COMPETITION, INTEGRITY AND ACCOUNTABILITY AT MOOREBANK - CAN PUBLIC CONFIDENCE IN THE AUSTRALIAN GOVERNMENT BE RESTORED?
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COMPETITION,
INTEGRITY AND
ACCOUNTABILITY
AT MOOREBANK
CAN PUBLIC CONFIDENCE
IN THE AUSTRALIAN
GOVERNMENT BE RESTORED?
Centre for
International
Corporate Tax
June 2021 Accountability
and Research
2
COMPETITION, INTEGRITY
AND ACCOUNTABILITY AT
MOOREBANK:
CAN PUBLIC CONFIDENCE IN
THE AUSTRALIAN GOVERNMENT
BE RESTORED?
Centre for
International
Corporate Tax
Accountability
and Research
4 Competition, Integrity and Accountability at Moorebank
Contents Introduction................................................................................7 About Moorebank Logistics Park..................................................7 The procurement process: Non-competitive, fraught with conflicts and risk............................7 Why did the Commonwealth concede so much to Qube?............. 8 What are these concessions worth to Qube?................................ 9 The Australian Government: Looking after its mates..................... 9 Eroding public confidence by cutting back on critique..................10 Towards a democratic and accountable government.....................10 References................................................................................. 11
6 Competition, Integrity and Accountability at Moorebank
Introduction
An investigation by the Centre for International Corporate Tax and Accountability
Research (CICTAR) has revealed serious risks to the public interest at a major federal
government infrastructure investment in Moorebank.
CICTAR’s new research exposes a recent $1.65 billion land deal that shows how
much private interests may be profiting from close relationships to government – and
the potential cost to taxpayers. Building on findings by the Australian National Audit
Office (ANAO), CICTAR research shows the links between the massive concessions
made by the Commonwealth to Qube during the Moorebank negotiations and the
company’s windfall profits from a recent property sale.
The current Liberal Government is bent on cutting funding to its independent
regulators. This research makes clear that greater scrutiny is required in Australian
federal politics. That means properly funding independent voices such as the ANAO,
“
the Australian Broadcasting Corporation, the Australian Securities and Investment
Commission, and establishing a new federal commission against corruption.
This research
About Moorebank Logistics Park
The Moorebank Logistics Park (MLP) is a nationally significant infrastructure
makes clear
development and will transform logistics from Port Botany. The MLP will dominate
freight and logistics once fully operational, as the largest intermodal in NSW, and with
that greater
a dedicated rail link from the port. Given its anticipated dominance, and the large
federal government investment in the project, there is a significant public interest in the
scrutiny is
proper management of this asset. required in
The Commonwealth Government tasked its wholly owned business, the Moorebank
Australian
”
Intermodal Company (MIC),1 with managing the procurement process and
development of the MLP.
federal politics
The procurement process:
Non-competitive, fraught with conflicts and risk
Serious concerns have been raised about governance risks and anti-competitive
behaviour by MIC and its contracting partners. Two investigations by the ANAO
found that the procurement process for Moorebank was non-competitive, fraught
with conflicts of interest, and undermined value for taxpayer dollars.2
The first ANAO report found that the competitive open tender process initiated by
MIC was quickly abandoned in favour of a no-bid contract for Qube³,the country’s
largest freight operator, and a firm with close connections to the Liberal Party.
The ANAO found overwhelmingly that ‘[v]alue for money progressively eroded during
the negotiation of the contractual arrangements’.4 The process was not sufficiently
competitive and the Commonwealth failed to secure many of its priorities in the
negotiations, undermining value for the tax dollars spent.
‘Between the commencement of direct negotiations and the final contracted outcome,
MIC agreed to arrangements that have increased the Australian Government’s financial
Competition, Integrity and Accountability at Moorebank 7
contributions and contingent liabilities (as compared with those proposed within the
successful proponent’s EoI); mitigated private sector exposure to demand risk; reduced
the coverage and effectiveness of the access regime; and reduced the revenue streams to
the Australian Government.’5
The Commonwealth agreed to cutting the ground rent on the warehousing land,
up to 10-year rent holidays, and concessions on Qube’s obligations to develop the
land. The Commonwealth will receive less than half of the ground rent
for warehousing land than was originally expected. Despite this, the
government will pay significantly more for necessary site and infrastructure
development, and is exposed to greater contingent liabilities.6
In addition, the Auditor-General was concerned that parts of the MLP were
completely exempted from open access requirements.7 The regime for competitive
open access to the MLP does not apply to warehousing. Given the public interest in
the Moorebank project and its unique and pivotal role in the NSW logistics economy,
access on a competitive basis was a key priority for the Commonwealth.8 But this was
surrendered to Qube during the negotiations.
Why did the Commonwealth concede so
much to Qube?
This is perhaps the question that motivated the ANAO’s second investigation into this
deal, which focused on MIC’s governance and risk management, especially in relation
to probity (conflicted interests).
The Auditor-General’s second report found that the process by which Qube obtained
the contract to run the MLP was marred by conflicts of interest, improper gifts
and hospitality and other probity risks.9
The ANAO found that MIC’s policies and procedures for managing conflicts of
interest, gifts and hospitality were inadequate. MIC had no procurement strategy, and
was slow to develop policies and procedures, which resulted in numerous conflicts.
Even where MIC did have risk management strategies, the ANAO found that it failed
to follow them.10
MIC had a preference for identifying candidates for procurement ‘by way of
personal or business referrals’11 and through non-competitive processes. While MIC
employees did acknowledge that they had relationships with service providers,
there was no evidence that conflicts of interest were identified and managed.12 The
Auditor-General found that this ‘diminished the value for money that might have
otherwise been obtained’.13
Up to April 2018 (after financial close on the Moorebank deal), at least 138 offers
of gifts, benefits or hospitality were made to MIC staff.14 Four organisations
were responsible for more than half of these offers, and 65% of the total value of these
offers. These four organisations included MIC’s three key advisers and Qube.15
The Auditor-General found ‘[g]ifts and benefits offered by both Qube and the consulting
firms were almost always directed towards senior MIC staff, and in particular, those
8 Competition, Integrity and Accountability at Moorebankwith influence over or decision-making responsibilities in regards to MIC’s contractual
arrangements. Three of MIC’s most senior staff members accounted for 83 per
cent of the total offers made.’16
What are these concessions worth to Qube?
A recent real estate transaction indicates how Qube may have monetised its access to
government and unfair, anti-competitive advantages.
In early 2021, Qube sold real estate interests and warehouses at MLP to LOGOS
Property Group for $1.65 billion.
In 2020, Qube’s share of the developable land was valued at $100 million.17 Qube
spent $671 million on capex,18 though much of that was spent on developing the IMEX
rail terminal, not part of the real estate deal with LOGOS. Generously assuming the
entirety of the capex is attributable to the property rights transferred, this leaves an
“
almost $900 million gain for Qube on this deal. There are serious questions
here that should be answered.
How much did the rent holidays, discounts on ground rent and freedom from competitive
Remember,
imperatives increase the value of the $1.65 billion Moorebank property?
my value is:
How much of Qube’s $900 million windfall has been underwritten by taxpayers who
we look after
”
have paid more to develop the land and will receive less in rental payments?
The Australian Government: our mates
Looking after its mates
The Moorebank deal was fraught with probity risks and appears to have allowed a
– Scott
powerful industry player to obtain undue commercial advantages. Aside from the
public underwriting of private profits, the Moorebank deal raises questions about the
Morrison,
future of the freight and logistics sector in NSW. What economic and political risks arise if
this crucial industry is controlled by a firm that is unconstrained by competitive pressure?
September 6
This is the latest in a long list of scandals that have rocked the federal Liberal Government. 201819
Senior government officials have become notorious for using publicly funded
programmes to benefit private interests of well-connected friends and corporations.
Community development grants benefitted some of the wealthiest (Liberal)
electorates in the country. Political support was rewarded with tens of millions of
dollars in ‘development funding’ while the country’s poorest (Labor) electorates
received little or no funding.20 Since 2014, the community development scheme has
awarded $1.126 billion in grants: nearly 70 per cent of it for government seats, only 25
per cent for Labor seats.21
• Awards of $100 million in community sports development funding ‘not
informed by an appropriate assessment process and sound advice’
• $440 million to protect the Great Barrier Reef awarded to people connected
to the Liberal-allied Business Council without due process
• Tens of millions of dollars to NewsCorp without due process
• A million dollars for advertising, paid to a friend of the Liberals, with no tender
Competition, Integrity and Accountability at Moorebank 9• A new audit is being launched into claims that the Home Affairs minister
personally slashed millions in grant funding from certain organisations chosen
according to merit-based criteria, in favour of others he chose to curry political favour
Eroding public confidence by cutting
back on critique
The Australian Liberal Government has been cutting back on critique ever since it took
office in 2013.
The ANAO, which has repeatedly exposed controversies involving the misuse of public
funds and the improper exercise of political influence, has been stripped of funding in
every budget from 2013 to 2020. Proposed cuts in the 2021 budget were abandoned
after sustained public outrage, but cuts to other independent voices continue.
The Australian Broadcasting Corporation (ABC) has suffered the same treatment,
with a series of budget cuts along with constant intimidation from government
ministers and federal law enforcement agencies, including raids and threats of
prosecution, described by some as ‘extreme and unrelenting pressure’ and by the
Chair of the ABC as behaviour that ‘smacks of political interference’.
The conservative government in Australia has also slashed tens of millions of dollars in
funding for ASIC, its corporate regulator and has stacked the Administrative Appeals
Tribunal with government-friendly appointees. The aged care sector languishes amid
myriad heart-breaking and disgraceful crises as its regulator stays quiet and ineffective.
Towards a democratic and accountable
government
Australia used to be a world leader in public integrity. Since 2014, just after the
Liberal Government took power, Australia has fallen out of the top ten least-corrupt
countries, and its ranking on the global corruption scale has fallen steadily ever since.
Research by Transparency International shows that a decade of spending scandals has
eroded public confidence in Australia’s government. 85% of Australians believe that
at least some federal members of parliament are corrupt, and their trust in democracy
has fallen from 86% in 2007 to 41% in 2018. If these trends continue, by 2025, fewer
than 1 in 10 Australians will trust their political leaders and institutions.
There is an urgent need to arrest this decline and restore the public’s faith in the
possibility of democratic and accountable governance.
While the Commonwealth Government prefers its independent regulators ‘weak and
underfunded’, it is clear that this is not in the public interest. Hundreds of millions of
dollars have been spent at the federal level with little to no scrutiny of the potentially
corrupting influences at play. Funding for independent voices must be restored, and a
new federal independent commission against corruption established.
10 Competition, Integrity and Accountability at MoorebankReferences
1 100% Commonwealth government owned business enterprise
2 The Auditor-General ANAO Report No.23 2017–18 Performance Audit (ANAO Report 1) and The
Auditor-General ANAO Report No.9 2018-19 Performance Audit (ANAO Report 2)
3 ANAO Report 1, pp9-10
4 The Auditor-General ANAO Report No.23 2017–18 Performance Audit (ANAO Report 1), para 7
5 ANAO Report 1, para 15 and see also pp32-34
6 ANAO Report 1, Appendix 3
7 ANAO Report 1, para 3.1, p42; para 3.6, p43
8 ANAO Report 1, para 3.1, p42
9 ANAO Report 2, page 9
10 ANAO Report 2, pp8 -9
11 The Auditor-General ANAO Report No.9 2018-19 Performance Audit (ANAO Report 2), page 9
12 ANAO Report 2, page 9
13 ANAO Report 2, page 9
14 ANAO Report 2, page 10
15 ANAO Report 2, page 10
16 ANAO Report 2 page 53
17 See ANAO Report 1 pp16
18 Qube Annual Reports 2019 page 107 and 2020 page 14
19 https://www.crikey.com.au/2020/10/27/scott-morrison-government-corruption/
20 https://thenewdaily.com.au/news/2020/05/25/michael-pascoe-community-develop-
ment-grants-scandal/
21 https://thenewdaily.com.au/news/2020/05/25/michael-pascoe-community-develop-
ment-grants-scandal/
22 https://www.anao.gov.au/work/performance-audit/award-funding-under-the-community-sport-in-
frastructure-program
23 https://www.crikey.com.au/2020/10/27/scott-morrison-government-corruption/ ; https://www.
abc.net.au/news/2018-08-03/turnbull-defends-cash-to-reef-foundation/10070556
24 https://www.theguardian.com/australia-news/2020/jul/22/coalition-gives-another-10m-to-foxtel-
to-boost-womens-sport-on-tv
25 https://www.crikey.com.au/2020/10/27/scott-morrison-government-corruption/
26 https://www.abc.net.au/news/2021-04-14/national-audit-office-launches-review-peter-dut-
ton-grant-funds/100069338
27 https://www.abc.net.au/news/2021-02-19/auditor-general-warns-budget-cuts-less-au-
dits/13172600
28 https://www.abc.net.au/news/2020-07-02/federal-police-seek-charges-abc-investigation-af-
ghan-files-dpp/12415930
29 https://www.afr.com/politics/federal/extreme-and-unrelenting-pressure-on-abc-over-mps-sex-
investigation-20201109-p56cs7 ; https://thenewdaily.com.au/news/2020/11/09/politician-mis-
conduct-abc-four-corners/; see also https://www.crikey.com.au/2020/10/16/corruption-govern-
ment-australia/
30 https://www.theguardian.com/media/2020/dec/14/abc-chair-ita-buttrose-accuses-government-of-
political-interference-in-draft-letter-to-paul-fletcher
31 https://www.crikey.com.au/2020/10/16/corruption-government-australia/
32 https://transparency.org.au/national-integrity-commission/
33 https://transparency.org.au/national-integrity-commission/
34 https://www.crikey.com.au/2020/10/16/corruption-government-australia/
Competition, Integrity and Accountability at Moorebank 11cictar.org Centre for
International
@CICTAR_Tax Corporate Tax
Accountability
claire.parfitt@cictar.org and Research
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