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Special Inquiry Into Government Programs and Projects FINAL REPORT VOLUME 2 - FEBRUARY 2018

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Special Inquiry into Government Programs and Projects FINAL REPORT VOLUME 2 - FEBRUARY 2018 Special Inquiry into Government Programs and Projects - Final Report Volume 2 1 Special Inquiry into Government Programs and Projects This report is available on the Public Sector Commission website publicsector.wa.gov.au © State of Western Australia 2018 There is no objection to this report being copied in whole or part, provided there is due acknowledgement of any material quoted or reproduced from the report. Published by the Public Sector Commission, Western Australia, February 2018. Disclaimer The Western Australian Government is committed to quality service to its customers and makes every attempt to ensure accuracy, currency and reliability of the data contained in this document. However, changes in circumstances after time of publication may impact the quality of this information. Confirmation of the information may be sought from originating bodies or departments providing the information. Accessibility Copies of this publication are available in alternative formats upon request. ISBN: 978-0-7307-0291-7 Cover image: Perth Children’s Hospital 2 Special Inquiry into Government Programs and Projects - Final Report Volume 2 TABLE OF CONTENTS Volume 2 Introduction 5 Synergy 7 Synergy Billing System 9 Muja Power Station - Muja AB 23 Synergy consulting contracts 43 Western Power 53 Project Vista 57 Woodlands transmission line 71 Western Power consulting contracts 79 WA Health 91 Fiona Stanley Hospital - Facilities management and support services 99 Perth Children’s Hospital 12 7 St John of God Midland Public Hospital 169 Karratha Health Campus 179 Queen Elizabeth II Medical Centre Car Park 19 5 Major IT procurement 215 Outsourcing of non-clinical services 235 NurseWest arrangement 247 Royalties for Regions 255 Pilbara Underground Power Project 2 61 The Ningaloo Centre 279 Bulgarra Regional Sports Complex 297 Wanangkura Stadium 307 Ord River Irrigation Expansion Project 323 Pilbara accommodation 337 Hedland 125 Service Workers Accommodation 341 Former Port Hedland Hospital site 355 The Quarter 367 Pelago 383 Perth Stadium and Swan River Pedestrian Bridge 397 Perth Stadium 4 01 Swan River Pedestrian Bridge 443 Other projects 465 Elizabeth Quay 469 Land Asset Sales Program 491 Net Feed-in Tariff Scheme 507 Temporary Personnel Services Common Use Arrangement 527 GovNext-ICT 545 Road Safety Commission and RugbyWA Partnership - Western Force 569 Special Inquiry into Government Programs and Projects - Final Report Volume 2 3 4 Special Inquiry into Government Programs and Projects - Final Report Volume 2 VOLUME 2 INTRODUCTION The Special Inquiry into Government Programs and Projects was a very large task. In the course of examining the list of programs and projects between 2008 and 2017, the Special Inquirer determined that there were a number of themes. Volume 1 of the Special Inquirer’s report covered the themes of governance, public sector capability, leadership, transparency, planning and project management, and procurement and contract management. Volume 1 also included chapters on Royalties for Regions, Government Trading Enterprises and State Finances. VOLUME 2 Volume 2 comprises the reports for each of the programs and projects from the inquiry’s terms of reference Each report includes a synopsis of the project and evaluation of its governance, project management, procurement, contract management and identified cost and benefits analysis. Each has findings, and where appropriate, recommendations. Because of time constraints for the inquiry, the examination of each program or project has been limited to a defined scope. This means some were not examined in their entirety. The Special Inquirer’s decisions to limit the scope on some large programs and projects was based on the number of issues and problems within that aspect of the project, and whether previous credible reviews had been undertaken. For example, the construction of Fiona Stanley Hospital was not examined because it came in on-time and on-budget. The scope for examination of the GovNext-ICT program did not include the procurement of the services for GovNext-ICT as this has been the subject of previous detailed reviews. The Special Inquirer ensured that matters that had previously been raised by the public, or in Parliament, in relation to projects were included in the examination. The findings and recommendations for each project are contained within the separate reports. In most circumstances, the recommendations are aimed at the agencies involved in the projects. Where the recommendations have whole-of-government impacts, they have been included in the relevant chapter in Volume 1 of this report. In most cases, the agencies responsible for projects were very cooperative and helpful. They provided documentation, answers to written questions, attended hearings, and reviewed draft findings. Volume 2 comprises the following reports. Special Inquiry into Government Programs and Projects - Final Report Volume 2 5 Synergy projects • Consulting contracts • Synergy billing system • Muja Power Station Western Power projects • Consulting contracts • Woodlands transmission line • Project Vista WA Health projects • Fiona Stanley Hospital – Facilities Management contract • Perth Children’s Hospital • St John of God Midland Public Hospital • Karratha Hospital Relocation • QEII Hospital parking • Major ICT contract (Centralised Computing Services) • Outsourcing of non-clinical services (medical typing) • NurseWest Arrangement Royalties for Regions projects • Pilbara Underground Power • The Ningaloo Centre • Bulgarra Regional Sports Complex • Wanangkura Stadium • Ord River Irrigation Scheme • Pilbara accommodation • Hedland 125 • Old Port Hedland Hospital site • The Quarter • Pelago Perth Stadium • Perth Stadium and transport infrastructure • Swan River Pedestrian Bridge Other projects • Elizabeth Quay • Land Asset Sales • Net Feed-in Tariff • Common Use Arrangement for Temporary Personnel Services • GovNext-ICT • Road Safety Commission and Rugby WA Partnership 6 Special Inquiry into Government Programs and Projects - Final Report Volume 2 SYNERGY Synergy is one of two Western Australian Government owned statutory electricity corporations specifically responsible for the sale of electricity and power generation within the South West Interconnected System.1 2 Until 1 January 2014, the generation functions of Synergy were undertaken by a separate corporation called Verve Energy. The Special Inquirer examined Synergy’s involvement in three projects between 2006 and 2017, these being: • Consulting contracts; • Synergy billing system; and • Muja Power Station. In August 2017, the Special Inquirer commenced consultation with Synergy and obtained relevant documentation to the projects. On 28 September 2017 and 19 October 2017, the Special Inquirer conducted hearings with Synergy representatives, including the Board Chairman and Chief Executive Officer. A key focus of the Special Inquirer was to determine whether the consulting contracts, the billing system and Muja Power Station projects had sound procurement practices and offered value for money outcomes. The Special Inquirer’s examination did not encounter positive signs in all of these areas for the projects. Synergy was unable to provide the full tender and evaluation documents for all ten sample consultancy contracts, many of which were awarded to a single supplier. It is therefore difficult for the Special Inquirer to determine whether Synergy made sound decisions that offered value for money. Synergy’s billing system project involved replacing the existing customer information and relationship management systems. It was logical for Synergy to seek efficiencies after the separation with Western Power’s information technology systems. Synergy’s project management and the underlying financial assessments that formed the business case were inadequate, leading to a total cost of $93.4 million for the project. Synergy’s records and statements led the Special Inquirer to believe that other costs were both 1 “Electricity Industry”, Department of Treasury, accessed 7 November 2017, www.treasury.gov.wa.au 2 “Government Electricity Corporations”, Department of Treasury, accessed 7 November 2017, www.treasury.wa.gov.au Special Inquiry into Government Programs and Projects - Final Report Volume 2 7 directly and indirectly associated with the billing system project. It is therefore difficult, with the information made available, to determine whether Synergy will realise the benefits or savings that they set out to achieve in the short and long term. As mentioned previously, Synergy took over the generation functions from Verve Energy on 1 January 2014. In 2007, Verve Energy had conducted an expression of interest process to determine the future use of the Muja Power Station. Verve Energy engaged in a joint venture with Inalco to refurbish four 60MW units at Muja Power Station. This included the installation of pollution abatement equipment and a number of new enhancements to the plant. Verve Energy provided a financial guarantee of $150 million to Inalco which indemnified and backed the debt in the event of default by Inalco. Synergy did not submit any documentation to provide reasoning as to why Verve Energy selected Inalco over other shortlisted companies, nor was a business case provided for the project and joint venture with Inalco to form Vinalco Pty Ltd. As a private company, Vinalco made decisions independent of Verve Energy’s Board.
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