$1 billion wasted due to loopholes in procurement guidelines

A Federal Government Department in Canberra is paying several million dollars a year above the market price for rent of a building.

The Canberra Times has revealed that up to $1 billion is being wasted because loopholes in procurement guidelines are being used to avoid open tenders in the competitive market.

The lease agreement, negotiated by the Department of Finance, did not go out to open tender. However, technically it did not have to under government procurement guidelines but the Government agreed to pay between $17.76million and $20.8million a year, or $100/sqm to $200/sqm per year above the market price at the time.

The Department of Families, Housing, Community Services and Indigenous Affairs is locked into the expensive lease agreement at Tuggeranong Office Park for another five years.

The Tuggeranong Office Park lease was signed in mid-2008 when the Commonwealth wanted to sell the complex to Cromwell Property Services, now the Government's landlord at the site.

The ACT is in the midst of its biggest oversupply of office space in history as 300,000sqm sits vacant.
Information on the AusTender website said the department agreed to pay Cromwell $20.83million a year, or $630/sqm a year.

The department said the figure was a lower $17.76million annually, or $537/sqm annually, at the time the lease was signed.

The department signed a 'triple net lease', meaning it agreed to pay the maintenance bills. Traditionally this arrangement lowers the per sqm lease cost.

The cost of upgrading Tuggeranong Office Park was expected to reach $45million, according to a report written in 2009 by a parliamentary standing committee on public works.

Property analyst from BIS Shrapnel Christian Schilling said it was well above the market rent if these figures were correct.

"Most government departments are paying $420/sqm to $460/sqm a year,' Mr Schilling said. 

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