Ministers for the Department of Communications and the Arts

NBN Policy Audit Finds Labor NBN Policy Making Process Flawed

5 August 2014

An independent Audit, commissioned by the Government, has found that Labor made a series of errors in formulating its NBN policy, including a failure to conduct an independent cost-benefit analysis before committing to the project.

The Independent Audit of the NBN Public Policy Processes: April 2008 – May 2010, contains seven key recommendations which will help future Governments in devising and implementing major infrastructure projects, similar to the NBN.

The study was conducted by one of Australia's foremost authorities on public policy, Mr Bill Scales AO.

Most notably it recommends that large public sector infrastructure projects with costs above $1 billion should be subject to a cost benefit analysis study and the results made public prior to the commencement of the project.

The Government has committed to conducting independent cost-benefit analyses on infrastructure projects worth more than $100 million. The Government has commissioned a cost-benefit study on the National Broadband Network, which will be made public in coming weeks.

Additionally, the Audit found:

  • Labor did not submit the NBN project to normal cabinet processes until it was 'rubber stamped' just hours before the policy was announced.
  • Labor reconstituted its NBN policy – modelling on preliminary costs, devising funding structures and deciding on a wholly-owned Government owned-monopoly to deliver the project – all in a 'chaotic' 11 week period in early 2009.
  • The Government relied on flawed advice, including from agencies who did not have the relevant technical or industry expertise
  • The Government did not release a formal Statement of Expectations to the company until 16 months after the appointment of the Executive Chairman. People involved with the project complained that all they had in terms of guidance was the press release and a bunch of business cards
  • Senior members of the public service found they "had difficulty in having their 'voice' heard on many of the most important public policy matters related to the Labor Government's NBN policy", with Labor uninterested in listening to advice that contradicted their promises

Crucially, the Audit also found that, "NBN Co was not fit for purpose. It was a start-up company given a job that only a well-functioning, large, and established telecommunications company would have been able to undertake in the allotted timeframe. The governance arrangements that operated in the very early stages of NBN Co's life had a long lasting and detrimental effect on its operations, and a profound effect on the roll out of Australia's NBN."

The Government is committed to finishing the NBN project sooner, at less cost to taxpayers and therefore more affordably for consumers.

Since coming to Government, the Coalition has implemented a series of important reforms on the project, including increasing the NBN Co's transparency and level of public reporting, appointing new management at NBN Co, conducting a strategic review into the true costs and timeframe of the project and undertaking a cost benefit analysis and review of regulation to bring some rigour and focus to the project.

The Government thanks Mr Scales for his work on the audit and will use these recommendations to further improve the governance of the project.

The Scales report is published online on the Australian Parliament House website. A copy of the report published on that website can be accessed here.

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