took the advice of local industry when Labor was last in government that South Australia and the South Australian government needed to do more to use its procurement spend more wisely. Coming from that was the appointment in 2012 of the Industry Participation Advocate, the former executive director in the Department of Primary Industries, Ian Nightingale. Starting with a pretty blank slate, he did two things. He put upon agencies a requirement: to weight their tender evaluation criteria more favourably towards South Australian goods and services providers; and, perhaps arguably more importantly, to try to assist and educate goods and services suppliers in South Australia of the opportunities available for public sector procurement. That has in many instances been a fantastic success.

Certainly, with some of the major road projects, you only need to look at the extraordinary efforts of Lendlease and what they did out at the Northern Connector and also, to a similar but lesser extent, what York Civil and their project partners did with the Torrens to Torrens upgrade of South Road to get more and more South Australian companies involved. I was really pleased to hear the member for Schubert talk about how terrific it is to have completely Indigenous-owned companies providing services to those road upgrades. The first two of those, of course, were providing those services in traffic management to the Darlington project back in late 2016/early 2017 and also to the APY lands road upgrade up in the Far North of the state. Those are two small examples of the sorts of outcomes which government procurement should be driving.

The government's Productivity Commission report said, amongst other things, that it should be a focus of government procurement efforts to find the most efficient goods or services provider for the South Australian government here in South Australia because by giving them government business at that efficient price you are, in effect, supporting them and their operations being so efficient so that they can take their business and spread their wings interstate, if not overseas.

That is a terrific point of view for the economic rationalists amongst the Productivity Commission. Putting price and efficiency at the absolute top of the considerations when it comes to government procurement I am sure makes them feel better, but here in South Australia—a relatively small economy located geographically more distantly from markets than perhaps our eastern state counterparts if not our Western Australian counterparts for some markets—it has always been the case that the South Australia government has had to find ways to assist business and industry grow here.

There is a key role for state government to assist economic development in South Australia. Economic development through procurement is very, very important. Take for example—and I am sorry to go on about transport issues—the procurement of the public transport bus fleet. One of the quirks of the Laidlaw privatisation of bus services in South Australia was that the bus operations and bus maintenance would be provided by the private sector but the buses, as assets, would be kept and owned by the public sector and, hence, as buses reached the end of their permissible life, 25 years, they needed to be replaced with newer buses.

In 2017, the former Labor government went out to tender to provide a forward commitment of 400 new buses over a 10-year period to replace those buses that were reaching the end of their useful age over the same period. We were really pleased to partner with Precision Engineering, a company that had grown and established itself by providing the rear suspension assemblies for Holden's operations in South Australia—and providing them for other models I am sure, but when I visited their factory they were for the VF and VF series II Commodores—and seeking to try to transition their business away from providing those rear suspension assemblies for a business which was due to close in October 2017.

They were funded by the state government through the transport department to build some buses, to try to demonstrate that they were capable of moving into what was traditionally known as coachbuilding. Of course, it was made very clear to us that if they were successful in their tender for those buses, then that would enable some of their other commercial activities to not only flourish but also remain in South Australia—for example, the Brabham supercar BT62, I think it is called.

So you can see how government procurement can be used not only to assist companies that have the skills and the capability and the wherewithal to provide what is being tendered for, but also to transition away from economic opportunities which were about to come to an end, as well as provide enough scale and capability to engage in other separate commercial ventures. I think the Precision group has done an extraordinary job in doing that, and I was pleased that, after the tender process was delayed for some reason for more than 12 months after the 2018 state election, they were subsequently successful in winning that tender.

So government procurement can be a very good thing. I know that when the government announced its 1000 Homes in 1000 Days program to try to build 1,000 new public housing dwellings in a little over three years the market engagement seminar conducted by the industry participation advocate, Ian Nightingale, had over 250 attendees, many of whom had never built for government before, many builders who were interested in doing government works, and that is a good thing.

As we have seen, not just because of COVID but before COVID, we had a remarkable drop-off throughout 2019 in the number of homes being approved to be built in South Australia, which terrified a lot of builders, worried about whether they would be able to continue on. We also saw a number of builders collapse in South Australia. We can be blasé about these things, as was the Treasurer at the time, and say, 'Oh, well, some companies fall over. That's their problem, nothing to see here,' but we know that while that might have been true for some of those companies other of those companies were struggling simply because of the lack of work in the market.

It is not necessarily the role of the government to solely provide activity within a market, for example, committing to, on an ongoing basis, build more and more houses just to keep builders busy, but it is the role of government to support industries where they need it. I note that today, even with the HomeBuilder scheme that the federal government has put in place to provide $25,000 to eligible recipients for either new homes to be built or extensive renovations to be done, we are among a very small number of remaining jurisdictions in Australia that has not provided any additional support to the housing construction industry.

There are opportunities in the procurement of both government goods and services and also the additional opportunity to support those industries as well, something that is not being taken on by the current government in the same way. I think we would feel vastly more confident with this bill if we had a clear indication from the government exactly how the operations and the responsibilities of the Procurement Board were being replaced. Certainly, we have had an indication of intent from the government. This will all be set up in the Department of Treasury and Finance.

There will be people responsible for this, and ultimately they will be answerable to the Treasurer. Well, that is no comfort, as I said, and not just for those examples either. Not only have we seen some of those essential government services being privatised under the government—as I mentioned before, rail operations—but we have also seen the government choose to deliberately cut those government efforts that were being put into trying to support South Australian businesses from purchasing decisions, either from government or from the general public. I am talking specifically about the Premier's decision to cut and defund the Brand SA organisation.

We had gone through an extraordinary period of work, which had been led by the former Economic Development Board, something also abolished under this government and led by Darren Thomas, the proprietor of Thomas Foods, to establish a new state brand. In fact, some of us, like me today, are wearing it. Brand SA's job was not only to promote the state brand but also to encourage manufacturers and other providers of goods and services to use the state brand so that people who were looking at purchasing goods or services could be aware that they were South Australian-provided goods or services. That being cut has of course almost completely—not entirely but almost completely—derailed the efforts of Brand SA.

We have a government that loves to look over the border to hand out lucrative multimillion dollar contracts, deliberately excluding any South Australian from having an opportunity of getting that government-funded work, and at the same time stopping the government-funded efforts to encourage other South Australians to support South Australian providers of goods and services.

I think it is alarming that the government, particularly when South Australia's economy was the slowest in the nation in the financial year leading up to the coronavirus pandemic, has continued to be the slowest in the nation on an ongoing basis since then and now has the highest unemployment rate in the nation and is actively looking at ways of reducing the amount of support that South Australian businesses and workers can get.

I would have thought a responsible government would choose to do the opposite. I would have thought a responsible government would seek to support South Australian businesses and workers through these very difficult times, not merely hand over the responsibility for the independent oversight of government procurement activities to the same bloke who privatised ETSA, TAB (for an amount less than one year's profits, mind you), the Ports Corp and SGIC.

I would have thought that he is the last person we should be giving it to, but apparently, according to this government, the Hon. Mr Lucas is the perfect person to be handed the responsibility for this. Well, I completely disagree. I think there is a role for an independent agency, like the State Procurement Board, not only to monitor what government agencies are doing but, where appropriate, to put pressure on agencies—if not putting pressure on the government themselves—to do better when it comes to state government procurement.

It is very regrettable that, once again, this is a way in which the government is seeking to limit the amount of transparency and oversight that will be available to South Australians when it comes to procurement operations in government. We know that the government is not comfortable with transparency and separate oversight, and I think this bill only further underlines that. It is with those words that I indicate the opposition will not be supporting the bill, as we did not in the other place when it came down.

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General, Minister for Planning and Local Government) (12:57): I wish to place a number of matters on the record in response to the contribution by the member for Lee. He acknowledged that the abolition of the act and of the board was the principal purpose of this legislation, about which he is correct. He then outlined, presumably for the benefit of the parliament, what he currently sees as unacceptable advances of the current government in relation to the appointment of three parties for the purposes of work.

One was the Keolis Downer contract, about which he outlined his rather scathing assessment of what happened there—without a shred of evidence, but nevertheless that is what his statement was. Second was the KordaMentha appointment, claiming that they had cost money, that they were not South Australian and that they were fly-in fly-out to assist the health department, which was a complete debacle when we came into government.

He complained about $40 million being expended, which I might remind the member was almost completely recovered in the first year when they found millions of dollars of invoices that had not actually been presented for payment. That was really a so mind-blowingly hopeless legacy of the previous government that you would wonder why he would even rate it. Nevertheless, that was his second contribution.

The third was the appointment of Sensum to undertake a body of work for the education department in modular school buildings, which he claimed were available in South Australia. I am advised that, during the course of the early part of this government, this model was not available. It was utilised by the Labor government in Victoria because it was a Victorian company and was only available at that stage. I seek leave to continue my remarks after the lunch break.

Leave granted; debate adjourned.

Sitting suspended from 13:00 to 14:00.

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