Democrats urge Auditor-General to Investigate Hindmarsh Soccer Stadium Redevelopment Project

Extract from Hansard

Legislative Council
10 November 1999

Mike Elliott
Leader Australian Democrats
Member of the Legislative Council

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That the Legislative Council requests that the Treasurer, under section 32 of the Public Finance and Audit Act 1987, requests that the Auditor-General examines and reports on dealings related to the Hindmarsh Soccer Stadium Redevelopment Project and, in particular-

I. Whether there was due diligence by government representatives prior to the signing of agreements for construction of stages 1 and 2 of the project.

II. Whether due diligence was applied subsequent to the commitment to stages 1 and 2, including whether the Crown Solicitor's advice as described on page 12 of the thirty-third report of the Public works Committee, August 1996, was adhered to.

III. (a) Whether undue pressure was placed on individuals leading to legal commitment by them on behalf of sporting clubs or associations.

(b) The present status of all relevant deeds of guarantee or other legal documents, the financial status of the signatories and whether the legal agreements have created financial difficulty for any non-government persons or organisations.

IV. Whether there were any conflicts of interest or other imprudent or improper behaviour by any person or persons, government or non-government, involved with the project, and whether the appropriate processes were followed in relation to-

V. The Auditor-General be requested to include in his report recommendations for government and the parliament where appropriate.

In moving this motion it is not my intention to go exhaustively through the entire history of the Hindmarsh Soccer Stadium saga, nor indeed to do a great deal of finger pointing. But I will cover the broad outlines of what has happened in the past, point to areas of concern and argue that it would be appropriate if we referred questions surrounding the Hindmarsh Soccer Stadium redevelopment project to the Auditor-General under section 32 of the Public Finance and Audit Act.

The issue of the soccer stadium first went before the Public Works Committee back in 1996, at which time it was projected to cost $8.125 million. One of the major justifications given for the upgrade at that stage was to make it capable of hosting preliminary soccer matches for the Sydney Olympics. That upgrade was to contain 15 000 permanent and 5 000 temporary seats. As I recall, 3 000 of those 15 000 permanent seats were to be under cover. At that time a memorandum of understanding was signed between the Minister for Recreation, Sport and Racing and the South Australian Soccer Federation, under which memorandum money was to be supplied 50 per cent by the South Australian Soccer Federation and 50 per cent by the South Australian government, and the government also was to offer security for the total loan.

One of the obligations under the MOU was that the Soccer Federation would ensure that there was a $3 levy on every ticket sold to spectators at the Hindmarsh Soccer Stadium. I encourage members to look at the entirety of the thirty-third report of the Public Works Committee, August 1996, on the Hindmarsh Soccer Stadium upgrade; I will refer to just a few components of it. On page 8, under `Project outline', the report states:

Based on the evidence taken from witnesses, the committee had some concerns regarding the use of Construction Management for this project. These concerns, together with evidence received from the Crown Solicitor in relation to the process, are detailed in section 3 of this report.

So, the committee at that stage made it plain that it had some concerns. Page 9 of the report notes:

To ensure Adelaide retains the opportunity to host preliminary rounds of the competition, it is essential that a stadium meeting the FIFA minimum requirements is available. Although some ad hoc upgrading of the stadium has taken place over recent years, it does not meet all necessary FIFA requirements. The proposed upgrade will ensure those requirements are met.

Although it is intended that a traffic study will be undertaken some time in the future, the committee is concerned that there is no allowance for additional car parking in either the plans or budget presented as part of this proposal. The committee highlights the fact that extreme difficulties will be experienced if additional space is not secured for car parking prior to the completion of the project.

To this day, issues around transport and parking do not appear to have been adequately addressed. This is in relation to the $8. 125 million upgrade-which was not then known as stage 1. There was not going to be a stage 1 and stage 2; it was simply the upgrade. On page 11 of the report, looking at procurement methods, paragraph 3.2 states:

A major factor in the selection of Construction Management as the procurement process for this project is that it will maximise the South Australian Soccer Federation's opportunity to secure additional sponsors. The potential risk of conflict of interest existed as, while a particular tenderer may not be able to provide certain works at the cheapest price, they may be able to offer the Soccer Federation excellent sponsorship opportunities.

In fact, there are some suggestions that the opportunity for further sponsorship is not the only thing that might have eventually had some impact, but that is a matter I do not intend to go into in any depth. Certainly, serious allegations are being made. The Minister for Recreation, Sport and Racing on 26 June during Estimates Committees stated:

. . . the inference that any member of that [executive] committee, whether a member of this parliament or any other members, might have a role in that decision is incorrect.

Given this statement was in direct conflict with the evidence given to the committee on 12 June 1996, witnesses were recalled on 10 July to seek clarification.

The project. . . should follow the usual government approval and delivery process. Accordingly, cabinet will approve the funds, the Minister for State Government Services will be the principal in the numerous contracts and Services SA will perform the contractual role of superintendent. Probity will be managed by the utilisation of the government audited process, for example, the calling of tenders, the opening of tenders and tender acceptance.

All trade tender calls for this project will be on a selected basis following a registration of public interest. . . the registrations will be assessed in the first instance by the construction manager, who will then recommend a short list selection to the Services SA project manager [who] will then seek endorsement by the project executive committee. Any unresolved dispute in regard to the tender selection will be resolved finally by Services SA as the government's risk manager in construction matters. Services SA will also ensure that all trade tenders invited can adequately perform the services tendered.

The process of accepting a trade package will be that Services SA will call the tenders. . . [and] close and schedule the tenders. The tenders will be appraised by the construction manager and Woods Bagot, who recommended to the Services SA project manager, who will table the appraisal and recommendation to the executive committee for endorsement and then recommend acceptance to the government delegate. The delegate for trade packages less than $500 000 will be the Services SA Director of Building Management and the delegate for trade packages greater than $500 000 will be the Minister for State Government Services.

The Public Works Committee sought assurance from the Crown Solicitor that the procedure being adopted for construction management is well founded, lawful in all respects and legally defensible. I quote from the report on page 12:

that the process. . . would be legally defensible as an appropriate arrangement expeditiously and efficiently to undertake the redevelopment of Hindmarsh Stadium in the light of all relevant circumstances, provided that each of the following conditions are satisfied:

1. Cabinet approves the Minister for State Government Services to be principal contracting party and to be contractually responsible to undertake the development.

2. The various commercial, prudential and risk management issues attendant upon the Minister for State Government Services directly contracting to undertake the redevelopment are adequately addressed, especially in respect of the contractual relationship between the Crown on one hand and Soccer Federation on the other.

3. The processes set out by Services SA are implemented and observed. This would include the following:

3.2. The minister is exclusively responsible to accept the lowest conforming tenders;

3.3 The Hindmarsh Redevelopment Executive Group and the Hindmarsh Redevelopment Committee are, in relation to the actual undertaking of the development, merely performing a liaison or consultative function and do not have any right or power to determine or influence the acceptance of tenders or the performance of the Minister's contractual, prudential or construction responsibilities and obligations.

4. Any `sponsorship' arrangements proposed by individual tenderers for `trade packages' are considered separately from the acceptance of the actual tender and are negotiated independently by the Soccer Federation directly with any such tenderer.

That is the end of the Crown Solicitor's advice within the report, but the report continues:

The Public Works Committee was advised by Services SA and the Minister for State Services that Services SA will table tender appraisals and recommendations to the executive committee and as such draws attention to 3.2, 3.3 and 4 above. The committee stresses that approval for the proposed works is subject to all the above conditions being met.

It is worth making the point, as the committee did, that the land upon which the development is taking place is not owned by the Soccer Federation or by any soccer clubs but indeed is the property of the City of Hindmarsh-Woodville. Finally, in the conclusion section at page 14 of the report, it is stated:

Furthermore the committee is concerned by the conflicting evidence received regarding the construction management process and emphasises that the proposed works are endorsed subject to the strict adherence by all parties to the Crown Solicitor's conditions as detailed in section 3. As such the Public Works Committee stresses the importance of a distinct separation between the tendering process and possible sponsorship opportunities for the South Australian Soccer Federation. In addition, due to the nature of construction management, the committee recommends close monitoring of the project to ensure it is completed within budget and at cheapest possible price.

At that stage I guess the Public Works Committee felt that it had done its job. The South Australian public believed that it would get an upgrade to the soccer stadium costing $8.125 million, of which the government would pay half and act as guarantor for the other half, and that a $3 levy on each entrance would be sufficient to cover that commitment. It became apparent a little later that things were just not that simple. There is also the assumption that the advice given by the Crown Solicitor and endorsed by the Public Works Committee would have been adhered to.

When the 1997-98 budget papers emerged, people became aware that there were extra allocations in relation to the stadium. This aspect had not found its way to the Public Works Committee. Someone managed to work out how to read the budget papers, which each year are becoming less readable and less informative. They contain an increasing amount of numbers but it was much easier almost 14 years ago when I came into the parliament to read a budget paper and work out where the money was spent than it is today.

The Hon. M.J. ELLIOTT: Complimenting? No, I am not. I actually support accrual accounting but they have not produced a budget paper that is in any way useful and readable. The Public Works Committee had another look at the question of the Hindmarsh Soccer Stadium and suddenly there is another 9 700 permanent seats and another $18.5 million to be expended on what has now become stage 2 of the Hindmarsh Soccer Stadium. The given reason was that it was necessary to secure Olympic matches. We had been told that that was what the $8.125 million was for: suddenly we are told that, without spending another $18.2 million, we would not be able to secure Olympic matches.

That is not adding other things such as the consultancies for Mr Ciccarello, which ran, I think, to $378 000, if my memory serves me correctly, nor the fact that it appears that the state will also have to foot the transport bill and accommodation costs for players who come to South Australia. Further, there is a grave risk that we could lose considerable sums of money on each game in itself, aside from the fact that the stadium has been upgraded and doubly upgraded, the major reason being given that we could have soccer preliminary matches played here in Adelaide. That is an aside. That is another couple of million done cold. I am focusing on the public works aspect of this matter and the fact that now we have a bill that is running closer to $30 million than the $8.125 million-

The Hon. M.J. ELLIOTT: Well, there is more to come-that is right. The story is not finished yet. I suppose it becomes obvious that something is going astray when even government members start asking questions in this place-and when they ask not one or two questions but quite a few. That is one of the strengths of upper houses: you are more likely to find backbenchers who will kick the party system in an upper house than in the other place.

A series of other concerns have been raised, some through questions in this place and some elsewhere. For instance, while the MOU states that the Soccer Federation was to take up the responsibility through this $3 levy, it has been suggested to me that other agreements were reached directly with the two clubs that were then using the stadium. It has been suggested that a great deal of pressure was brought to bear on them to get them to sign off on agreements in terms of their responsibilities. It has even been suggested that part of the reason why the club that fell over did so was the financial problems that were being created for it by the commitments which-

The Hon. M.J. ELLIOTT: It might have, but it certainly was not assisted by this sort of agreement. Clearly, the big question that is coming up at this point-other than the contract process and contract management process which everybody had an understanding was to be complied with, but now there is a general belief that those arrangements were not complied with-is whether the Soccer Federation had the ability to meet the commitments that were created by the 1996 agreement in relation to the first upgrade.

Although it appears that the government may be footing the entire bill for the second upgrade, it still creates other costs for the Soccer Federation. Clearly, if you have bigger and additional buildings to maintain, you have a much higher maintenance cost, and it is difficult to put numbers on that. But, as I understand it, those sorts of things simply were not taken into account. A report commissioned by the government and prepared by Arthur Anderson suggested that conditions which the South Australian Soccer Federation was meant to comply with-in particular 8.1, 8.6 and 8.11-were not being complied with. That does not mean that it was doing it wantonly, but it was having difficulties in being able to raise the necessary funding.

An important question that needs to be answered is, `Was there due diligence in terms of investigating the cash flows in relation to the first stadium upgrade to find out whether or not it was capable of supporting the financial commitments that were being created for the Soccer Federation?' Clearly, things have become far more difficult now that we have gone from having two national soccer league clubs in Adelaide to one-and the government might not have foreseen that- but I am told that the remaining club was seeking to shift its games and had looked at going to Norwood Oval, and that the reason for that was the financial constraints that were being created because of the additional costs of the stadium which were affecting its cash flow. However, I understand that legal pressure was brought to bear and that, in the end, that shift did not eventuate.

When the Auditor-General appeared before the parliamentary Public Works Committee it was quite apparent that, while he had spent some time looking at the issue of the Hindmarsh Soccer Stadium, he had not looked at all aspects of it. He certainly raised concerns in his reports about aspects of the soccer stadium, but it was clear that when the committee asked him questions there were matters of which he was not aware-matters which may have made the situation worse and caused him more concern than that which he expressed in his reports.

I said at the beginning that I did not want to go exhaustively through every allegation made about every individual, who did what to whom and so on. However, what I want to do is make it plain that there are issues of significant concern about whether or not there was due diligence in relation to the government's decision initially to enter into the contract for the upgrade; whether or not there was due diligence in relation to the further upgrade to ensure that costs that were being incurred would be met; and whether or not there was due diligence in relation to the maintenance of the contract and that the contract was administered along the lines as suggested by the Crown Solicitor and supported by the Public Works Committee.

Those matters are of real concern. If sporting clubs or associations were in any way subjected to undue pressure, whether or not they made commitments that ultimately they were unable to meet-which of course rebounds back on to the public purse-is a matter of importance. If one has concerns about these things, the next question is, `What is the best way of getting to the bottom of them?' I was approached by several people on this matter, and the suggestion that was made to me was that we should look at some sort of judicial process. I know that the Hon. Mr Cameron has some concern about the cost of an Auditor-General's inquiry, but I can assure him that any judicial inquiry where large numbers of lawyers are involved will-

The Hon. T.G. Cameron: My worry is sending it to the Auditor-General: I don't want him wasting any more taxpayers' money on reports. I will have my say about that in a moment.

The Hon. M.J. ELLIOTT: If you are going to have your say in a moment, you should let me have mine now. There is no question that a judicial inquiry would be horrendously expensive. We have had recent experience with a number of them, and I do not think the taxpayers would thank us for that. If you have already done some 20-odd-

The Hon. T.G. Cameron: A royal commission would be cheaper than sending it to the Auditor- General.

The Hon. M.J. ELLIOTT: I think that we could question that. Having already done $20 million to $25 million cold, I was a bit reluctant to do another $1 million or so cold by going through a judicial process, because if you set up a judicial process everybody would be represented by lawyers. Frankly, there have been a few quasi judicial inquiries in this state recently that I have extreme reservations about, but having expressed those reservations I will not go into them further at this point.

Another proposition that was put was that perhaps there could be a select or joint house committee investigation. I gave that consideration, but that is not my preferred route because while the committee process works extremely well in this parliament most of the time it becomes more difficult when an issue is referred that is of a highly political nature. That is not a reason for it not to go to a committee, but it is a reason why you might look at the other options.

If, for instance, an allegation has been made about the government not doing things too well, what you end up finding is that the government members are hardly ever available and you cannot get a meeting-that is the first thing that happens. By way of convention-although I think it is a ridiculous convention-these committees are chaired by government members, and they manipulate the process even further in terms of stalling, obfuscation and everything else; and on the other side I presume we would have Foley and Co. playing their games as well, and at the end of the day I do not think that would take us a long way.

Of course, the other problem is that, while the committee has the power to call for persons and papers, etc., if there are public servants who had reservations about what had happened, they are not going to appear before a parliamentary committee and say so. I saw that problem happening with the committee looking at some of the privatisation matters, and I have seen it on other committees, where I have known public servants who privately have said one thing and when they get before a committee say something else again, because they are covering their own backsides. There would be a lot of people involved in the Soccer Federation, and clubs also, which, for a variety of reasons, would be reluctant to speak. Certainly they would answer questions but I am not sure that we would get full answers.

If we have to end up going down that track then I am prepared to consider it. However, the reason I have opted for the Auditor-General is that, despite interjections earlier, there is no doubt in my mind that the Auditor-General's process would, first, be cheaper than a judicial or quasi judicial process. Secondly, because the Auditor-General has already looked at the issue, although clearly there are aspects of it that have not been brought to his attention, I believe that the Auditor-General has a significant head start. On this matter the Auditor-General will not be starting from square one, because this is a matter that he has already reported on to this parliament on a couple of occasions. So he has more than a working understanding of the general issue, if not some of the more specific issues. I noted earlier that when he appeared before the Public Works Committee matters were raised there that had not previously been brought to his attention.

My motion calls for section 32 of the Public Finance and Audit Act to be invoked. Section 32 provides:

(a) examine the accounts of a publicly funded body and the efficiency and economy of its activities; or

(b) examine accounts relating to a public funded project and the efficiency and cost-effectiveness of the project.

(1a) An examination may be made under the section even though the body or project to which the examination relates has ceased to exist.

(2) After making an examination under subsection (1), the Auditor-General must prepare a report setting out the results of the examination.

(3) The Auditor-General must deliver copies of the report to the Treasurer and to the President of the Legislative Council and the Speaker of the House of Assembly.

Members can see that this type of inquiry has clearly been entertained under the Public Finance and Audit Act 1987. It is not me suggesting that here is a new role for the Auditor-General. In fact, that role was contemplated in the drafting of the act. It is a request that must be made by the Treasurer, and it is for that reason that the framing of this motion is:

That the Legislative Council requests that the Treasurer, under section 32 of the Public Finance and Audit Act, requests that the Auditor-General examines and reports on dealings related to the Hindmarsh Soccer Stadium Redevelopment Project. . .

Having indicated that this is my preferred course of action and having pointed out the weaknesses, I think, of a judicial process, and of a committee process, if I have an indication that the numbers are not here for this, then next week I am prepared to support a motion for a parliamentary committee. I would ask government members, and other members of this place, to consider that very seriously. I do not think that is the preferred course of action on this matter but it might be the only action that is left available, and that would be a great pity.

I said that I was not going to go through the whole issue chapter and verse. I have not repeated a large number of allegations that have been made to me. I think in the first instance those allegations can be made to the Auditor-General. They will not be made in open session, but the Auditor-General will be in a position to examine those matters and then eventually report back if real concerns remain after due consideration. I urge all members to support the motion.

After failing to get support from two independents for an Auditor-General's inquiry, Mike Elliott moved for a joint parliamentary inquiry into the Hindmarsh Soccer Stadium: 17 November 1999

However it was the Auditor-General's Inquiry which was ultimately endorsed by the Legislative Council: 17 November 1999