1.1. For the purposes of the Commonwealth of Australia, the definition of a public work is contained in Section 5 of the Public Works Committee Act 1969 (public works). In simple terms "work" means works of a permanent architectural or engineering nature. The definition excludes intangible things, moveable property and engineering equipment which are not integral parts of a work, but includes works which are financed by deferred payment or similar arrangements where there is a clear intention for the Commonwealth or its agencies to become the owner or lessee of such facilities.
1.2. The Act also constitutes the Parliamentary Standing Committee on Public Works (also kndwn as the Public Works Committee or PWC), which was first established in 1913 and is one of the oldest investigative committees of the Commonwealth Parliament.
1.3. The Act requires that all public works for the Commonwealth which are estimated to cost over A$6 million must be referred to the Committee and empowers the Committee to inquire into and report to the Parliament on each public work referred to it. There are some exceptions to this rule, but essentially all public works sponsored by Commonwealth departments and major statutory authorities with large building programmes come within the ambit of the Committee's investigatory powers.
2.1. The audit of public works and projects in Australia takes place within the structure of the three tiers of government. The Commonwealth of Australia is a federation of six states and two territories, each with its own Parliament and administrative infrastructure, including public works responsibilities, in addition to that of the Federal Government itself. Consequently, there are nine public works departments in Australia with varying responsibilities. For example, in the state of New South Wales, the Public Works Department controls and manages all the major works for all the state government departments and authorities. The state governments are responsible for major services such as electricity and gas reticulation, harbours and major road networks.
2.2. Additionally, local government is also responsible for services with costly capital investments such as sewerage and water and urban roads. Local government generally operates with a full-time professional administration under the direction of an elected council with part- time members. While local government raises its own revenue through rates and taxes to cover operating expenses, funds for capital improvements are usually derived from grants and loans from state and federal governments. These council administrations are not audited by the Commonwealth Auditor-General.
2.3. In the Commonwealth Government administration (which is the sole subject of this paper) responsibilities for public works devolve to the various departments and authorities. Each has the authority to develop its public works and projects and seek the approval of the Public Works Committee for implementation. At any time there is approximately A$ 1 billion of current project work spread across nine Commonwealth agencies. The Department of Defence represents approximately 30-40% of the total. Additionally, the major government business undertakings, such as the Federal Airports Corporation, Australia Post and TELSTRA (telecommunications authority) undertake their own works programmes using private contractors.
2.4. Specialist services for public works and projects are provided by Australian Construction Services (ACS), a government business entity within the Department of Administrative Services, which has professional expertise in project design and management. This organisation competes with the private sector for work. The ACS also provides policy advice to the Commonwealth Government.
2.5. The Commonwealth Auditor-General is responsible for the audit of Commonwealth Government entities. Thus, only Commonwealth public works and projects are subject to audit by the Australian National Audit Office.
The types of works and projects referred to and examined by the Public Works Committee include:
- building and other structures
- plant and equipment
- earthworks
There are basically eight steps in the project approval process for major projects which cukninate in parliamentary approval through the Committee. These steps are as follows:
5.1. The responsible agency is required to prepare a detailed description and justification for the project including cost benefit analysis and environmental impact studies in order to obtain the administrative and political approval required for the project to proceed. Funds are specifically appropriated by Parliament for major capital works and agencies are accountable for expenditure of those funds and the project's achievement of its objectives. To ensure fair and open competition and selection of competent and effective contractors, tenders are almost always sought through open competition.
5.2. For major projects the cost of tendering is substantial. It would be irresponsible for departments to involve companies with the cost of tendering in the absence of a genuine intention to proceed with the project and having funding arrangements in place. Companies incur those costs in the first instance assuming that all invitations to tender are genuine and that the client department will be able to pay for the work in relation to which tenders are called.
5.3. Companies are entitled to full and frank information from clients concerning issues which may affect a client's decision to proceed with the project.
5.4. Clients need to precede project authorisation with sufficient definition to permit the project to go ahead without the prospect of major changes in direction. Satisfactory definition depends on clients' willingness to spend significant amounts on project identification and feasibility which may have to be written off if the decision is made not to proceed. Studies have identified a correlation between shortcomings in project implementation and associated inadequate definition with time over-runs common in all projects where less than 1% of cost was spent on definition.
5.5. Most public works authorities have now adopted modern commercial accrual accounting systems for the financial management of the services they provide to other government agencies, with such services being charged on a fee-for-service basis. Most government services functions are funded directly from the budget.
6.1. The major proportion of public works expenditure in Australia is carried out by state and local government organisations which are outside the mandate of the Commonwealth Auditor- General. Some expenditure is funded indirectly through payments by the Commonwealth to state, territory and local governments responsible for the administration of the projects. Audit of these projects is the responsibility of state and territory auditors.
6.2. The remainder, carried out by Commonwealth government agencies, is not significant in terms of other government programmes and does not, therefore, attract a consistent audit effort by the SAL Particular projects are selected for audit from time to time as part of the objective in achieving broad coverage of all government functions.
6.3. In such cases the audit scope may include any or all of the following issues:
- efficiently obtain competitive tenders
- to reduce the cost to tenderers of the compilation of tenders.
6.4. The Auditor-General may include in any audit, an examination of the effectiveness of contract administration procedures, including such issues as :
- propriety - the Auditor-General maintains a focus throughout the audit to ensure there is an appropriate arms-length relationship between the government agency and the contractor and seek to ensure that the interests of taxpayers are at all times protected
- value for money - the achievement of this objective is paramount and is assessed through tests to ensure, for example :
The Auditor-General does not undertake the technical examination of works by government as an in-line function, but may review technical aspects as part of performance audit.
In Australia, there is some competition by the public sector with private contractors for public works and projects. Business undertakings within a department may compete for project design and supervision works in addition to minor construction and replacement work. However, major construction works are invariably carried out by private contractors, as the Commonwealth does not maintain day labour forces.
Computers are used extensively by the audited organisations, including the Australian Construction Services which uses nationwide computer-based systems for project design in addition to the financial management of projects. Although the audit of technical design is not undertaken by the Auditor-General, no difficulties have been experienced in the audit of financial management systems, with system controls being evaluated and tested in the normal manner.
The Auditor-General does not undertake the technical examination of works by government as an in-line function, but may review technical aspects as part of performance audit.
In Australia, there is some competition by the public sector with private contractors for public works and projects. Business undertakings within a department may compete for project design and supervision works in addition to minor construction and replacement work. However, major construction works are invariably carried out by private contractors, as the Commonwealth does not maintain day labour forces.
Computers are used extensively by the audited organisations, including the Australian Construction Services which uses nationwide computer-based systems for project design in addition to the financial management of projects. Although the audit of technical design is not undertaken by the Auditor-General, no difficulties have been experienced in the audit of financial management systems, with system controls being evaluated and tested in the normal manner.
There are no special audit arrangements and obligations in relation to foreign-funded projects.
In the audit of major projects, the Auditor-General may engage professional consultants to assist in assessing the efficacy of design features in meeting the specifications and purposes of the project.
The SAI is not associated with the evaluation of tenders for public works and projects. Although the Auditor-General does not become involved with management in the evaluation of tenders, after the organisation has evaluated tenders and awarded the contract, the Auditor-General may, in the normal course of an audit, make an independent assessment of the tendering processes followed.