Nonsense of $8bn BER ‘waste’ claims exposed

Claims by Federal Opposition Leader Tony Abbott and Opposition education spokesman Christopher Pyne of $8 billion “waste” in the Building the Education Revolution (BER) program are nonsense. Independent cost estimates by quantity surveyors of 130 Government schools throughout Australia expose this lie.

The Building the Education Revolution Implementation Taskforce, formed to assess value for money (VFM) in individual BER projects, received 332 complaints, equating to 3.5 per cent of all schools involved in the program. The Taskforce conducted more than 460 school visits to both complainant and randomly selected non-complainant schools, and collected standardised cost data for more than 3700 of the primary schools for the Primary Schools for the 21st Century (P21) projects from all 22 education authorities, which allowed it to undertake a variety of comparative assessments and data analysis. What follows about the cost estimates for 130 Government primary schools is extracted from that report.

In presenting the Taskforce’s final report to the Minister for Tertiary Education, Skills, Jobs and Workplace Relations, Senator Christopher Evans in July 2011, Taskforce chair Brad Orgill said: “Given the context in which the BER program was delivered, it is a testament to those involved that the Taskforce has still only received 332 complaints, over three per cent of BER schools across the nation and at an overall premium on pre-BER business as usual costs of five to six per cent.

“Over 9,000 of the 10,500 projects have been completed since the P21 program was conceived in February 2009. This is a significant achievement. It is clear that the program did in fact deliver substantial stimulus.”

The Taskforce noted in its final report that it had detailed VFM assessments for 137 schools, of which 130 were Government, 5 Catholic and 2 Independent. While there were some randomly selected non-complainant schools, it stressed that the overwhelming majority were selected as a result of complaints and subsequent visits to these schools. I excluded the 7 non-government schools from my analysis because they were too small a sample.

The following table for the 130 Government primary schools comes from information contained in the detailed VFM case studies in the second section of the December 2010 BER Implementation Taskforce (BERIT) report (pages 115-170) and from Appendix 8 (pages 154-233) of the BERIT final report of July 2011. The reports can be accessed at the BERIT website.

In the table, ‘Cost of projects’ refers to the total Education Authority costs for a particular State or Territory for the number of schools listed. ‘Above assessment’ is the net amount for a State or Territory by which all the surveyed schools exceed the cost estimates of the quantity surveyors. ‘Net figure’ is mentioned because with some schools the assessments of the quantity surveyors were more than the education authority costs.
Area Schools Cost of projects Above assessment  % variation
NSW 77 $99,230,405 $15,543,802 15.7
Vic 29 $64,801,594 $3,468,279 5.4
Qld 14 $21,428,603 $645,719 3
WA 5 $7,745,505 $192,028 2.5
SA 2 $2,531,532 -$345,765 – 13. 7
Tas 1 $269,584 -$40,051 – 14.9
ACT 1 $2,397,368 $225,769 9.4
NT 1 $1,784,840 $194,571 10.9
Totals 130 $200,189,431 $19,884,332*  9.9
*This total is a net figure in that it allows for the two States where the assessments are under the costs.

The BER Taskforce engaged independent quantity surveyors who were not informed of the costs for each school they reported on. These surveyors reached their conclusions from the measures of the drawings and specifications on the same basis as if they were advising a client on a project budget.

The State and Territory breakdown of the 95 complaints that applied to the 130 schools studied in the detailed VFM case studies is: NSW 77 (67 complaints, or 87.0 per cent of the 77 schools studied), Victoria 29 (17, or 58.6 per cent), Queensland 14 (8, or 57.1 per cent), Western Australia 5 (2, or 40 per cent), South Australia 3 (1, or 33.3 per cent) and Tasmania ACT and Northern Territory 1 each (with none involving a complaint).

Thus, of the 130 primary schools in the inquiry’s VFM case studies, 95 (73.1 per cent) were the subject of complaints. There were 5675 Government primary schools involved in P21. Of the 332 complaints received by the inquiry, 292 involved Government primary schools – a complaint rate of 5.1 per cent for Government schools. (Note: The Taskforce’s 3.5 percentage mentioned earlier for the total of 332 complaints relates to both primary and secondary schools as all were involved in the National Schools Pride (NSP) component of the overall BER program).

The net $19,884,332 by which the estimated costs of projects at 130 Government primary schools exceeds the estimates by quantity surveyors works out at an average of $152,956 for each school. (That average is probably high because of factors mentioned in the previous paragraph).

However, even using this average and projecting it to the 5675 Government primary schools involved throughout Australia in the P21 program gives a total of $868,025, 300, considerably short of a billion, let alone billions.

Pyne uses his own maths:
The only apparent basis I can find for the $8 billion ‘waste’ claim is the following statement by Pyne when moving for a Commission of Inquiry into the BER in the House of Representatives on October 18 2010 (page 389 of House of Representatives Hansard for that day). He said:
“The opposition have been supported in raising these issues by notable media identities and outlets such as Ray Hadley, The Australian, the Today show on Channel 9 as well as others. In spite of all this, the previous Minister for Education, now the Prime Minister, described those complaints as nitpicking about a $16 billion program - in spite of the fact that we have uncovered billions of dollars of waste and mismanagement. Outlets and organisations such as the New South Wales Teachers Federation, not usually aligned or associated with the coalition, have said that there is as much as 30 to 50 per cent waste in this program, leading people to assume that there is as much as $6 billion to $8 billion of wasted taxpayers’ money.”

Pyne apparently uses different mathematics to the rest of the world in managing to get 30 per cent of $16 billion to equal $6 billion.

However, Abbott never bothered attempting any explanation for the $8 billion ‘waste’ claim – he simply asserted it. An example is when he moved a motion on 18 November 2010 (3020 of House of Representatives Hansard on that day) to suspend standing and sessional orders in the House of Representatives.

“Another policy that was also too important to be delayed was the school halls program. We all know what happened there: $16 billion was spent on $8 billion worth of value, if we are lucky. ... Let me make this prediction to the House: the National Broadband Network will turn out to be the school halls program on steroids. The school hall program wasted $8 billion.”

Dubious sources cited:
But back to Pyne. His claim that “we (I presume he means the Opposition) have uncovered billions of dollars of waste and mismanagement” is in conflict with the quantity surveyor findings.

The media groups and identities he cites are not noted for their objectivity as was shown by their use of highly unreliable sources for exaggerated claims about the BER. More of that later.

The only named outlet or organisation that Pyne cites is the NSW Teachers Federation which on April 23 2010 made a submission to the inquiry into the Primary Schools for the 21st Century (P21) by the Senate Education, Employment and Workplace Relations Committee. This can be accessed at the Federation website.

In its submission, the NSW Teachers Federation lists 27 case studies from individual (but not named) schools to say in its conclusion:
“We have estimated from the many examples provided that there will be less than $10 billion in actual value from the $16 billion allocated under BER.”

That estimate relies on 27 case studies of unidentified NSW Government primary schools, or 1.5 per cent of the 1784 NSW Government primary schools, being appropriate for the entire nation.

Another problem with this estimate is that the Teachers Federation is actually referring to the P21 program (that’s the subject of the Senate inquiry). The $14.06 billion P21 program involves $13.852 billion funding for actual school projects and $207.787 million allocated to the 22 education authorities (8 State or Territory education departments, 6 Catholic and 6 Independent Block Grant Authorities (BGAs) and two combined Catholic/Independent BGAs). So, what the Teachers Federation is really estimating is ‘less than $10 billion in actual value’ from the $13.852 billion allocated to schools under P21.

The NSW Teachers Federation covers teachers at NSW Government schools. It has no direct links to teachers at 6178 (77.6 per cent) of the 7962 primary schools involved in P21 projects throughout Australia (DEEWR figures). These 6178 represent other State and Territory primary schools and all Catholic and Independent primary schools.

Why bother with evidence?
In his October 18, 2010 speech in the House of Representatives calling for a Commission of Inquiry into the BER, Pyne let the cat out of the bag about how the Opposition was not waiting for any evidence before asserting waste and mismanagement in the BER.

Here is what Pyne said: “Unfortunately the waste continues unabated, in spite of the fact that since April 2009 the opposition have raised in this House and in the media example after example of waste and mismanagement.” It really is hard to see how there could have been much “waste and mismanagement” by April 2009, seeing as April 10, 2009 was the closing date for 20 per cent of eligible schools to submit lists to the Commonwealth for approval. Another 40 per cent was required by May 15 and the final 20 per cent by July 10.

Pyne wrote to the Auditor-General on June 12, 2009 requesting scrutiny of whether the delivery of the program represented appropriate use of taxpayers’ money. In fact, Pyne’s letter was sent about five weeks after the first round of P21 projects were due to start in May-June 2009.

On June 25 2009 – about seven weeks after the first of Round 1 of P21 projects were due to start – the Senate resolved to request the Auditor-General to undertake an urgent investigation of ‘waste and mismanagement of the BER program’.

Both of these moves came nearly two months before the first BER project was completed at Yandina State School in Queensland’s Maroochy Shire in late August 2009.

Much ado about nothing:
As promised, back to the unreliable claims from ‘sources’. On April 7, 2010, The Australian reported under the heading ‘Building rort claims face audit’, that State Education Minister Geoff Wilson and Education Queensland director-general Julie Grantham met Greg Applin, a civil engineer ‘who is alleging overpricing for an $850,000 library to be built at Hendra State School, where his wife recently quit as Parents' and Citizens Association president’.

The newspaper report continued: “Mr Applin produced a ‘budget cost plan summary’ from construction manager Abigroup, showing the 224sq m library would cost exactly the $850,000 of taxpayer funds allocated by the federal government.

“The actual building costs – including site works, landscaping and $130,000 for ‘site services’ such as electricity and water connections – total $628,284.

“But ‘other design and construction’ costs add up to $128,528 -- including a 6 per cent construction management fee of $51,000, another $63,149 for ‘professional design’ and $4922 for site surveying.

“A further $27,353 has been quoted for furniture and fittings, $4505 for a ‘principal's representative’, and $2805 for an ‘audit quantity surveyor”.

“An 8 per cent project contingency allowance, totalling $57,524, brings the cost to $850,000.

“Based on the 224sq m floor plan provided with the quote, the completed price is $3794 per sq m – 50 per cent more than the cost of building and fitting out a high-quality home.”

(I note that submissions to the Coalition-dominated Senate inquiry closed more than two weeks after the April 7, 2010 report in The Australian. It is interesting that when submissions closed there was none from any Queensland school and none from any Queensland P & C. Mr Applin apparently did not feel strongly enough to pursue the matter there).

Now for the facts:
The Taskforce VFM case study for Hendra State School on page 212 of its final report tells a different story.

The library, which is shown to have been completed on 22 February 2011, was rated Value for Money. The case study shows the Education Authority gave the floor area as 287 sq m while the quantity surveyor estimated it at 238 sq m.

The Education Authority building cost was $639,539, or $157,792 less than the surveyor’s estimate of $797,332. The education authority gave external works costs at $210,461,or $127,054 more than the quantity surveyor’s estimate of $83,407. The overall result was that the quantity surveyor calculated the total project cost at $880,739, or $30,739 more than the education authority.

One of the most unreliable sources used extensively by News Ltd publications, Ray Hadley, and the ABC, was Craig Mayne, who was routinely described as a ‘whistleblower’ and a ‘civil engineer’. Mayne also wrongly claimed experience as a project manager in the construction industry. I wrote a piece about this in July 2010, which can be accessed at Google by typing: Analyzing Craig Mayne’s full claims.

Mayne’s credentials to be called an expert analyst are shaky and his experience in the construction industry is minimal – in fact when appearing at the Primary Schools for the 21st Century (P21) inquiry by the Senate Education, Employment and Workplace Relations Committee on May 19, 2010 he was finally forced to admit he had not been employed in that industry in any capacity since before 1986. He also admitted he was not a civil engineer, although he had left uncorrected repeated media mentions attributing this qualification to him.

His submission to the Primary Schools for the 21st Century (P21) inquiry contains errors such as claiming Education Queensland would manage almost $5 billion worth of Federal funds (it was actually about $2.24 billion for all three components of the BER); taking out of context a quote from Queensland’s Department of Public Works; falsely claiming that more than $1.7 billion in work had been allocated in Queensland to builders without tender; and justifying an analysis of projected costs of $200,000 against projected costs of $850,000 library at Hendra State school by saying he contacted a Queensland home builder to find out how much it would cost for a building of the same size.

Yes, that is the same Hendra State School examined by the Orgill inquiry’s VFM case study quoted above. The school was also visited three times by the inquiry – in June 2010, in November 2010 and in June 2011.

Yet Mayne was praised by Anne Connolly, of the ABC News Online Investigative Unit, in an article ‘BER issues slip under the media radar’ on 31 May 2010. She wrote: “It’s worth pointing out that much of the financial analysis comparing standards with public school costs has been done by a dogged former P&C president and civil engineer from Queensland, Craig Mayne, who gathered publicly available data and pieced the puzzle together and all for The Australian’s benefit.”

Connolly, a former Walkley Award winner, wrote this article 12 days after Mayne’s appearance at the Senate inquiry where not only was the civil engineer claim shown to be false, but that under questioning Mayne admitted he had not been employed in the construction industry for just on 25 years.

In this article Connolly was very much “Anne of Queensland fables”.

In the second article of this series, I will discuss more of the fables that follow as a result of these claims of $8 billion BER ‘waste’.