Defence: Contracts

Senator Hogg asked the Minister for Defence, upon notice, on 26 April 2002:

With reference to contracts let by Defence for labour hire:

1. What contracts have existed since July 1996 in the Townsville area for the Army and for the Air Force, held by: (a) local labour hire firms; and (b) firms from outside the Townsville area.
2. Were there multiple contracts held by any contractor; if so, what are the summary details of those contracts.
3. (a) What contracts that were in existence post-July 1996 have been renewed; (b) when were they renewed; (c) were they renewed as a result of a further tendering process; and (d) if a contract was not renewed why was it not renewed.
4. (a) What, if any, contracts were renewed or extended without a further tendering process; and (b) what assessment/approval process was applied.
5. (a) What, if any, contracts were extended; (b) what was the period of extension in each case; and (c) what assessment/approval process was applied.
6. (a) What, if any, contracts were not renewed or extended; (b) why were they not renewed or extended; (c) who or what contractor was given the work where a contract was not renewed or extended; and (d) what process was applied to transfer the work to a new contractor.
7. Have any contracts that previously existed been transferred to companies outside of Townsville without a tender process; if so: (a) what are the summary details of those contracts; and (b) what process was used to re-assign the contracts.
8. Who, and at what level within Defence or the relevant service, had the authority to approve the letting of the contracts and/or the renewal or extension of the contracts.
9. (a) What commitments or undertakings, oral or written, have been made, by the department, individual services, or the Minister or any of his predecessors, to retain work in the Townsville area by contracting to a Townsville tenderer; and (b) if there are any written undertakings, can copies be supplied.
10. (a) What are the terms of insurance requirements, including public liability, under any of these tenders and/or contracts; (b) has this changed from tender to tender; if so, how have the requirements changed; and (c) is there any flexibility in the request for tender for the terms and conditions of insurance requirements; if so, are tenderers made aware of this.
11. At whose direction does the contract labour operate: the immediate Defence personnel supervisor or the contractor's personnel.
12. Have the direction and supervision arrangements for labour hire changed since July 1996; if so, in what way.

Senator Hill - The answer to the honourable senator's question is as follows:

Defence does not maintain comprehensive records of the precise information sought, but the following answer is based on available information.

Recently the significant activities involving labour hire have been undertaken by the Northern Logistic Group (NLG), a Business Unit of Joint Logistics Command within the Defence Material Organisation, hence the answers to the Honourable Senator's questions are focused on these activities.

1. The definition of 'local labour hire firms' in the Senator's question is assumed to refer to firms located in the Townsville area, whether they are corporately based in Townsville or corporately based elsewhere but with a subsidiary or branch operations in the Townsville area.
   1. NLG/Army: No.
      
      Standing Offer No. PQ 5273 was raised for the "Supply of Tradesmen to Undertake the Repair/Maintenance of Motor Vehicles and Miscellaneous Equipment on Army Premises at Lavarack Barracks, Townsville". The effective date was 1 September 1994 to 31 August 1997 with the option of extension by one (1) year to 31 August 1998. The Contractor was Diesel Motors, corporately based in Townsville. At the expiry of Standing Offer No. PQ 5273 numerous purchase orders were placed under a Simple Procurement methodology with various Townsville firms, some of which are local firms and others are branch offices of national firms.
      
      Due to the changes in organisations within Defence and within the Townsville area since 1996 there is difficulty in locating exact records pertaining to individual purchase orders over the requested timeframe. The organisations in question span 2nd Field Logistic Battalion, 10th Force Support Battalion and NLG. A summary of contractors who provided labour hire services, on behalf of these organisations, after the expiration of Standing Offer No. PQ 5273, up until March 2001 are as follows:
      1. Diesel Motors.
      2. Skilled Engineering.
      3. Scobie Mcintosh.
      4. Drake International.
      5. Westaff.
      
      Royal Australian Air Force (RAAF):
      
      There were no Standing Offers let to local firms on behalf of the Air Force during this period. Details on local purchase arrangements, if applicable, could not be determined.
   2. NLG/Army:
      
      CMAS Consulting (Brisbane-based) provided personnel to repair equipment on-site at 3rd Brigade and NLG on a sole source basis from 8 October 2001 to 26 April 2002, through an Amendment to Standing Offer No. S 0004.
      
      Drake Industrial, Townsville Branch was awarded Standing Offer No. 0204-100-23 for the Provision of Personnel to Repair and Maintain ADF Equipment and Components On-Site at ADF Establishments in Townsville, on 15 April 2002. This Standing Offer was raised on behalf of 3rd Brigade and Northern Logistic Group by NLG.
      
      RAAF:
      
      Standing Offer No. 0010-087-32 was raised for RAAF on behalf of Support Equipment Logistic Management Unit. The Effective Date was 19 October 2000, with an initial Expiry Date of 18 October 2003, with the option for two extensions of one year duration each. The Contractor is Manpower Services (Aust) P/L based in Sydney.
2. NLG/Army:
   
   After the expiration of Standing Offer No. PQ 5273, contract staff continued to be supplied by Diesel Motors on a month-by-month basis until December 2000. Labour hire requirements in addition to those supplied by Diesel Motors, entailed a Simple Procurement process of seeking quotations from other Labour Hire suppliers in Townsville. These practices continued until March 2001. A search of financial records provides an approximate breakdown of the value of purchase orders awarded to these firms by financial year. It should be noted that it could not be accurately determined with these monetary values were all for labour hire as opposed to other maintenance related activities.
   
   FY 1997/1998:
   
   Diesel Motors standing offer for trades persons, value $320,000.
   Skilled Engineering purchase order for trades persons, value $150,000.
   
   FY 1998/1999:
   
   Diesel Motors standing offer for trades persons, value $460,000.
   Skilled Engineering purchase order for trades persons, value $300,000.
   Scobie Mcintosh purchase order for trades person, value $11,000.
   Drake International purchase order for trades person, value $30,000.
   Westaff purchase order for trades person, value $32,000.
   
   FY 1999/2000:
   
   Diesel Motors purchase order for trades persons, value $460,000.
   Skilled Engineering purchase order for trades persons, value $350,000.
   Scobie Mcintosh purchase order for trades person, value $43,000.
   Westaff purchase order for trades person, value $87,000.
   
   FY 2000/2001:
   
   Diesel Motors purchase order for trades persons, value $280,000.
   Skilled Engineering purchase order for trades persons, value $270,000.
   Westaff purchase order for trades person, value $36,000.
   Scobie Mcintosh purchase order for trades person, value $3,400.
   Drake International purchase order for trades person, value $17,000.
   
   FY 2001/2002:
   
   Skilled Engineering purchase order for trades persons, value $50,000.
   Westaff purchase order for trades person, value $10,000.
   Drake International purchase order for trades person, value $8,000.
   Commercial Solutions purchase order for trades person, value $8,000.
   
   RAAF:
   
   There were no multiple Standing Offers held by any contractor on behalf of Air Force Requirements. Local purchase arrangements could not be verified.
3. As detailed in response to questions 1 and 2, there were a number of contracts arranged via Simple Procurement processes for Army requirements during the period, especially at the expiration of Standing Offer. The Standing Offer No. PQ 5273 with Diesel Motors was not renewed at the expiry of its extension on 31 August 1998.
   
   As the question relates to the renewing or extending of contracts via formal contract amendments or tendering activities, the response focuses on the Standing Offers that were in place during this period, rather than Simple Procurement arrangements.
   1. No Standing Offers raised on behalf of Army or Air Force have been renewed in the period,
   2. is not applicable,
   3. is not applicable, and
   4. Standing Offer No. PQ 5273 for the Supply of Tradesmen to Undertake the Repair/Maintenance of Motor Vehicles and Miscellaneous Equipment on Army Premises at Lavarack Barracks, Townsville was not renewed after its first extension expired on 31 August 1998. It was not renewed initially because it was considered that the establishment of a new Standing Offer was not cost-effective, based on the estimated value and the administrative overhead of the procurement activity. Subsequently the market testing of Base Repair functions through the Defence Integrated Distribution System (DIDS), which was planned to implemented in Townsville from late in 2000, was deemed to not justify establishing a Standing Offer for Labour Hire.
4. 1. NLG/Army:
      
      Standing Offer No. PQ 5273 for the Supply of Tradesmen to Undertake the Repair/Maintenance of Motor Vehicles and Miscellaneous Equipment on Army Premises at Lavarack Barracks, Townsville was extended form 31 August 1997 to 31 August 1998.
      
      RAAF:
      
      Standing Offer No. 0010-087-32 was not renewed or extended in the period.
   2. The assessment/approval process for the extension of Standing Offer No. PQ 5273 from 31 August 1997 to 31 August 1998, was via Amendment No. 4 - Type B, raised by the Defence Acquisition Regional Office (DARO-QLD), as the then Contracting Agency for this Standing Offer.
5. The question has been addressed in the previous response to Question 4.
6. 1. NLG/Army:
      
      Standing Offer No. PQ 5273 for the Supply of Tradesmen to Undertake the Repair/Maintenance of Motor Vehicles and Miscellaneous Equipment on Army Premises at Lavarack Barracks, was not renewed at the completion of its first extension to 31 August 1998.
      
      RAAF:
      
      Standing Offer No. 0010-087-32 was not renewed or extended in this period.
   2. NLG/Army:
      
      Standing Offer No. PQ 5273 was not renewed because it was considered that the establishment of a new Standing Offer was not cost-effective, based on the estimated value and the administrative overhead of the procurement activity. Subsequently the market testing of Base Repair functions through the DIDS, which was planned to implemented in Townsville from late in 2000, was deemed to not justify establishing a Standing Offer for Labour Hire.
      
      RAAF:
      
      Not applicable.
   3. After the expiration of Standing Offer No. PQ 5273, contract staff continued to be supplied by Diesel Motors on a month-by-month basis until December 2000. Labour hire requirements in addition to those supplied by Diesel Motors, entailed a Simple Procurement process of seeking quotations from other Labour Hire suppliers in Townsville. These practices continued until March 2001. Although a repetitive requirement existed over the period, additional labour hire procurement was conducted on a job-by-job basis utilising Simple Procurement procedures. This approach proceeded in anticipation of the transition of the DIDS market testing process occurring in Townsville from the second half of 2000, with commencement by early 2001.
      
      Standing Offer No. S0004 for the Provision of Personnel to Repair and Maintain ADF Equipment and Components 'On-Site' at ADF Establishments in South Queensland was placed with Brisbane- based CMAS Consulting. It is used to supply labour hire to 7th Brigade in Brisbane, and was amended to address a significant and growing maintenance backlog that emerged as an urgent priority in 3rd Brigade, Townsville during 2001. The Amendment was for the period 8 October 2001 to 26 April 2002.
   4. There is insufficient detail on file to determine the exact process by which Diesel Motors continued to provide Contract Staff at Lavarack Barracks after the expiration of Standing Offer PQ 5273. It is likely that the process entailed raising a monthly purchase order on a sole source basis with Diesel Motors for the period 1 September 1998 to December 2000.
      
      Standing Offer S 0004, was established as a result of a Complex Procurement tendering exercise and involved proven process and procedures for managing a large pool of labour hire, on-site, on a medium to long-term basis. The procurement strategy to utilise Standing Offer S 0004 as an interim approach to support 3rd Brigade maintenance requirements was endorsed by the Assistant Director, Contracting Directorate Aerospace and Logistics Support (CONDALS) on 14 September 2001.
      
      During this period, Standing Offer 0204-100-22 was raised for labour hire on behalf of 3rd Brigade and NLG Townsville, and awarded to Drake Townsville on 15 April 2002. This Standing Offer is for an initial period of 16 April 2002 to 15 April 2004, with the option of two extensions, each of a maximum period of one year. This Standing Offer entailed a competitive tendering process which provided an equal and fair opportunity for Townsville-based firms to tender.
7. Standing Offer PQ 5273 expired on 31 August 1998 and was not renewed and therefore was not transferred to any company. A new requirement emerged as result of a significant maintenance backlog identified in 3rd Brigade during 2001. This requirement was initially addressed by utilising the existing Standing Offer No. S 0004 for South East Queensland requirements, due to the non-existence of a Standing Offer in Townsville for Army requirements at the time, and the urgency of the requirement.
   1. Standing Offer No. S0004 for the Provision of Personnel to Repair and Maintain ADF Equipment and Components 'On-Site' at ADF Establishments in South Queensland was placed with Brisbane-based CMAS Consulting. It is used to supply labour hire to 7th Brigade in Brisbane, and was amended to address a significant and growing maintenance backlog that emerged as an urgent priority in 3rd Brigade, Townsville during 2001. The Amendment was for the period 8 October 2001 to 26 April 2002. Standing Offer S 0004, was established as a result of a Complex Procurement tendering exercise and involved proven process and procedures for managing a large pool of labour hire, on-site, on a medium to long-term basis. The procurement strategy to utilise Standing Offer S 0004 as an interim approach to support 3rd Brigade maintenance requirements was endorsed by the Assistant Director, CONDALS on 14 September 2001.
      
      During this period, Standing Offer 0204-100-22 was raised for labour hire on behalf of 3rd Brigade and NLG Townsville, and awarded to Drake Townsville on 15 April 2002.
   2. Amendment No. 5 to Standing Offer S 0004 was raised by NLG on 21 September 2001, to enable the provision of labour hire to support Townsville requirements for the period 8 October 2001 to 26 April 2002. During this period Standing Offer 0204-100-22 was raised on behalf of 3rd Brigade and NLG Townsville as a result of a public tendering process. This Standing Offer was awarded to Drake, Townsville on 15 April 2002, with an effective date of 16 April 2002 and an expiry date of 15 April 2004.
8. Under the Defence Chief Executive Instructions the authority for letting of contracts and or renewal/ extensions is the Liability Approver, who must have sufficient financial delegations to approve the value concerned.
   
   The authority for the letting of Standing Offer No. PQ 5273 for the Supply of Tradesmen to Undertake the Repair/Maintenance of Motor Vehicles and Miscellaneous Equipment on Army Premises at Lavarack Barracks, Townsville was the Logistics Operations Officer of 2nd Field Logistic Battalion. The authority for the extension of Standing Offer No. PQ 5273 was the Vehicle Fleet Manager of 2nd Field Logistic Battalion.
   
   The authority for Amendment 5 to Standing Offer No. S0004 for the Provision of Personnel to Repair and Maintain ADF Equipment and Components 'On-Site' at ADF Establishments in South Queensland was the Commanding Officer, NLG.
   
   The authority for the letting of Standing Offer No. 0204-100-23 for the Provision of Personnel to Repair and Maintain ADF Equipment and Components On-Site at ADF Establishments in Townsville, was the Commanding Officer, NLG.
   
   The authority for the letting of Standing Offer No. 0010-087-32 for the Provision of Skilled Labour in Support of Mechanical Equipment Operations and Maintenance Sections, was the Officer-In-Charge, Support Equipment Logistic Management Unit.
9. 1. In accordance with the Defence Procurement Policies and Principles a fair and open opportunity is provided to all suppliers, including those based in Townsville, to tender for Defence requirements. No specific undertakings have been made by the department to retain work in the Townsville area by contracting to a Townsville tenderer.
   2. Not applicable.
10. 1. The Terms and Conditions for Insurance and Indemnity are established in Defence standard procurement documentation for Simple and Complex Procurement. The clauses for the Standing Offers are generated from Defence Complex Procurement templates, such as DEFPUR 500, while the clauses applicable to Purchase Orders are generated from Simple Procurement templates, such as the SP 20 proforma. The Public Liability amount indicated in the Draft Terms and Conditions can be varied, particularly for Complex Procurement, as result of a risk assessment.
    2. NLG/Army:
       
       The Public Liability insurance amount in the Request for Tender (RFT) for Standing Offer No. PQ 5273 could not be determined from available documentation. The Public Liability insurance amount in the RFT for Standing Offer No. S 0004 was $10 million. The Public Liability insurance value in the RFT for Standing Offer No. 0204-199-22 was $50 million.
       
       RAAF:
       
       The Public Liability insurance amount in the RFT for Standing Offer No. 0010-087-32 was $10 million.
    3. There is flexibility in that the Statement of Compliance Clause of the RFT provides for varying degrees of compliance (eg, complies, partially complies, does not comply) and as such are negotiable. This information is conveyed to tenderers at the tenderers briefing which is conducted during the tender response period.
11. Contract staff are employed by the Contractor and supervised by Commonwealth staff on a daily basis on-site.
12. No.

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