‘War Memorial releases material under FOI relating to $498m expansion program: did a billionaire’s personal guarantee clinch the deal?’ Honest History, 4 October 2019 updated
Update 5 November 2019: Dr Nelson’s final bow at Estimates gives more information about the Stokes guarantee.
Update 17 October 2019: see below for update following tabling of the Memorial’s Annual Report 2018-19.
Update 7 October 2019: Pdf copy of Financial Review article based on this post. Summary.
As part of the Heritage Guardians campaign against the proposed $498m extensions to the Australian War Memorial, we made a claim under Freedom of Information for ‘documentation generated between May and November 2018 referred to or tabled in an Interdepartmental Committee chaired by Director, Australian War Memorial, and which relates to government consideration of the Detailed Business Case for the extensions to the Australian War Memorial’.
After some toing and froing (Memorial-Prime Minister and Cabinet-Veterans’ Affairs-back to Memorial) over a number of weeks, the Memorial came good with a record (Summary Minutes) of seven Interdepartmental Committee meetings running from April 2018 to May 2019. In view of the time taken on the claim, the Memorial kindly waived the fee. We noted that the material provided did not cover the full extent of the claim (‘documentation … referred to or tabled in’) but let that pass; at one point the Memorial was proposing to charge us $6000.
Like most material released under FOI, the IDC Minutes raise as many questions as they answer. (For earlier efforts by Heritage Guardians using Memorial documents released under FOI to another group, see the first and second papers by former Memorial officer, Richard Llewellyn.) We were particularly interested in what the Minutes said about the fact, already revealed on the public record, that the Prime Minister on 1 November 2018 announced $498m capital funding for the Memorial project, seven weeks before the Detailed Business Case (DBC) for the project ‘was fully delivered’ to the government (21 December). (For earlier discussion and evidence, see the first Llewellyn paper, especially paras 86 and 102.)
This timing issue was of interest because of the wording in the Department of Finance’s mandatory Commonwealth Property Management Framework, paragraph 74 of which says ‘[t]he purpose of the Second Stage Approval Process is to secure government approval and funding for implementation and delivery of a project in accordance with the DBC’. This might suggest that the DBC has to be finalised first, and funding then follows, but the IDC Minutes show that securing funding proceeded largely independently of the development of the DBC. (The IDC included representation from the Department of Finance.)
Update 17 October 2019: Note that the Memorial’s Annual Report 2018-19, tabled this week, includes (p. 21) this opaque paragraph: ‘The Memorial Redevelopment Team presented the Detailed Business Case to government on 21 December 2019. This document drew together the various briefings and submissions to government which formed the basis for the announcement of funding.’ This paragraph seems to be a post facto attempt to couple together two processes – development of the Detailed Business Case and funding approval – which the Interdepartmental Committee Minutes show were dealt with on separate tracks. (The Minutes – see below – refer to a Cabinet submission and a brief to the Minister for Finance, both prior to 1 November.) As noted above, the Department of Finance’s mandatory Commonwealth Property Management Framework says (para 74), ‘[t]he purpose of the Second Stage Approval Process is to secure government approval and funding for implementation and delivery of a project in accordance with the DBC [Detailed Business Case]’ (emphasis added).
Ostensibly, the DBC was central to the deliberations to the IDC: when the IDC commenced, its terms of reference were tweaked ‘to shift its focus towards the approval of the DBC, rather than towards the project per se or the functioning of the committee’ (IDC Minutes, 4 April 2018, p. 1; 15 May 2018, p. 2). However, the Minutes show the decision on funding did not depend on the DBC being finalised and delivered to government.
Memorial representatives on the IDC kept reminding members about the DBC and its December 2018 due date (21 August 2018, p. 3; 9 October 2018, pp. 1, 2; 20 November 2018, p. 1). For example, at the 21 August meeting, after discussion of an impending brief to the Minister for Finance, the War Memorial Director ‘reiterated that the DBC would still be submitted in December for government consideration’. Yet, the funding followed its own track, built around the following:
(a) The brief to the Minister for Finance on 3 September, which included ‘a full cost estimate at P70 or P80’, but ‘[would] not replace’ the DBC (21 August 2018, p. 2). (Note that P70 and P80, according to the Finance manual on calculating cost assurance, ‘refer to a confidence level regarding the probability of the cost not being exceeded, and does [sic] not indicate a quantum of cost or proximity to the actual cost realised. That is, P80 is not a cost plus/minus 20% but instead it is a cost that will not be exceeded 80% of the time.’ So, at P80, there is a 20 per cent chance that the projected capital cost ($498.7m) will be exceeded.
(b) A Cabinet submission, though it is unclear from the IDC Minutes what was in it (9 October 2018, p. 2). The DBC had been intended to go to Cabinet (4 April 2018, p. 2) but there were issues of timing: the time-frame for completion of the DBC (ultimately December 2018) did not match the Budget cycle, which was November 2018 to March 2019 for the 2019 Budget (4 April 2018, p. 3). Funding of the project was also brought forward ahead of the Budget cycle, presumably to ensure it was nailed down in advance of an election. (Note, though, that Labor had given its support to the project.)
(c) A ‘personal guarantee’ by the Memorial Council Chair, Kerry Stokes, to the Prime Minister (then Turnbull) ‘that the Memorial would only seek $500 million’ (21 August 2018, p. 2). (A cost of around $500m had been the subject of public speculation since April: see the first Llewellyn paper, paras 86-88. The Memorial Director had said in July ‘that the DBC submission would not exceed $500 million’: 10 July 2018, p. 2.) We will come back to this item shortly.
The extent of the separation between funding and the development of the DBC was indicated by an exchange at the 20 November IDC, where the representative from Prime Minister and Cabinet ‘enquired as to the nature of remaining Cabinet approvals required to secure funding. [The Memorial representative, chairing in the absence of the Director] informed the members there were no further approvals required and that the government had announced funding (with bi-partisan support) on 1 November 2018 for the $498.7 million dollars’ (20 November 2018, p. 3).
The PM&C representative seems to have assumed there was a connection between approval of the DBC and funding. This was a reasonable assumption, given the importance placed during the IDC on the development of the DBC, including the repeated references to it by Memorial representatives. But the fact that a senior public servant (who had attended or been represented at previous meetings) had to make such an inquiry perhaps shows how much of the negotiation on funding was done at the political level – perhaps directly between the Memorial (Dr Nelson, Mr Stokes) and successive prime ministers – and reported post facto to the IDC. As the Prime Minister said at the launch on 1 November, ‘Kerry and Brendan have been bringing this proposal to us now for several years’.
When Prime Minister Morrison made the 1 November announcement of funding, at what level was cost assurance for the project? While estimates at P70 and P80 were apparently included in the 3 September brief to the Minister for Finance (21 August 2018, p. 3), IDC members were told in October that ‘a P80 Cost Estimate’ was still being developed (9 October 2018, p. 2). So, it is unclear from the IDC Minutes what level of cost assurance had been reached by 1 November; we have to assume that the DBC included cost assurance at P80, as required by the Finance rules, but the DBC was not submitted to government until 21 December. By then, the project had been well and truly launched, with a price tag attached.
Update 10 December 2019: During a presentation on the Memorial’s projected second EPBC Referral, a Memorial spokesperson confirmed under questioning that the DBC, a Cabinet document, would not be released publicly but that it did include cost assurance at P80. When the Prime Minister made his funding announcement on 1 November 2018, cost assurance was at P75, but government was advised that cost assurance at P80 was imminent.
As we said, FOI documents often leave many questions unanswered. In this case, the key hanging questions are about Mr Stokes’ guarantee.
- If Mr Stokes’ ‘personal guarantee’ was given to Prime Minister Turnbull did it carry through to Prime Minister Morrison?
- If the degree of cost assurance was still uncertain at the time of the 1 November launch, what part did Mr Stokes’ ‘personal guarantee’ play in sealing the deal?
- Was Mr Stokes’ ‘personal guarantee’ given in his capacity as Chair of the Memorial Council or on his own behalf?
- Does Mr Stokes’ ‘personal guarantee’ bind a new Chair – or bind the Council after he leaves? (Mr Stokes has just turned 79 and his current term expires in June next year. There has been speculation that Tony Abbott, recently appointed to the Council, might then take over as Chair.)
- Is it common for a private sector party to provide a guarantee on the capital cost of a government project in this way?
- How much further might Mr Stokes’ financial involvement go in the future, in the event of a capital cost blowout? (Remember that even at P80 there is a one-in-five chance that the cost will be exceeded. Mr Stokes has been a generous donor of artefacts to the Memorial and towards the cost of the launch of the expansion project, but those donations were not for capital.)
- Might a capital cost blowout be covered by donations from other corporate interests, including arms manufacturers, interests on whom the Memorial has previously relied for support?
- Might corporate donors be offered, in return, naming rights for sections of the proposed extensions, as has been the case in the past at the War Memorial (entries for 11 and 23 April, 2 May)?
* David Stephens is editor of the Honest History website and a member of the Heritage Guardians group.
Process seems askew at many levels with this development by the Memorial. AusTender records (CN3482050) that the company engaged by the Memorial for development of the business case was initially contracted (Jan 2018) on a 12 month contract worth $401,500. This amount was amended 6 months later to a new contract value of $8,299,610. An extraordinary increase! Can the taxpayer assume they got value for money for this?