‘CEO of the Year’ sacked by DHA board in Finance power play

By Harley Dennett

March 23, 2016

Sandy Macdonald

The Department of Finance should be stripped as shareholder of one of the government’s most profitable enterprises, a Senate committee hears, in astonishing scenes pitting two major departments against each other.

The fallout resulted in Finance’s grip over Defence Housing Australia tightening. The Defence-linked managing director was sacked and replaced by a former Finance deputy secretary, amid accusations the defence of Australia was being compromised.

The Defence Housing Australia board chair, former National Party senator, Sandy Macdonald (pictured), revealed the government enterprise’s boss Peter Howman was let go after losing the confidence of one of its two shareholders. That shareholder was Finance, who declined to answer the Senate Foreign Affairs, Defence and Trade References Committee’s summons.

The other shareholder, the Department of Defence was not consulted about the removal and had nothing but praise for Howman and the quality of service he had achieved at DHA. Nor was Defence consulted about the appointment of the interim managing director, former Finance senior executive Jan Mason.

No explanation was given at the time of Howman’s departure last year, six months after the government announced it would not sell DHA as had been strongly suggested in leaks from Cabinet.

The committee held its first inquiry hearing into the operation of DHA on Wednesday and got an early earful from Defence community representatives. Returned & Services League Australia representatives and Australian Defence Association’s Neil James blasted the government over its threat to sell off the Australian Defence Force’s best tool for retention of personnel.

“The asset strippers should go away and go find something else to asset strip that doesn’t have such an impact on the defence of Australia,” James told the committee. “DHA is a victim of their own success, [having] lifted standards of housing so well that people see it as a bag of gold to be privatised … but it’s not a garden-variety government enterprise that should be privatised.”

The RSL and James were highly critical of the instability and uncertainty inflicted on DHA’s operations — and by extension Defence — by the government, Finance and the DHA board.

Finance’s enforcement of the Public Governance, Performance and Accountability Act should be secondary to the service delivery intent outlined in the DHA Act, the two Defence community associations told the committee, and if necessary, Finance should be stripped as shareholder.

Defence happy with Howman

Defence deputy secretary Steven Grzeskowiak assured the committee that his department had no issues with Howman’s tenure at DHA. Rather, the quality of housing DHA provided to ADF members was a successful capability enabler for Defence’s workforce strategy.

DHA was created to ensure Defence members and their families, who are asked to move frequently around the country for service reasons, would have a consistent standard of living. The subsidised rent it charges Defence members for those properties is the same in any location, regardless of fluctuations in local housing markets. DHA can afford to continue this objective for government because of its business buying, developing and selling properties — and turns a tidy profit for the government in doing so.

“The Australian Defence Force members are the customers of DHA,” Grzeskowiak explained. “Currently ADF members report very high levels of satisfaction with the services provided by DHA in the order of 96% across all the metrics we monitor.

“Housing is a vital component of the ADF employment offer mainly aimed at retention issues rather than recruitment. It’s fair to say 25 or more years ago the quality of housing for Defence was poor. Now it’s very good. That’s an achievement of DHA in the last 25 years.”

Grzeskowiak predicted “no showstopper” if Defence becoming the sole shareholder of DHA to ensure its service delivery intent was preserved. But he rejected the notion the government’s dividend pressure was compromising the service:

“I don’t think there’s a tension between requiring a dividend and quality of service, in terms of the service homes … from my management of the DHA contact, as we work with DHA on a day to day basis, we are only focused on the delivery of houses to the ADF, to the standard we require, in the places we require, and in the numbers we require.”

‘Nothing to hide here’

DHA chair Sandy Macdonald told the committee the board lost confidence in the managing director.

“There’s nothing to hide here,” Macdonald said. “He did not resign because of misbehaviour. He did not resign because of unsatisfactory performance. He just simply did not resign on the basis he had done anything wrong, but he left because he was not the best person to lead the organisation.

“Under the DHA Act he served at the board’s pleasure and it had come to the board’s notice that there was a loss of confidence with our stakeholders, namely the departments of Defence and Finance and there was also a level of dysfunction in our head office. How or why these relationships had been destroyed, they were of no concern to me or the board. I wanted to keep the business running.”

Macdonald could not explain why Grzeskowiak’s evidence seemingly contradicted his own.

The former senator added that he had formed a “very favourable impression” of Mason during his years in public life, and became aware she had left the public service. After Macdonald became chair, shortly before it was announced DHA would not be sold, he met with Mason and offered her the job if Howman’s position became untenable.

On October 30 last year that scenario played out exactly and Howman was paid out for “early loss of office”. He had a little over two years left on his contract.

But when Senator Sam Dastyari began a new line of questioning, the seriousness of the allegations came out of the blue:

“Are you aware of any matters being referred to the Australian Federal Police?” Dastyari asked.

Macdonald denied knowing of any AFP referral, and said it would have been very helpful if the question hadn’t been asked, as to comment or confirm would be entirely out of order, as indeed was the question.

“I’m not copping that,” Dastyari hit back, rising out of his chair. “I’m not making any inference on any individual, I’m asking broad questions.”

However, shortly afterward the committee moved the hearing in-camera to enable Dastyari to continue his questions.

Finance deputy secretary John Edge was invited to testify but did not appear in public. The Mandarin understands questions in-camera were taken on notice.

Dastyari criticised the department for playing games with the Senate committee by declining to send a representative until the last moment.

Howman is former member of the Royal Australian Air Force with extensive public and private sector management experience. He is a fellow of the Australian Institute of Company Directors and was named “CEO of the Year 2015” in the Australian Service Excellence Awards by the Customer Service Institute of Australia.

Update: The Mandarin has contacted Howman, who was surprised he was not invited to appear before the committee.

Disclosure: this reporter has previously worked with Peter Howman through Defence Families of Australia and lives in a DHA property

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