14/07/2011 - 00:00

Taxpayers carry the can, again

14/07/2011 - 00:00

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The revelation the state government’s Office of Shared Services is to be disbanded after costing taxpayers almost $450 million over six years is just the latest in a long line of public sector financial disasters.

Taxpayers carry the can, again

The revelation the state government’s Office of Shared Services is to be disbanded after costing taxpayers almost $450 million over six years is just the latest in a long line of public sector financial disasters.

That it came in the same week as a row over the latest cost of the troubled Perth Arena development – $500 million, or three times over budget – reinforced long established doubts when it comes to the public sector’s capacity to handle big projects.

Even though Colin Barnett’s government is about to reach its third anniversary in power, the premier was quick to point the finger of blame at the Labor government, under whose watch both projects were initiated. Labor leader Eric Ripper was just as quick to claim the current administration must bear some of the responsibility for this latest bad financial news.

Coincidentally, Mr Ripper oversaw the introduction of the Office of Shared Services (OSS) five years ago when he was the treasurer.

Early in 2006, he announced that an $88 million contract had been awarded to help facilitate the project, which would see more than 100 government agencies consolidate their back-office functions into three shared service centres.

“The signing of this major contract is another significant step in delivering a more efficient, cost effective public sector in Western Australia,” Mr Ripper said. “Reaching full potential in 2008, the Shared Corporate Services Project is expected to deliver savings to WA taxpayers of $55 million a year.”

Even the hard-nosed Economic Regulation Authority was enthusiastic – initially.

In its 2007 annual report, the ERA said: “Following the transition to the Office of Shared Services (OSS) financial system ... the authority has worked with OSS finance staff to better utilise the Oracle system and the whole of government chart of accounts.

“The next year will see all project management staff having access to the OSS Oracle system, which will provide detailed and up to date project-specific financial reports on demand.”

Dream on. In June 2007 the auditor-general blasted the OSS’s performance, noting it had experienced major cost blowouts and failed the efficiency of back-office services.

Mr Ripper blamed “teething problems” and, once again, bravely claimed that the office would save the public sector about $55 million a year when fully implemented.

After the change of government in 2008, Colin Barnett kept a close eye on the OSS’s performance and brought its administration under the control of the under treasurer, Tim Marney.

But not even his eagle eye could stem the losses and ensure the system delivered the savings that had been promised.

Coincidentally, it was a report from the ERA last week that sounded the death knell for the haemorrhaging OSS.

But it will still cost millions to effectively decommission.

The Perth Arena case is significantly different, although there is one important common factor – taxpayers will be forking out millions for a major miscalculation.

Builder Len Buckeridge is refusing to pay penalties of $45,000 a day until completion late next year because the job is late. He has described its appearance as similar to a “squashed beer can” and one of the most disgraceful buildings he has worked on.

But he did not get much sympathy from the premier who said Mr Buckeridge competed for the project, so he knew what he was letting himself in for.

There’s truth in what both men say. But the building magnate might have been hoping for at least some sympathy from the premier, who could eventually face opposition from unlikely sources in his Cottesloe seat at the next election, as a result.

What is it about the public sector and money? The Perth-Mandurah railway ended up over budget, but it did switch to the more costly – and quicker – Kwinana Freeway-Narrows Bridge route, with the innovative tunnel under William Street adding to its complexity.

And there were the bad old ‘WA Inc’ days when taxpayers’ money was thrown around like confetti. Who can forget the $150 million government guarantee for the 1988 bailout of Rothwells, which would ‘never be drawn on’? It was – quick smart.

And what about the $175 million paid over as part of the $400 million payment to Dallas Dempster and the late Laurie Connell for the ‘intellectual’ property linked with the proposed $1.2 billion petrochemical plant?

Where’s the petrochemical plant, you might ask. Good question. It seems like a bad joke now but the taxpayers’ money was just handed over and effectively disappeared in an extraordinary act of largesse for the two loyal Labor government backers of that day.

It was a former NSW Labor premier, Neville Wran, who opened my eyes when it came to public sector spending, and how quickly taxpayers’ money can disappear.

Opening a helipad in Darling Harbour for Channel Ten in 1979, he said it would be an asset and could be used in emergencies and to ferry people quickly, including between Sydney Airport and the CBD, to beat the frequent traffic jams.

When I asked if the government would consider introducing a helicopter commuter service itself, a look of horror came over his face. He said I must be kidding.

Asked why, the premier, with his feet on the ground explained: “Well, it would either run at a loss, or some public servant would get his fingers caught in the till.”

Harsh perhaps, but the public sector is still bleeding money more than 30 years later.

Walsh touch remains

It might be 21 years since former WA Labor senator Peter Walsh stood down as finance minister in the Hawke government, but he has not lost his touch.

When told recently the state government expected the sports stadium at Burswood to cost about $700 million, his first response was: “Who’s paying? I suppose it will be the long-suffering WA taxpayer, with that so-called cash-strapped organisation, the AFL, contributing as little as possible.”

It’s a good point. At this stage no one knows who will be paying what, except that – as Walsh perceptively notes – local taxpayers will fork out the lion’s share.

It’s a far cry from the 1980s when the forerunner of the wealthy AFL – the Victorian Football League – developed its own stadium at Waverley, then on the outskirts of Melbourne, as an alternative venue to the Melbourne Cricket Ground. One theory was that if the league had problems with the MCG management, it would have an alternative site available, which indeed it would own.

But those days are long gone. In fact, the AFL says the facilities in Perth now lag behind the rest of the country. But how much it, and the federal government, might contribute remains a mystery.

New parliamentary secretary John McGrath will have his work cut out cajoling both the AFL and Canberra to be generous. And he will also have to keep an eagle eye on the inevitable cost overruns once construction starts.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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