19/08/2010 - 00:00

Orgill report shines light on management

19/08/2010 - 00:00

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The WA model used to deliver the BER stimulus program should be a template for future projects of this kind.

THE ‘Building the Education Revolution Implementation Task-force Interim Report’ might not sound like good bedtime reading, but if you were vaguely interested in the workings of government it is a very interesting document.

The report, by a committee chaired by Brad Orgill, shows the dramatic differences in building costs across jurisdictions and school systems.

It is very good evidence for keeping a federated system where we can see – state by state – the differences in the way government manages taxpayers’ money. The table with this story is evidence enough that I could almost stop writing right now.

The report highlights the fact that the NSW government’s record for incompetence is now benchmarked. What’s worse is this known incompetence has been rewarded with billions of dollars to waste.

The great pity is that those who deny the BER waste, like Prime Minister Julia Gillard who says she’d do it all again, is that they just can’t see that is the problem. Just like a drunken sailor who blows a month’s pay on the first night in port, they can’t see what the problem is when they wake up in a daze asking for enough money to buy breakfast.

The figures in the Orgill report show that for every 2.5 buildings the NSW government system built, the WA government built four, and still had change.

While this report is interim and based on a sample that is to be expanded on in a final report, the evidence to date is that the WA government adopted practices that worked to benefit the state.

They also worked to benefit the Commonwealth, because the federal government was getting a lot more building for its buck in the west. Instead of congratulating herself on saving the Australian economy, Ms Gillard might have been congratulating WA for giving her more money to waste in other states. No wonder people here are anti the mining tax.

What is really intriguing is trying to understand why WA, and some of the non-government sectors for that matter, performed better than the other states, especially NSW.

One reason suggested by the Orgill report was that WA took a business-as-usual approach. This is an interesting concept.

WA’s Building Management and Works (BMW) unit of the Department of Treasury and Finance engaged project managers under the terms of a pre-existing project manager services panel arrangement. Furthermore, according to the report, project managers in WA model had no building design function or risk. That was undertaken by BMW, for template designs, and by the architectural consultants, for customisation/integration of template designs for particular schools.

In addition, the Orgill report points out that when the federal government allowed more flexibility in the way its funding was allocated between schools, WA’s BMW pushed that to the limit to make sure that schools that were struggling to keep within budget got money from schools that had gone under.

The WA rollout also came against a backdrop of restraint being preached at ministerial level, namely through then treasurer Troy Buswell, who may deserve some credit for this, as would his under-treasurer Tim Marney. People in the building and architectural industry have also suggested Steve Luce who oversaw the BER program ought to be recognised.

Some builders were initially angry at the process used by BMW because it sought tenders as it normally would, but then asked the bidders to go back and sharpen their pencils.

But this is the public purse and the funding was supposed to be keeping builders alive and employees in work.

The numbers on the WA BER website suggest the Orgill report has understated its cost effectiveness.

According to BMW, $1.28 billion in funding over the 2009-10 and 2010-11 financial years has been spent on 2,355 projects at 1,471 schools.

In NSW, the worst-performing state, it appears that the scale of the stimulus spend prompted government to introduce a different management system – a managing contractor system that required very careful scrutiny by the state authorities.

It also seemed to have paid the managing contractor for risks it did have to take because it passed those risks on. Why a state was overpaying any builder for risks at a time when it was spending to save the building industry beats me.

Anyway, the above delineation between WA and NSW is based on broad comments that the cheaper and more efficient systems used standard procedures while the more expensive jurisdictions changed the way they did things.

“The taskforce’s assessment is that where education authorities have had the capacity to implement an extended ‘business as usual’ procurement and delivery model, and where principals’ and parents’ views have been carefully considered in project decisions, and where available flexibility in the BER Program Guidelines has been taken, schools have secured higher quality educational infrastructure outcomes and better value for money,” the Orgill report said.

I think there is a very useful lesson here for all business.

Firstly, systems that have been carefully developed over years are most likely to be robust, even at a time of significant growth in spending like in WA, where the schools capital works budget more than doubled.

The fact is that if bureaucrats – and, presumably, employees in private enterprise – are inundated with work it seems likely they’ll best handle that in with procedures they know and understand. The builders would probably be the same, in terms of working out their costs.

In contrast, NSW seems to have adopted a special system to handle stimulus spending. Thus, at a time when huge capital was flowing through the department, the bureaucrats were using a system they were unfamiliar with.

The global financial crisis might have been a new experience for most people in business and government but the lessons learned from the BER show that there is no reason for the size of the job to overwhelm good management practices.

When you are already spending more than you have to survive, why spend more than you have to?

• mark.pownall@wabusinessnews.com.au.

 

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