Background Briefing

If our governments have unpalatable truths to hide, or there's a bit of dodgy accounting going on, or you don't want the buck to stop with you, then the best ruse in town is a "commercial in confidence" clause.

It's become so serious a problem, even Auditors-General talk of threats not only to "the public interest", but to democracy itself.

Transcript

This transcript was typed from a recording of the program. The ABC cannot guarantee its complete accuracy because of the possibility of mishearing and occasional difficulty in identifying speakers.

Voice: Shrinking democracy.

DOOR SLAMS/FOOTSTEPS

Tony Harris: I've been approached by two very large financial institutions in Australia who are now complaining to me that governments are requiring confidentiality provisions which even they in the private sector believe are so restrictive as to be massively inappropriate. Now it appears to me that governments just don't want to be accountable, and are using private sector participation and so are reducing the amount of information that's available. It is really outrageous.

MUSIC

Tom Morton: The Auditor-General of New South Wales, Tony Harris, voicing his concerns about the growing trend to secret government in Australia.

Governments both State and Federal are hiding more and more of what they do behind walls of silence.

Whether you're privatising the waterworks or outsourcing a public hospital to a private company, all you have to do is put in the words 'commercial in confidence' and the details of the deal are off-limits to the parliament and the public.

DOOR SLAMS

Only this week, the South Australian Auditor-General published a report in which he warns that the increasing use of commercial confidentiality by governments is undermining the foundations of parliamentary democracy itself.

Hello, and welcome to Background Briefing. I'm Tom Morton. And today: shrinking democracy. It's a trend which alarms some of our most senior public officials and commentators on government in Australia.

Arie Freiberg: I think we're getting a very cold bath in the area of democracy and we can see it again and again. The dislike of many governments for accountability is now being masked, it's being added to by the privatisation or contracting out process. It's been convenient but I think there will be a backlash and I think that ultimately we look to governments to provide very, very important services and they're the ones that we hold accountable and governments have to accept that part of a thriving democracy is to make all that information available and not hide behind the cloak of commercial confidentiality.

...

Tom Morton: Arie Freiberg, Professor of Criminology at Melbourne University. Arie Freiberg is currently giving expert testimony in support of a Freedom of Information request in Victoria. The FOI request aims to uncover information about the running of private prisons in Victoria. Eleven people have died in these prisons in the last year, but the Victorian Government is saying that details of the day-to-day running of the prisons, including security arrangements are commercial in confidence and can't be released to the public.

Voice: Shrinking democracy.

Tom Morton: It's becoming routine now for governments, both State and Federal, to claim commercial confidentiality for almost any area of government activity. Billions of dollars of taxpayers' money is being handed over to private companies to run public hospitals, prisons, ambulances, employment services, aged care and just about anything else you can think of.

Taxpayers are told that they're getting a better bang for their bucks from outsourcing, and that may well be true. The problem is that in many cases they, the public, can't know that, because the financial details of these deals are deemed to be commercial in confidence. It's a hot issue in New South Wales at present, where the government has claimed commercial confidentiality for information about everything from the Olympics to matters relating to the recent Sydney Water debacle.

Tony Harris, the Auditor-General of New South Wales, says this tendency is diminishing the accountability of government.

Tony Harris: There's no doubt about it, it's substantially diminishing accountability. If you don't have information then you really don't have the data to come to judgements about whether someone is doing well or not. So it is doing that, but more interestingly, I don't even think that there is merit in the claim that this material, these contracts, contain commercial in confidence data. New South Wales has a very rigid view about ensuring that information not be provided unless you had to provide it. The New South Wales government takes great pains not to disclose information which in my view should be disclosed.

Tom Morton: Tony Harris, the Auditor-General of New South Wales. Auditors-General, by the way, are the public officials whose job it is to audit the government. In other words, to go through the books of government departments and government-owned corporations, and make sure that everything is above board.

In many cases, they are the last bastion of independence left, the only public officials who have access to the financial details of privatisations and contracting our. And you might remember that the Victorian government tried to outsource even the Auditor-General's job, but pulled back after intense public protest. Like Tony Harris in New South Wales, the South Australian Auditor-General, Ken McPherson, has been critical in the past of growing secrecy and lack of accountability in government.

The South Australian government has privatised the water supply and a public hospital, contracted out government information technology and a number of other government services in deals with well over a billion dollars.

Last week, the South Australian Auditor-General released his annual report on the State's finances. It's a report which raises very serious concerns about the use of commercial confidentiality to deny public access to information. The report warns that this denial of information about government contracting out strikes at the very roots of democratic government.

Here's a little of what it says:

Reader: The issue of confidentiality is of central importance in matters associated with government contracting. In my opinion, it is not stating the matter too highly to say that in some respects the political safety of the community is an important consideration in the analysis and resolution of this matter,

Tom Morton: The South Australian Auditor General doesn't give interviews to the media.

However I was able to speak to Suzanne Corcoran. She's a former corporate lawyer on Wall Street, and now Professor of Law at Flinders University, who's been acting as a consultant to the Auditor General.

I asked her precisely what the Auditor-General meant when he said that the political safety of the community was affected by the use of commercial confidentiality.

Suzanne Corcoran: The issue of confidentiality and the issue of the extent to which matters of public interest are disclosed lies at the heart of our democratic system of government, and it's not just the substance of a contract that might in fact involve a core government type of activity which is being kept confidential. The decision-making processes which we have in place in order to ensure that government is accountable to the people and that the executive branch of the government is accountable to parliament cannot function properly if too much information is kept confidential.

Tom Morton: Professor Suzanne Corcoran.

...

Reader: Governments often claim a right to secrecy on the basis of commercial confidentiality in respect to functions that have been contracted out. This results in a reduced capacity for scrutiny by parliament and the public.

Tom Morton: In his report, the Auditor-General points out that Parliament has a constitutional responsibility to scrutinize the government.

The parliament, of course, includes both the members of the government and of the opposition and other parties who are not in power.

So the parliament can call the government to account and haul it over the coals if it's not acting in the public interest.

That, says the Auditor-General, is the very basis of our parliamentary democracy. And the parliament not only has the right to scrutinize the government, under the constitution it has the responsibility to do so.

But if the parliament is denied information which it needs to scrutinize government policies, it can't carry out its constitutional responsibilities.

Reader: The extensive use of contract for the delivery of government services, when combined with claims for confidentiality, can diminish the effectiveness of one of the foundations of responsible government. That is, parliamentary control of government spending.

Tom Morton: The report points out that this issue of parliamentary scrutiny is a particularly critical one in the case of long-term contracts.

The water privatisation contract in South Australia for example, runs for 20 years, and many contracts signed by governments around Australia have similar durations. Yet the financial details of these contracts have been kept from the parliament and the people, under commercial confidentiality.

Suzanne Corcoran.

Suzanne Corcoran: Well if you're looking at a long-term contract that the government is entering into and the contract or substantial parts of the contract are kept confidential and not disclosed to government, there is no way that they can react to the financial implications of that contract or the long-term decision making or legislative implications of that contract.

Tom Morton: In other words, in a very simple sense, the parliament can't know where the money's going.

Suzanne Corcoran: That's correct, not at all.

Tom Morton: So the argument here would be that if the parliament, and perhaps most importantly, the opposition, is able to scrutinize the process whereby a contract is signed, that they can criticise or potentially criticise some of the assumptions that are being made, the deal that's being done between the government and a private contractor, and the public has a better chance of having its interest protected if there's a possibility for scrutiny and criticism.

Suzanne Corcoran: Well that's correct, and it's not just that there's a better chance, because there is this extra scrutiny and you've slowed down the process, but also that is our system of government, and that's what gives us the best chance of maintaining the kind of democratic principles and accountability that we actually have a constitution about.

Tom Morton: In a sense, this is what the Auditor-General means as I understand it, when he says that this goes to the very issue of the political safety of the community, that government by contract and in particular government by secret contract, actually strikes at the roots of our system of parliamentary democracy.

Suzanne Corcoran: That's right, because our system is that parliament is our legislative arm of government, and it's parliament who passes laws, and it's the government of the day by entering into long-term contracts is fettering the future of the parliament and its ability to actually exercise and do its job. And also the fact that there is openness and discussion means that there's more likelihood that we all know what's happening, when we can do something about it, rather than when it's too late and all we can do is pay.

Voice: Shrinking democracy.

Tom Morton: In his report, the South Australian Auditor-General quotes a judgement of Sir Anthony Mason, a former Chief Justice of the High Court.

Reader: It is unacceptable in a democratic society that there should be a restraint on the publication of information relating to government when the only vice of that information is that it enables to public to discuss, review and criticise government action.

Tom Morton: That ruling in the Fairfax case, is one of the central precedents in cases involving freedom of information. The Auditor-General states in his report that the people's right to know is a key consideration in assessing claims of commercial confidentiality.

Suzanne Corcoran.

Suzanne Corcoran: It's one of the core foundations of our democratic system of government that the people have a right to know, that the government is elected by the people and that the government is accountable to the people. And this right to know is based not only on the financial impact of government decisions such as spending a lot of money on one thing or another, and people wanting to know how their tax dollars are spent, it's also a decision-making issue. It goes to the heart of the question of ought not the people to be able to say whether they want to have their water or their electricity or other core services such as hospitals and prisons controlled by private entities, or whether they would prefer that to be a government activity.

...

Tom Morton: One of the main ways in which the public can assert its right to know what government is doing behind closed doors is through the use of freedom of information.

Around Australia, a growing number of people are attempting to use freedom of information laws to lift the veil of commercial confidentiality. One recent attempt involves the Federal government's controversial Job Network. It's one of the largest government outsourcing contracts in the world, but serious concerns have been raised about the fairness and openness of the tendering process.

Most of the details of that process however, have been deemed commercial in confidence. But one women wouldn't take no for an answer. Our story begins in Tasmania.

STREET SOUNDS

Tom Morton: It's a sunny spring morning in Glenorchy, one of the northern suburbs of Hobart. Glenorchy's a pretty place, it's nestled in between the hills on one side and the Derwent River on the other. But it's also a low income, high unemployment area. The average length of unemployment in Glenorchy is over a year, which means that most unemployed people here qualified as long-term unemployed.

BANGS, COUGHS, BACKGROUND SOUND

Woman: Goodday.

Woman: We overcharged ....

Woman: Yes? Well at the moment that's all you need ...

Tom Morton: Glenorchy Skillshare is a community-based non-profit organisation which has been working with long-term unemployed people for some years. In fact it was one of six organisations nationwide which were chosen in 1994 to pioneer case management of long-term unemployed people.

When the Federal government announced last year that it would set up a competitive employment services market, Glenorchy Skillshare was one of the organisations in Tasmania which put in a bid to provide intensive assistance to long-term unemployed people. With their proven track record in the area, they thought they had a high chance of being successful in the tender process. But when the results of that process were announced, they learned that they'd failed to get a contract.

The General Manager of Glenorchy Skillshare is Iris Todd, and she described to me her reaction when Glenorchy Skillshare learned that they'd been unsuccessful.

Iris Todd: Shock and surprise initially, and obviously disappointment, And I guess once that sort of initial emotional reaction has passed, then on a business level you start questioning how you might be more competitive in the future, what element of your tender may not have been as attractive as it could have been.

Tom Morton: Despite ten years experience working with unemployed people and getting them into jobs, Glenorchy Skillshare didn't get a so-called 'Flex 3' contract.

Flex 3 contracts are for intensive assistance. Because they involve case management of long-term unemployed people, they're more lucrative than the other contracts available under Job Network, Flex 1 and Flex 2.

The Flex 3 contracts were price fixed. In other words, price wasn't the reason why Glenorchy Skillshare's bid had been rejected.

As part of the tender process, unsuccessful applicants were entitled to a debriefing session. Iris Todd went along hoping for some clues.

Iris Todd: It was really disappointing and really frustrating to find that we could talk about a number of issues to do with process, but nothing in terms of specifics. What I had been able to ascertain was we were competitive on quality and price, yet we didn't win. And I was provided with no additional information to explain that to me.

Tom Morton: Iris Todd was told at the debriefing session that most of the information she was seeking was commercial in confidence. Many of her colleagues and competitors in similar community organisations experienced the same frustration when they went to their debriefing sessions.

John Jessup is Chairman of TESA, the Tasmanian Employment Services Association.

John Jessup: They went back to the Department for the debrief and got very little, and the feedback to me from my members was it was just a joke. People have just believed that it's a black box.

Tom Morton: How do you mean, a black box?

John Jessup: You would send in a request or a complaint or ask for clarification of what went wrong with your tender, or how you might enhance it for next time, and basically get told, 'Sorry, we can't answer your question'; it's either commercially in confidence or they refer you back to the guidelines, or they say, 'We don't know, you need to talk to Canberra.' When you talk to Canberra or you write a letter to Canberra, it often takes many, many months to get a response.

Tom Morton: As a result of not getting a Flex 3 contract, Glenorchy Skillshare had to sack 28 staff and cut back on services.

Iris Todd decided that she'd try to bust open that black box of secrecy and find out more about why their tender had been unsuccessful. She launched a Freedom of Information request to gain access to documents relating to Glenorchy Skillshare's tender.

Iris Todd: Well the request was denied. We asked for four or five separate pieces of information, and all of those requests were denied. And basically, they're denied on a basis that they're commercial in confidence and that information was provided in the request for tender kit.

Tom Morton: In her FOI request to the Department of Employment, Education and Training, Iris Todd asked for a copy of the assessment instrument used to assess their tender. That's public service jargon for a standard form or software package which is used to evaluate bids.

Iris requested a blank copy of that form, but was told that it was commercial in confidence. Not only that: the Department of Employment, Education and Training refused to release any information on how Glenorchy Skillshare's own bid had been assessed.

Iris Todd: It did strike me as odd. The fact that that's been denied, it just causes me more confusion. It leaves more questions unanswered. If all the criteria were there up front in the request for tender kit, and that's what your tender and everybody's tender was being measured against, then surely if you're asking for your own, there can't be any issue about commercial in confidence.

Tom Morton: So in other words, you were being told that information that related only to Glenorchy Skillshare was commercial in confidence and could not be made available to Glenorchy Skillshare under commercial confidentiality?

Iris Todd: That's right, yes. Now there must obviously there must be something more to it, because that's just a nonsense, that's totally illogical.

DOOR BANGS

Voice: Shrinking democracy.

Tom Morton: Glenorchy Skillshare wasn't the only organisation in Tasmania which hit a wall of silence when it tried to get information about the tender process. The Beacon Foundation is a not-for-profit community-based organisation which focuses on youth unemployment. Its 'No Dole' program for school leavers was recently praised the Prime Minister as one of the best initiatives he'd seen in years.

Beacon Foundation also bid for a Flex 3 contract to provide intensive assistance to long-term unemployed people. But like Glenorchy Skillshare, Beacon was unsuccessful.

The Chairman of Beacon Foundation's governing Board is Bill Lawson. In his professional life, Bill is a consulting engineer with 20 years experience of bidding for government construction contracts.

Bill Lawson was shocked by the degree of secrecy surrounding the Job Network tendering process.

Bill Lawson: Well we were unsuccessful in gaining a Flex 3 contract, and yet we've had a long history doing case management and very successfully so, and so we availed ourselves of the DEETYA offer to receive a debrief. Because you go to debriefs to learn when you failed, to do better next time. We went along to the debrief and we really came out of it just as mystified as we went into it, in fact I said that. It was not satisfactory in terms of telling us anything. There seemed to be an inordinate degree of secrecy, or an unwillingness to share information, and I know since that officers of DEETYA have expressed to me that there's a need to keep things confidential, of winning bids, and keep that away from the losers of the bids. That's not my experience in the construction industry for instance, where really, if you lose a bid you go along and you find out why you lost it, and it helps you do better next time, as part of the way the whole industry ratchets up on itself.

I really just think that it doesn't do much to build a new marketplace.

Tom Morton: Bill Lawson, Chairman of Beacon Foundation.

When Background Briefing approached the Department of Employment, Education and Training for a response to the concerns you've been hearing about, they declined to comment and referred me to the Minister's office,

The new Minister for Employment Services, Tony Abbott, told Background Briefing that the administration of the tender process was a matter for the Department and that he didn't wish to comment on it. However he said that he would be happy to organise fuller briefings for unsuccessful bidders.

On the Department's claim of commercial confidentiality, he said that the bidders should go back to the Department and ask for more information.

Voice: Shrinking democracy.

Man: The beat becomes one with the calculator.

DRUMS/SONG: 'Privatisation'

Tom Morton: As Iris Todd found out, there are major obstacles in the way of anyone who tries to use FOI legislation to break open the black box of commercial confidentiality. A great deal of government information which used to be accessible under FOI is now off-limits.

Chris Finn is a Lecturer in Law and specialist in FOI at the University of Adelaide.

Chris Finn: Well the basic point there is that FOI legislation only applies to public sector bodies. So if you take something, say, like the Electricity Corporation, which is run by the public sector, then, prima facie, FOI legislation applies. If you then privatise that, then although you're getting the same service from the private sector body, the FOI legislation no longer applies and you can't find out details of how that operation is run. That's one circumstance.

The other circumstance is that there are various exemptions to the application of legislation, so that even where a government agency does possess documents that may still be exempt for reasons of commercial confidentiality, or some other exemption, and this applies particularly in the case of outsourcing and contracting out.

Tom Morton: Despite these obstacles, there are some signs that the tide may gradually be turning against secret government. In a number of recent cases, courts and tribunals have set aside commercial confidentiality in the public interest.

AMBULANCE SIREN

Tom Morton: One of the most important of these cases involved the Metropolitan Ambulance Service in Victoria. In 1993 the Kennett Government announced that it would contract out non-emergency ambulance services to the private sector.

The following year, concerns about the fairness of the tender process were aired, including allegations of conflict of interest and corruption.

John Thwaites who's now Deputy Leader of the Opposition in the Victorian parliament, launched an FOI request to try and get details of the tender process.

John Thwaites: There's been evidence of mismanagement and possibly corruption in contracting out of the ambulance service. The Auditor-General pointed to major problems and so the Opposition wanted to get access to the documents to see how much the ambulance service was paying, and what it was paying for.

Tom Morton: In his FOI request, John Thwaites sought the contracts which had been signed with the successful tenderers, as well as any documents which related to the tender itself.

John Thwaites: I put in a request to the ambulance service for all these documents. The ambulance service refused to supply them, and in fact I think it's fair to say they did everything they could to delay providing the documents. I then had to appeal to the Administrative Appeals Tribunal, and finally after I think more than a year of delay, the hearing took place before the Tribunal.

Tom Morton: And the ambulance service argued that these documents were in fact commercial in confidence?

John Thwaites: The ambulance service argued that these documents were commercially confidential, commercial sensitive, and indeed the private companies that got the contracts, also argued that.

Tom Morton: What was the final ruling by the Administrative Appeals Tribunal?

John Thwaites: The Administrative Appeals Tribunal ordered the ambulance service to release the documents to me, and they did that in the public interest. That was the ground. In fact the Tribunal found that it was necessary in the public interest, that these documents be released.

...

Tom Morton: One of the reasons why the Tribunal decided to overrule commercial confidentiality in this case has to do with the distinctive nature of Victoria's Freedom of Information legislation.

The legislation has what's called an overriding public interest test, which basically means that it's much stronger in considering the public interest than legislation in other States, or indeed the Federal legislation.

Chris Finn believes that the decision was something of a landmark in lifting the veil on privatisation and contracting out.

Chris Finn: The Tribunal commented that the outsourcing initiative was of such public significance that it must be seen to give rise to a higher level of entitlement of the public to be well informed as to the circumstances. And in particular, information relating to the costs of the services provided by the contractors was released on the basis the public had a right to know the cost of contracting out a service. And without that sort of information being in the public domain, there's be a poorly informed and less purposeful public debate about the merits of the outsourcing arrangement. It was also noted by the Tribunal that it was important to clear the air surrounding the awarding of these contracts. I think that's quite important, because it shows that you can obtain information in the public interest, and it's not always used to criticise what government's done, it could also be utilised to show that in fact the outsourcing arrangements have been of great benefit to the community.

Tom Morton: But we don't know, or the public doesn't know unless that information is made available to us.

Chris Finn: Yes, and that's exactly the point.

Tom Morton: John Thwaites says that when he finally got the documents he'd been seeking from the Metropolitan Ambulance Service, they blew the lid on many of the claims that the government had made about why they had to be kept confidential.

John Thwaites: Well it was very interesting, because the government claimed that the reason that we shouldn't get the documents was that they wanted to have individual negotiations with each company, each tenderer and come to a separate agreement, and that if the companies knew what the other companies had bid, then that would be difficult. Well as the result of our Freedom of Information request in getting the documents, we found that all the companies got exactly the same contract, they were all paid the same amount and as I said before, the government, the taxpayer, the ambulance service was paying more in the long run than they had before.

Tom Morton: How could you substantiate that the taxpayer was paying more, that these services were costing more than they had done previously when they were publicly supplied?

John Thwaites: By looking through the annual reports of the ambulance service, seeing how much had been spent before, and comparing it to the current expenditure.

Voice: Shrinking democracy.

AMBULANCE SIREN

Voice: Shrinking democracy.

Arie Freiberg: It has been argued that any kinds of activities which might potentially be contracted out, are therefore potentially commercial and therefore shouldn't be made available. And I think that if we accept that argument and given the impetus, given the kind of feeling we have certainly in Victoria where almost any form of government activity is liable to be contracted out, then we close down the whole of government to accountability. I think if we accept that argument, then we're in for enormous strife.

Tom Morton: State governments in Victoria and South Australia have denied access to contracts for the running of private prisons, a matter criticised by the South Australian Auditor General in his report.

And the cloak of secrecy is descending over the public health system as well.

Recently in Victoria, John Thwaites launched another FOI request, this time for information relating to the Latrobe Regional Hospital.

John Thwaites: The Latrobe Regional Hospital is the first Victorian Public Hospital to be privatised by the Kennett government. The government has entered a contract with a private company to hand over the running of the Latrobe Hospital to that private company. And what I've sought under Freedom of Information is the contract for the private company.

Tom Morton: A spokesperson for the Victorian government told Background Briefing that the documents which John Thwaites is seeking are commercial in confidence. The financial details of the contract, they say, are the intellectual property of the company, Australian Hospital Care Pty. Ltd., and if such details were released, it would dent Victoria's reputation as a place to do business.

But this much is on the record:

Under the contract, Australian Hospital Care will run the hospital and provide services to public patients for 20 years. The company also gets a virtual monopoly, since the contract states that no other public hospital can be built in the Latrobe Valley for the life of the contract.

The government admits that the running costs of the hospital won't be any lower than in the public system. However it claims that where it will make substantial savings is on the capital cost of building the hospital.

John Thwaites is still waiting for a decision on his FOI request, but he told me that the nature of the contract has also attracted attention from the Victorian Auditor-General.

John Thwaites: The Auditor-General criticised the fact that there'd been no proper cost benefit analyses done prior to entering the contract.

Tom Morton: No cost benefit analysis, so in other words, no analysis of whether it would cost more or less than providing these services through the public system?

John Thwaites: That's right, it's pretty incredible, isn't it, that the Kennett government has been prepared to enter a contract for 20 years to provide all the health care in the Latrobe Valley and not carry out proper cost benefit analyses.

Tom Morton: I mean why shouldn't we trust the Victorian government to get a good deal for taxpayers, if their aim is as they regularly say, to get greater efficiency and greater effectiveness in public services, why shouldn't we trust them to make sure that in this instance too, we'll get good service for a reduced price?

John Thwaites: Well I suppose it's the old story. If you've got nothing to fear, you've got nothing to hide. If the government genuinely is getting a better deal for taxpayers, why won't it release the documents?

...

Tom Morton: Across Australia, State governments have shown particular enthusiasm for privatising public hospitals or outsourcing the services they provide to the private sector.

In each case, claims were made that these arrangements would save taxpayers' money, money which is in short supply in the over-stretched public health system.

But now the balance sheets are starting to come in, and they tell a very different story.

In 1996 the New South Wales Auditor-General, Tony Harris, delivered a damning report on a privatisation deal between the Greiner Liberal government and Mayne Nickless, a major operator of private hospitals. The deal involved the privatisation of public hospital services at Port Macquarie. The Auditor-General disputed claims by the government that the deal would save the taxpayer between $14-million and $40-million over 20 years.

Instead, the Auditor-General found that:

Reader: The government has paid for the hospital twice and given it away once.

Tom Morton: At a total cost of $143.6-million.

In Western Australia, the Health Department outsourced a public hospital, again to Mayne Nickless. There, the Auditor-General rejected the Health Department claims that the outsourcing deal would save taxpayers $21-million. He found that the Department had not produced a proper business case before proceeding with the deal.

And on the claimed savings to the taxpayer, he found that:

Reader: There is no reliable estimate of any savings.

Tom Morton: And that:

Reader: There is not reliable information to establish that the contract provides net tangible benefits to the State relative to the public sector alternative.

Tom Morton: In other words, there was no evidence that outsourcing the hospital was any cheaper than keeping it within the public health system.

Similar criticisms were made by the South Australian Auditor-General of a deal involving the South Australian State Government and another private company, Healthscope Ltd.

The deal, known as the Modbury Hospital contract, nearly came unstuck when Healthscope announced that it was losing money.

As a result, the State government made extra payments to Healthscope over and above what was agreed in the contract.

Professor Suzanne Corcoran.

Suzanne Corcoran: The whole thrust of this is based on an assumption that the private sector will be able to deliver more cost-efficient and cost-effective types of services, and that's an assumption that's not been demonstrated anywhere. And what happens when the actual contract begins to run is that if the private entity doesn't make a profit, then the contract is going to have to be renewed. And the result of the private entity not making a profit will be that the private entity goes out of business, in which case the government is left having to provide the service anyway.

Tom Morton: Or else the government has to give more money to the private entity.

Suzanne Corcoran: Well, that's really the only practical result, is the government has to give more money to the private entity to prevent it from going into insolvency.

Tom Morton: What public information we do have about these hospital contracts has mainly come to us from Auditors-General. But there's very little information on the public record about the day-to-day running costs of privatised or outsourced hospitals. Once again, the companies involved claim that this information is commercial in confidence.

Dr Fran Collyer is an academic at the University of Canberra who's working on a comparative study of hospital privatisation around Australia.

As part of that study, she lodged an FOI request with the New South Wales Department of Health, for information about the Port Macquarie Base Hospital, the hospital which the New South Wales Auditor-General had said the government had paid for twice and given away once.

Fran Collyer was seeking a report which compared the running costs of the hospital with seven public hospitals in New South Wales. The report had been completed in 1996, but hadn't yet been publicly released.

Fran Collyer: When I received it, a full third of the report had been blacked out, and that included any information about comparative costs. So there wasn't even one sentence which gave an indication of the comparative cost.

Tom Morton: I asked Mary Ann O'Loughlin, General Manager of Corporate Services at Healthcare of Australia, that's the subsidiary of Mayne Nickless which operates the hospital, whether it was her company which had objected to the release of those blacked-out sections of the report.

Mary Ann O'Loughlin: Quite to the contrary; we actually want the document released. It's on public record that we'd like the report released. We've said it many times; we've asked the Minister, Minister Refshauge, to release the report, we're happy for the report to be released.

Tom Morton: But a letter to Dr Fran Collyer from the New South Wales Department of Health tells a different story.

The letter, dated 23rd February 1998, clearly states that parts of the report were blacked out because Healthcare of Australia objected to their release.

Reader: Those parts of the document considered exempt include information obtained by the committee under the terms of the Port Macquarie Base Hospital Services Agreement. Healthcare of Australia did not consent to its release.

Tom Morton: The New South Wales Department of Health told Background Briefing that both parties had signed an agreement that sections of the report wouldn't be released because of a confidentiality clause.

I asked the New South Wales Auditor-General, Tony Harris, to comment on this statement, that the government and Healthcare of Australia, had agreed not to release sections of the report.

Tony Harris: The last sentence is the rub, isn't it? that two parties have conspired to reduce information that may in this case seemingly, is relevant to assessing whether the deal is a good deal, or whether the government has done a good job or not. Now I think agreeing not to release data is so an affront to accountability as to warrant particular condemnation.

Voice: Shrinking democracy.

...

Tom Morton: As we heard earlier, the West Australian Auditor-General has reported on a deal between the State government there and Mayne Nickless to outsource public hospital services, at the Joondalup Health Campus.

Joondalup is a rapidly-growing northern suburb of Perth.

In his report, the Auditor-General recommends that there should be regular public reporting by the Health Department on the management of the contract. In particular, the Auditor-General argues that details of the costs charged by Mayne Nickless should be made publicly available.

West Australian Auditor-General, Des Pearson.

Des Pearson: Well from an auditor's perspective, I would argue that that information should be publicly available in respect of the commercial interests of an operator; in the Joondalup Hospital case, they have a 20 year contract, and I think that provides adequate compensation or consideration for that requirement to disclose the costs of public sector services. And that comes back to the taxpayer is paying for the services and it is a big market, and I think private operators, they have a choice whether they want to participate in that market or not.

Tom Morton: Of course it's perfectly legitimate for private corporations such as Mayne Nickless to sign contracts with governments which are financially favourable to the corporation. After all, they're not in business for their health.

And New South Wales Auditor-General, Tony Harris is quick to point out that contracting out may well save governments money if it's done properly. But he says that governments and public servants need to drive harder bargains when they're dealing with the private sector.

Tony Harris: The costs that we are paying is not because Mayne Nickless is inefficient, it's because Mayne Nickless has written a very good agreement. So we've been pressing on government that we shouldn't send, what my father used to say, 'Never send a boy on a man's errand', we should make sure that we equip our public servants if we expect them to negotiate with people where that's their bread and butter, that's their game, that's their business.

Tom Morton: Like his fellow Auditors-General in Western Australia and South Australia, Tony Harris argues that once outsourcing or privatisation contracts have been signed, they should become public documents.

In broad terms, the Auditors-General agree that while it's appropriate for commercial information to be kept confidential during a tender process, once a government has signed on the dotted line, that information should be available for scrutiny by the parliament and the public.

Tony Harris points out that this is common practice in many overseas countries, like Britain, New Zealand and the United States, which have all gone down the outsourcing road.

Tony Harris: The public accounts committee brought out a senior officer from California who is engaged continually with the private sector in negotiating transport projects, and as soon as he signs an agreement with the private sector, they publish all of the documentation. They see no problem about it. This is the land of capitalism, this is the land of competition, they don't see any problem about tabling and publishing all of it. And yet we, whether it's the Sydney water filtration plants, or roadways, or hospitals, we insist that these documents can't be published, and I don't know why.

...

Tom Morton: There are few signs at present that governments, whether State or Federal, show very much inclination to let the bright light of public scrutiny illuminate the darker corners of their deals with the private sector.

But some lawyers are beginning to argue that they may have no choice but to do so.

Tom Brennan is a corporate lawyer who's worked on both sides of the fence. He's been a public interest advocate in freedom of information cases; worked as a public servant and political adviser; and is now with the corporate law firm, Corrs Chambers Westgarth.

At a conference recently, he gave a paper arguing that there's now a body of legal precedents in Australia which challenge a government's capacity to claim commercial confidentiality. It's a complex argument, but Tom Brennan says it can be summarised quite simply.

Tom Brennan: It's two streams really. The first is that for the last 20 years the courts have been developing theories about government and government accountability, which place a premium on the accountability of government and every part of government, to the parliament and to the public. The second is that in more recent years the High Court has developed a stream of constitutional law which says that the constitution entrenches the rights of Australians as electors to know what it is that is going on within government. And so it's the joining of those two streams which now raises the question not only will the courts say that government does not operate as an ordinary commercial body when it comes to protecting information, but might well say government cannot operate as a normal commercial body in protecting information.

Tom Morton: One of the central planks of Tom Brennan's argument rests on a recent High Court decision.

Interestingly enough, the case involved a defamation action brought by the former New Zealand Prime Minister, David Lange, against the ABC.

The judgement is very long and complicated, but Brennan focuses on a paragraph which states that there's a limitation on the power of governments or parliaments to deny information to the electors.

Ultimately, says Tom Brennan, the fundamental principle which the courts have stressed is the public's right to know.

Tom Brennan: What I conclude is that the result of the decision taken with a lot of other law, is that the government can enter into an obligation of confidence, but if it ever comes to an issue of someone wanting that information, that person will be able to obtain the information unless it can be proved in the particular case in the particular circumstances, that it would be contrary to the public interest to disclose the information.

...

Tom Morton: You've been listening to Background Briefing. Technical Production was by John Diamond and Tom Hall; Readings were by George Whaley, Vic Rooney and Colleen Cook. Our Production Co-ordinator is Linda McGinness. Researcher, Vanessa Muir, and extra research by Charles Gent and Murray Bramwell. Background Briefing's Executive Producer is Kirsten Garrett. I'm Tom Morton, 'bye for now.

Further Information

South Australian Auditor-General's Report online
http://www.audit.sa.gov.au/

West Australian Auditor-General
http://www.audit.wa.gov.au/

NSW Auditor-General
http://www.audit.nsw.gov.au/