Stephens, David: The growing cost of the War Memorial’s vanity build: a tale of four letters: Part II

David Stephens*

‘The growing cost of the War Memorial’s vanity build: a tale of four letters: Part II’, Honest History, 28 September 2022 updated

In Part I, we looked at two letters, one from Honest History/Heritage Guardians to the Treasurer and Minister for Finance, and one from the Australian War Memorial to Honest History/Heritage Guardians. Now, we look at two more.

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Update 29 September 2022: Extracts from Minister Keogh’s press conference insofar as they relate to the costs of the project and whether they might go up again. Short answer: ‘There’s no current ask on government for additional funds’ (Minister).

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On 4 August, Honest History/Heritage Guardians had written back to the Director of the Memorial, seeking clarification of his letter of 15 July. We copied our letter to Minister Keogh, implying that the matter was really one for him to get involved in. The answer to our letter came directed from a quarter unexpected, the actual Minister’s office, dated 5 September and over the signature of his Chief of Staff (CoS). So, no flick-pass to the Memorial this time, though the CoS’s letter was almost certainly drafted there. Here are the key paragraphs in our letter of 4 August, with the CoS’s responses (italics), and our comments:

Honest History/Heritage Guardians letter of 4 August

1. Is it the case that the March 2022 Project funding increase of $50m is included in the ‘increase in equity injections to fund capital expenditure’ mentioned in DVA, Portfolio Budget Statements 2022-23, para 3.1.2, ‘Explanatory notes and analysis of budgeted financial statements’?

Minister’s CoS reply of 5 September

1. Yes, the additional $50 million provided to the Memorial was included as an equity injection in the overall Department of Veterans’ Affairs budget for 2022-23.

HH/HG letter

2. If it is not the case that the $50m is included in the above increase in equity injections, where can the $50m be found in the Budget Papers?

Minister’s CoS reply

2. As above, the funding change can be found in the Department of Veterans’ Affairs
   budget for 2022-23.

HH/HG letter

3. If the $50m was not part of the Budget, through what means and when in March was the money provided?

Minister’s CoS reply

3. As noted above the money was provided and published as part of the regular budget process.

Comment from HH/HG

So, as we thought, the $50 million was an equity injection, it was additional (despite the Memorial’s fancy dancing in its ‘Humpty Dumpty’ letter of 15 July; see Part I), and it was included in the March 2022 Budget. Exactly where in ‘the overall Department of Veterans’ Affairs budget for 2022-23’ does the $50 million appear, then?

There is no figure of $50 million in the mentions in the DVA Portfolio Budget Statement 2022-23 (PBS) of Appropriation Bill (No 2), the place where capital funding is recorded – for example, at pages 84 and 104 of the PBS pdf we find the figure of $181 569 000 for ‘equity injections’. Nor does the figure of $50 million appear as the increase in equity injections to fund capital expenditure mentioned in DVA, PBS 2022-23, para 3.1.2 ’Explanatory notes and analysis of budgeted financial statements’, where the words read, ‘an increase of $170 million from 2021-22’.

So, the $50 million extra funding was not included in the Budget as a stand-alone figure, but it was part of larger figures, particularly the $170 million increase. So, the potential for the equity injection process to hide funding increases within normal drawdowns of equity is clear, especially around election time or with politically sensitive projects.

HH/HG letter

4. Given that the additional $50m had been received in March, whether through the Budget or not, why did not Acting Director Dawson or another Memorial officer mention this fact in Senate Estimates on 6 April? [Director Anderson was absent overseas.]

Minister’s CoS reply

4. The purpose of Senate Estimates is to provide Senators with the opportunity, through public hearings, to question officials directly about the objectives, operational procedures and efficiency of the programs for which they are responsible. The role of the Memorial’s officials is to answer those questions and the Memorial provided answers accordingly at the April 2022 Senate Estimates process. Having reviewed the Hansard for 6 April 2022 it is clear that no Committee members raised the matter of funding and hence no discussion of the matter occurred.

Comment from HH/HG

That analysis of the 6 April Hansard (pdf, pp 60-61) is quite correct. Every public servant knows that one does not usually volunteer answers to questions that have not been asked. More to the point, the Senate Foreign Affairs, Defence and Trade Committee often fails to ask questions at Estimates that should be asked; it should note this description of the attitude of the Memorial to Estimates and be well-prepared and on its guard in future. Still, it is nice to have the rules of engagement spelled out in this way.

HH/HG letter

5. Why was it not until July (Steve Evans’ piece in the Canberra Times of 1 July) that the $50m increase became public knowledge?

Minister’s CoS reply

5. The decision not to announce the additional funding was made due to the need to ensure ‘value for money’ procurement. The Memorial was, and is, in the process of procuring head contractors for the major construction elements of the Development Project. Revealing publicly that additional funding had been provided to the Memorial would likely have led to adverse impacts on financial negotiations with tenderers and increased taxpayer expense for construction works.

Comment from HH/HG

Prima facie, this seems a fair point: why would you let the tenderers know you had more money to spend than had previously been revealed? Particularly when tendering for contracts for the new work had been rather fraught for the Memorial, with the process for major elements of the project having to be reopened in 2021, as contractors pulled out.

So, we searched the AusTender website, tenders.gov.au, looking for contracts that were open or under negotiation between March and end June 2022 – the period when the Memorial kept mum about its $50 million boost – and which looked like ‘procuring head contractors for the major construction elements’ of the big build. We looked through the AusTender records around that period for big jobs with no dollar figure settled, but none leapt out for us.

The reopening had led, however, to AWM000484 REOI 2 ‘Construction Contractor(s) for Main Works Packages 1 and 3 (Re-release)’. The second time around, Expressions of Interest for this work had been required by September 2021. Perhaps there were still negotiations proceeding between March and end June 2022 on these contracts and that was why the Memorial was concerned to hush things up about the $50 million – at least until the disclosures in the Canberra Times article of 1 July. Perhaps those negotiations have now ended, and the successful tenders have been chosen. We don’t know. Perhaps the Memorial will inform us.

Update later 29 September 2022: Director Anderson said this at the 29 September press conference:

And we’re now at the stage where we have signed with Hindmarsh to undertake the Bean Building and the central enter part work and the geothermal work. We are in the process of finalising with our preferred tenders the other major works packages.

The press conference included other remarks relevant to the cost issue.

Update 18 November, 8 December 2022: Third construction contractor finally announced, so all are in place. Memorial’s progress report (para 6.2) tells of the long struggle the Memorial undertook to ensure value for money from contractors.

As with the equity injections issue referred to above, we again need to note the potential for concealing cost increases: ‘we have to stay shtum about project budget increases because there is a contract negotiation under way (or there is one about to get under way) and the other side might take advantage’. In a large and complex project like the Memorial big build, though, there are likely to be tendering processes under way – or anticipated – most of the time.

Conclusion: three things to keep an eye on

The matters covered in these two posts are now history, but one always hopes that history does not repeat – and there has been enough of both tragedy and farce about the Memorial project already. It is encouraging that Minister Keogh, and now his Chief of Staff on his behalf, have said the Minister is keeping a close eye on the costs of the War Memorial project. David Smith, MP for Bean and the Chief Government Whip, has also said there is no blank cheque. Most recently, the Minister told Greg Jennett of the ABC there had been no additional request for funding and the current project budget was ‘the envelope that the War Memorial is working at the moment’. We hope there is no wriggle room hidden in those last three words.

The history of the lazy $50 million increase of March 2022 suggests that the Albanese government needs to monitor closely:

• whether routine equity injections are used to hide increases in project funding requirements that should have been covered by contingency planning or that are just being ‘snuck through’ opportunistically, for example, when government is about to change hands (rather like last-gasp appointments to government bodies);
• whether current or pending contract negotiations are being used as an excuse for not releasing information about project funding increases, particularly when there are other reasons for suppressing such information, for example, when a project is controversial and news of cost increases could embarrass the project proponent (here, the Memorial), the government, or both; and
• whether sufficient evidence has been provided to justify claims that global or national or sectoral cost increases are affecting the costs of a specific project to the extent that it needs further money from government.

Finally, we welcome any comments from the Memorial, the Minister or anyone else on the material in this post or in Part I. If any of it is wrong in fact or interpretation, we’d love to know. We are prepared to print without amendment any comment we receive. Any errors we’ve made will be partly due to the Memorial’s unwillingness to keep the public and the Parliament fully informed.

*David Stephens is editor of the Honest History website and has been convener of the Heritage Guardians group, opposed to the War Memorial extensions.

Part I of this series.

Part III looks at some loose ends (a current FOI claim, a letter to the Public Works Committee, the possible Audit Office audit of the War Memorial project) and a bunch of dates (not a timeline).

Later developments, as disclosed in October Budget.