“Troubling”: Ombudsman questions senior official’s OTR decision

The Ombudsman has slapped down a senior State Government public servant for taking an application for a Peregrine Corporation petrol station out of the hands of Burnside Council on the basis of “irrelevant” information.

Jul 19, 2017, updated Jul 19, 2017
One of OTR's many South Australian service stations.

One of OTR's many South Australian service stations.

Ombudsman Wayne Lines’ report, about a proposed OTR petrol station development in Kensington Park, expresses concern that the Office of the State Coordinator-General (OSCG) and the Department of Planning, Transport and Infrastucture (DPTI) appeared to have pre-determined views on the economic significance of Peregrine Corporation’s projects.

His report says that Coordinator-General James Hallion’s determination that the assessment of the proposed development be taken out of the hands of Burnside Council in favour of the Government’s Development Assessment Commission (DAC), relied on an “irrelevant consideration”.

The State Government says it will amend its regulations in response to the report.

“The Government has reviewed the report, and will amend the regulations to provide better clarity of the economic intent of any proposal to be considered by the Coordinator General,” a spokesperson said.

In May 2016, Peregrine Corporation submitted an application to Hallion, asking for him to “call-in” the project (to have DAC assess it).

Under the Development Regulations, the OSCG can only “call-in” projects that cost more than $3 million.

Peregrine had advised OSCG that the development would cost between $2.97 million and $3.19 million.

Lines writes that during a phone call between Peregrine’s lawyer and an OSCG official, it was suggested that the company “‘review’ its initial cost estimates for ‘any errors’”.

In August 2016, the company submitted a revised request to the OSCG, saying that that the project scope had been expanded to include additional items – such as dog wash facilities and solar power – raising the cost of the project to between $3 million and $3.3 million, excluding GST.

Lines writes that: “It is clear that the second cost estimate report was prepared in light of the feedback provided by the [OSCG] to Peregrine’s corporate lawyer during the 27 June 2016 telephone call.”

“The notes concerning this discussion are somewhat troubling.

“It appears that the OSCG, having formed the view that the figures provided in the first cost estimate report fell below the $3 million threshold … suggested to Peregrine that it ‘review’ its initial cost estimates for ‘any errors’.”

The report says the “appropriateness” of the interaction was unclear.

“I query the appropriateness of … taking such a proactive approach […and] whether the course adopted by the OSCG in this matter is consistent with its approach to other developments,” Lines writes.

The report says it would have been open to Peregrine to conclude, from that exchange, that an amended quantity surveyor’s report with increased costs would not be “unfavourably received by the OSCG”.

Last month, following Hallion’s determination, the Development Assessment Commission considered and rejected the OTR project.

Lines’ report – which was initiated after a complaint by Burnside Council CEO Paul Deb, on behalf of the council – finds a general “lack of rigour” in the process of approving the call-in and suggests there was a lack of meaningful scrutiny of the second cost estimate report.

In an email dated March this year, Lines writes to Hallion’s office asking whether he was concerned by the costs estimated in the second cost estimate report, “noting that emails released to my office suggested concerns about ‘inflated costs’ in relation to another, otherwise unrelated, development proposed by Peregrine”.

Hallion responded that, according to an assessment by DPTI, Peregrine had provided a detailed independent quantity surveyor report, which advised the project would cost $3.1 million.

But Lines’ report says: “The records provided to my office do not disclose any meaningful scrutiny on the part of the OSCG of the figures provided within the second cost estimate report … the circumstances of the revised call-in request justified such scrutiny.”

“One cannot but notice that the lower bound of the total [second cost estimate…] fell at the exact figure identified within the threshold clause of the Development Regulations.”

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Nonetheless, Lines accepted that the OSCG was “entitled to place a considerable degree of weight on the inclusion of the additional works identified within the second cost estimate report” and that it had received a detailed independent quantity surveyor report that “provided a reasonable explanation for the difference between the first and second cost estimates”.

Ultimately, Lines finds he is not satisfied the OSCG’s acceptance of the second cost estimate report amounted to an administrative error of the kind described in the Ombudsman Act – but: “Overall there appears to have been a concerning lack of rigour in obtaining and assessing information in relation to this particular site.”

In particular, Lines says Hallion’s assertion that it was “sensible” for a series of developments by the same proponent (Peregrine) to be considered by the same assessment authority (the DAC) was an “irrelevant consideration”.

In a letter to Lines’ office in February this year, Hallion advised that: “While each project is considered [for call-in] on its own merits … as a portfolio they are also incredibly significant to the state, as each new store employs between 15 and 20 people and up to 100 construction jobs”.

“This is not a fast track process, but rather a streamlined one – one that provides a significant local company the opportunity to have multiple applications assessed by the one assessment authority,” the letter continues.

But Lines’ report says the number of jobs that would be created by the project was not large enough to justify a finding that it was of “economic significance to the state”.

“Even if one accepts the employment figures considered by the OSCG in at their absolute highest (i.e. 50 ongoing positions, of which, surely, only a fraction could ever by full-time or skilled, in addition to the jobs generated in construction), I simply do not consider the employment generated to be so considerable as to mean the project is of ‘economic significance’ to the state,” Lines’ report says.

“Even if I were to accept that the OSCG’s interpretation of the ‘economic significance’ requirement, while wrong, was reasonably open to it in the circumstances (a finding that I do not necessarily make), I do not consider this would be capable of curing the various other defects with respect to its assessment of the proposed development so as to render the determination reasonable in all the circumstances.”

The report says the OSCG’s consideration of employment numbers related to Peregrine developments in general, rather than to the proposed petrol station specifically, assuming that the figures would be the same or similar.

Lines report also notes that emails between Hallion and Peregrine Corporation’s executive chairman Yasser Shahin were “suggestive of a somewhat familiar relationship between the two men”, however the communications “did not disclose anything that is otherwise of relevance to my investigation”.

In Hallion’s submission to the investigation, he writes that: “While I acknowledge the presence of a professional relationship due to the nature of my role, I provide the same level of courtesy to all proponents that I encounter.”

Hallion’s submission also disagrees with Lines’ conclusion it was unreasonable to find the proposed development was of economic significance to the state.

Hallion also wrote that his determination was based on employment figures identified “in the relevant briefing”, arguing “it is appropriate practise to rely upon standard job construction estimates and employment data provided by the proponent [Peregrine]”.

The OSCG, according to its communications with Lines, has approved just over half (76) of the 150 call-in requests it had received since the office was established in 2014.

Lines’ report recommends Hallion’s office develop guidelines that and clarify which considerations are relevant, and which are irrelevant, to call-in decisions, and that refer to the need to obtain clear, site-specific employment estimates.


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