18/06/2018 - 14:04

State still sorting contracts

18/06/2018 - 14:04


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SPECIAL REPORT: The state government appears to be tacking away from using contracting in public services provision, but the work of Serco is an example of how private businesses can bring cutting-edge innovation into the space.

State still sorting contracts
Serco’s contract for non-clinical services at Fiona Stanley Hospital runs until 2021. Photo: Attila Csaszar

Something is going on behind the walls of Fiona Stanley Hospital.

Through a network of pathways inside the internal structures of the $2 billion facility, autonomous vehicles move medicines, meals, and linen to ward assistants, who deliver them to patients.

The Serco contract has been criticised by unions, but chief executive Asia Pacific Mark Irwin told Business News it was one example of how the business, which holds the contract for non-clinical services at the hospital until 2021, had brought learnings from its global operations to its work in Western Australia.

“The benefit we have, not just Serco, many of the private sector partners that are involved with government, is our ability to reach internationally,” Mr Irwin said.

“We look at what we can learn from successes and failures across the world where we work.”

(Click to see full PDF version of this four-article special report on Infrastructure Contractors)

The focus at Fiona Stanley, he said, was productivity – getting the best use out of floor space, longer use of equipment, and proactively managing asset life cycles.

The robotic carts ease congestion, providing an additional safety benefit, Mr Irwin said.

Other examples included the use of 400,000 monitoring points across the hospital, which automatically tied into the asset management system.

Serco operates other contracts in WA, including at Yongah Hill Detention Centre, Acacia Prison and Wandoo Reintegration Facility, and has about 2,500 local staff.

In 2015, the Economic Regulation Authority found Acacia was the lowest-cost prison in the state at $185 per head, per day, although it was noted that economies of scale and other factors contributed.

Wandoo was most expensive prison at $1,292/head per day, although that was driven by the facility being occupied well below its small capacity.

More recent data suggests a cost of $450/head per day.

The ERA found the contracts for private prisons gave greater accountability, recommended that similar agreements be made for government-run prisons, and advocated for increased used of competitive tenders for prison services.

In May, Corrective Services Minister Fran Logan announced the contract for Wandoo would be insourced, and it would become a female drug treatment prison.

When asked by Business News if the new arrangement would be more cost effective, Mr Logan said there would be different operational requirements and public management meant no need for a financial return.

“There is a significant difference between the operations of Wandoo under Serco which ran a reintegration facility and the stand-alone female alcohol and other drug treatment prison," Mr Logan said.

“Nevertheless, it is expected the state government will be able to run Wandoo more cost-effectively than an external provider.

“Wandoo will no longer have to provide the level of external vocational training required for young men when it was run as a reintegration facility.

“Previously, these costs were passed on to the department under the contractual arrangement.

“As a public facility, there is also no requirement now for Wandoo to deliver a financial return to a private operator.”

The state has generally been quite cautious in its use of private contracting for asset management, including public private partnerships, although there are some notable examples.

Brookfield Infrastructure and Mitsubishi were among the parties in the Helena Water consortium that won the $300 million public private partnership to build the Mundaring Water Treatment plant in 2011.

Beijing Enterprises Water Group bought a stake in the business this year, prompting criticism from Water Minister Dave Kelly.

In 2015, Badge Constructions, Perkins Builders and Macquarie Group were selected for a 30+ year, $370 million school finance, build and maintain PPP.

They will build 8 schools, with four primary schools and a secondary already in operation.


Serco's Mr Irwin said the business was aware that there was some opposition from interest groups to companies winning contracts in the public sector space.

“We’re living through a period of quite profound change, particularly when it comes to citizen expectations," Mr Irwin said.

“We’ve done this for a long time, we understand that reality.

“The most effective way we can combat that is just to do our job and do it really well."

He said the question for governments should not be ideological, but rather, how the best results can be achieved.

“I think it becomes a luxury to have a debate about should it be this or should it be that," Mr Irwin said.

“The ultimate decision point is how those services can best be delivered… in the context of quality, speed, sustainability and cost."


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