Eccles slaps Victoria’s Auditor-General over East West criticism

By Harley Dennett

Wednesday December 9, 2015

Victoria’s top mandarin has clashed with the state’s Acting Auditor-General over the extent to which bureaucrats must challenge ministers after a policy decision has been made.

Chris Eccles (pictured), secretary of the Department of Premier and Cabinet, wrote to Acting A-G Peter Frost last week taking exception to characterisations the Victorian public service implements government policies uncritically and “at any cost”.

The source of those characterisations was a report by Frost — tabled today — into the East West Link project, which was started under the previous Baillieu/Napthine government, and cancelled under the current Andrews government. It’s a highly critical document that accuses the Victorian public service of misinterpreting its obligations in advising governments.

Notably, Frost warns the logical conclusion of a “narrow” reading of the Public Administration Act and code of conduct leads to all other public sector values being subordinate to implementing government policy.

He says at critical points throughout the East West Link project the bureaucracy failed its obligation to go beyond merely appraising government of risks, but also make impartial recommendations in the best interests of the state.

That assertion drew an angry response from Eccles. His three-page letter (in full below) rejects the view and warns Frost’s interpretation would fundamentally undermine the public service as a trusted and apolitical institution and erode longstanding conventions at the heart of the Westminster system:

“In an environment where advice is contestable, and can be sought from parties that have no obligations to neutrality, DPC remains of the view that the public service’s credibility and influence with government would likely diminish if the public service repeatedly and explicitly recommended a course of action that is contrary to the government’s settled policy.

“If the draft report’s implications were followed to their logical conclusion, it would appear to permit public servants to refuse to enact lawful government decisions on the premise that the public service is the best judge of what is in the public interest.”

Eccles also warns that to judge the public service over individual briefs on any given day, rather than looking at the totality of advice, creates an unreasonable burden on both the public servants writing the advice and the ministers that would receive them.

The disquiet had been building over VAGO’s then not-yet-finalised report, and spilled over into a speech Eccles gave to the IPAA Victoria’s National Fellows Dinner. In it, Eccles advocated for an apolitical public service that provides frank, professional and candid advice, but does not run its own agenda at the expense of the elected government’s settled policy. He referred to others who disagreed, but did not identify them:

“A view has been offered from a particular quarter that it is in stark contrast to this view.”

The oblique reference has now been unmasked as the Victorian Auditor-General’s Office.

VAGO has repeatedly clashed with other Victorian departments, especially Education and Training, over accountability and implementing its recommendations. Frequently, departments would accept its recommendations and then fail to follow through. It is rare, however, for a secretary to write such a strongly worded rebuttal to an auditor-general’s findings.

Chris Eccles’ letter in full

Dear Acting Auditor-General

Performance audit – East West Link project

Thank you for the opportunity to comment on the draft report on the performance audit of the East West Link project.

As explained below, DPC has two key concerns with the draft report:

  • As the report notes, there is a fundamental difference between DPC and your Office about the public service’s purported failure to meet the “frank” standard in its advice to Government on the project.
  • DPC disagrees with the proposed treatment and presentation of the cost of the project.

1. “Frank” advice standard

As the Secretary of the Department of Premier and Cabinet, I have an institutional stewardship role in maintaining the integrity of the Victorian Public Service as a trusted, a political public institution. I take this role very seriously.

It is with this role at the forefront of my mind that I would like to reiterate that DPC maintains its position that the advice provided to Government on the project was consistent with the standards, practices and conventions associated with the public service’s role in our Westminster system of representative democracy. Further, the advice met all relevant standards under the Public Administration Act 2004 and the Code of Conduct for Victorian Public Sector Employees.

The draft report present a view that DPC is arbitrarily adopting a narrow reading of the Public Administration Act 2004 in so far as the report claims that DPC is asserting that a requirement to ‘implement government policies’ sit at the apex of public sector values.

DPC rejects these views

Since the earliest articulation of a professional, apolitical public service in the 1850s, the role of the public service has been to serve, and act as an instrument of, the government of the day, subordinate to the Ministers that it serves. Ministers are responsible to Parliament, and through Parliament to the people, for their decisions and actions, as well as those of their departments. Implementing government policies goes beyond a public sector value; it is the principle reason why the public service exists.

The obligation to provide frank and impartial advice is a corollary of the core role of the public service to serve the government of the day. The public service must remain apolitical so that it is able to serve successive governments of different political persuasions. Providing frank, professional and candid advice is a key aspect of remaining apolitical.

The draft report also implies that the Victorian Public Service implements Government policy uncritically and “at any cost”, compromising the public service’s integrity and impartiality.

DPC also rejects this view.

The Victorian Public Service has, and will continue to provide, frank and impartial advice to Government, consistent with the role of a professional public service to advise, assist and importantly, influence the government of the day.

Being a public service is more than just a job; we have an essential public function to influence Government decision-making through professional, frank and apolitical advice. This is what distinguishes public servants from free-for-service consultants and political advisers.

After a Government or Minister has made a decision, the public service must understand how to exercise its role appropriately. We continue to provide objective and impartial advice that is of practical assistance in implementing those decisions and Ministers are advised of risks, particularly if circumstances surrounding a matter change. However, the role and duties of the public service do not extend to prosecuting its own agenda by repeatedly advises of other options that it may prefer, but that run counter to the Government’s settled and stated decision.

In an environment where advice is contestable, and can be sought from parties that have no obligations to neutrality, DPC remains of the view that the public service’s credibility and influence with Government would likely diminish if the public service repeatedly and explicitly recommended a course of action that is contrary to the Government’s settled policy.

If the draft report’s implications were followed to their logical conclusion, it would appear to permit public servants to refuse to enact lawful government decisions on the premise that the public service is the best judge of what is in the public interest. For a public servant to hinder progress to implement a lawful decision, constantly recontest that decision, or refrain from actions that follow from a lawful decision of a Minister, would be to fundamentally undermine the Victorian Public Service as a trusted and apolitical institution, undermine the integrity of our democracy, and erode longstanding conventions that are at the heart of the Westminster system of government.

It is not a uniquely Victorian approach to view the role of the public service as serving the government of the day by diligently implementing lawful government decision, and through providing impartial advice both in the forming of those decisions and on potential risks flowing from those decisions. Public service guidance from other Australian jurisdictions, including Auditor-General reports, consistently articulate this role for the public service. For example, in instances where Government has already made a lawful decision, New South Wales guidance materials advises that it is the responsibility of public servants to implement that decision diligently and to the best of their ability, and to advise the Minister if they see potential risks resulting from that decision.

Finally, the draft report claims that there were seriously deficiencies in the advice provided to government on the EWL project.

DPC reiterates that the quality of advice provided by the public service about any project can only be assessed fairly and effectively by considering the advice cumulatively and in totality over a project’s life cycle.

An auditing process that focuses on individual briefs rather than on a continuous program of advice in its totality would set an unreasonable standard for the public sector, and Ministers, to manage.

2. Treatment and presentation of costs.

Emphasis on sunk costs

DPC is also concerned that report places too much emphasis on sunk costs as a relevant and appropriate factor in decision-making and, consequently, as a measure of assessing the value of projects.

In particular, the report notes that the Government was provided with comprehensive advice about the termination of the project, but that advice did not fully consider the benefits of completing the project or include detailed information about the amount of sunk costs.

While the amount of sunk costs incurred in the project was significant, the only costs relevant to a rational investment decision are prospective costs. In the context of the incoming Government’s decision about whether to continue the project, as the report notes, the prospective costs of:

  • discontinuing the project were estimated at $900 million (though DPC notes that this cost would vary over time depending on the time of termination); and
  • proceeding with the project were $22 billion.

Presentation of costs

The approach used to calculate the costs of the project also potentially materially overstates its costs, and does not fairly represent the offsets or other benefits that the State will realise.

In particular, the headline figure of $1.1 billion in costs is misleading, because it does not offset the revenue that the State expects to realise from renting and selling properties that were acquired for the project.

DPC also notes that the headline figure includes costs of “complementary” projects (approximately $9.7 million) that are proceeding and deliver standalone benefits to the state, and pre-construction activities such as design and geotechnical work that may be of value in future.

DPC considers that these issues are fundamental to an informed discussion of the project.

Please consult me if you would like to discuss any of these matters further.

Yours sincerely

Chris Eccles
02 DEC 2015

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