At the end of September, South Australian Labor Premier Jay Weatherill announced that the bidding process by the private sector to develop the former Royal Adelaide Hospital site was to be scrapped and that the state government was going to take over the project.
Millions of dollars of private sector funds were now wasted. The Premier stated that he “would ensure the interests of South Australians were placed above those of private developers.”
This is a classic left wing Labor Government snub of the private sector and a complete waste of massive amounts of money. And the cancellation of this process follows previous well meaning competitive processes for the site that led to no solution but cost the private sector vast amounts of money. The collapse of the private sector proposal follows a similar collapse in negotiations by the South Australian Government for private sector redevelopment of lands at Gillman.
It is highly unlikely that the South Australian Premier was the decision maker on this project but he felt the need to put a negative spin about the development industry to back up decisions by mid-level bureaucrats in his government. It is almost understandable that a Labor Government will exploit the private sector and then rely on public servants to take over with little compensation to the development industry.
But the same sorry story is happening in the supposedly free market supporting Liberal Government in New South Wales. And again it seems it is mid level bureaucrats that make the decisions that can drive the private sector into bankruptcy while their own public service salaries are protected.
A year ago, the NSW government agency UrbanGrowth asked the private sector to make proposals for the White Bay Power Station in the Bays Precinct. Thirteen teams were short listed and they were encouraged to balance the incredible cost of remediating the old power station by providing significant apartment buildings. This would take the project off budget from a government perspective and the private sector would take all the risk.
In what now seems like a setup, the proponents had to give their intellectual property to the government, including who their tenants were for the Power Station. A bunch of mid-level bureaucrats in reviewing the 13 proposals, which included work from some of the best architects in the world, amazingly found that none were up to scratch and said the government should now take the project over. A few months later, UrbanGrowth announced that they had secured a top IT tenant who just happened to be part of one of the private sector proposals and they would now run the project rather than the incompetent (in their eyes) private sector.
Fast track forward another six months and the star IT company who was to be the tenant announced that they were pulling out. Tens of millions of private sector dollars have been wasted. “Not our problem,” say the comfortable mid-level bureaucrats, “we are protecting the broader public.”
But add up these costs on many similar projects and vast amounts of private sector money is wasted. All the private sector can do to balance their books is to lift prices on the sale of future apartment projects to cover the losses. The end product of the mid-level bureaucrats’ decisions to encourage and then cancel private sector proposals on government land is to drive up house prices across Adelaide or Sydney. Every time they allude to their higher level responsibility to the public domain as the reason to cancel, delay or frustrate private sector proposals, they are driving housing costs up.
This strange situation has partly arisen as politicians are terrified of probity issues and rely on independent, public servant experts. They won’t question their decisions that the government could do a better job itself. Years of rationalising the public service to favour the more efficient private sector are now being compromised by a new band of mid-level bureaucrats (MLBs). And there are more examples. UrbanGrowth NSW recently cancelled a bidding process for Lachlan’s Line Stage 2 after many millions of dollars had been spent. The Central site at Barangaroo has had its bidding process cancelled a number of times.
There is another creeping virus in the bureaucracy where well meaning standards are issued to the private sector for how big an apartment should be, or how much sunshine should get onto the living room floor in mid-winter. But there is no regulatory impact statement to measure the impact on housing cost. Victoria recently brought in design standards for apartments after looking at the NSW standards but they took a very different approach in favour of housing affordability. The Urban Taskforce asked some planning and costing experts to measure the difference, and if Victorian standards replaced NSW standards, a two-bedroom apartment would be $150,000 cheaper.
It seems the NSW public service and most councils across Sydney have a number of well-meaning MLBs who are out to protect the broader public without any accountability about the excessive costs they then transfer to private sector. Of course we all want quality solutions, but this must be at an affordable price. By positioning developers as a profit driven group of exploiters, the MLBs and their political masters can appear to be on the side of public good. The reality is, they are simply driving housing costs up and they must be held accountable for Sydney’s and Adelaide’s housing affordability problems.