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Money down the drain: Auditor's damning report says govt is wasting millions

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The Queensland government’s poor contract management is contributing to multimillion dollar cost blowouts and lengthy delays on major projects, according to a report from the state auditor-general.

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Brendan Worrall has analysed how the Department of Energy and Public Works and Education departments, which together manage 60 per cent of government projects, handled six contracts worth a total of $1.4 billion.

Changes to the contracts after construction began increased the combined costs by $127 million and led to delays of up to four months.

The report found many of the changes were made because public servants did not manage projects effectively.

“The projects we examined had many variations and, in some instances, lacked appropriate processes and procedures for effectively managing them,” Worrall wrote in the report, released on Tuesday.

“We found examples of variations that were not appropriately approved by departmental delegates prior to work commencing, and unsatisfactory documentation of approvals for some variations.

“Due to the size and scale of these projects, the value of variations and the associated costs to manage them are usually in the hundreds of thousands – if not millions – per variation.

“This can collectively contribute to significant increases in project costs.”

The Department of Education’s Brisbane South State Secondary College and Fortitude Valley State Secondary College were among the projects probed.

Worrall said late changes to the projects cost about $18.5 million, or 8.5 per cent, more than the original budget.

About $7.3 million of those changes were because the project team did not conduct detailed flood or fire modelling in Fortitude Valley so stakeholders could not assess the risks until construction was underway.

Similarly in South Brisbane, a lack of consultation on bike and pedestrian access during the design stage cost an additional $2 million and pushed out the project by four months, the report said.

Budget blowouts resulted in the department having to shelve some parts of the Brisbane South State Secondary College project.

The auditor-general said a big part of the problem was the government’s one-size-fits-all contract management framework, which had not been updated for more than 20 years.

The report said the Capital Works Management Framework, overseen by the Department of Energy and Public Works, is outdated, has gaps and is not always applied.

The report said both departments had failed to train or provide standardised guidelines to project teams for managing risks.

Project teams had also failed to show and document their risk management or assess the performance of contractors.

“This means they have breached the requirements of the whole-of-government framework and they do not always know whether they are receiving value,” the auditor-general wrote.

Mr Worrall recommended the Department of Energy and Public Works develop a new framework outlining the minimum rules for managing infrastructure projects, and guidelines for the public sector agencies applying it.

That framework should be reviewed and updated at least once every three years, the report said.

The auditor-general said both departments should clearly define processes and procedures for managing project risks; standardise procedures recording, evaluating, approving, and reporting on contract variations; and regularly assess and report on contractor performance.

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