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Prudency and Efficiency Assessment - Redland City Council QUEENSLAND COMPETITION AUTHORITY

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Prudency and Efficiency Assessment - Redland City Council QUEENSLAND COMPETITION AUTHORITY Prudency and Efficiency Assessment - Redland City Council QUEENSLAND COMPETITION AUTHORITY Price Monitoring of South East Queensland Water and Wastewater Distribution and Retail Activities 2013 -2015 QE99110RP0005 | Final January 2014 Price Monitoring of South East Queensland Water and Wastewater Distribution and Retail Activities 2013 -2015 Prudency and Efficiency Assessment - Redland City Council Project no: QE99110 Document title: Price Monitoring of South East Queensland Water and Wastewater Distribution and Retail Activities 2013 -2015 Document no: QE99110RP0005 Revision: Final Date: January 2014 Client name: Queensland Competition Authority Project manager: Madeleine Kench Author: Michelle Strathdee/Lionel Chin/Bob Graham/Scott Birkett (BDO)/Lyn Zhou (BDO) File name: \QE99110\QE99110RP0005 - Redland City Council.docx Sinclair Knight Merz ABN 37 001 024 095 32 Cordelia Street PO Box 3848 South Brisbane QLD 4101 Australia T +61 7 3026 7100 F +61 7 3026 7300 www.globalskm.com COPYRIGHT: The concepts and information contained in this document are the property of Sinclair Knight Merz Pty Ltd (SKM). Use or copying of this document in whole or in part without the written permission of SKM constitutes an infringement of copyright. QE99110RP0005 PAGE i Price Monitoring of South East Queensland Water and Wastewater Distribution and Retail Activities 2013 -2015 Contents Limitation statement.................................................................................................................................................................................... 1 1. Introduction ................................................................................................................................................................................... 2 1.1 Terms of reference ........................................................................................................................................................... 3 1.2 Prudency and efficiency ................................................................................................................................................... 3 1.3 Scope exclusions ............................................................................................................................................................. 4 1.4 Report overview ............................................................................................................................................................... 4 1.5 Application of assessment ............................................................................................................................................... 4 2. Background ................................................................................................................................................................................... 5 2.1 The entities ...................................................................................................................................................................... 5 2.2 Redland City Council ....................................................................................................................................................... 6 2.3 The role of the Authority ................................................................................................................................................... 8 3. Policies and procedures ............................................................................................................................................................ 10 3.1 Introduction .................................................................................................................................................................... 10 3.2 Capital expenditure policies and procedures ................................................................................................................. 10 3.2.1 Good industry practice .................................................................................................................................... 10 3.2.2 Redland City Council process ......................................................................................................................... 14 3.2.3 Standardised approach to cost estimating ...................................................................................................... 15 3.2.4 Prepares a summary document ...................................................................................................................... 15 3.2.5 Prepares an implementation strategy.............................................................................................................. 15 3.2.6 Includes a ‘gateway’ review process ............................................................................................................... 15 3.2.7 Includes a detailed analysis of options for major projects ............................................................................... 16 3.2.8 Only includes only commissioned capital expenditure from 1 July 2010 in the RAB ...................................... 16 3.2.9 Compliance ..................................................................................................................................................... 16 3.2.10 Considers regional perspective ....................................................................................................................... 19 3.2.11 Procurement .................................................................................................................................................... 20 3.3 Operating expenditure policies and procedures ............................................................................................................ 21 3.3.1 Good industry practice .................................................................................................................................... 21 3.3.2 Operating budget formation............................................................................................................................. 23 3.3.3 Asset management system ............................................................................................................................. 23 3.3.4 Planned improvements to processes .............................................................................................................. 25 3.4 Conclusion ..................................................................................................................................................................... 26 4. Operating expenditure................................................................................................................................................................ 27 4.1 Overview of operating expenditure ................................................................................................................................ 27 4.2 Benchmarking ................................................................................................................................................................ 30 4.2.1 Comparability of data ...................................................................................................................................... 30 4.2.2 Australian Benchmarking ................................................................................................................................ 32 4.3 Sample selection ............................................................................................................................................................ 38 4.4 Corporate costs .............................................................................................................................................................. 39 4.4.1 Definition and comparability ............................................................................................................................ 39 QE99110RP0005 PAGE ii Price Monitoring of South East Queensland Water and Wastewater Distribution and Retail Activities 2013 -2015 4.4.2 Costs in total.................................................................................................................................................... 40 4.4.3 Cost of each function....................................................................................................................................... 42 4.4.4 Internal corporate costs ................................................................................................................................... 42 4.4.5 Corporate costs allocation methodology and drivers ...................................................................................... 44 4.4.6 Costs at Council level (SLA related cost centres) ........................................................................................... 44 4.4.7 Prudence and Efficiency.................................................................................................................................. 44 4.4.8 Comparison between Allconnex Water and Redland City Council .................................................................. 45 4.4.9 Top-down benchmarks .................................................................................................................................... 46 4.4.10 Cost escalations .............................................................................................................................................
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