Elected latte-sippers roast DPS over Australia's most politically connected cafe

By Stephen Easton

February 28, 2017

CANBERRA, AUSTRALIA – FEBRUARY 12: A large storm gathers over Parliament House on the opening of the 42nd Parliament on February 12, 2008 in Canberra, Australia. (Photo by Andrew Sheargold/Getty Images)

The Department of Parliamentary Services has again found itself the centre of controversy at Senate estimates, demonstrating how easy it is to get caught in a political bunfight when you’re tasked with administrative support to the nation’s powerful and hungry elected representatives.

This time it’s about Aussies, the coffee shop beloved by most of the apparatchiks, lobbyists, media staff and public servants who work in Parliament House (although this correspondent prefers the robust blend served by the other outlets, which are run by the department).

Being seen to be picking on the venerable cafe and general store is probably one of the best ways for the department to make powerful enemies, especially within a government that is very keen to be known as the friend of small business.

Yesterday afternoon, Senator Eric Abetz angrily tapped out a press release accusing the department of trying to “fleece” the cafe and using “bully-boy tactics” in negotiations to renew its operating license, which expired in 2014. Following reports the new licence would come with a major rent hike, Abetz was far from the only one who thought the new conditions being imposed sounded a bit rich.

Small business ombudsman and former Liberal politician Kate Carnell in fact told the Australian Financial Review’s Rear Window column she would go in to bat for Aussies on Sunday night, leading Abetz and Senator Nick Xenophon to take up the issue in yesterday’s estimates hearing.

Abetz said he was outraged to hear the conditions would include a “58% increase on license fees” and Aussies “handing over its business plan to its only competitor” while that competitor — the department itself — was “exempt from paying similar fees” for the other food outlets in the building. Those other outlets do appear to have lower prices.

DPS secretary Robert Stefanic might be taking a second look at the dire warnings of his predecessor Carol Mills, who was sacked in 2015 and faced some notorious estimates grillings and made powerful enemies of her own.

Stefanic disputed the exaggerated details of the Financial Review’s report, which incorrectly stated the department had imposed a 70% rent hike per annum, demanded a right of veto over the menu and prices, asked to see business records and “ordered” the owner to stop using the “Aussies” trading name. The article also scoffed that DPS had asked the owner “to establish key performance indicators for his part-time staff, which include his mother and sister” and said on one day it had audited his records three times.

Not quite. The secretary had to explain that an initial independent valuation proposed a rent increase of 58% — not 70% — but the surprisingly high figure could change and had only emerged from the calculations at least partly due to the intransigence of the cafe’s owner.

“The current lease arrangement is something just short of $87,000 a year, not including GST. The amount — and I stand to be corrected — advised by the independent valuer was something of the order of $150,000 a year,” said Stefanic.

“The reason the amount is so significant is that the proprietor of Aussies has refused to share his turnover information. In doing so, it became very hard for the valuer to make an assessment of the true, fair market value of the rent.

“The independent valuer had to make an estimate based on a complex formula to establish a licence fee value. He had to make an estimate of the turnover that Aussies achieves in a year.”

Stefanic said the cafe owner had only responded to a new draft agreement and the valuer’s independent report, which was sent in December, with an “offensive email” to the department. The secretary also suggested that rather than negotiate in the normal way, the cafe had instead circulated inaccurate rumours about how the oppressive bureaucracy was holding him down:

“We had advised that we would like to start negotiations on 6 March. The operative word is ‘negotiations’. It was the provision of a draft agreement. It has been alleged in the media that it was ‘take it or leave it’. That is not the case at all. We have not even got to the stage of representations by Aussies to us. Rather, it has played out in the media.”

What about the story that Aussies was not told to stop using its well-known trading name? Was that true?

“No,” said Stefanic. “There is a clause in the draft contract which exists to avoid there being an inappropriate use of a business name.

“If, for example, the Aussies name were to be changed to something that would be deemed inappropriate for the environment, it will provide the department and the Presiding Officers the opportunity to stop that from occurring. There has been absolutely no intent by the department at any time to stop the name use or for some sort of change in its name.”

Does the department want a right of veto over the coffee shop’s menu? “No.” And what about the supposed demand to set KPIs for the mum and the sister working in the business? “There are key performance indicators that apply to the business itself. There are no key performance indicators that relate to any employees. That would be ridiculous.”

The KPIs that would apply were up for negotiation too, he explained.

But Abetz wasn’t having it. He later produced a copy of the draft agreement and, along with Xenophon, suggested Stefanic had misled the committee by saying the department didn’t care how many cups of take-away coffee the shop sold. It turned out that was in the draft agreement but Stefanic said the department was only concerned with accurately calculating the cafe’s turnover.

“If he is concerned with any elements of that, it is subject to negotiation and he has been given ample opportunity to do that,” said the secretary. “There is no take it or leave it here. He can discuss it with us. He has made no attempt other than, very apparently, making representations to senators and also to the media.”

“Do you have a problem with that? You do, don’t you?” countered Xenophon. Stefanic coolly suggested some might consider it unusual for a commercial agreement to be negotiated via Senate committee and reminded his interrogators that the presiding officers, the Speaker of the House and President of the Senate, would sign off on any deal.

The DPS secretary also later pointed out “the licence held by Aussies has not been subject to market testing in 25 years” and that his department had been criticised by the auditor-general failing to make big enough profits for the Commonwealth, “hence its recommendations to undertake a retail strategy.”

“I do not know where to go, then,” Stefanic said. “Do we just leave the existing licence in place forever?”

Abetz made his displeasure with Stefanic’s responses clear in his later press statement:

“The Department’s defensive disposition to questioning made it very clear that DPS’ approach is not as it ought to be.

“Seeking to impose a 58% increase in license fees, in circumstances where other ventures pay none, along with a requirement that Aussies disclose its turnover, business plan and even how many coffees they sell is quite revealing.

“This is another regrettable classic case of big government bureaucracy unnecessarily burdening small business.”

“While I am pleased that the Small Business Ombudsman is looking into this matter, I hope that DPS will have a rethink of its behaviour.”

The fact that an obviously quite well-connected cafe owner was portrayed in an influential national newspaper and a Senate committee as a struggling victim of mindless red tape may in fact indicate that it was not the department playing hardball, but the business.

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