Monday, August 9, 2010

Claims of stimulus waste were greatly exaggerated

Media reporting and opposition politicking have left many people with the impression much, if not most, and maybe even all of the billions spent on school buildings under the Rudd government's stimulus package has been wasted.

It's an impression based on the piling up of unproved anecdotes about waste or rorting of particular school building projects. Which means it's an impression that's not genuinely "evidence-based".

Enough anecdotes have been produced to demonstrate that some degree of waste has occurred. But that's hardly surprising: there's a degree of waste involved in most spending, public or private.

The real question is how significant that waste has been. And no amount of piling up of unproved allegations can satisfactorily answer that question. Only a thorough investigation of the complaints can determine the extent of the waste and the reasons for it.

It's important to understand - as most people don't - that news reporting practices aren't intended to give us a representative picture of what's happening. Indeed, what's "newsworthy" is often quite unrepresentative.

News focuses on the unusual not the usual, the bad news not the good, the contentious not the widely accepted. (That's why climate change-denying scientists get a degree of media publicity out of proportion to the relevance of their qualifications or how representative they are of scientific opinion.)

This is why you wouldn't expect the media to do justice to the reassuring conclusions of the independent taskforce established to investigate complaints about the Building the Education Revolution spending.

For one thing, reassurance isn't very newsworthy. For another, any critical comments will be given more prominence than generally approving comments.

But there's more to the school building issue than just the limitations of news reporting. The complaints have been seized upon and played up by elements of the media and others with either partisan or ideological motives for seeking to discredit the use of budgetary stimulus in response to the downturn in our economy prompted by the global financial crisis and the world recession.

These people want us to conclude there was never any threat to the economy, thus making the stimulus spending unnecessary and, as it turned out, quite wasteful. Those with an ideological opposition to fiscal stimulus want us to conclude it NEVER works.

That's why I've read for myself the interim report of the taskforce, chaired by Brad Orgill, and want to give you a balanced account of its findings.

The taskforce was established to receive and investigate complaints about the school building program and to determine whether schools are achieving value for money. So far it has received complaints affecting 254 schools, representing only 2.7 per cent of all schools involved in the program.

Almost all the complaints relate to the part of the program that promised to build and upgrade infrastructure in all the nation's primary schools. The $14 billion cost of this element accounts for almost 90 per cent of the total cost of the program.

It will have delivered more than 10,500 construction projects to more than 7900 primary schools by late next year. About a third of the money is going on multi-purpose halls, almost 30 per cent on classrooms and a quarter on libraries, with the remainder going on covered outdoor learning areas and other things.

Spending of the money is being administered by 22 state government, Catholic and independent school authorities. Although the NSW government accounts for 22 per cent of the projects, it attracted 56 per cent of the complaints. The Victorian government, with a 12 per cent share of projects, attracted 20 per cent of the complaints.

More than half the complaints relate to value for money. "From our investigations to date, the majority of complaints raise very valid concerns, particularly about value for money and the approach to school-level involvement in decision making," the report says.

The report acknowledges - as many of the critics don't - that the primary reason for spending the money was to help counter the downturn in the economy by providing employment for building and construction workers throughout the country. It was also hoped the new buildings would improve the quality of our kids' education.

The report finds the stimulus "prevented many construction organisations from reducing staff or the size of their operations to match an otherwise decreasing workload resulting from the global financial crisis".

But the stimulus motive meant it was important to get the money spent quickly and this involved a trade-off. It meant less time for consultation with individual schools and less choice and customising of projects. That meant a degree of waste and, certainly, dissatisfaction on the part of some schools.

Cost per square metre was very much higher in NSW government projects, mainly because of big project management fees, which were 5 percentage points higher than normal. But these fees are partly explained by the high priority the NSW government gave to getting its projects completed quickly. Those states in less of a hurry incurred lower costs per metre.

The report says that, overall, delivering the projects within the short time-frame to achieve the economic-stimulus objective may have added a premium to normal costs of 5 to 6 per cent.

"Notwithstanding the validity of issues raised in the complaints, our overall observation is that this Australia-wide program is delivering much-needed infrastructure to school communities while achieving the primary goal of economic activity across the nation," the report concludes.

So the impression of widespread waste the media and people with axes to grind have left us with is greatly exaggerated.